ACTION REQUESTED:
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Communication from the City Manager with a Request to ADOPT an ORDINANCE Approving the GRANDVIEW LODGING, INC. REDEVELOPMENT AGREEMENT. (1st District)
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BACKGROUND:
The Four Points Peoria is the largest hotel property in Peoria and has been closed since October 2013. Its closure has had a negative impact on the local visitor and convention business and its re-opening has been a key Council and staff goal. In August 2015, Grandview Lodging, Inc., a subsidiary of Hawkeye Hotels, purchased the shuttered property. In addition to the $5,800,000 purchase price, the company is planning to invest an additional $9,900,000 to completely renovate and reopen the 319 room hotel as well as the banquet space and restaurant. Hawkeye Hotels is very experienced in purchasing and renovating hotels, as well as constructing new hotels. They own over 50 hotels, generally in the Midwest, employ over 1000 individuals, and have strong corporate relationships with brands such as Marriott and Starwood.
The property is within the City’s Hospitality Improvement Zone TIF District. The developer has requested that it be reimbursed 80% of any property tax increment generated by their investment. Of note, the property has a current (2014) Equalized Assessed Value (EAV) of $2,029,400. This value is considerably below “Base EAV” in 2007 of $2,346,670. No tax increment will be generated, nor rebated, until the EAV exceeds this base amount.
FINANCIAL IMPACT: In 2015, the hotel property paid a total tax bill of $186,813. The investment should increase the property’s value to beyond its 2007 level. Once that threshold is met, the tax bill would be approximately $230,000 with the $44,000 difference being dispersed to the taxing bodies (approximately $4,400 additional general fund revenue to the City). Additionally, more room sales in Peoria, and associated food sales for banquets, room service and restaurant, will generate additional hotel, restaurant and sales taxes for the City. According to the developer, the hotel will likely employ up to 75 people and have an annual payroll in excess of $1,500,000.
The developer will be rebated 80% of any property tax increment generated from growth in value above the 2007 EAV, with the City capturing the balance of 20% in the Hospitality Improvement Zone TIF. The developer estimates that total property taxes at stabilization will be approximately $350,000. Of this amount, approximately $230,000 would be attributable to the 2007 base EAV with the remaining $120,000 being “increment” eligible for the rebate. At this level, the developer would be rebated $96,000 and the City would retain $24,000 in the TIF fund. The TIF expires in 2031, payable 2032. The Agreement outlines $8,470,899 of eligible redevelopment costs that can be recovered from TIF increment. Assuming post stabilization assessed values increase at inflationary levels, Hawkeye would receive $2,082,157 over the life of the TIF. This equates to 13.3% of their $15,700,000 million investment or 24.6% of the $8,470,899 eligible redevelopment costs.
The hotel owner will also be able to participate in the Hospitality Improvement Zone Business Development District capital investment program. This program attaches an additional 1% hotel tax and 1% sales tax within the property that can be used to pay for the property’s future capital improvements.
NEIGHBORHOOD CONCERNS: Not applicable.
IMPACT IF APPROVED: The Redevelopment Agreement will be approved and the project will proceed.
IMPACT IF DENIED: The Redevelopment Agreement will not be approved and the project’s future would be in doubt.
ALTERNATIVES: Council could offer a different percentage rebate, but a smaller incentive may make the project infeasible. Council could provide financial assistance up front, but the developer is amenable to a reimbursement for their investment in Peoria.
EEO CERTIFICATION NUMBER: Not applicable.
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL’S 2014 - 2029 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Grow Peoria: Businesses, Jobs, and Population
2. Vibrant Downtown: Riverfront/ Central Business District/ Warehouse District
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Grow employers and jobs.
DEPARTMENT: City Manager's Office