Herald Journal - Enterprise Dispatch - Delano Herald Journal
Hotel developers taking it one ‘half-step’ at a time
Oct. 11, 2010

By Ryan Gueningsman
Managing Editor

DELANO, MN – In a special work session before its regular meeting, the Delano City Council met with representatives from a group wishing to build a hotel in Delano.

One “half-step” at a time is what Innovation Investment Partners, the developers, were hoping to accomplish, as they were present at the meeting to review financing options that were previously presented, and also explore some potential new opportunities.

In June 2006, the city approved a preliminary plat and planning components for a hotel 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 work session Feb. 26, 2008.

A final development agreement for the project has not been approved by the council.

Last week, Innovation Investment Partners representatives discussed several additional options to bridge an approximate $2 million funding gap to get the project underway.

Rick Schaffer of Innovation Investment Partners said it’s tough making the financing work for a project like this, adding that investment groups are purchasing foreclosed hotels at cheaper rates.

He said his group has been looking at ways to close the equity gap, bring construction costs down, and bring the value of the property up.

Schaffer said the group won’t be able to finance the equity portion unless the group has a letter from the city stating it is behind the project, contingent upon financing.

“It’s really a half-step at a time,” Schaffer said. “That’s the only way to move this forward.”

Schaffer also noted issues with the assessment of the property, and discussed with the council tax abatement, tax increment financing, revenue bonds, searching for grants, and the possible creation of a “lodging tax.”

Tom Schaffer of Innovation Investment Partners asked how his group can “partner up” with the city to bridge the funding gap.

Mayor Joe McDonald said before making a decision on something like a revenue bond, he would have to look at the pros and cons of it and how it could potentially affect the city’s credit rating if something should fail.

Rick Schaffer said he appreciates the work Kern and other city staff have done to try to work with the investment group.

“We just need anything we can to get the project pulled through,” Rick Schaffer said.

Tom Schaffer added that the group wants to look at the project as realistically as possible.

The council directed city staff to obtain more information on revenue bonds, and also to investigate a lodging tax.

Several items approved by council for Industrial Louvers

At a meeting in August, the council tabled action on applications submitted by Industrial Louvers for a building expansion, pending approval of the annexation of a portion of the project site from Franklin Township.

The annexation was approved by the state Sept. 21, and at the council meeting Tuesday, the council approved a subdivision that combines several parcels into one parcel, located at 511 Seventh Street South.

A resolution was also approved for the site and building plans for the expansion of Industrial Louvers, as well as an amendment to the city’s zoning map. Additional discussion took place regarding an easement needed for the project.

Odds and ends

In other business, the council:

• accepted the resignation of Bob Heltemes from the Historic Preservation Committee.

• recognized a letter received by the city from the local Relay for Life chairpersons, expressing appreciation to the city council and city staff for support in the fight against cancer.

• entered into closed session to discuss Rivertown commercial building leases.

The Juke Box has had a special rent rate for the last 18 months, which expired Sept. 1, and was the topic of the conversation.

After the meeting, Kern said he, McDonald, and Council Member Holly Schrupp will be meeting with Juke Box representatives Thursday to start discussing alternative lease possibilities.

• briefly discussed compensation for the mayor and city council in the work session.

Information will be presented at the Tuesday, Oct. 19 meeting, and no action was taken.

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