Jim Dey: Hotel plan raises many concerns
Whoa — not so fast.
That's what at least two members of the Urbana City Council are saying about a proposal calling for taxpayers to subsidize a $19 million project to renovate and reopen the Landmark Hotel at Lincoln Square.
"The deal that's being proposed to us is a terrible use of taxpayer money and should not be approved," said Alderman Eric Jakobsson.
Jakobsson is joined in his skepticism by Alderwoman Diane Marlin, who is expected to win the April 4 mayoral election and take office as the city's chief executive on May 1.
Marlin said "there are a lot of questions the developer still hasn't answered" and suggested that the public is "being misled" about the threat the proposed deal poses to taxpayers.
"If you count the interest, we're on the hook for up to $17 million over the next 20 years," Marlin said.
Both council members focused on the proposed $9.5 million in public financing the proposal requires. They questioned whether the hotel could generate the kind of tax revenues, including the regular hotel/motel tax, a special levy just for this hotel, property tax revenue from the hotel's location in a tax increment financing district and food and beverage taxes, needed to meet bond obligations.
If those revenues proved insufficient, the balance of payments to bondholders would have to come from the city's general operating fund.
Mayor Laurel Prussing, who lost in the Feb. 28 Democratic Party primary to Marlin, is a major supporter of the plan. She's called it a "gem" and a "fantastic" opportunity for the city.
It certainly has that potential — but only if the financial numbers work.
Mayor Prussing, however, reiterated her confidence in the proposal, saying her administration is relying on "conservative estimates" and will be happy to provide council members whatever information they would like.
Prussing said the fact that Hilton, what she called a "very well run company," is interested in the project gives it credibility. Further, she said a successful hotel at Lincoln Square would provide a boost to the entire facility.
"The hotel is what's going to make Lincoln Square viable," said Prussing. "I think (Hilton's interest) is pretty strong evidence it is a good idea."
Hotels operated under different managements at Lincoln Square have failed repeatedly over the years, most recently the Landmark under the ownership of XJ (Yiao Jin) Yuan. Attracted by city incentives, Yuan bought the hotel in 2010 and put it up for sale in 2015.
Currently closed, the hotel represents a blight at Lincoln Square, one that will continue to deteriorate as times passes with no improvements.
City officials have for years been interested in returning that space to productive use.
So Mayor Prussing was excited when developer Dionis Rodriguez came to the city with a proposal to turn the 128-bedroom facility into a boutique hotel operated under the Hilton Tapestry name.
Speaking before the city council last week, Rodriguez said the Landmark "can be restored to a leading 3- or 4-star hotel."
But both Jakobsson and Marlin said there has been too much emphasis on the glitz associated with restoring the hotel and not enough focused on the finances.
Mayor Prussing has indicated she'd like the city council to approve this measure while she still holds office. But Marlin said there is "no official timelime" for action and that the council does not yet know what it's being asked to approve.
"There are a lot of questions the developer still hasn't answered," she said.
City community development director Libby Tyler said she, among others, is working to provide information the council is seeking.
Tyler aid she hopes to present information to the council at either its April 3 or 10 meetings. For now, she said, everything is preliminary.
"I don't have anything that is final or in coherent form," Tyler said,
She said the schedule for the council to act while Prussing still holds office is "doable," but that complication could push the matter into the new administration.
Further complicating the issue is what, if anything, can be done with redeveloping the Landmark Hotel property if this project is not approved.
Alderman Jakobsson raised the possibility of the city using its eminent domain power to purchase it and, once it's acquired, marketing the property for multiple uses.
"We don't absolutely need a hotel there," he said.
Developers plan to renovate the property and reopen the restaurant, bar and conference center. They're asking the city to issue $9.5 million in bonds post construction.
In addition to the roughly $19 million renovation costs, the developers plan to purchase the hotel for $5 million. That sum stands in stark contrast to the property's taxable assessment of less than $1 million.
Marlin and Jakobsson questioned whether the hotel can charge enough for its rooms, have high enough occupancy rates and generate sufficient tax revenue to meet the bond payments.
They also questioned why taxpayers are being asked to finances half the cost of the project and have no ownership interest in it.
Although it's early in the council's deliberative process, Jakobsson characterized himself and Marlin as extreme skeptics. Aldlermen Dennis Roberts and Charlie Smyth are considered generally favorable while Aldermen Michael Madigan, Aaron Ammons and Bill Brown in the middle.
Jim Dey, a member of The News-Gazette staff, can be reached by email at email@example.com or by phone at 217-351-5369.