HOUSTON – For the last five years, Houston’s downtown Hilton Americas has been the host for top corporate leaders, convention guests and even stars who performed nearby.

But the city-owned hotel has turned into a costly problem for taxpayers.

Michael Granof, who is a University of Texas accounting professor, said Houston's leaders have made some bad moves with the taxpayers' money.

“There’s a day of reckoning that’s going to come,” said Granof.

The problem started when Houston tried to use the Hilton Americas Hotel to reduce some of the debt it owed to pension plans by handing over a promissory note. The note promised that the city would eventually pay $300 million to the pension fund.

The $300 million was supposed to come from the sale of the convention center hotel.  But the city has not found a buyer yet, which means it still owes the debt.

“I called it an accounting sleight of hand,” said City Controller Annise Parker.

Parker said she warned city leaders years ago not to do the deal. However, the promissory note is not the only thing she doesn’t like.

Parker doesn’t like the huge interest rate that the city agreed to pay on the $300 million loan.

“We have been deferring the interest on those payments. So you do not have just the 8.5 percent, but the interest on the interest,” said Parker.

During Tuesday’s budget hearing, Parker presented the city with a way out. She recommended that they refinance the loan at a cheaper rate.

She said the city could create a type of ‘IOU’ by selling a pension bond that is bought by Wall Street investors.

But if they do that, Houston will have to pay Wall Street back hundreds of millions of dollars more than city leaders borrowed.

“I’m not a fan of pension obligation bonds. But we already have the deal in place for the Hilton Americas,” said Parker.

Because the deal is already in place with the hotel, she hopes Wall Street will buy in and help Houston transform its debt to the lesser of the two evils.  They are planning to pitch the deal to Wall Street on Wednesday.

Council initially authorized the city to issue pension bonds to get rid of the hotel deal a few months ago, but those plans could get sidetracked if Wall Street investors ask for too high a rate.

Mayor Bill White was a leading proponent of the hotel deal that is now under fire.  

His press secretary did not comment on the refinancing proposal, but did say that the mayor and his staff are always trying to find a way to balance between employee and taxpayer needs.