By TESA GLASS
MT. VERNON —
The Drury Hotel is working with the city to create a new hotel and possibly develop two new restaurants around its current location.
“The city has worked on an agreement with Drury, which will be presented to the council on Monday,” City Manager Ron Neibert said.
The new hotel has an estimated project cost of $19.9 million, not including the possibility of two restaurants for the area, Neibert said.
“There is also some demolition involved in the project,” Neibert added. “They will be taking down the existing Drury Hotel at some point in the project, demolishing the old Denny’s building, the former gas station, the Thrifty Inn and the old Behind The Pines building. Their plans are to have two restaurants on the property in their development area, but they are not committing to it at this time.”
Neibert said the agreement has an incentive for the restaurants. The agreement uses East Side Tax Increment District funds and hotel taxes, home rule taxes, sales taxes and the food and beverage taxes in the project area as an incentive.
“The city will agree to reimburse them up to $5.03 million,” Neibert said. “Of that, $3.03 million will come from TIF funds and $2 million will come from a rebate of hotel taxes, sales taxes including Home Rule taxes and food and beverage taxes, just in their project area. So, their reimbursement is contingent on their own success.”
The project area does not include the former Behind The Pines property of the buildings being demolished.
“Also, from the TIF funds, to get the $3 million, they will receive 90 percent of the increment and we retain 10 percent,” Neibert said. “From the tax funds, they will receive 85 percent of new taxes created from their project over a base of $167,000. We currently are getting an average of $167,000 from the property at this time, so we want to maintain that base. We are using the TIF concept on the city portion of the agreement.”
At this time, there are few funds in the East Side TIF, so to get the project started, Drury will be issuing notes to cover the $5 million, and the city will reimburse Drury as funds are available.
“Essentially they are self-financing the notes up front,” Neibert said. “The amount will be amortized over a 25 year period and the city will use TIF and tax funds under the agreement to make payments to them. If there are not enough revenues to pay, under terms of the notes, the city is not obligated for further payment. If they are successful, the money will be there. If they don’t raise the (Equalized Assessed Valuation) and improve the (TIF) increment within 25 years, it’s done and there are no more payments.”
If the council approved the agreement during its meeting on Monday, construction and demolition is expected to begin immediately with full completion of the project in 20 months.