The Jefferson City School Board is opposed to the Tax Increment Financing (TIF) proposed for the redevelopment of the Truman Hotel & Conference Center property as it currently stands, according to discussion at a Tuesday meeting.
If the TIF is approved in its current form and the project moves forward, the school district would gain $1.69 million in revenue, but would forefeit $11.6 million in new property tax revenue over 23 years.
The Puri Group of Enterprises, which purchased the Jefferson Street hotel and conference center in July 2013, submitted an application to the city for about $8.89 million in TIF assistance for redevelopment of the 8.51-acre property.
City Attorney Drew Hilpert said the TIF is, in part, to help pay for the demolition of the hotel, which has fallen to disarray and is "full of asbestos."
The Puri Group would replace the Truman Hotel with two new ones - a Holiday Inn & Suites and a Courtyard by Marriott - and renovate the existing 24,000-square-foot meeting space. A restaurant, Cheerleader Pub and Grill, would be located inside the Holiday Inn & Suites.
Vivek Puri, of the Puri Group, told the News Tribune in a previous interview the project would not continue without the TIF assistance.
The purpose of a TIF is to help a developer pay for rehabilitation of a blighted property. Over a maximum lifetime of 23 years, the Truman Hotel TIF would reimburse the Puri Group for approximately $8.89 million in project costs, plus financing costs and interest, which accounts for about 15 percent of the projected $56.78 million for the total redevelopment.
As the property's values would rise as a result of redevelopment, the Puri Group would pay the increased property tax; but any property tax revenue collected over what was collected before the TIF began would be paid back to the Puri Group on a pay-as-you-go basis for up to 23 years or until the reimbursable amount was reached.
The TIF as proposed would also reimburse the developer with 50 percent of new sales tax revenue produced on the property, but that amount would be negligible compared to the property tax benefit because sales tax charged on lodging costs legally cannot be attached to a TIF - meaning the amount of sales tax that would be collected on the property would be primarily from the restaurant.
There's very little downside for the school district if the project isn't completed, said Jefferson City Public Schools CFO Jason Hoffman.
The current appraised value of the hotel is $1.75 million, several million less than it was worth in 2012, Hoffman said. Over the maximum 23-year period, the district would lose only about $24,000 in potential tax revenue if the hotel and conference center are left in their current state.
If the TIF moves forward in its current state and the project is completed, a projected $11.69 million in property tax revenue will go back to the Puri Group instead of funneling to the district over that 23 years, Hoffman said.
The city is projected to redirect roughly $2.72 million in tax revenue from the potential new development, and the county is projected to redirect $2.52 million during that same time frame for the current TIF, according to Hoffman's information.
Nearly half of the school district's revenue comes from property taxes, Hoffman said - so the TIF affects the district more than the other government entities.
The school board met for a special session Tuesday to discuss the TIF, and the board members concluded they'd like more information about the project and time to discuss their stance. Currently the TIF proposal asks for 100 percent reimbursement to the developer of increased property tax revenue, and the district would like to negotiate that amount.
Board member Pam Murray said she found it "hard to believe" a different developer wouldn't be interested in the property if the TIF isn't approved and the Puri Group drops the project. She said, in her opinion, it's a prime piece of real estate and the property wouldn't sit empty forever.
She suggested the board negotiate with the Puri Group, and the other board members agreed.
A report gathered by third-party firm Springsted on behalf of the city determined the project proposed by the Puri Group on the blighted Truman property could not profitably proceed without TIF assistance.
"As presented, I think we have some concerns," said board President John Ruth. "The board is supportive of progress but doesn't support it as presented. We'd like to see the project happen, but $11 million is a real number."
Hoffman and Superintendent Larry Linthacum will serve as representatives on the 11-member TIF Commission. The TIF Commission will meet April 11 and will eventually vote on whether to recommend the TIF to the City Council. The City Council would then vote to approve or disapprove the application.
"We're extremely conscious of revenue since we're missing $5 million (of unfunded money) from the state foundation formula," Linthacum said. "We value economic growth, and we think the foundation of that is the school district."
Linthacum said JCPS will ask the commission for a 30-day extension starting Monday before casting its vote on the TIF application. However, the extension is not guaranteed.
"It's an important piece of property that's in disarray, so it's a good project," Hoffman said. "But it makes it hard to take a stance with the tax dollars that would come to us (if the project moves forward without the current TIF)."
The district supported a TIF in 2012 for the redevelopment of Capital Mall, but that TIF had higher stakes for the district, Hoffman said. JCPS stood to lose $387,897 in tax revenue if the redevelopment didn't occur, and it is projected to gain $2.36 million in new revenue during the life of the TIF.
In the Capital Mall case, the district had more to lose and more to gain, Hoffman said.
Related article: Truman hotel seeking Tax Increment Financing for proposed developments