The Unified Government Commission tonight gave its permission for the UG administrator to proceed with a purchase-sale agreement for the Hilton Garden Inn in downtown Kansas City, Kan.
Very few details were released by the Unified Government. Administrator Doug Bach said the UG has put the hotel on the market through Warmbrodt Hospitalities, which has been doing marketing since April. The 147-room hotel near 5th and Minnesota, built in 2002, is owned by the UG and managed through KCK Hotel Group. The hotel did a $2 million renovation in 2014.
Bach said the marketer has come up with some proposals that the UG staff is working with. Besides the hotel, the UG is considering a third-party manager and renovations for the nearby Reardon Convention Center, which the UG owns.
The project sales price of the hotel was $8.8 million, according to UG figures. A new private sector owner is being sought for the hotel, according to Bach.
Tonight Bach received authority to execute a deal to cover the UG’s costs, including $4.1 million in 2013 refinancing; a $1.8 million loan; $2 million for renovations to the Reardon Center; and $885,000 for closing costs.
Bach anticipated budget savings for 2016 and the future from paying off the Section 108 loan on the hotel, as well as increased revenue from property taxes based on the new hotel valuation.
The UG officials did not discuss further information about the sale or who the potential buyer may be, and under the motion approved, the sale will not have to come back to the commission for approval.
Commission establishes TIF district for Rainbow Village
The UG Commission approved a TIF district for the Rainbow Village Redevelopment District, four acres at the northwest corner of 34th and Rainbow Boulevard. A project proposed for this area would include the existing Applebee’s located there.
While there is a hotel project planned as a future development at Rainbow Village, tonight’s action did not approve the redevelopment project, according to UG officials. Commissioner Hal Walker voted for the TIF district and said the redevelopment project as originally presented was not acceptable to him. He said he was hoping for more negotiation on it.
The Rosedale Development Association appeared in favor of the TIF district, and stated that if the developer makes a civic contribution, the association was in favor of the contribution going to the city at large, specifically to the parks department, to be shared across the city.
The commission also approved a change to the University-Rosedale Urban Renewal Plan Amendment. The original plan had language prohibiting construction of any new hotels, motels or transient guest housing developments, which was removed for the Rainbow Village area.
South Patrol station moves forward
The commission also amended the Metropolitan Avenue Redevelopment District plan, to allow for government uses within this plan. The new South Patrol police station will be built on property that used to be a brownfield and is located next to the Walmart Neighborhood Center in Argentine. Last week, the commission voted in favor of accepting land in connection with the project.
Marcia Rupp, a Kansas City, Kan., resident, spoke in favor of moving this project forward.
Commissioner Mike Kane said that the UG needs to figure out a way to build two fire stations in western Wyandotte County. Mayor Mark Holland acknowledged there was a need to upgrade the fire stations, and noted that the present South Patrol police station was in poor condition.
Wyandotte Plaza sale approved
The UG Commission also approved, without discussion, an amendment to the Wyandotte Plaza redevelopment agreement allowing for the sale of Wyandotte Plaza by the developer, removing the pledge of the original community improvement district to the lender. The amendment pledges the original CID to the initial bond refinancing, which will occur in February 2016.
Also approved was a resolution authorizing the transfer and sale of Wyandotte Plaza retail center, including grocery store and all in-line shops, at 78th and State Avenue to Phillips Edison. Another resolution approved the transfer and sale of Krispy Kreme Doughnuts in the Wyandotte Plaza Retail Center at 78th and State Avenue to LAG Investments Kansas City.
The Wyandotte Plaza project was discussed at last week’s UG meeting. https://wyandotteonline.com/deal-to-sell-wyandotte-plaza-advancing-through-ug/
Bond and note sale
A resolution was approved for the offering for sale of municipal temporary notes and general obligation bonds for the UG. The temporary notes are $61,048,573.29 in tax-exempt notes and $7,167,702.08 in taxable notes; and the general obligation improvement bonds are $28,076,930.89 in tax-exempt bonds.
Agreement with workers’ group approved
The commission approved a memorandum of agreement with the Laborers International Union of North America (LIUNA)-Public Service Employees Local Union 1290PE for 2015-2017. It is the fifth of 13 labor contracts to be ratified, representing 51 percent of the UG’s union workforce under contract so far, according to UG information.
The agreement states there is a 1 percent wage increase for Jan. 1, a 2 percent increase for July 1, and a 2 percent increase for Jan. 1, 2017.
Other action
In other action, the UG Commission also adopted its state lobbying priorities for 2016; approved several Land Bank items; extended its minority and women’s business enterprise contracts program for construction contracts exceeding $250,000; distributed drug and alcohol tax funds to three agencies; and funded Violence against Women Act positions.
Past stories about Hilton Garden Inn
Note: The discussion about Hilton Garden Inn has been going on for some years at the UG Commission.
Here is an excerpt from a past Wyandotte Daily News UG budget story from July 13, 2015:
Also, a special asset fund is in this year’s budget, Bach said, that reflects the potential sale of the Hilton Garden Inn in downtown Kansas City, Kan., and the Legends Theater, both UG properties. At this point it is an accounting measure without any real effect on the bottom line, adding $18 million for potential revenue and expense, according to Bach.
Here is another excerpt from a story about economic development from the Wyandotte Daily News on Feb. 12, 2015:
The EPA building downtown – Mayor Holland said the Environmental Protection Agency office building downtown, now vacant, has changed hands, and is owned by a real estate investment team. It has been sold a couple of times, he said. There have been a couple of nibbles, but because it is 200,000 square feet and was made specially for the EPA, it would be difficult to subdivide, he said. It would take a very large company to take that much space, he added. “It’s high on our radar screen for downtown,” he said.
