City to Repay Debt to Hotel, Save Money : Finance: Waterfront Hilton agrees to cancel Huntington Beach’s $6.2-million obligation in return for immediate payment of $5.3 million.

In a move to save the city $900,000, the City Council on Monday night voted unanimously to pay off the city’s redevelopment debt to the new Waterfront Hilton Hotel at a discount rate.

Deputy City Administrator Robert J. Franz said that the city owes the hotel $6.2 million but that the hotel officials will agree to a lump sum payment of $5.3 million and forgive the rest. Refinancing of 4-year-old redevelopment bonds at today’s lower interest rates will raise most of the money needed to repay the loan to the hotel, Franz said.

City Administrator Michael T. Uberuaga said: “Basically, what we’re doing is refinancing our debt just like you might refinance your house because the interest rates are better.”

Added Councilman Don MacAllister: “In looking to pay off the developer, we’re saving money.”

The Waterfront Hilton, which opened in 1990, is built on redevelopment land on Pacific Coast Highway at Huntington Street. The City Council, in its secondary role as the city’s Redevelopment Agency, agreed in 1988 to pay the costs of public improvements at the hotel, such as streets and lighting, and for relocating tenants of mobile homes that were formerly on the land.

The city, however, did not immediately have the $6.2 million for the public improvements and relocation costs. The hotel developer, the Waterfront Inc., in effect loaned the city the money by paying for the costs.

Franz said the hotel developer has now agreed to accept a lower amount in repayment from the city to get the money now.

Franz also said that refinancing of the city’s 1988 redevelopment bonds makes sense because “interest rates are at a 20-year low.” He said the city issued $26.7 million in bonds for general redevelopment purposes in 1988, when the interest rate was 8.4%. He said the city will probably be able to refinance those bonds this year at a 7.1% interest rate.

Some critics of the city’s redevelopment have said that the new hotel is in financial trouble and that the lump-sum repayment of the city’s debt to the hotel was designed to bail the hotel out. But city and hotel officials unequivocally denied the rumors.

“The speculation is just that--speculation,” Franz said.

Stephen K. Bone, president of Waterfront Inc., also flatly denied the rumors that the hotel is in financial trouble. He said that even though the recession has badly affected the hotel industry, the Waterfront has been maintaining a 70% occupancy. “We’re doing well above the market,” Bone said.