GRAND RAPIDS — City commissioners voted 6-1 Tuesday to give the Downtown Development Authority leeway to invest $5 million in street work and other public improvements that will pave the way for Alticor Inc.’s new downtown hotel.
Commissioners had to amend the DDA’s tax increment financing and development plan for Alticor to receive tax credits and reimbursement revenue for the project.
HP3 LLC will break ground next month on the planned 24-story, 340-room Marriott Hotel near the intersection of Pearl Street and Campau Avenue. HP3 had sought and was granted a brownfield tax credit for the project from the Brownfield Redevelopment Authority, Michigan Economic Growth Authority (MEGA) and the City Commission. The state offered a $5.9 million tax credit.
For the project to qualify for Brownfield Single Business Tax credit, MEGA stipulated that either the city or DDA had to come up with a 45 percent local match. The DDA agreed to ante up $2 million in cash for public improvements that include reconstruction of Campau Avenue NW and renovation of the Louis Campau Promenade. The DDA also will reimburse Alticor $3 million for public improvements the company makes during construction, which will include additional streetscape improvements, utilities, floodwall and riverwalk construction, skywalks and ADA required facilities.
Alticor estimated it would cost $11 million to remediate and redevelop the brownfield site, so the nearly $6 million in tax credits and the DDA’s $5 million contribution are meant to help Alticor recoup the additional costs of putting the hotel on the brownfield site.
The DDA’s obligation to reimburse Alticor for public facilities improvements is limited to 75 percent of the local tax increment received annually from the project. The remaining 25 percent can be used for other downtown projects.
Other hotel operators have complained that the DDA is subsidizing the new hotel and giving Alticor an unfair competitive advantage. Commissioners heard from a number of disgruntled residents at Tuesday’s meeting.
Jose Flores, owner of La Familia Stop N Shop, equated local tax support for the project to corporate welfare.
“I just believe that there’s something wrong with Michigan and the city of Grand Rapids when they began to give out corporate gifts that look to me like welfare. I do not believe that billionaires, such as those that operate Alticor, need tax breaks,” he said.
Brian Maxwell, general manager of the local Howard Johnson hotel and a member of Taxpayers Against Waste, said he opposed local funding for the project because it would impact occupancy rates at his hotel.
“My employees have voiced concerns to me about job security and what’s going to happen to them if the new hotel goes up,” he said. “I’m asking that you think about the smaller people when you decide the vote.”
Ed Wilson, general manager of the Radisson East on Ann Street, pointed out that hotels in the metro area employ thousands of people, and he claimed the tax funding gives the new hotel an unfair leg up competitively.
Bob Sullivan, who has ownership in three local hotels, told commissioners that the new hotel’s riverfront property is neither distressed nor blighted, so its owners don’t need any help.
“We don’t think they need this help. If the DDA didn’t use the funds in this manner, it could give the whole $5 million-plus to city schools, and I want the world to know that,” he commented.
Joe Tomaselli, president of Alticor’s Amway Hotel Corp., countered that the new hotel represents more than $100 million in private investment and “progress for the community.”
“It will help strengthen our convention business, thus filling downtown and area-wide hotels,” he remarked.
Bert Crandell, the hotel’s project manager, added that the project would create 250 permanent jobs and hundreds of construction jobs over the next two years. He said the hotel would add $650,000 to the hotel-motel tax annually and have an estimated $2.5 million ripple affect on the local economy. He said the project also creates a new tax base that will provide more than $470,000 a year to Grand Rapids Public Schools.
DDA Executive Director Jay Fowler said the DDA is not subsidizing the hotel.
“One issue that’s overlooked by some here is the extra expense of developing a site of this sort,” he said. “It’s much more difficult to redevelop a brownfield than a greenfield.”
Mayor George Heartwell said misconceptions are that the taxpayers are paying for the hotel, that those tax dollars could be used elsewhere, and that the project will reduce tax revenues to the city.
“That’s not true,” he said.
The new Marriott is expected to open in the summer of 2007.