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?
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.
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.
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.
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.
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.
2017 proposal: Approximately 100 rooms
2019 proposal: Minimum of 95 rooms.
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.
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.
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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The hotel should cost about $17.57 million. This would be paid with a combination of private loans/equity and tax increment finance, or TIF, funds.
This would be about $3 million. It would be paid with TIF funds, along with tax breaks through the Iowa Reinvestment Act.
The new Music Man Square Museum would cost $1.5 million. It would be funded completely with Iowa Reinvestment Act funds.
The skywalk which would connect the Music Man Square Museum to the conference center would cost $2.5 million. It would be paid with TIF money.
The new pavilion is estimated to cost $1.65 million. This would be funded through private grants and Iowa Reinvestment Act money.
Perhaps the most complex funding structure goes toward the ice arena, estimated to cost about $12.55 million. This would be paid through private grants, TIF money, Iowa Reinvestment Act funds, a local option sales tax and a $500,000 pledge from Cerro Gordo County.
All of these estimates are “not-to-exceed” figures, and could change based on how much the Iowa Economic Development Authority awards the city. The money is only allocated if the two ballot items pass with at least a 60 percent approval (or “yes” votes).
The city has spent $150,000 on a predevelopment agreement with Gatehouse, the developer of the proposed hotel. That amount will be returned to the city once the project begins. Another $750,000 could be spent on preconstruction funding, and the maximum amount of the loan the city is giving Gatehouse for the hotel at $4.2 million. The Mason City Chamber of Commerce Foundation is guarantor of all city expenses.
The Iowa Economic Development Authority seems poised to award anywhere between $7.1 million to $10 million in tax breaks for the project. That money would be given to the city on an incremental basis – rather than a lump sum, upfront payment – as long as the two ballot items are approved.
The current development agreement requires Gatehouse to invest 10 percent of the hotel cost. About 26 percent comes from the Gatehouse and its investors, 50 percent from the senior bank loan, and the rest from the city’s $4.2 million loan. Eventually, Gatehouse and its investors will pay $13.37 million of the cost of the hotel. It has to re-pay the $4.2 million loan to the city over a 20-year period.
The hotel, which will probably be developed by Gatehouse pending project approval, would be in the southeastern part of the Southbridge Mall parking lot. It would be 106 rooms, and renderings show it would be a Hyatt Place model, although that has not been confirmed by Gatehouse. There have been concerns about how the hotel would impact parking in the area, but city officials claim there is enough throughout Mason City to handle the load.
The current Music Man Square Museum space would be converted into a conference center with a banquet space that would hold 600 people. The streetscape space would be improved, but remain in place. Along with renovation costs, the $3 million projection includes the resources needed to package and move artifacts to the new Meredith Willson Museum.
A new museum would be built to the east of the hotel, and serve as the home to history considering Meredith Willson, along with housing all related artifacts. It would be connected to the new hotel and the skywalk over South Delaware Avenue, linking it to the new conference center. The museum currently inside The Music Man Square will be moved to a separate, adjacent building. The Music Man Square building will remain intact, as the conference center.
This would connect the museum to the conference center. Newly elected city council member Joshua Masson said at a recent council meeting that the skywalk would be an important factor in attracting possible conferences, adding Mason City has been passed over in the past because it doesn’t have one.
The pavilion would primarily serve as a location for the municipal band to perform. It would be located at the north façade of Southbridge and corresponding plaza, and create new entrances for the mall itself. It would improve acoustics and provide more opportunities for free outdoor entertainment in the plaza.
Perhaps the most complex part of the project, the ice arena and multipurpose center would hold up to 4,400 for concerts and similar events. The Mason City Youth Hockey Club has committed $2 million to this part of the project, and would operate the ice rink for six months out of the year. Because of a memorandum of understanding between the city and club, the arena could only be used for multipurpose events for the other six months. That could change, however, according to city officials.
