That's effectively what Mason City-area officials bought today after going in front of the Iowa Economic Development Authority Board.
The former comes as part of an expansion plan by Mason City Kraft to grow the company's ready-to-eat line with an additional 9,200 square feet on the existing facility.
"Designed with the future in mind, our facility is going to be on the cutting edge of food manufacturing,” Mason City plant manager Janelle Kruger said. "The investment demonstrates our long-term commitment to this community."
Projected financing for the plan, which was unanimously approved by the IEDA board, would include a $185,000, 10-year TIF rebate from the city, and two state tax credits totaling $232,500, in part from the state's High Quality Jobs Program.
According to IEDA Communications Director Jacque Matsen, Kraft Heinz has used the High Quality Jobs Program before for other facilities in other locations in Iowa but this is the first time for the location in Mason City.
Matsen said that a driving factor for the program is that, as of now, Iowa has the highest corporate tax rate in the country at 12 percent. So the program is basically a state incentive program we use for existing business within Iowa as well as outside to encourage business expansion.
Chad Schreck, who heads the North Iowa Corridor Economic Development Corporation, said that the deal signals a promising future.
"It's a great sign of its long-term commitment to North Iowa," Schreck said.
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The other commitment for Mason City is the state financing requirements it has as a part of the River City Renaissance project.
Previously, the city had to provide weekly updates to IEDA staff until construction started on the downtown hotel project and submit a document to the IEDA by Sept. 17, 2018, that G8, the developer at the time, had either secured construction financing for the project or that it was in default on one or more of its provisions.
With G8 being dropped from the project for allegedly defaulting (a lawsuit against the city is currently underway) and a final deal with new developer Gatehouse still not inked, Mason City officials were able to set a new deadline for the construction financing commitment of Sept. 30, 2019.
That move would give the city more time to work out any kinks with Gatehouse as it attempts to start construction before winter.
Over time, Gatehouse has changed crucial elements of the planned Music Man Complex & Hotel in the face of rising costs.
According to Gatehouse representative David Rachie: Bonds approved by the city in 2017 don't account for inflation so developers have less money to work on the project, once pegged at $15 million. So, to adjust, Rachie said Gatehouse decided to put its planned hotel on top of the proposed conference center to save money.
The River City Renaissance is a $39 million project that includes the hotel plans as well as a multi-purpose arena, and related components. In February 2018, the IEDA Board approved a maximum benefit amount of $9,162,600.
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 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.
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.
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 | 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.
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.