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Council demands funding gap numbers from Ehrhardt Group

Council demands funding gap numbers from Ehrhardt Group

Consultant talk put on hold - Johnson may still owe services to city

December 10th, 2013 in News

The Jefferson City Council is requesting more specific numbers from the Ehrhardt Hospitality Group on a proposed conference center within one week after several council members expressed frustration at the lack of information included in the developer's proposal.

At a City Council work session Monday, the council unanimously approved a motion to direct interim City Administrator Drew Hilpert get specific numbers from the Ehrhardts by Dec. 17. The needed information includes the total cost of the project, how much the developer will invest in the project, the funding gap for the project and what incentives the developer is requesting to fill that gap.

The funding gap is the difference between the total price tag on a proposal and the city's $9 million contribution.

In mid-November, 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 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.

The funding gap for Farmer Holding Co. is $27 million, which the developer has proposed closing by using $11.4 million in private investments, $10.6 million in tax increment financing funds and roughly $5 million in sales tax proceeds from a community improvement district.

During a discussion of what tax incentives the city would be willing to authorize for the developers, several council members expressed frustration with the Ehrhardt Group's proposal, saying the city never received much of the information it needs.

"This is foolish for us to sit here and speculate about what they need," said 3rd Ward Councilman Bob Scrivner. "I'm tired of having meeting after meeting after meeting having speculations ... Right now, they're telling us nothing."

Scrivner, who made the motion, originally included that if the Ehrhardt Group did not provide the numbers by Dec. 17, they would be eliminated from consideration for the conference center project.

"If you don't eliminate them, there's no incentive to provide the numbers," Scrivner said. "It's not like they're starting today ... If they don't (have those numbers), I'm not sure I want them as the developer."

But 5th Ward Councilman Ralph Bray made a motion to strike the threat of elimination from Scrivner's original motion, which was approved 8-2. Scrivner and 2nd Ward Councilman Shawn Schulte voiced the only opposing votes.

Hilpert said whatever he receives back from the Ehrhardt Group could be reported in closed session under contract negotiations.

The council also unanimously approved a motion to take property tax abatement "off the table," meaning the tax incentive would not be available to the two developers.

The Ehrhardt Group is the only developer to officially request that incentive in their final proposal, though the Farmers had discussion in closed session with the council about using that incentive. During those discussions, the council indicated to the Farmers that they would not allow property tax abatement as an incentive.

Hilpert also noted that both developers have indicated so far that they will not be requesting any stipend from the city for work done on the proposals.

The council also was slated to discuss a draft request for proposals for a new consultant to assist in the negotiations phase, but that was put off at Hilpert's request.

Hilpert said, after a discussion with Schulte, the city's previous consultant, Charles Johnson, of Johnson Consulting, may owe the city additional services from his contract in the last phase of conference center discussions.

Johnson has been paid more than $44,000 out of the lodging tax fund for his work.

But Hilpert said his contract also included a provision to assist in contract negotiations and he plans to look more thoroughly through that contract to determine whether Johnson owes additional services.