Dec. 17–Calling it a “game-changer” for downtown Roanoke and the city at large, the Roanoke City Council unanimously approved a deal Monday night that will allow a builder to construct a $17 million 127-room hotel atop the city’s Market Garage starting next year.
The city will sell part of the six-story garage’s first floor and the air rights — a “box of air,” city officials called it — above the building to South Carolina-based hotel developer Windsor-Aughtry Co. for $800,000. The city will retain ownership of the garage itself.
As part of the deal, the city will make two grants to the developer totaling a maximum of $2.2 million to help fund improvements, such as fire suppression infrastructure, to the garage to allow it to work seamlessly with the hotel above it. Windsor-Aughtry sought the additional funds to close part of the gap after bids on the Hampton Inn & Suites came in about $4 million higher than expected.
But city officials stressed repeatedly during the evening meeting that no taxpayer dollars are being risked upfront on the project, and that all grant funds will come from new revenues generated by the hotel project. The deal will convert a government-owned, tax-exempt building into a revenue source, they said.
Both grants are performance-based, meaning if the developer doesn’t meet certain milestones, they don’t get the money, and they get only what they actually spend on up-fitting the garage.
One grant for a maximum $700,000 will be paid out during construction. City Manager Chris Morrill said that funding will come from the proceeds of the sale to Windsor-Aughtry.
A second grant of up to $1.5 million will be paid out over a maximum of six years from real estate and lodging taxes generated by the hotel once it’s open. The city will each year grant an amount equal to half of those tax revenues generated in the previous year, under the approved deal.
According to figures Morrill provided, those revenues are estimated at an average of about $478,000 per year. That doesn’t include estimated sales taxes of $45,000 per year, he said.
By those estimates, the hotel will generate nearly $4 million in new revenue for the city in 10 years, Morrill said, and the city will recoup the grant funds in about five years.
Morrill called the hotel “critical” to the city’s efforts to be a tourist destination because of the dearth of hotel rooms in the downtown area. He said the city has lost convention business because there aren’t enough rooms in downtown’s only hotel, the Hotel Roanoke.
Because the hotel will not have a restaurant, downtown eateries — along with other retailers — will benefit from the 200 or so guests a day the hotel will be able to accommodate, Morrill said.
The city will also incur an additional $80,000 in debt service because it has to refinance bonds on the garage, but city officials said additional parking revenues from hotel guests will more than cover it.
“It’s a slam-dunk to be successful,” said Beth Doughty, director of the Roanoke Regional Partnership, during a public hearing before the vote. She recounted how her group and Downtown Roanoke Inc. invited the developer to Roanoke to examine empty lots for possible hotels downtown, but Windsor-Aughtry representatives saw the garage and wanted to build there. The company has built five other hotels in urban settings on top of garages.
Matt Bullington, owner of the Texas Tavern, was the first to call the hotel a “game-changer.” He also called it a “no-brainer.”
Skeptics accused council of having already made up its mind.
“This project is like a lot of projects in the city that end up costing us a lot more than we expected,” said Dan Cullither.
Former state senator Granger McFarlane, who is in the hotel business, called it a “bad idea” and urged council to pay for an engineering study of the building to make sure it will safely support the hotel.
Assistant City Manager Brian Townsend explained that the garage was bolstered structurally during a renovation in 2008 and a structural engineer certified to the city that it will support the proposed hotel.
Councilman Ray Ferris emphasized that revenue from the hotel would be new revenue to support other city needs, including those in neighborhoods and schools.
“That garage right now is producing zero beyond parking revenues,” he said.
Councilman David Trinkle and Mayor David Bowers echoed Bullington’s “game-changer” remark, and Trinkle acknowledged that the project’s skeptics asked fair questions.
But when your city is in competition with other cities for reputation and the tourist dollars that come with that, he said, “Sometimes it takes a ‘you want to do what?!’ to make things occur.”
The city’s Economic Development Authority must also approve the grants to the developer at its Wednesday meeting.
In other action, the council:
— ? Voted unanimously to send back to the planning commission a request to alter the land use plan for a Franklin Road property to allow Pegasus Tower Co. to construct a 165-foot cell tower on the site.
Pegasus requested the remand to allow it to submit a revised plan for the tower and because the company’s attorney believes a planning commission member doesn’t understand how federal law governs its role in considering such tower requests. The commission opposed the tower on a 4-3 vote last week and several citizens spoke against it.
— ?Unanimously approved the rezoning of an outparcel at Crossroads Mall on Hershberger Road to allow construction of a new Krispy Kreme Doughnuts bakery and store.
The approval means the appliance store currently occupying the spot will be displaced and the existing building demolished.
The measure passed with almost no discussion.
Bowers wanted to know if the approval means Krispy Kreme will be returning to Roanoke after closing its only store here following a fire in May.
It does, he was told.
Councilman Sherman Lea asked the only other question.
“There will be a drive-through?”
Yes, he was told, there will be.
