Commission endorses Regency tax incentive
After three months of hearings with little public opposition, the Columbia Tax Increment Financing Commission lent its support to the proposal to redevelop the Regency Hotel on Broadway and Short Street.
The commission on Dec. 14 voted unanimously to send a recommendation to the City Council to approve $6.9 million, or $3.2 million in current dollars, in TIF assistance for developer Dave Parmley’s $17.5 million plan to redevelop the aging hotel. The support is a sharp reversal from the first two TIF projects looked at by the commission during the first half of 2009, which barely secured a majority of the members’ approval.
“It was definitely a 180 in terms of support being unanimous,” Parmley said of the lack of opposition. “I think a lot of people recognize the value of this project.”
The City Council will have the final say on the 23-year TIF, which would provide assistance to the developer by capturing increased tax revenues generated by appreciating property value. Parmley’s proposal would capture all real property taxes greater than what is currently assessed as well as 50 percent of the increase in “economic activity taxes,” mainly sales tax generated on the property. Parmley said those monies would be used as a “stream of payments” to pay off project costs.
The District Executive Director Carrie Gartner noted that both the Sasaki Plan and the downtown planning Charrette recommended the idea of a revamped downtown hotel.
“I’m not sure we needed a consultant to tell us that,” she said. “We all knew we needed a hotel downtown.”
Parmley’s project would be a “catalyst” for other economic development in the District and beautify its eastern gateway, Gartner said. And Parmley has a proven track record.
“Dave Parmley has certainly shown he can make it work,” she said.
Parmley said he has submitted an application to InterContinental Hotels for a Hotel Indigo franchise. If built, it would have 112 rooms with an average room rate of $122 per night, according to materials submitted to the TIF Commission. It would also provide a healthy boost in jobs and employ 62 people with a payroll of $1 million, rather than the 23 people and $300,000 payroll at the Regency.
The application argues that without TIF assistance, the rate of return on the development would be too low to justify the risk — a necessary prerequisite for the incentive. Should Council approve the assistance, Parmley estimates the hotel would be ready by the first quarter of 2013. He projects an occupancy rate of 65 percent; the Regency averages 49 percent.
The past two projects examined by the TIF Commission, one for the redevelopment of the Tiger Hotel and one for a mixed-use development downtown, each garnered four opposition votes. Even so, those projects received unanimous votes of approval from the City Council. The current Council could vote on Parmley’s proposal by its Feb. 21 meeting.
Commissioner Tom Rose, a member of the Columbia Board of Education, voted against the last two TIF projects after the school board unanimously voted against their approval. This time, though, Rose noted that the board voted unanimously to support the redevelopment.
“I think there was more concern about the previous projects than this one in terms of being successful,” Rose said after the meeting.
Nathan and Jon Odle of Trittenbach Development, who proposed the eight-story mixed-use building on 10th and Locust, ended up dropping the TIF assistance and building a four-story apartment building serving the college student market. The Tiger Hotel owners — John Ott, Dave Baugher and Al Germond — are still seeking financing to redevelop the Tiger as a “boutique hotel.” Baugher and Germond own the Columbia Business Times.
On Tuesday, the City Council granted the Tiger owners a second extension to their development agreement, which required them to have financing in place by Jan. 31. They now have until July 31. Baugher said he is presently in discussions with a potential operator and hopes to have an agreement soon.
Attorney Robert Hollis, who represents Parmley and whose firm represents the Tiger owners, said the unanimous support by the commission and the school board shows that the public is more educated about TIF than they were in 2009.
“There was this misperception when the Tiger was discussed that the developers would get this bucket of money,” Hollis said. Because TIF freezes tax assessments, it doesn’t take any revenue away from taxing entities and can actually increase it by appreciating nearby property values, Hollis said.
At the commission meeting last Thursday, members did vote to recommend some things for the Council to look at including some caveats in the possible development agreement with Parmley. For one, if the project comes in under budget, they would like to see the TIF adjusted accordingly. The commission also recommended the Council make sure that economic activity taxes be the first funds used to retire the project costs. Finally, the commission recommended the Council have city staff study the impact a sale of the Regency’s parking lot would have on the amount of necessary TIF assistance.
The city has indicated it might be interested in buying the surface parking lot servicing the Regency and building a multi-level garage. Assistant City Manager Tony St. Romaine said the city “thought it would be prudent” to talk with the hotel developer, Stephens College, residents of the northeast area of downtown and Trittenbach Development, which is proposing a 100-unit apartment building in the area, about the possibility of building a garage next to the Regency site.
At the Council work session Tuesday night, St. Romaine said the city is in the process of hashing out a development agreement with Parmley that could be ready by the end of February. According to a presentation from St. Romaine, that agreement “could also address parking as it relates to the hotel and surrounding properties’ needs.”
If the Council does end up building a garage, Parmley has indicated he would lease one-third of the parking spots, St. Romaine said, adding the city is still negotiating a price.
The city would have to sell bonds to finance the garage at a time when many residents are questioning the need for the nearly completed Fifth Street garage. Mayor Bob McDavid, in particular, has wondered aloud whether that garage’s cost to the city is warranted and noted that the parking utility will run a deficit because of it.
But despite reservations about the cost of financing another garage, McDavid indicated a garage next to the redeveloped Regency might fill a parking void in that area of downtown.
“It would seem there would be a market for non-surface parking in that area,” he said at Tuesday’s meeting.
But if the city does want to build a garage there, it should decide before it approves the Regency TIF, he said.
“Once we approve this, we’ve lost leverage,” he said.
With a potential vote on the TIF only a month away, that would put big pressure on the city to negotiate a development agreement. Plus, with a tight budget and a municipal bond market less friendly to borrowers, the city would likely have to raise parking rates, another issue that would take some analysis and negotiation.
“It would be disingenuous to say we can do it at the current rates because we can’t,” City Manager Bill Watkins said at the meeting.