The developer of the Marriott hotel and event center east of Interstate 35 in Clear Lake will no longer have to wait until the project is complete to receive $1.2 million in economic development incentives from the city.
That comes after the Clear Lake City Council unanimously approved an amended development agreement with JSM Investment LLC, of Johnston, for the multimillion-dollar project Monday evening.
“Because of the favorable market conditions, utilization of a local financial institution and the significant construction progress made by the developer to-date on the project, the city has opted to issue debt for the $1.2 million forgivable loan now, rather than wait until closer to the project completion date,” said Scott Flory, Clear Lake city administrator.
The amendment was presented after the City Council approved resolutions awarding the sale of its seven-year $1.2 million and $600,000 general obligation bond notes for the hotel and event center project and land acquisition, respectively, to local banks.
Clear Lake Bank & Trust received the bid for the Marriott hotel note proposing a 0.55% interest rate, and Manufacturer’s Bank & Trust, or MBT Bank, received the land acquisition bonds with a 0.42% interest rate.
“You’re borrowing $1.8 million and only having to expend $39,000 in interest costs,” said Chip Schultz with Northland Public Finance. “Just incredible.”
The bond issuances bring the city’s total debt placed locally with an interest rate below 1% to three.
In September, the council awarded its five-year $700,000 general obligation loan note for its contribution to the Clear Lake Community School District’s recreation and wellness center to MBT Bank at a 0.37% interest rate.
“This is unbelievable rates, and we are so fortunate to be able to take advantage of that at this point in time,” said Nelson Crabb, Clear Lake mayor.
Flory said IRS guidelines for municipal bonds generally require “proceeds be expended as quickly as possible on the qualified project” to ensure compliance with arbitrage regulations, so that’s why the amended development agreement was proposed.
The hotel — the city’s first in at least 20 years — was celebrated with a groundbreaking ceremony in late June after the city council approved a development agreement with JSM Investment to build an 85-room Marriott-brand hotel with an attached 8,000-square-foot conference center and event space that accommodates about 450 people.
As part of the original development agreement, the city agreed to offer a not-to-exceed $1.2 million economic development forgivable loan to the developer upon completion of the hotel and event center.
The amended agreement, which was reviewed by Flory Monday evening, entails an incremental payment schedule of $200,000 for construction milestones that are met, such as framing, drywall, mechanicals, flooring and wall finishes, furniture and certificate of occupancy, over the next eight months.
According to the agreement, Clear Lake will give $200,000 to JSM Investment for starting project framing and it’ll issue another payment if the building is dried in and drywall is started in February.
If the developer doesn’t meet the estimated completion date for any of the milestones identified in the amended development agreement, the city will defer the $200,000 payment until certificate of occupancy is issued, the agreement states.
The hotel and event center is scheduled to be completed in August, which is about four weeks later than indicated in the original development agreement.
Flory attributes the delay to the national lumber shortage related to the COVID-19 pandemic.
“Like everyone else, they were having a very difficult time getting lumber for a while, but they got past that, so they’re on good pace, good schedule right now,” he said.
A construction crew with HCI Hotel Supply, the project’s general contractor, is framing the fourth floor of the hotel in Courtway Park east of Interstate 35 this week.
The building is positioned on the southern four acres of Lot 4 in the Courtway Park subdivision with one entrance from Bayou Road.
The Fairfield by Marriott hotel in Clear Lake will be among nearly 20 in Iowa, and it’s the only one along Interstate 35 between Ames and Burnsville, Minnesota, which Flory said speaks volumes about the developer’s — and Marriott’s — confidence in the community.
The Courtway Park subdivision comprises 11 lots — six highway commercial and five light industrial — and two roadways and curb and gutter on nearly 64 acres east of Interstate 35 and north of Highway 122.
Ashley Stewart covers Clear Lake and arts and entertainment in North Iowa for the Globe Gazette. You can reach her at firstname.lastname@example.org or by phone at 641-421-0533. Follow Ashley on Twitter at GGastewart.