JC Council: Conference center plans need specifics
Council members outline concerns, details they want to see
Sunday, November 24, 2013
As Jefferson City moves into contract negotiations with two developers for a possible conference center, members of the City Council say they are looking for more specifics about each plan before a final decision can be made.
Conference Center Proposals
Capital Mall: $36 million
Developer: Farmer Holding Group
150-room hotel (Courtyard Hotel by Marriott)
10,000 square feet of additional meeting space
23-year tax increment financing district to raise $10.6 million
40-year community improvement district to raise roughly $5 million
West McCarty Street: $24.6 million*
Developer: Erhardt Hospitality Group
150-room hotel (Courtyard Hotel by Marriott)
30,000-square-feet of meeting space with collapsible doors
Requests state super TIF, which requires legislative approval
City tax-exempt status for all purchases of furniture, fixtures and equipment
Missouri Downtown Economic Stimulus Act funding
Property tax abatement
*Proposal requires city to build and operate $7 million, 350-space parking garage
Last week, the City Council voted 6-4 to move conference center proposals from both Jefferson City-based Farmer Holding Co. and Hannibal-based Ehrhardt Hospitality Group forward into the contract negotiation phase. There is no timeline for completing the next phase, with interim City Administrator Drew Hilpert saying it could take from two months to two years before contracts are ready to be presented.
Farmer Holding Co. has proposed a $36 million hotel and conference center at the Capital Mall, while Ehrhardt Hospitality has proposed a $24.6 million hotel and conference center at the West McCarty Street site, which is owned by the state.
But City Council members say they are looking for a lot more specifics to come out of the next phase in order to make a decision, especially when it comes to the proposal from Ehrhardt Hospitality Group.
Second Ward Councilman J. Rick Mihalevich said there are many unknowns in the downtown
proposal, and the goal now is to get to the point where there are no unknowns left in either proposal. For the Ehrhardt proposal, Mihalevich said the city needs to know what the state is willing to contribute and what they may want in return.
Previously, the city has indicated the state would be willing to sell the land for $2 million or do a type of trade where the city has to make up for lost parking to state employees.
Mihalevich also said a discussion needs to be had with the Ehrhardts about “acceptable and unacceptable economic incentives.”
The Ehrhardt proposal lists several incentives as being required to make the project work, including a state super tax increment financing (TIF) district, Missouri Downtown Economic Stimulus Act funding and chapter 353 property tax abatement.
“I don’t believe (chapter 353) is a viable option,” Mihalevich said.”They may not have been aware … of the majority not wanting to touch the 353.”
He also noted that the state has indicated Missouri Downtown Economic Stimulus Act funding is no longer available.
As for the Farmers’ proposal, Mihalevich said the council still needs to consider the TIF district and community improvement district proposed by the developer. Mihalevich said he doesn’t know whether those districts will be approved by the council and, without those incentives, the Farmers’ plan may not work.
Mihalevich said both developers have different construction costs per square foot as well, and the city needs to take a close look and make sure nothing is being built below standard or, on the other side of the spectrum, if unneeded amounts of money would be spent.
In the Farmers’ final proposal, construction costs for the conference center are listed at $300 per square foot for an $18 million conference center facility. The Ehrhardts’ proposal does not specify a cost per square foot, but the conference center facility itself would cost $9.1 million.
“What are we getting for that additional square foot cost,” Mihalevich asked.
Third Ward Councilman Bob Scrivner said he’ll be looking for specific numbers, especially on how to close the funding gap, which is the difference between the total price tag on a proposal and the city’s $9 million contribution.
“What it’s going to boil down to for me is the numbers,” Scrivner said.
Scrivner said the Farmers have provided a blueprint for how to close the funding gap and the council needs to decide if that blueprint is acceptable. He said many details still need to be discussed as part of the Ehrhardts’ proposal, such as how a proposed super TIF would work and what properties would be part of any TIF.
