TIF funding for hotel tabled

Council plans tour of property at later date

After a long conversation on creation of a tax increment funding (TIF) district and business model for a proposed boutique hotel in the Joseph Wolf building in downtown Stillwater, the City Council Tuesday tabled a decision until members could tour the property.

Stillwater Caves LLC, seeks $1.15 million in city TIF money so the group and its other financial backers can get bank support to move forward with the development.
City Development Director Bill Turnblad reminded the council that they discussed establishing a TIF district at a recent council meeting but held off approving the conceptual idea until they had more information about project costs and feasibility.

Stillwater Caves LLC, which represents the parties interested in the Wolf hotel project, provided the requested information, but Councilman Tom Weidner and Mayor Ken Harycki made it clear they were concerned about putting the TIF funds up front as part of the project’s equity.

“Why not set this up as a pay-as-you go model? Why do we need to put our money in as equity? What is the risk to us in doing that versus doing this as an up front payment,” Weidner said.

“I just want to make sure that this isn’t going to end up in people running to the hills with a big paycheck,” Harycki added.

Stillwater Caves  representative Troy Hoekstra assured council that the $9 million project would not result in the group leaving with the city’s money.

“No one is heading for the hills so we can take that option off the table right now,” he said. “Why we can’t have a pay-as-you-go model is because the building is collapsing in certain areas and we need to use that money to shore up the building to make it a bankable product to even begin moving forward with the project at all. That, in itself, will cost at least $500,000, not to mention all the things we’d have to do to keep the building in line with the historical building guidelines established by the city that we intend to follow.”

Hoekstra said the total amount of the improvements that would fall into the historical guidelines could be $2 million. He also assured city officials that the group currently has four to five financially strong partners behind the project, but he did not reveal their names to council in the public portion of the meeting.

A situation with a business asking the city for TIF money up front has only happened once, according to City Attorney Dave Magnuson. He added that in that situation, TIF money was put up to save a manufacturing company and the jobs that went with it.
Magnuson said about 95 percent of TIF-funded projects have been based on a pay-as-you go model and if the council chose to go forward with the deal, a minimum assessment clause could be included in the agreement.

City Administrator Larry Hansen said Finance Director Sharon Harrison had very preliminary estimates showing the city being paid back the $1.15 million in 23 years if the project moves forward. Turnblad added that the Wolf building project fits all portions of established TIF requirements.

“This is one example of improving our downtown that we can do now. Remember that the conditions involved with TIF funding include suggestions about restoring historic buildings in our historical districts, and preserving the background of our city. TIF money is meant to be used by people like them and acts a way to benefit them and benefit us as well, and the risks we’d take aren’t unbearable. This is about the bigger picture, revitalizing our downtown,” said Councilman Doug Menikheim.

Councilman Ted Kozlowski asked what the worst case scenario could be. Magnuson said the worst case could be that the hotel would go broke and be unable to pay taxes. But he added that it’s hard for people to avoid paying taxes.

“This could be a significant amenity to the city if this project went forward,” Kozlowski said. “It’s the doorway to our downtown and I would hate for something terrible to happen to those historical buildings. If we put this off is there going to be anyone else who will be able to do this if the buildings are in worse condition. That wouldn’t be any help to them.”

Council members agreed to look at the Wolf building before they made any decisions. The council is expected to tour the buildings at a future date.

Contact Avery Cropp at avery.cropp@ecm-inc.com

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