At a special meeting early Tuesday morning, the Board of Trustees voted unanimously to establish a “special purpose corporation (SPC)” that will own the proposed hotel and hospitality learning center (HLC) and provide for its financing, construction, operation and management. The corporation, to be known as HLC @ Metro, Inc., will be a nonprofit.

General Counsel Loretta Martinez, in presenting the rationale for the corporation, introduced a team of advisors from the legal, financial and hospitality fields who worked together with Metro State staff and members from both the Metro State Trustee and Foundation boards to explore alternatives for the structure, financing, ownership and operation of the HLC.

Martinez said the team had concluded that an SPC was the most advantageous way to structure Metro State’s relationship with the HLC to obtain the lowest possible cost of financing, reduce the College’s potential exposure for the debt obligations associated with the projects, and maintain the greatest level of control of the project.

After Martinez presented an overview of the legal issues associated with the SPC, Vice President of Administration, Finance and Facilities Natalie Lutes presented a financial analysis and Vice President of Institutional Advancement Carrie Besnette discussed the foundation’s role in fundraising and future operations of the hotel and HLC. Lutes presented the results of a recent feasibility study, comparing them to an initial study conducted in 2007. Current estimates are that the entire project will be financed through taxable subsidized Build America Bonds, with 25 percent of the debt service to be paid for by fundraising and 75 percent by operating revenues generated by the hotel. The project cost is estimated at $45 million, the total estimated bond issuance at $58 million, and the estimated debt service at full ramp-up is $3.6 million annually. Besnette presented an overview of an initial plan for fundraising $10 million, which will include both cash and in-kind donations. (To see handouts from the presentations, click here.)

Faculty Trustee Hal Nees posed what Board Chair Rob Cohen called “THE question,” regarding whether and how Metro State would be protected against risk. Martinez explained that investors (bond-holders) assume the risk and that if there were to be a default, they and the College, as guarantor, would be liable. President Stephen Jordan explained that the SPC structure attempts to minimize risk to the College, but also enables the College to realize all the profit from the HLC. The hope is that the structure will provide a source of revenue for an endowment, as well as regular payouts to benefit the College and academic programs.

Cohen said, of the complexity of the issues involved, “It’s like drinking out of a fire hose. There’s a lot of information to process here.”

In addition to authorizing the SPC, the board approved preliminary bylaws and articles of incorporation and authorized staff to proceed with the incorporation process. The board of HLC @ Metro, Inc. will be appointed by the Metro State BOT; proposed initial board members are Martinez, Lutes, Besnette, BOT member Dawn Bookhardt and foundation board member Diedra Garcia.

A host of action items related to the SPC are slated for the Sept. 1 regular board meeting:

· Approve an agreement between the SPC and Metro State to form a recovery and reinvestment act finance authority to issue the Build America Bonds that will fund the project.

· Approve a parameters resolution relating to issuance of the bonds.

· Approve a ground lease with AHEC for the project site area.

· Accept a franchise agreement with a hotel operator, if approved.

· Approve a guaranty with respect to the bonds.