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Despite financial hurdles, plans remain underway for hotel/waterpark in Delano

March 24, 2008

By Ryan Gueningsman
Managing Editor

Plans have been underway for some time for the proposed Comfort Inn and Suites hotel and waterpark in Delano, and despite hitting a financial roadblock, the local investment group still hopes to have a facility by Thanksgiving.

At a request from Delano Planning Commission Chairman Paul Stansberry, the Delano City Council reviewed where the plans stood on the project at Tuesday night’s council meeting.

“A lot of citizens are wondering where we’re at with it,” Stansberry said.

City staff met with several members of the project’s investment group, Innovation Investment Partners – Tom and Rick Schaffer and Curt Christensen – Feb. 15 to discuss the plans. At that meeting, the investment group requested additional funding assistance from the city in order to see the project come to fruition.

“They made a request up and above what the city committed for the project,” Kern told the council at the meeting Tuesday.

In June 2006, the city approved a preliminary plat and planning components of the facility. One of the conditions at that time was to work out a developer’s agreement with the city, which introduced the waiver of sewer and water access charge (SAC/WAC) fees and tax abatement in January 2007. This would be approximately $625,000.

“That would negate development fees, and capture future tax dollars to repay the development fees,” Kern explained to the council at a special worksession Feb. 26. A final development agreement for the project has not been approved by the council.

Kern said the investment group requested a total of $1.8 million from the city at the meeting Feb. 15 to help with the financing of the project. Kern explained the cost of the water park would essentially be shared by the investment group and the city, and said the investment group was planning on overbuilding the water park to ensure users from the city would have access to the park.

In order for the city to contribute the $1.8 million to the project, Kern said it goes beyond what the city can do in terms of tax abatement. He said the city would have to obtain additional property tax revenue in order to do it.

Kern said over a 15-year period, at $160,000 per year, on a $250,000 value home, property taxes would increase $75 a year. He said that number will vary depending on the value of a person’s individual property.

Another option the investment group presented to the city was a possible liquor/lodging “hospitality” tax, which would be referendum-driven.

“Basically, there would be a question on the ballot saying ‘Here’s the waterpark proposal. Do you support it?’” Kern said. At the worksession Feb. 26, Kern said he’d have to research more what goes into a city attempting to set a hospitality tax.

At the worksession, the council encouraged the investment group to look at other alternatives for funding options – including possibly downsizing the proposed plans.

“We simply can’t afford to meet them halfway,” Mayor Joe McDonald said at the worksession. “We wish them well and hope they can find the financing they need to bring it to fruition.”

If the investment group has considerable changes to the plans, the proposal would be brought back before the planning commission, and, ultimately, the city council for final consideration.

Projected costs for the proposal are $4.5 million, plus an additional $730,000 of “soft costs.” The project will be located on 3.6 acres of land along Highway 12 between Ridgeview Medical Clinic and Delano Crossings.

Rick Schaffer said last week it’s becoming difficult to move forward without assistance from the city.

“I think it’d be great for the City of Delano, and we’d love to do it, but the biggest barrier is raising the amount of capital it’s going to take to get it done,” Schaffer said, noting banks and financial institutions become skeptical, and tend to think “If the city won’t participate, why should we?”

At this point, the investment group is considering scaling back the project, or doing it in phases.

“The hope to doing it in phases would be to show a successful return in the rooms where it’s easier to raise capital for the rest of it,” Schaffer said. Another option would be to remove the waterpark plans from the project all together, but he said that would hurt weekend occupancy at the hotel.

“There’s a huge, huge need for the hotel and banquet hall here in Delano, and I think also the water park,” Schaffer said. “If I didn’t really believe it was wanted, I wouldn’t have gone this far.”

He said one of the goals of the waterpark would be to provide something for families to do on the weekends – especially during the winter months.

Another benefit to having a hotel in town is that it would allow various athletic tournaments to take place in Delano, as well as provide a place for people to stay who are in town visiting relatives, he added.

“Many people I’ve talked to are very, very excited,” Schaffer said. “It’s not like I’m building a hotel in another state where it’s nothing but numbers or business, but I obviously can’t do it at a loss, I can’t risk family and household on it.”

In order to meet that timeframe of having a facility in place by Thanksgiving, Schaffer said it’s viable – but only for a couple of weeks yet, adding there is a certain window for construction in Minnesota that would have to be met.

“If we’re not able to meet that window, we’re better off stretching the construction longer and opening in spring,” Schaffer said.

Innovation Investment Partners includes Tom, Rick, and Ben Schaffer, Curt Christensen, and Ed Schmidt.

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