Pleasant Grove council members on Tuesday evening unanimously voted to authorize the city to take out a loan for an amount two and a half times the city's annual budget.

The $23.5 million bond issue will go to purchase property and build infrastructure for two hotels and a convention center, restaurant and retail space in the city's Gateway area. City officials announced in July that a 12-story 300-suite Embassy Suites Hotel and Conference Center has been proposed by John Q. Hammons, the nation's leading independent builder of upscale and full-service hotels. The center would be built near Pleasant Grove Boulevard and Interstate 15.

In order to succeed, the hotels must maintain 72 percent occupancy on rooms that cost $285 a night in one of the hotels, a price never before seen in Utah County, said Jason Burningham, financial consultant to the city.

Burningham repeatedly told council members that the $285 per night rate gave him "heart burn" but that the hotelier believes it is possible. The amount is more than double the highest hotel room rate in Utah County.

Still, to protect the city's interests, Burningham recommended that the city's contract with the hotelier require the hotelier to pay part of the bond payments if the hotels fail to realize the necessary occupancy and rates, and if the hotelier does not build the hotels, restaurants and retail spaces as quickly as projected.

The hotels are now expected to be completed in 2008 and 2009, with the restaurant and retail spaces completed in 2010 and 2011, he said.

Pleasant Grove Mayor Mike Daniels said in the worst-case scenario in which the convention center and retail spaces would go out of business, the city would still own the land and would be able to sell the land for enough money to pay off the bond.

The 20-year bond issue would be guaranteed by 70 percent of the property tax and sales taxes from the convention center and surrounding shopping district, as well as a pledge of one-third of the county restaurant tax, a hotel tax, and a new convention center tax, Burningham said. The other 30 percent of the property and sales taxes would go to Alpine School District, the county and two water conservancy districts.

"This is like a four-star hotel and we don't have anything like this in the county," he said when council members asked the likelihood of the project's success. "It's a different animal for this market and it is difficult to evaluate."

A similar convention center in Davis County charging similar rates has met its occupancy and rate goals, he said.

Some council members expressed heart burn over the numbers, too.

"I can't imagine paying $285," said Councilman Lee Jensen. "A stranger walks through the door and makes all these promises and you find out after you've spent your money if it was or wasn't right."

Burningham said convention-goers would make up the majority of the hotel guests, and many of the room rates would be paid by businesses sending employees to conferences. The hotelier is expected to invest between $75 million and $100 million in building the convention center.

Caleb Warnock can be reached at 443-3263 or at cwarnock@heraldextra.com.

This story appeared in The Daily Herald on page D1.