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InterContinental, a premier KC hotel, seeks ‘blight’ designation

lhorsley@kcstar.com

InterContinental Kansas City at the Plaza, 401 Ward Parkway, is seeking a blight designation from the City Council so it can establish a community improvement district and new sales tax on hotel guests to help pay for a $16 million renovation.
InterContinental Kansas City at the Plaza, 401 Ward Parkway, is seeking a blight designation from the City Council so it can establish a community improvement district and new sales tax on hotel guests to help pay for a $16 million renovation. tljungblad@kcstar.com

One of the city’s premier four-star hotels, the InterContinental Kansas City at the Plaza, wants to be declared “blighted.”

The hotel will ask the City Council next week for a blight designation, which it needs to establish a community improvement district and new sales tax on hotel guests to help pay for a $16 million renovation.

The community improvement district and sales tax would apply just to the hotel property, about 3.6 acres at 401 Ward Parkway between Ward Parkway and Wornall Road.

A study on file with the city supports the “blight” finding and includes numerous photos of deterioration, especially in the 500-space parking garage and also in the hotel public areas and guest rooms. The study pointed out deteriorated bathroom finishes and ceilings, torn and badly stained carpets in heavily trafficked areas and guest rooms, and torn wall paper.

When asked why the hotel doesn’t just raise room rates to pay for the improvements, general manager Don Breckenridge responded via email, “The business side of hospitality is complex and experienced management companies explore all options to maximize revenues.”

He said that for the InterContinental, “the CID is a valuable strategy that ultimately benefits all parties.”

Other cities in the metro area have policies that allow community improvement district proceeds to fund improvements to building exteriors and infrastructure like sidewalks and parking lots.

Leawood’s community improvement district policy says such financing cannot be used for general maintenance. Leawood also discourages CID funds for interior improvements. A Hy-Vee grocery store in Leawood sought a community improvement district for such improvements in 2014 but was turned down by the city.

Breckenridge insisted the blight request was not a reflection on the hotel’s overall quality, but said it is a legal determination required by Missouri statutes to allow the sales tax to pay for private improvements.

“The legal definition of blight is not the same as what someone might think when they hear the word,” he wrote in the email. “Hotel ownership and every member of the hotel’s exceptional staff work very hard to maintain the highest standards of quality and outstanding guest experiences.”

Breckenridge said time and Kansas City’s harsh weather have taken their toll on the property, built in the early 1970s.

“The CID is an excellent program offered by our city leadership,” he said, “to ensure that assets like the InterContinental remain examples of the pride we all take in our community.”

New sales taxes in the majority of Kansas City’s community improvement districts go for public infrastructure improvements and services. To use the public sales tax for strictly private improvements, under Missouri law, there has to be a blight finding, said Jim Hedstrom, development specialist with Kansas City’s planning department.

“To do a CID for private property or private ownership or private benefit, it has to be declared blight,” Hedstrom said Friday. “What you’re spending the money for is to remediate the blight.”

The InterContinental’s website touts it as a luxury Plaza hotel that is “well appointed, offering beautifully designed suites, an outdoor pool and elegant Oak Room Bar.” It’s marketed as a site for a “romantic getaway” or “dream wedding.”

But the blight study on file with the city tells a somewhat different story.

Judging from that report, Hedstrom said, “apparently it’s in rough shape.”

The improvements will be funded by a capital investment from the hotel’s ownership, he said, and the tax will offset a small portion of that cost, allowing the owners to continue investing in the hotel for years to come.

The InterContinental’s request is slated to go before the City Council’s Planning, Zoning & Economic Development Committee on Wednesday. Several council members said they see it as a relatively painless way to apply a tax, affecting just hotel patrons and not the general populace.

Quinton Lucas, a member of that committee, said the InterContinental’s proposal taxes itself and doesn’t require additional contributions from taxpayers, nor does it affect other taxing jurisdictions.

“Certainly, the blight issue is a controversial one, especially considering the location,” he said, but added that he doesn’t expect the proposal to run into trouble before the council.

“It appears to be an effort to rehab what is essentially a pretty tired building,” said Katheryn Shields, another committee member. “I think it’s certainly worth a hearing and seeing what evidence and testimony is presented.”

Community improvement districts are a growing retail trend throughout the metro area and allow owners to impose a tax without a vote of the general public. The city has 44 community improvement districts and five more in process, including this one, Hedstrom said.

The majority are for shopping centers. The InterContinental’s is one of only two in the city that are isolated to a hotel property. The other is for a planned convention center hotel downtown that has not yet been built.

The blight study on the InterContinental was completed in May by James Potter of Development Initiatives. “Numerous instances of worn, torn or tattered furniture was (sic) noted” in both public areas and guest rooms, the report said.

Much of this is the result of normal wear and tear, the report said, but it added that typical lodging facility improvements need to be done every five to seven years. Breckenridge said the hotel last started a renovation in 2007, and it was completed in 2008.

The current assessed valuation of the parcel was done in 2015 by the Jackson County assessor’s office, with an assessed value of $8.96 million, according to the blight study. But the assessed value was much higher in 2010 and declined nearly 14 percent in 2011. Since 2014, it has slowly rebounded, gaining 3 percent in assessed value.

The report notes that the lodging industry is highly competitive.

“The Intercontinental Hotel is a prestige brand which caters to high guest satisfaction and convenience. This satisfaction is dependent upon a high quality and highly maintained facility. Luxury and upper-scale lodging customers consider ‘look and feel’ of the hotel as one of the most important factors for first and repeat visits,” it said.

“Deteriorating conditions can cause a loss of potential sales tax if these conditions deter potential customers or guests and can cause an economic liability,” the report said.

“The factors previously shown within this report combine to create economic liability. Supporting this opinion is the potential trend of a general decline in property within the District without investment.”

According to the community improvement district petition, the hotel plans nearly $16 million in improvements, including $8 million for the 366 guest rooms and suites, $775,000 for the parking garage and covered entrance, $1.3 million for the restaurant, $400,000 for the building’s exterior, and more than $600,000 on the lobby/gift shop.

The community improvement district would allow the hotel to charge up to a 1-cent sales tax on retail sales for 20 years to help pay for those improvements. It’s not clear how much of the improvement costs would be covered by the tax. Breckenridge said the sales tax totals will depend on the hotel’s future revenues.

If the council approves, the tax could start in January and the improvements would be done next year.

The hotel was first built in 1972 and opened as the Alameda Plaza Hotel. It became the Ritz Carlton in 1990, the Fairmont in 2000 and the InterContinental in 2006. It is owned by TPG KCMO LLC, an affiliate of TPG Hotels and Resorts in Rhode Island. TPG also owns Sheraton Suites on the Plaza and the Hilton Kansas City Airport hotel.

Lynn Horsley: 816-226-2058, @LynnHorsley

Steve Vockrodt: 816-234-4277, @st_vockrodt

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