Council 1

Mason City Administrator Aaron Burnett reads over the details in the agenda item for the city council's special meeting to terminate the city's development agreement with G8 Development at City Hall on Tuesday.

Tuesday night's Mason City Council meeting marked a seemingly small but significant first. 

Since Mayor Bill Schickel's announcement on Friday morning that the city had the contours of a hotel development proposal from Gatehouse Capital, Tuesday night was the first time that members of the public (as well as city council) had a chance to ask questions about the proposal as submitted.

And there were more than a few. Nearly all of them were directed to City Administrator Aaron Burnett. Most of the questions were asked by City Councilman Joshua Masson.

The motion in question was a recommendation for the council to approve minimum development requirements for the hotel deal and to determine that the proposal from Gatehouse was satisfactory while declaring the intent to enter into a purchase, sale and development agreement with Gatehouse. 

Even though the city's 30-plus page tentative agreement with Gatehouse outlined deadlines and financing requirements (construction must begin by July 1, 2020, Gatehouse must spend at least $600,000 for convention center improvements to Music Man Square), follow ups were required.

During his period of questioning, Masson asked Burnett what the max dollar exposure for the city would be if Gatehouse were to neg on the deal. According to Burnett, roughly $1 million. There is a $7.7 million construction grant phase but Burnett was quick to elucidate that an incomplete deal would "never get to $7.7 million." The likelihood of exposure, in the event of the deal falling through, would be $1 million.

Along similar monetary lines, Masson inquired to Burnett where financing assurances were in the tentative agreement. Burnett said that the point of entering into the agreement is, in part, that it would spur Gatehouse to provide financing and close on a hotel by April 1, 2020 at the latest. Gatehouse not doing so could result in default and the city could reacquire the title to the hotel property.

As for the specific hotel, there's no mention of what "brand" would be brought to Mason City in the rough city agreement with Gatehouse. Masson asked what hotel might reasonably be expected to come to town and Burnett said that Hyatt was the most likely chain.

How that compared to a previous plan for a Hilton with the since ousted G8 Development, Masson posed a question to Development Services Director Steven Van Steenhuyse "What makes this better."

The response: "What we have here, from the standpoint of development, is a better project. We have a much better proposal on the table."

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And then the issue of vetting. 

The point-man for much of Gatehouse's dealings with Mason City has been David Rachie, who the company's website lists as a principal developer. 

In the past, there were accusations that Rachie intended to "runaway" with the city's money but the company's vice president, Colin McDonald, has called that a "libelous accusation" and said that he had known Rachie for a decade plus and was "incapable of any such actions."

Despite such past assurances, Masson asked Burnett about the amount of vetting that's been done of Gatehouse in general and of David Rachie in particular. Burnett clarified that since the pre-development was completed he had been in constant discussions with both McDonald and Rachie about the deal.

Ultimately, city council voted 5-0 to approve the Gatehouse resolution.

Competing bids for the project would have to be received by the city, by July 19.

Anyone submitting a competing bid would have to follow the same project contours found in the agreement but with terms even more favorable to the city. 

If nothing is received by the city, the public hearing and evaluation for the purchase, sale and development agreement with Gatehouse will take place on July 23.

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