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On July 23, the Mason City Council will meet and hold a public hearing and evaluation of a purchase, sale and development agreement with Gatehouse Capital for a hotel as a part of the River City Renaissance project.

Versions of the deal have existed for more than two years now but the final proposal isn't exactly a carbon copy of the initial offer.

In the time since Gatehouse first entered the fray, there have been project cost fluctuations, design changes and ownership shifts. 

The development company, based in Dallas, has even come and gone and come back again from negotiations with Mason City as city officials vacillated between plans by Gatehouse and G8 Development, which is currently suing the city.

At the most recent city council meeting, Development Services Director Steven Van Steenhuyse said that, from a development standpoint, the agreement the city has now arrived at with Gatehouse is a better project.

"We have a much better proposal on the table," Steenhuyse said.

So just how does the 2017 proposal compare with the proposal now being considered?

Cost

2017 proposal: Not listed in the initial Gatehouse "Request for Qualifications" response but a May 2017 pre-development agreement pegged the costs at $15 million. 

2019 proposal: Approximately $24 million in total project costs.

Exposure

2017 proposal: Between pre-construction funding and pre-development agreement money, the city had an estimated financial risk of about $900,000.

2019 proposal: According to City Administrator Aaron Burnett, were Gatehouse to neg on the deal, the city's max dollar exposure would likely be $1 million.

Funding and investment

2017 proposal: Mason City officials noted that two bond issues requiring voter approval would be necessary.

According to Councilman Paul Adams, at the time, the city was projected to loan $4.2 million to Gatehouse for the hotel. The loan would have been made with general obligation bonds and would have been an "interest forgivable" loan in which Gatehouse would repay the principal over 20 years. The city would have been responsible to pay the interest to retire the bonds. 

Gatehouse also anticipated providing 10% equity investment in the hotel.

2019 proposal: Gatehouse would still have an equity commitment of at least 10%. 

Mason City's construction funding would be $8.7 million in incentives (with $850,000 required to go toward Music Man Square improvements and predevelopment refunds). The city's funding would be through Tax Increment Financing, Reinvestment District Funding, and Hotel Motel tax collections.

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According to City Administrator Aaron Burnett, Gatehouse will fund the remaining cost (which is anticipated to be approximately $17 million) through a mix of various financing sources including investors and bank debt.

Music Man Square

2017 proposal: Gatehouse Capital was authorized to build a 100-room hotel in the Southbridge lot, connect it to The Music Man Square and build a conference center with a 6,500-square foot grand ballroom that could accommodate events with up to 600 attendees and a 1,500-square foot catering/kitchen area.

A Meredith Willson Museum would have also been constructed.

2019 proposal: Gatehouse would spend at least $600,000 of the project costs for convention center improvements on The Music Man Square property. At least $150,000 of that amount would go toward new museum attractions or features. The conference center will now be on the same site as the hotel.

Number of rooms

2017 proposal: Approximately 100 rooms

2019 proposal: Minimum of 95 rooms.

Ownership

2017 proposal: The hotel would've been privately owned by a Gatehouse affiliate with public incentives provided by Mason City. The conference center would've been owned by the Mason City Foundation.

2019 proposal: Hotel still privately owned by Gatehouse with a termination agreement date of 2045. Conference center would also be owned by Gatehouse since design plans changed. 

Revenue

2017 proposal: The state hotel/motel tax generated by hotel room sales — 5 cents for each dollar.

2019 proposal: The city would receive 4% of sales taxes from the hotel and the 5% state hotel excise tax, which will go to the city's Downtown Reinvestment District for its 20-year lifespan. Incremental property taxes collected from the project will go into the city's Tax Increment Finance fund and be used to retire the bond debt on the project. Mason City would be awarding a rebate of 50% of any local hotel/motel taxes to Gatehouse once the hotel opens.

Sustainability

2017 proposal: Features integrated into the project would help to reduce annual energy use by 20 to 30% and annual water consumption by 20 to 30%.

2019 proposal: No specific mention of sustainability. Proposal does include language that would hold Gatehouse responsible for any environmental claims, costs and damages that didn't exist before the hotel closing date.

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