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Mason City inks deal with Gatehouse for downtown hotel
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Mason City inks deal with Gatehouse for downtown hotel

Q&A 1

Gatehouse representative Dave Rachie speaks during a March 2019 Q&A session on the planned Music Man Complex & Hotel project at Music Man Square.

After months of negotiations, it appears downtown Mason City is one step closer to getting its hotel and conference center.

In a Facebook post on Friday morning, Mayor Bill Schickel revealed a tentative development agreement has been reached – pending city council approval – with Gatehouse Mason City LLC for the $24 million project.

"The project represents the next step in the River City Renaissance Project," Schickel said in the video. "We appreciate the investment by Gatehouse."

The agreement contains both required benchmarks and incentives for the development and construction of the hotel and conference center, including:

  • The hotel must have a minimum of 95 rooms
  • Gatehouse will spend a minimum of $600,000 for convention center improvements to Music Man Square, $150,000 of which will go to new attractions or features at the museum
  • The hotel must include a ballroom that can hold 700 people – presumably to be used as a conference center
  • Gatehouse must employ a minimum of 20 full-time equivalent employees for the term of its agreement with the city

The city's part of the deal includes:

  • Selling 2-3 acres of land that is currently a parking lot near Southbridge Mall for the hotel to Gatehouse for $1 (the 2017 appraised value of the land was $172,077/acre)
  • Giving Gatehouse an $8.7 million hotel grant, of which $1 million will be for pre-construction costs
  • Bonding no more than $16.125 million for improvements to the proposed skywalk connecting the hotel to Music Man Square (and the previously noted hotel grant)
  • Awarding a rebate of 50% of any local hotel motel taxes to Gatehouse once the hotel opens

Any 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. 

The city will also 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.

In the video, City Administrator Burnett attributed the time it took to come to an agreement with Gatehouse to the fact that they were negotiating a complex legal document, and that he wanted to be sure the city got what it desired in exchange for the incentives it was providing.

The length of the negotiations have also impacted the scope of the project.

Elements changed to reflect increasing costs of the project, Gatehouse representative David Rachie told the Globe Gazette in March.

Rachie said that 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.

Most notable in the changes was building the hotel on top of the conference center instead having the center as part of Music Man Square. Another change in March was scuttling the relocation of the Music Man museum.

And a proposed ballroom to go in place of the museum was never mentioned at the March public forum, but it appears to still be part of the project, though in the hotel itself.

The city council will vote to approve the resolution for a July 23 public hearing on Tuesday night, which initiates a 30-day period in which the city must receive competitive bids on the property. If qualifying bids are received, the council must determine if they are more "in the public interest" than the Gatehouse bid.

Should no bids come in, the council can OK the development agreement after the public hearing.

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