How much do you want trimmed?
What is usually a phrase overheard at the barber shop is now being overheard at city hall. And county council chambers. And school board council rooms.
Three entities—Morgan City Council, Morgan County Council and Morgan County School Board—are considering how much taxes they are willing to “trim” from their future budgets in an effort to entice a hotel to locate on Morgan’s Commercial Street.
And one chain, Cobblestone Inn & Suites, is listening.
The hotel group would like $1 million in tax incentives from Morgan to be paid over 10 years in order to build a $5.7 million 54-room hotel with a pool and conference room. The group may begin meeting with the city’s planning commission in May, start construction in July, and be open by spring of 2018, Little said in a Feb. 27 Council of Governments meeting.
Crunching the numbers
When the city Redvelopment Agency (RDA) was first put in place in 1993, the Commercial Street property in question had a year-end tax value of just over $2 million. In 23 years, that valuation has increased almost $11 million. The property, now valued at over $13 million, gives the county $9,871 in annual property tax revenue; the school $33,224; and the city $8,358, according to figures provided by Morgan City Mayor Ray Little at the March 20 Council of Government meeting.
After a hotel invests $5.7 million in a building on that same property, the tax valuation would jump dramatically to over $16 million. By keeping just 30 percent of that increase and passing 70 percent (or $139,149) each year along to the hotel in incentives, the three entities would still see an increase, Little said.
The county’s increased revenue one year after the hotel is built would jump $1,391 to an annual total of $11,263; the school’s would increase $4,683.11 to $37,907; and the city’s would increase $1,178 to $9,537.
The percentages can be still be negotiated, as can the number of years the incentive would be good for. Once the deal expires, the three entities would begin receiving the full property tax valuations. A similar deal was struck years ago when the car dealerships now occupied by the Young Auto Group were constructed.
Rural areas are Cobblestone’s specialty
While Morgan’s tax valuations are on the increase, it just wasn’t enough to secure a larger hotel chain years ago. In 2014, Marriott and Renascent Hospitality stepped away from a possible deal in Morgan.
Many say Morgan was just too small of a market for a big chain like Marriott. But Cobblestone’s outlook is a bit different.
Cobblestone specializes in smaller rural markets that the bigger chains often overlook. Their tag line is “Big city quality, small town values,” according to their website at www.staycobblestone.com. The chain’s first property opened in 2008 and now it has 123 hotels open, under construction or in development across 17 states including Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan, Minnesota, Nebraska, North Dakota, Ohio, Pennsylvania, Tennessee, Texas, Wisconsin and Wyoming.
Cobblestone broke ground on a 53-room hotel in Soda Springs, Idaho, in November of 2016. That location is planned to include a conference room, fitness room, laundry facility, convenience store, alcohol bar, hot breakfast, and in-room microwaves, refrigerators and 40-inch flat screen TVs. Nine other locations under construction include Paxton, Ill.; Stevens Point, Wis.; Vinton, La.; Gering, Neb.; Greenville, Pa.; Guernsey, Wyo.; Lamoni, Iowa; Menomonie, Wis.; and Orrville, Ohio.
Based in Neenah, Wis., Cobblestone Hotels, LLC claims to be an upper-midscale hotel brand with signature amenities such as high-speed Internet, complimentary hot breakfast, convenience store, fitness center, and business center.
But whether or not Cobblestone actually comes to Morgan is still contingent on negotiations, including if the three Morgan entities are willing to give up some property tax revenue now with the promise of increased property values and revenues in the future.
Another $233,000 worth of concession is currently on the negotiation table, with the city considering paying to move power lines and waiving hook-up fees.
For the hotel project to come to fruition, it would be necessary for all entities to agree to extend the city’s current RDA, which was first established in 1993. It is set to expire in two years, but may need a 10-year life in order to see tax incentives for the hotel through.
“If (the hotel) comes, it is up to the three entities to decide if they want a ‘haircut’ and how much,” Little said.
The school board is looking at how much past “haircuts” have cost them, and weighing what a future trim could mean as they prepare to take a $40 million bond to the voters in November that would be used to finance an addition to Morgan High School as well as a new middle school in Mountain Green.
School Board Member Kelly Preece said that since 1993, the RDA has resulted in a total $512,000 loss to the school district’s coffers.
“The school is on board with it, but we have to release enough to have some give back to the schools,” Preece said.
Preece said the school board would be willing to extend the RDA, but only if the hotel comes. If it does not, Preece said the school board would like to see the extension not take effect and have tax monies returned.
“The board sees what a commercial enterprise does for the community. In the past, the record has been (that the board is) favorable to these kinds of agreements,” such as those used to bring the Young car dealerships to town, School Superintendent Doug Jacobs said in a recent school board meeting. “But every penny counts in this district.”
Others look at the tax incentives as an investment to ensure increased revenues in the future.
“It is using future money we don’t have to fund a future project,” said Morgan County Economic Development Director Steve Lyon.
But one future project could bring in a wave of others.
County Councilman John Barber said that if a hotel comes to Commercial Street as an “anchor,” it would likely bring in three to six other new businesses each valued at around $500,000 on commercial pads in front of the hotel. Barber said the hotel developer may want to coordinate with the local 7-Eleven to set aside tractor trailer parking in order to lure truckers off the freeway to stay overnight in Morgan. Not only would this help drive hotel occupancy up, but it would “drive business for the convenience store” as well, Lyons said.
With a hotel in town, the school district could host events they haven’t been able to in the past, noted City Councilman Tony London.
While Cobblestone decides on a Morgan location, other businesses such as Wardell Brothers are constructing new buildings that will increase property tax values, Little said. Wardell’s new $700,000 building could bring in $9,000 more in property taxes next year, he said.
Little said the next step is for the city to hold a public hearing to extend the RDA. On Tuesday, the Morgan County Council voiced their support of offering tax incentives, although they will wait for the city to provide exact details before taking an official vote. In the meantime, the school board will have the item on its April 11 agenda for discussion. Eventually, all entities will have to sign an interlocal agreement.
Barber said it is important for the three entities not to drag their feet, as Cobblestone is looking at 1,300 other locations. Morgan’s current RDA’s ability to extend tax incentives has put Morgan at the “front of the line,” Barber said.
Cobblestone’s move to spend $6,000 in secondary studies of the Morgan area, analyzing tourist information and trucker traffic on Interstate 84, proves that they are serious about a Morgan hotel, Lyon said. “I think they are pretty serious,” he said. Those studies should be complete by the first week of April, with a letter of intent possible by May, and groundbreaking possible by summer “if all our ducks are in a row,” Lyon said.