Council meeting sees lengthy debate on proposed hotel

WASHINGTON — City officials, prospective developers, and members of the public went back and forth on a proposed hotel development agreement for nearly an hour at a Washington City Council meeting Tuesday night.

Council members took no action at the meeting, but vowed to continue the discussion in future weeks.

All agree on need for hotel, as details surface

After restating some established details about the proposed Cobblestone Hotel on the east side of Washington, developers offered some new information to boot.

Washington Hotel Group Co-Founder Dave Waite said the 54-room, three-story hotel would have its own small bar, a pool, and a labor budget of around $360,000. An information packet given to council members and acquired by The Union shows a sketch of the building’s exterior as well.

Waite also put some rough numbers behind the hotel’s expected economic impact.

“Average indirect food revenue is over a half-million dollars a year, average indirect jobs needed because of the added (traffic) is around nine to 10 jobs,” he said. “Entertainment is, again, around a half-million a year added … it’s not just the hotel, we’re bringing in all this other stuff.”

All speakers at the meeting — from council members to public commentators — said they were excited about the prospect of a new hotel in Washington.

WEDG Director Mary Audia said it would beef up the tax base. YMCA Director Amy Schulte said it would house families traveling for tournaments at the Wellness Park. Main Street Washington Director Samantha Meyer said it would boost downtown business traffic.

Caleb Miller, a Washington resident who spoke during the public comment period, said the development agreement was a no-brainer.

“We should be jumping for joy … these are local developers, wanting to use an economic development tool that has been used by multiple other developers on multiple other projects for over a decade,” he said. “Based off the jobs it’s going to create, the other tax it’s going to create, the other business and industry, if they were to never pay a cent in property tax, this is still a really good deal for Washington.”

Question of TIF remains contentious

While the hotel in a vacuum is quite popular, its development agreement may not be. Washington Hotel Group has requested an up to $1.5 million rebate on its taxes from the city over its first 10 years of operation, an amount developers said would make the project financially feasible.

The exact sum would be based on the hotel’s property taxes paid, and the degree to which it changes the property’s value, through a process called Tax Increment Financing, or TIF.

At least one decision-maker is skeptical of the request. $1.5 million, while less than a fifth of the project’s total cost, would represent the biggest TIF rebate in the city’s history.

Council Member Bethany Glinsmann said investors could afford to finance the project themselves, and that city money would only help raise their private rates of return.

“We have heard from our local businesses about the need for this hotel, they are projecting a high occupancy rate,” she said. “That brings me back to the question of, why does the city need to have such a large contribution? … My understanding is the minimum investment rate is $100,000, and just looking it up, the median household income here in Washington County is $55,000.

“The folks who are able to invest in this obviously are those higher-income folks in our town, so if this money is going to really inflate that rate of return, I have problems with that from an equity standpoint.“

Hotel group co-founder Andy Drahota said the plan would lose investors if returns dropped too much lower, given the state of the economy.

“If they can take that money and go straight to the bank, and a CD right now is 5% … what do you have to offer somebody to take a little risk?” he said. “By diluting down the investor pool, now you’re down to a 5% return. Now, they’re not convinced. That’s the cyclical process we’re dealing with here.”

Several argued that TIF was the only way to incentive a hotel’s development in Washington. Council Member Fran Stigers said similar economic incentive developments were solely responsible for Washington’s survival as a community.

Miller said he didn’t foresee another hotel coming along without the tax break, despite long-rumored interest from a handful of companies.

“If you think a developer is going to come in and develop this hotel without needing a tax incentive, we’ve had 46 years since the last hotel was developed,” he said. “That’s given them plenty of time. The other thing is, those developers are going to go to Iowa City, they’re going to develop the same hotel, for the same price, with a similar occupancy, and they’re going to charge double the rate. Or they’re going to go to another town 30 minutes away or (an) hour away that does have TIF.”

Handful of other complaints raised

The city council meeting saw several other questions asked about the potential new hotel.

Downtown business owners said they wished it were closer to their front doors, suggesting the old YMCA building as an alternative location.

“To me, if I could have it all, I’d have another hotel much closer to the downtown, rather than way out by the Walmart,” said Isabella Santoro, an owner of the soon-to-open Northside Diner, formerly known as Winga’s. “It would help support businesses on the square, restaurants, shops, the theater, the Kewash trail, Fareway. Everything would be walking distance.”

Developers said they had looked into the option, but found all the real estate prohibitively expensive to build on.

“The Main Street package is hundreds of thousands of dollars more … it’s a more expensive structure,” he said. “And we all remember when the library went up, and what’s going on at the high school. It takes a lot of land to put up a small building, and that becomes very cost-prohibitive as well. Everyone has to be in a small area, this person has to be there at this time, it’s a lot of logistics that cost a lot of extra money … aside from the fact of taking down a building and not knowing what the infrastructure is underneath.”

Council Member Elaine Moore said she wanted to see more information about the hotel’s impact. While both Washington Hotel Group and the city conducted their own “hotel assessment studies” last year, it’s not clear how comparable their results were.

While the hotel group shared a portion of their study with council members Tuesday night, Moore said she needed all the details.

“I’m not hearing firm data … telling us we will have this kind of economic explosion, this ripple effect for our community,” she said. “I’m having trouble envisioning and calculating the amount of money that this is projected to bring into our community. I hear, ‘Yes, it will,’ but in your hotel study, did they do the figures, and the counting?”

Waite said he could assemble that information for the city, with Drahota adding that he expected it to confirm the results of its own study.

“You can read through that, if you have more questions, I’ll try to answer,” Waite said.

Comments: Kalen.McCain@southeastiowaunion.com