Goes by Mike Kohan and is president of Kohan Investment Group of Great Neck, New York. KIG purchased Southbridge Mall for $1.5 million in September 2016 and is doing business as Southbridge Mall Realty Holding LLC. As of Nov. 1, Kohan owes $210,854 in property taxes, after paying $28,190 in two tax sale properties (the mall sits on four parcels). If the mall is sold, all commitments related to the project will be the responsibility of the new owners.
A representative of Gatehouse Capital, whose company submitted a proposal when the city put out a request for proposals after Chodur defaulted. Gatehouse wants to build a 106-room Hyatt Hotel in the south parking lot of Southbridge Mall, connect it to The Music Man Square via a skywalk, build a conference center/ballroom in The Music Man Square and move the museum to an adjacent building. The city also received a proposal from Chodur but chose the Gatehouse plan.
The interim city administrator who replaced Brent Trout. He now handles many of the responsibilities of the project. As the city’s finance director, he understands much of the funding structures corresponding to each part of the project. But it is unclear when a permanent replacement will start, who will have many responsibilities in executing the project if the ballot items pass.
Mason City resident is one of the organizers of the "Mason City Says Yes" campaign, made up of residents who support the two public issues on the Nov. 7 ballot. The group submitted petitions with enough signatures to require the public vote.
The Mason City mayor has championed the project from the beginning and made presentations in Des Moines that led to the city's pre-application for state funding to be approved.
The president of San Diego-based G8 Development first proposed to build a Hilton hotel in the parking lot west of City Hall but could not get Hilton approval. He then proposed to build a Marriott hotel in the same spot but failed to meet city deadlines to start construction and therefore defaulted on the development agreement. Chodur is now suing the city for breach of contract with a trial date set for November 2018.
The former Mason City city administrator, now in Topeka, Kansas, was the city's chief negotiator and made numerous trips to Des Moines in support of the project, including his last day on the job.
The late City Council member accompanied Bookmeyer to Des Moines and helped with the presentations to state officials.
If the ballot items do pass, how much money will the IEDA award to Mason City?
1) The project has been in the works for several years now, and some citizens have doubts about the funding and execution of it. Initially, a parking ramp was proposed, costing the city hundreds of thousands of dollars. Now, that has been scrapped.
1) The city's population has declined since 2000, and supporters claim this project would help bring people back to town, especially younger people as the working population continues to age.
The first ballot issue asks whether the city should enter into a lease agreement to construct an ice arena/multipurpose center with a total construction and lease cost not to exceed $18 million.
MASON CITY | The clock is ticking for Philip Chodur, who is developing a downtown hotel for the River City Renaissance Project.
MASON CITY — The developer slated to build a hotel as part of Mason City’s downtown redevelopment project will go before a judge in March for his lawsuit against a city in California where he had another development agreement.
MASON CITY | Mason City is moving forward with the downtown River City Renaissance Project and it’s leaving Philip Chodur behind — again.
DES MOINES -- A familiar name is back in the picture as Mason City attempts to move forward with its downtown River City Renaissance Project.
MASON CITY | The Mason City Council in a special meeting Tuesday will consider approving two items related to the River City Renaissance Project – the downtown hotel and ice arena.
MASON CITY | G8 Development and Phillip Chodur are moving forward with a lawsuit against Mason City for what the plaintiff's attorneys are calling a "breach of contract" in the hotel development deal that's a part of the larger River City Renaissance Project.
MASON CITY | Gatehouse representative Dave Rachie said Monday the planned Music Man Complex & Hotel could add 120 jobs and $60 million for Mason City, but the timeline for that portion of the River City Renaissance Project remains in flux.
MASON CITY | Mason City has filed an answer and counterclaim to a February lawsuit alleging that it was guilty of breach of contract in a hotel development deal as a part of the River City Renaissance Project.
After months of negotiations, it appears downtown Mason City is one step closer to getting its hotel and conference center.
Mayor Bill Schickel announced in a Facebook post last week that Mason City officials had reached a tentative development agreement with Gatehouse Mason City LLC for a downtown hotel project as part of the broader River City Renaissance.
Tuesday night's Mason City Council meeting marked a seemingly small but significant first.
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