A super TIF would allow for property and sales taxes generated by the new project and development to be used to repay the costs of the redevelopment itself. A state super TIF also includes a portion of the state’s sales tax revenue to be returned to the developer as well.
“With the Ehrhardt Group, my concern has been all along that they really didn’t provide us any kind of a blueprint,” Scrivner said.
Like Mihalevich, Scrivner noted the differences in construction costs per square foot and whether those costs are appropriate. But the largest missing pieces of the Ehrhardts’ proposal, he said, is the land acquisition and need for a city built and operated parking garage, with an estimated price tag of $7 million.
“It all goes back to money,” Scrivner said. “There’s a lot of work left to be done … what can we afford and what can we accept as a council.”
Fourth Ward Councilwoman Carrie Carroll said working with the state is a big missing piece, but one that is on the city, not the developer.
“We should have (had discussions with) the state first and then be able to show the developer here’s what’s possible,” Carroll said. “That clearly counted against the downtown developer … that’s just a key factor that was missing.”
Carroll said as the process unfolded, the city should have entered into discussions with the state about acquiring the needed land on West McCarty Street, as well as what the state is willing to contribute.
The amount of exposition space in both of the proposals may be insufficient, Carroll said. The city’s RFP sought at least 30,000 square feet of expo space.
She noted the Farmers’ proposal includes a 20,000-square-foot ballroom, which would provide exposition space, with an additional 10,000 square feet of meeting space. The Ehrhardts’ proposal includes 30,000 square feet of meeting space with collapsible doors.
“If we don’t have sufficient expo space, and I think we’ve said this very clear throughout the process, then it’s something that may set us up to fail,” Carroll said. “Expo space is critical.”
Second Ward Councilman Shawn Schulte said the council simply needs to gather additional details on both proposals and comb through them very carefully to make the best decision for the city.
“I can’t name one specific detail, there’s just a lot,” Schulte said. “We have two great companies that the council is looking at, and I am committed fully to exploring and getting into the details of both companies.”
Fifth Ward Councilman Ralph Bray said the plans lack specifics needed for the council to make a final decision. Bray said the Ehrhardts have been handicapped because they don’t know what it will take to acquire the land and the parking issue.
“I think it’s easy to see that Farmer Holding has spent much more time on their proposal than the Ehrhardt Group,” Bray said. “The Ehrhardt Group (was) handicapped from the get-go.”
First Ward Councilman Rick Prather said the biggest question is what will be the city’s return on its $9 million investment. Prather said each plan has different issues and the city needs to go with the project that is the most financially feasible.
Prather also noted the city can still choose to go with neither if questions remain unanswered.
“I’m skeptical, but hopeful,” Prather said of the proposals getting to where they could be accepted by the city. “I’m not afraid to say no to both of them.”
Fifth Ward Councilman Larry Henry said at this point, he needs to see a complete plan for the downtown site. As for the Farmers’ proposal, Henry said the city needs to look at the numbers involved in the proposed TIF at the mall.
Henry said the proposals unveiled earlier this month were supposed to be the best and final offers, but because the council voted to move both forward to allow for more questions to be answered, they clearly weren’t the final offers.
“Those weren’t really best and final offers,” Henry said. “I just want to see a complete plan and what that looks like.”
Henry also said he’s wary of adding a new hotel to Jefferson City, questioning whether the existing market could handle a new hotel without taking business away from existing hotels.
Fourth Ward Councilman Carlos Graham said there are many unanswered questions and it was only fair to move both forward to allow the Ehrhardt proposal to be more complete. Graham said the city needed to enter into discussions with the state, but that didn’t happen.
First Ward Councilman James Branch said there were too many unanswered questions with the proposals, and contract negotiations will allow the developers to put together much more complete proposals. Branch said the proposal from Ehrhardt Hospitality Group is especially difficult because there are so many aspects out of the Ehrhardts’ control, such as land acquisition and parking.
