The city has reached agreement to sell the Chattanoogan hotel for $32 million.
The buyer is Schulte Hospitality Group of Lexington, Ky. The firm has 102 hotels in 26 states.
Daisy Madison, city chief financial officer, said the proceeds would be enough to pay off all the city's remaining debt for building it.
She said there had been interest in buying the hotel before, but the city held off until it had an offer that would satisfy all the debt.
Ms. Madison said the city will save $30 million in interest costs over the next 13 years.
The PFM public consulting firm had worked since July in finding a buyer.
PFM officials said they believe "we got to a market price for the building."
They added, "Taking this debt off your books is a big deal. This puts the hotel back on the tax rolls. That in itself is $650,000 a year in real estate taxes."
Tom Morsch of PFM said the price was around $160,000 per room. He said new hotel construction is about $220,000 to $230,000 per room.
The property was shown to around seven groups and there were three finalists.
The price went up about $1 million from the first round of bidding to the final, it was stated.
The group is making a $750,000 down payment. The city will pay the closing costs.
There will be 30 days of additional due diligence and then it will close within 15 days.
Benchmark Hospitality, which last year merged with Gemstone Hotels & Resorts, has long operated the hotel and conference center for the city.
The city built the hotel at 12th and Broad with a focus on it being a conference center, though there was some opposition to local government getting into the hospitality business and competing with private hotels downtown.
The Chattanoogan initially had some financial difficulties, but has been profitable in recent years as the debt for constructing it has been reduced.
It features 199 guest rooms and suites, a day spa and 25,000 square feet of conference space. It also features three restaurants.