Guest Commentary

A new boutique hotel would be a boon to everyone in Kansas City

A look at five hotels opening this year in downtown Kansas City

Kansas City's first downtown convention hotel since the 1980s is two years away, but the corridor from the River Market to the Country Club Plaza is seeing a resurgence with five hotels opening this year and another 10-plus planned to open by 2020.
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Kansas City's first downtown convention hotel since the 1980s is two years away, but the corridor from the River Market to the Country Club Plaza is seeing a resurgence with five hotels opening this year and another 10-plus planned to open by 2020.

Kansas City would reap many benefits from a special new hotel on Wyandotte Street, across from the Kauffman Center for the Performing Arts — a project that would create an all-new amenity to keep the city’s tremendous momentum moving forward.

It would be unique in Kansas City. There is nothing like our proposed hotel here now or under development. It would have an iconic design compatible with the Kauffman Center. Its cutting-edge, world-class quality would be fully competitive with virtually any upscale boutique hotel in the country. Today, Kansas City cannot attract the five-star segment of visitors because it doesn’t have enough high-end hotel capacity. Unfortunately, those travelers and convention planners have other options, and they bypass Kansas City in favor of Denver, Nashville, Austin and other cities that offer the quality they seek.

We are asking for zero up-front capital or credit guarantees from the city. We are bringing $63 million of investment that will immediately increase Kansas City’s tax base, tax collections and economic activity without burdening city finances. The tax increment financing arrangement we are requesting is different from most because it is a public-private partnership with no city cash. The private sector is shouldering the operating risk, and the TIF bond holders would have no recourse with the city if the project were to underperform or fail. The developers would provide the credit guarantees for the first mortgage. No other city priorities (such as affordable housing) would be sacrificed so that our development can be built.

It would bring immediate cash flow to Kansas City’s tax rolls. Our proposal complies with the Shared Success Ordinance and would provide 25% of TIF proceeds, plus non-TIF taxes, as immediate cash flow to the city’s taxing districts. When you add in other types of incremental taxes we would pay, including personal property taxes, it adds up to fully 40% of the value of the property tax on the development: nearly $300,000 in the first year (2022) and growing to more than $500,000 in the 23rd year. Taxing districts would receive $8.5 million during the term of the TIF, and once all benefits are included, the net gain would be more than $17 million. After that, property taxes would jump to $1.3 million per year to the taxing district, and $3.4 million per year plus escalations to the city overall. The land parcels where the hotel would be built pay $0 in property tax today.

This project cannot be built without TIF. S.B. Friedman, the city’s third-party consultant, has performed a review and reported to the Economic Development Council that the plan has passed the “but for” test mandated by Missouri statute.

The hotel would not get a free garage from the city. It would instead pay to use the city-operated Arts District Garage at the Kauffman Center for hotel guests, generating more than $150,000 annually for the general fund.

Construction and operation of the hotel would create more than 100 well-paying, career-building jobs. Hyatt Corporation, with 62,000 employees worldwide, would manage the hotel and its restaurants. This would give Kansas City workers opportunities for careers with a management powerhouse. It would also bring an international reservation system and demand to Kansas City’s convention and hospitality markets.

There are no five-star hotels in Kansas City today. There is a vacuum at the high end of the area hotel market, with just one four-star property: the Raphael Hotel. Our property, along with the new Loews convention hotel currently under construction, would give the city an opportunity to establish itself in the top segment, which would benefit both the Kansas City Convention Center and the Kauffman Center. Of the 5,000 hotel rooms downtown, and 30,000 across the city, our hotel’s 143 rooms would not adversely affect the middle market.

Our project would make Kansas City more competitive. A comparison of the city’s growth rate and upscale hotel inventory to that of other cities shows that Kansas City is in a group currently showing low growth. We think our extraordinary hotel project could help move us toward higher growth.

In recent years we have seen the opening of the downtown entertainment district, Sprint Center, the Kauffman Center, a revitalized sports complex, and soon the new terminal at Kansas City International Airport and the convention center hotel. Under our proposed deal, Kansas City can build on this momentum with no risk — and significantly enhance prosperity for all of us.

Eric J. Holtze is president of E.J. Holtze Corporation.