Kansas City would help finance half the $33 million cost to renovate the downtown Marriott hotel complex’s guest rooms, under an agreement that gained preliminary City Council approval Wednesday.
The Finance Committee unanimously supported a deal that would reimburse the Kansas City Downtown Hotel Group over 30 years from a portion of the city’s convention and tourism tax, as well as from a 1-cent community improvement district sales tax. The full council considers the measure on Thursday.
“We believe this is a great win-win situation,” said attorney Dave Frantze, who represents the hotel group. It controls the Marriott and Muehlebach hotels, bounded by 11th and 12th streets and by Central and Wyandotte streets. He noted that the financing will allow the hotel to completely renovate 980 guest rooms over the next two years, upgrading outdated decor and creating a first-class convention hotel to bolster the city’s convention and tourism business.
The deal also calls for the hotel to provide 200 spaces in an underused garage at 11th and Wyandotte for other hotels or public use for 30 years. Frantze said building a new garage to fulfill that need would cost about $5.5 million.
Frantze said this negotiation with the city began 18 months ago, and the discussion of a 1-cent Community Improvement District tax for the hotel was in the works long before the InterContinental Hotel on the Country Club Plaza proposed its own 1-cent CID, which has drawn some public criticism.
City Manager Troy Schulte told the committee that this particular CID and redirection of tourism taxes has a public purpose, because it will help ensure the city can host major conventions with first-class hotel rooms well into the future.
“This helps us dramatically change the playing field,” and make Kansas City more competitive in luring conventions, he said. “We have to have first class, full service hotels.”
In recent years, the hotel group has spent $25 million of its own money on improving the lobby, convention meeting space and exterior. The room renovations, which would be done over the next two years, are expected to cost just under $33 million, and the taxpayer help would cover half that cost. Schulte said redirection of a portion of the city’s hotel-motel tax to the project would generate about $600,000 annually, and the new 1-cent sales tax on hotel guests would provide an estimated $400,000 per year.
The hotel group will front the money through the sales of bonds. If the new tax revenue does not materialize as expected, there is no city guarantee, and any shortfall on the bond payments would be borne by the hotel group.
The hotel for years has had a tax increment financing plan that redirected sales, earnings and property taxes back to the property. But that TIF agreement is expected to expire in 2019. Schulte said that will free up several million dollars in property taxes per year for the taxing jurisdictions like the schools, county and library, and they would be held harmless in the upcoming deal. They did not object to the agreement.