MEMPHIS, Tenn. — Memphis taxpayers will be on the hook for more than $3 million in reserve funding to complete the privately developed One Beale hotels and add 700 hotel rooms downtown.

Under an unprecedented public-private arrangement being considered by City Council, the city will act as a financial backstop for half of one of the project’s $6.5 million debt reserve funds in the event of a bond shortfall.

Councilman Worth Morgan confirmed Tuesday afternoon that the council approved the One Beale proposal.

City COO Doug McGowen told council members Tuesday that, while a first for Memphis, the arrangement had been used for several projects in Nashville.

“We believe this to be very low risk,” he said.

But Councilman Martavius Jones had some questions about the project, which is being developed by Chance Carlisle, brother of fellow council member Chase Carlisle.

“Normally, when you take on more risk there is the opportunity for more return,” Jones said. “What do the taxpayers and the citizens of Memphis gain by our entering into an agreement where we’re putting out our full faith and credit, which we don’t do typically for private transactions?”

McGowen replied that, if the development moves forward, the city would gain increased property tax and sales tax revenue.

McGowen said the investment was necessary to make sure there’s adequate downtown hotel space to support the recent $200 million renovation of the Renasant Convention Center.

Conventions need large blocks of hotel rooms and studies show Memphis is short by thousands, he said. In February, Loews Hotels pulled out of a plan to build a convention center hotel downtown, so the One Beale project would help get the city part of what it needs to support large conventions.

The Hyatt Centric hotel has already opened at One Beale and McGowen said it is doing well. That hotel would be joined by the soon-to-open Hyatt Caption and the Hyatt Grand. The project has an estimated completion date of early 2025.

Councilman Worth Morgan said he was confident in the project, which was being steered by a local developer, and called it a “reasonable ask” of the city.

“I hope council members can see the value of having a project like this developed in downtown,” he said. “The tax dollars, the tourism, the activity that it generates. If we don’t make it easy for projects to say yes in Memphis … we’re gonna get what we deserve, and what we deserve is not much. We’re gonna be stagnant.”