Eddie Arana, Rick Thibodeau, & Chris Bakunas San Diego, Ca. March 2012

Eddie Arana, Rick Thibodeau, & Chris Bakunas San Diego, Ca. March 2012
Eddie Arana, Rick Thibodeau, & Chris Bakunas at Luche Libre Taco Shop in San Diego, March 2012

Friday, June 26, 2015

Boondogglers Are Gonna Boondoggle...

There you go...the new Denver International Airport Hotel and Transit Center, only 146 days until the projected opening date. Looks...monolithic, no? 

The design is intended to evoke an image of wings, it essentially being a wing added to DIA.

I can almost hear the comments around the room during the design phase..."It's not an addition to the airport, it's a new wing of the airport...get it? planes have wings, and the hotel/transit center is a new wing..."

DIA, which is the enormous circus tent like structure directly behind the monolithic wings, was designed with the intention of evoking an image of the snow-capped Rocky Mountains.

I'm sure you see that, and not an enormous white circus tent.

That design must of been chosen because it's a little hard to see the Rocky Mountains themselves all that well from DIA, the airport being located on the prairie about 25 miles northeast of downtown Denver.

The 519 room hotel comprises the lion's share of the building, along with a 26,000 square foot conference center, a large public plaza with restaurants and areas to relax, and of course the transit center where you can catch the light rail for a brisk 35 minute ride into Denver (well, you'll be able to do that when the light rail lines are finished, not Jan 1st 2014 as originally projected, but about another year down the road - in the meantime, you can take the bus).

In November of 2014, the Denver City and County Auditors office released a report that was critical of DIA's management of the South Terminal Redevelopment Project (STRP for short), and claimed the final cost of the hotel and transit center was going to come in at around $730 million, considerably more than the original $500 million budget.

For the hotel alone, the auditors stated the cost would total close to $599 million.

The report was lambasted by the staff at DIA, with a published defense that claimed the audit was a politically motivated attack on DIA and the current city administration by the City and County of Denver's auditors.

I'm trying to follow that logic...the City and County of Denver employs auditors who are tasked with auditing City and County of Denver operations, including capital improvement projects such as the STRP...they do their job...and suddenly the auditors are engaging in a politically motivated attack...got it.

I will use the DIA management's own published numbers for the STRP's total expected costs to determine if indeed there is malice afoot,

Hotel and transit center:        $580 to $586 million
Other capital improvements: $78 to $81 million
RTD rail line costs:                $56 to $58 million
Total:                                     $714 to $725 million

So...publishing a report stating the total cost will reach $730 million is an attack...right.

What is interesting about the latest numbers that DIA has published is that they also published the preliminary estimates that were used to sell the bond issue alongside the new estimates. 

Originally, it was $500 million for the hotel and transit center, $0 dollars (as in, zero) for "Other capital improvements," and $26 million for RTD rail line costs.

So...a $526 million bond issue projection results in a highly probable $200 million dollar overage by DIA's own count...nothing to get excited about there.

BTW, when I state "bond issue," I am referring to General Aviation Revenue Bonds, which are sold by DIA to fund airport related projects. DIA sold $1.6 billion in GARB's in 2013 and 2014 - an amount which was added to DIA's already considerable debt load.

Of course, all DIA will have to do to buy down that debt is raise the parking rates, increase what airlines pay to use the airport, squeeze concessionaires a little more, and maybe ratchet up the airport sales tax rate a percent or two...the average traveler will barely feel the bite.

All that aside though, the one thing that I cannot fathom is...how in the hell is a 519 room hotel with a 26,000 square foot conference center coming in at $580 to 599 million dollars? That's over one million dollars a room. 

519 three bedroom, two bathroom homes with attached two car garages can be built for less than 15% of that, including the cost of land and permits.

On the topic of land, It's not like they had to buy any more of it for the project - DIA covers an area of 53 square miles (that's twice the size of the city of Manhattan, BTW, and it doubled the area of the city of Denver when it was acquired from Adams County in 1989), so there is plenty of land there for expansion.

And you know, it being a City and County of Denver project, I'm certain the permits were fairly easy to get.

Do hotels cost this much to build everywhere? Let me check out other recent hotel construction projects. To the Google!

Let's see...the single largest Marriott hotel in the world was completed in Indianapolis in 2011. It has 1,005 guest rooms, and is part of Marriott Place, which has a total of five Marriott hotels (which are all connected to each other and the Indianapolis convention center). 

The new large Marriott hotel has literally four times the conference room space (104,000 square feet) of the new DIA hotel (26,000 square feet) along with 3 restaurants and one of the largest ballrooms in the world. 

So, it's bigger than the new DIA hotel. Much bigger.

Especially when you factor in the other hotels that are part of Marriott Place. Man o' man, that must of cost billions!

Nope. The total cost for the entire Marriott Place, and I mean all five hotels, in 2011?

$450 million. Total. Yes, total - that includes the cost of the 622 room Marriott across the street, and three other smaller Marriotts.

The rebuttal to the City and County of Denver's auditors report did include a comment alluding to the "higher building material and labor cost in the Denver area," so maybe I should compare apples to apples. 

How about if I use the single most expensive privately owned building ever built in the state of Colorado for comparison?

That would be the Four Seasons hotel in downtown Denver. It is 45 stories tall and boasts 766,487 square feet of usable space. It was completed in 2010 for $350 million, a few coins more than $456 a square foot. 

The new DIA hotel is 14 stories and a total of 433,000 square feet of usable space. A little bit of math here...580 million divided by 433,000...equals $1,339 a square foot.

Holy cow. Someone is getting rich off of DIA. Or more likely, richer.

And without the expense of buying the land, the huge benefit of an extremely stream-lined permit process, and apparently, a major city agency's protection from the evil forces of the City and County of Denver Office of the Auditor.

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