The City of Topeka’s purchase of Hotel Topeka at City Center, finalized in October 2023 for $7.6 million, has been a contentious decision. Critics argue that municipal governments should avoid direct involvement in private sector enterprises like hotel ownership due to financial risks, operational complexities, and philosophical concerns about government overreach. Below are 10 reasons why Topeka should not have purchased the hotel, emphasizing the need to steer clear of private sector involvement:
- Financial Risk to Taxpayers: The $7.6 million purchase price, coupled with an estimated $20 million in renovation costs, places a significant burden on public funds. If the hotel fails to generate projected revenues (e.g., $1 million in sales tax and $440,000 in Transient Guest Tax annually), taxpayers could be left covering losses, diverting resources from essential services like infrastructure or public safety.
- Government Inefficiency in Business Operations: Municipal governments lack the expertise and agility of private companies in managing hospitality businesses. The city’s plan to contract a management company via the Topeka Development Corporation adds layers of bureaucracy, potentially leading to inefficiencies and higher costs compared to private sector operators.
- Distortion of Market Dynamics: By purchasing the hotel, the city interferes with free market competition. Private investors or developers could have bid on the hotel at auction, potentially revitalizing it without public funds. Government ownership risks crowding out private investment and skewing the local hospitality market.
- Poor Condition of the Asset: The hotel, opened in 1998 as Capitol Plaza and renamed in 2021, has been described as dated and in decline, with issues like non-functional air conditioning, dirty rooms, and bed bugs reported by guests. Investing in a distressed asset with a history of mismanagement (post-2013 after developer John Q. Hammons’ death) is a gamble that could require ongoing subsidies.
- Opportunity Cost for Other Priorities: The funds used for the hotel purchase and renovations could have been allocated to pressing community needs, such as affordable housing, road repairs, or economic development incentives for diverse industries. Critics, including council members Sylvia Ortiz and Christina Valdivia-Alcala, raised concerns about unanswered questions and competing priorities.
- Temporary Ownership Still Carries Risks: The city’s stated goal is to redevelop the hotel and return it to private ownership, but there’s no guarantee of finding a buyer willing to take on a renovated property at a price that recoups public investment. The interim period of city ownership exposes Topeka to operational losses and market uncertainties.
- Overstated Economic Benefits: Proponents claim the hotel could generate 50,000 room bookings annually and $20 million in economic impact by 2027. However, these projections from Visit Topeka assume optimal redevelopment and market conditions, which are speculative given the hotel’s current state and competition from other regional convention destinations.
- Philosophical Overreach: Government ownership of a hotel contradicts the principle that private enterprises should handle commercial ventures. Critics argue that Topeka’s intervention sets a precedent for the city to meddle in other private sector industries, eroding the boundary between public and private responsibilities.
- Lack of Public Consensus: The 7-2 vote by the governing body indicates dissent, with council members Ortiz and Valdivia-Alcala expressing reservations about the rushed decision and unanswered questions. Limited public input and transparency (e.g., the purchase price was not disclosed initially) suggest the decision lacked broad community support.
- Historical Precedents of Failure: Municipalities that enter the hotel business often face challenges. For example, other cities have struggled with publicly owned hotels due to mismanagement or inability to compete with private chains. Topeka’s lack of experience in this sector increases the likelihood of repeating such failures, especially with a property already in receivership.
Counterpoint Consideration: Supporters, including Mayor Mike Padilla and City Manager Stephen Wade, argue that the purchase protects a key community asset adjacent to the Stormont Vail Events Center, preventing it from falling into disrepair or speculative ownership. They emphasize potential tourism growth and convention business, citing Topeka’s loss of events due to the hotel’s declining quality. However, these benefits hinge on optimistic assumptions and do not negate the risks of government overstepping into a sector better suited for private expertise.
Conclusion: Topeka’s purchase of Hotel Topeka represents a risky and philosophically questionable foray into the private sector. The financial, operational, and market uncertainties, combined with the city’s limited expertise and the potential for market distortion, suggest the city should have left the hotel’s fate to private investors. The decision prioritizes speculative economic gains over fiscal prudence and the proper role of government.