While there has been talk about making the EPA building into a convention center or a new city hall, Holland thought that might be a disaster. The current Reardon convention center is only 20,000 square feet, the EPA building is 10 times that size, and it was built for offices, not conventions, he said. Currently, they are looking at selling the Hilton Garden Inn, he said. Holland said the EPA was the No. 1 user of the Hilton Garden Inn, and now the American Royal is the top user of the Hilton Garden Inn.
Here is a past Wyandotte Daily News story from June 7, 2013:
by Mary Rupert
Having approved a bond issue less than a month ago for the Hilton Garden Inn in downtown Kansas City, Kan., tonight the Unified Government Commission approved a plan to bring in more funds for hotel renovations.
The Community Improvement District approved tonight will levy a 2 percent sales tax on the 10-year-old hotel, along with the Reardon Center and parking garage next to it. The CID will have a maximum 22-year term, according to Lew Levin, UG chief financial officer.
An expected $75,000 a year from the 2 percent tax will go to the CID for repairs, maintenance and improvements at the hotel, convention center and parking garage. According to UG documents, the projects to be financed by the CID will cost $3.2 million, plus other financing costs.
The funding could be used for upgrading personal property and fixtures in the hotel, along with repairs to the parking garage and convention center.
Kurt Mayo, general manager of the Hilton Garden Inn, told the commission that the CID will not raise taxes. It will be close to what Missouri hotels are charging, and for the most part, visitors will pay the increased sales tax, according to Mayo.
The sales tax district is a very small area, between 5th and 6th streets, and Minnesota and State avenues.
During a public hearing on the CID, Carolyn Wyatt, a resident, said she wanted to see more minority hiring. She said she didn’t see many African-Americans working on construction projects in that area. There are many persons who need jobs in the downtown area, she said.
UG Administrator Dennis Hays responded that although the hotel construction was completed more than 10 years ago, the hotel’s operators make an effort to hire locally and purchase products locally, and the policy of the commission is to encourage minority, local and women business enterprises in projects in which it is involved.
Another story from the Wyandotte Daily News on May 21, 2013:
UG approves bond refunding on downtown hotel
by Mary Rupert
The Unified Government Commission unanimously approved a bond issue refunding on Thursday, May 16, 2013, that will go toward renovating the Hilton Garden Inn in downtown Kansas City, Kan.
Dave MacGillivray, chairman of Springsted, reported that the bond issue would save the UG about $325,000.
A restructuring extended the bond issue for five years, resulting in a reduction of annual debt payments of about $1 million a year through 2018, according to UG information. Also, the hotel temporary note was refinanced, and an additional $2 million was authorized for hotel upgrades.
McGillivray explained that the bond sale, which was authorized by the commission in April, would have an effect on investor relations and the UG’s credit rating.
Standard and Poor has rated the UG at AA, which is considered good. Should it fall to the A rating, it would cost the UG a lot in interest costs, he explained.
Last year, Moody’s had rated the UG as AA3 negative outlook, which meant that if the financial picture, including reserves, did not change that the rating could drop to A. The UG reversed the negative trend in 2011, he said, and created a surplus in 2012. After the rating service evaluates the latest UG audit, it could return the UG to an AA rating without a negative outlook, he believes.
Commissioner Hal Walker asked about the commission being locked into the sale on May 16. Mayor Mark Holland said the UG Commission authorized the bond sale on April 4, after the general election, but before the four new commissioners took office.
Walker asked if any money was being made on the downtown hotel.
Lew Levin, UG chief financial officer, said the UG receives transient guest revenue tax from the hotel, as well as sales tax revenues. The hotel runs the day-to-day operations of the Reardon Convention Center, which formerly cost the UG $250,000 a year, Levin said.
The UG pays debt service on the cost of constructing the hotel, he said. The UG is building equity in the hotel, he said.
After questions from Walker, UG Administrator Dennis Hays said the hotel was a “break-even property.” The UG is not making money on it, but the hotel is an anchor downtown, he said.
Holland said that while the present UG Commission may not have approved the same financial package as the past commission made 10 years ago to build the downtown hotel, nevertheless the hotel is a legacy that the present commission has inherited. The questions about the refinancing were addressed earlier in standing committee meetings, he said, and the committee recommended to go ahead with the refunding.
The 10-year anniversary of the hotel is part of what started the refunding process, as the hotel chain wanted to renovate it at the 10-year point, according to UG officials.
Commissioner Ann Murguia said she was told by UG officials recently that the UG is losing about $50,000 a year on the hotel. She talked about how there might be some other funding priorities in the northeast area, such as a new grocery store, and discussed finding a private investor to take over the UG’s role.
Holland said some of the hotel loss is due to the Environmental Protection Agency moving its offices from about a block away from the Hilton Garden Inn, to Lenexa, Kan., last year, resulting in fewer hotel room stays.
“Filling the EPA building is a major priority,” he said.
However, officials believe the hotel in downtown Kansas City, Kan., has similar room occupancy as hotels in downtown Kansas City, Mo.
When the downtown Kansas City, Kan., hotel was built, it was part of a downtown renovation project including the BPU building and a new parking garage, Holland said. Currently, downtown has hit a little stalling point and needs to get jump-started, he said.
Commissioner Brian McKiernan said while the hotel has not become the linchpin that the UG thought it could be 10 years ago, at the same time, he did not want anything to happen to the new transit center nearby and he wanted the Hilton brand to remain downtown.
Commissioner Gayle Townsend asked about looking at an “end game” for the hotel. Some commission members raised questions about the future of the UG’s relationship with the downtown Hilton Garden Inn, and they decided to discuss an “end plan” for it at a later date.
Holland said a good time to discuss this more could be in a few weeks when a community improvement district for the hotel is on the agenda. A CID would levy an additional tax on those who use the hotel.