NORMAL - The downtown hotel and conference center will cost the town and developer John Q. Hammons $12 million more than expected because of increasing construction costs.
Hammons will pick up the bulk of the increase - an additional $8 million for the Marriott Hotel and $2 million for the conference center. The town will pay another $2 million for the conference center.
"The project is a good one - and will help the community," Mayor Chris Koos told The Pantagraph Editorial Board Wednesday. "We felt it was appropriate to (increase the town's financial commitment). Mr. Hammons is stepping up and absorbing costs; we should, too."
The City Council will vote on the matter March 20.
Koos said the increase in the value of the project also will generate more property tax money to help the town pay its share. The town will receive $1.3 million more in tax increment financing money over the life of the TIF district because the value of the project has increased from $38 million to $50 million.
A TIF district diverts property tax money generated by improvements in the district into a fund to pay for economic development.
The town plans to pay for its additional cost through a general obligation bond - the same route it will take to cover the rest of the $8 million town share of the project.
Bonds issued by the town for town projects are tax free.
City Manager Mark Peterson said with the additional $1.3 million the town will see in TIF money from the project, it will have to cover only $700,000 of the $2 million in extra costs.
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Peterson said there is sufficient revenue from other bonds the town has floated for downtown projects to cover that amount.
The town also will issue a $2 million taxable general obligation bond for Hammons' share of the conference center's increased cost, but Hammons will pay all the principal and interest of that bond, Koos said. The money will be used to purchase furniture, fixtures and equipment for the conference center.
This bond will be taxable because it will be repaid by a private investor. In this case, that will be Hammons.
While the interest rate will be slightly higher than the town's bond rate, it still would be lower than if Hammons sought the financing himself.
Koos said the increased cost of the project came as no surprise because building supply costs are skyrocketing. Town officials and the development team discussed paring down the hotel, but Hammons disagreed, saying he wanted the Normal facility to be "first-class."
Hammons plans to build a nine-story, 222- to 230-room hotel on land bordered by Beaufort Street on the south, Fell Avenue on the west, North Street on the north and Broadway on the east. The attached conference center will offer 20,000-square-feet of usable conference space.
Koos said Hammons plans to begin construction June 15. It will take 18 to 20 months to complete, resulting in an opening date in the first quarter of 2008.
The conference center will front on North Street but also have an entrance on Fell Avenue. It will attach to the west side of the Normal Theater. The brick theater wall will remain intact and be exposed on the inside of the conference center.
The main entrance to the hotel will be off Broadway.
Hammons originally planned to begin construction last year, but the land was tied up in an eminent domain trial. A McLean County Circuit Court ultimately ruled in favor of the town and the three properties needed for the project were purchased by the town from owners Orval and Bill Yarger and Alec Wade.
Normal paid $2 million for those properties and two other downtown properties owned by Orval Yarger.