Marriott, Muehlebach hotels seek millions in public funds for renovation

Kansas City wants to double down on the number of brand-new rooms downtown in its pursuit of convention business. To do so, it may pick up $16.5 million of the $33 million tab to renovate 980 rooms at the downtown Marriott and Muehlebach hotel complex.

A Wednesday meeting of the Land Clearance for Redevelopment Authority shed new light on a request by owners of the hotels to obtain public financing for room renovations.

David Frantze, a real estate attorney representing the Kansas City Downtown Hotel Group, told LCRA commissioners that a $33 million renovation of hotel rooms at the Marriott and Muehlebach hotels would coincide with the planned 2019 opening of the 800-room Hyatt downtown convention hotel.

If it all comes together, that would give Kansas City nearly 1,800 up-to-date hotel rooms near its convention facilities and make the city more attractive to conventions.

“Kansas City has never had 1,800 brand-new rooms adjacent to the convention center,” Frantze said.

The Kansas City Downtown Hotel Group plans to spend $33 million of its money up front to start renovations on the hotel rooms.

The ownership group would get half that $33 million reimbursed over time from the city’s convention and tourism tax, as well as proceeds from a 1-percent community improvement district tax on hotel sales.

Frantze estimated that 60 percent of the public financing for the renovations would come from the city’s convention and tourism sales tax, while the remaining 40 percent would come from the CID tax.

CIDs are special taxing districts that can impose additional sales taxes or property assessments to pay for certain improvements or services.

The CID for the downtown hotel complex hasn’t yet been formed. The InterContinental Hotel near the Country Club Plaza has sought a CID to impose a 1-cent sales tax to fix blight at its property. Frantze said his client’s pursuit of a CID was not spurred by the InterContinental’s decision to seek one. Rather, Frantze said the Kansas City Downtown Hotel Group has contemplated renovation financing for more than a year.

The Marriott-Muehlebach CID doesn’t require a finding of blight since it’s located within the larger Central Business District Urban Renewal Area, which essentially means most of the South Loop has technically been declared blighted.

The Kansas City Council is expected to have its first look at an ordinance for the Marriott-Muehlebach renovations at its Thursday legislative meeting.

The LCRA didn’t cast a vote Wednesday; it was presented with the framework of the hotel renovation plan since the agency may have to take action in the near future.

The LCRA owns the ground underneath the hotel and its parking garage as part of a previous financing arrangement for the hotel complex. The Kansas City Downtown Hotel Group plans to ask the LCRA to agree to reduce a $3.4 million purchase option for the hotel property to $1,000.

Frantze told the LCRA that the Kansas City Downtown Hotel Group has invested $25 million of its own money in recent years to upgrade the hotel facility.

Frantze did not take questions following the meeting, explaining that he was asked not to comment by the hotels’ owners.

He provided a written statement by Kansas City Downtown Hotel Group spokeswoman Shana Marchio, who works as a director of federal affairs and communications for former U.S. Sen. Christopher “Kit” Bond’s consulting firm in Washington, D.C.

“By investing almost $40 million of our own funds to upgrade the complex and through our partnership with the City, the Marriott will be comparable and complementary to the new Hyatt, allowing VisitKC to market almost 1,800 brand new, state-of-the-art rooms adjacent to the convention center,” Marchio’s statement said.

In addition, Marchio said the hotel group agreed to make a majority of the hotel complex’s rooms available to Visit KC, the city’s convention and visitors bureau, to market as a room block agreement.

That’s in addition to 200 parking spots that the hotel agreed to make available to the city at its parking garage at 11th and Wyandotte streets “that will enable development in the core of downtown that has been stifled by a lack of long-term parking.”

This story was originally published September 28, 2016 at 6:45 PM with the headline "Marriott, Muehlebach hotels seek millions in public funds for renovation."