“All we’ve seen so far from either one of them … is a presentation,” Branch said, noting Farmer Holding Co. had the better presentation. “I think there’s going to be numerous changes in both proposals before the end is done.”
Branch said moving both proposals forward allows the city to get to a point where it will be easier to evaluate them both fairly.
During the council’s debate last week, two council members brought up a list of criteria from the city’s original request for proposals, or RFP, which laid out a 100-point system for evaluating proposals. The criteria lists eight categories, from long-term economic impact to location of the facility with accompanying points.
At that time, Schulte said the city never received an evaluation based on that criteria from the hired facilitator of the last phase, Charles Johnson, of Johnson Consulting. Schulte said location had been the most heated aspect of the two proposals, but noted the criteria listed location as being worth five points.
“Has the emotion and passion regarding location overshadowed the other 95 points?” Schulte asked during last week’s council meeting.
When asked about whether he believes the criteria gave weight to the right aspects of a conference center project, Schulte said that is the criteria the 10 council members voted on to include.
“The numbers that were used, we all discussed and were talked about,” Schulte said.
Scrivner said that criteria, in his opinion, is no longer valid. He said the criteria was a tool used to get developers to respond to the RFP.
“We’re beyond that,” Scrivner said. “In my mind, that points system is gone … we’re past the evaluation criteria.”
Scrivner said the council will base its final decision on the contracts presented at the end of the negotiations phase, and a lot can change from now to when the contracts are finished.
Bray agreed, saying he believes the city is beyond the criteria laid out in the RFP and the points system that goes with it, but he noted he bets each council member likely would have weighted the criteria differently.
Prather said he didn’t come up with the criteria but he believes it’s interesting that the project originally depicted to voters when the lodging tax increase was approved was located downtown.
Prather said the city would need to receive a phenomenal proposal that gives it the best return in order to put the conference center anywhere but downtown. When asked why the city’s RFP opened up proposals to anywhere in city limits if that was the case, Prather said he wasn’t part of those discussions.
“Ultimately, wherever it goes, it needs to be what’s best for Jefferson City,” Prather said.
Henry said the criteria seemed to get lost somewhere, noting that when the city hired Johnson in May, everything done by the city for the original RFP was thrown out.
“Somewhere down the line, that just went by the wayside,” Henry said. “The city was trying to figure this out on a whim … the city got way off track with that RFP.”
That’s why, Henry said, he voted against hiring the facilitator to begin with, saying he believes a consultant should have been hired from the beginning if the city was going to go that route.
Carroll said she believes location should have been weighted more heavily in the criteria because she believes the right location is what will sell the conference center to meeting planners and the real question is where will the conference center be most successful.
“Truly, site is the base of what will draw them here or not,” Carroll said. “Location is key.”
Graham said there is some confusion because it’s been said voters were shown the downtown site when asked to increase the lodging tax, but if that was indeed a promise, the city’s RFP never should have been opened up to other sites.
“Was that really what the voters were looking at,” Graham asked. “That’s what’s concerning to me.”
Hilpert said the council still needs to decide whether another consultant is needed for the next phase and, if so, whether the city should bid out the work or simply rehire Johnson, who the city paid $17,000 to be the facilitator during the last phase.
The council also needs to decide the budget for any stipends or reimbursements for developers in the next phase, Hilpert said. He noted that one developer, whom he did not name, has proposed a budget of $200,000 for architectural costs and legal expenses related to tax increment financing district work for the next phase, though he specified that is not the amount the developer is requesting be reimbursed.
Hilpert and Interim Public Works Director Matt Morasch also said the city would like to complete traffic studies of both locations, which is estimated to cost $30,000 for both. Though the council has yet to specify, Hilpert said he believed all expenses related to the conference center project would come from lodging tax funds, not from general revenue.
Third Ward Councilman Ken Hussey did not return calls for comment.
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