The Puri Group of Enterprises met with the Jefferson City School Board on Monday to clear up some misconceptions about the proposed tax increment financing (TIF) for the Truman Hotel redevelopment project.
The redevelopment plan is broken up into two phases and would replace the Truman Hotel with a Holiday Inn & Suites and a Courtyard by Marriott, and renovate the existing 24,000-square-foot meeting space.
The purpose of a TIF is to help a developer pay for the rehabilitation of a blighted property. Raman Puri, vice president and chief financial officer, said the group's third-party financing is contingent on the TIF approval and the project will not be possible for them unless they receive financial assistance from the TIF.
"We want to save an icon as Truman Hotel has been in the past," Puri said. "In doing that, when we bought the property (in 2013) we had already spent $1 million walking in the door trying to upgrade and sustain it as it was. Those efforts were futile because we couldn't get people to stay at the Truman. It was decided in 2015 to fill early commitments and we closed the hotel down because it was bleeding."
Puri said, at that time, they met with the city to discuss potential options. The Puri Group and city officials mutually agreed a TIF was one option to revitalize the property.
Over a maximum span of 23 years, a Truman Hotel TIF would reimburse the Puri Group roughly $8.89 million in project costs. The reimbursement accounts for about 15 percent of the $56.78 million for the total redevelopment.
Once the TIF is approved, the property values are essentially frozen. The Puri Group would pay the increased property taxes, but the amount above the "frozen figure" is paid back to the Puris for the pay-as-you-go TIF.
Because this is a pay-as-you-go TIF, Puri said they are absorbing all of the risk. The Puri Group will fund the entire redevelopment, and once the project is completed, then they will begin to recapture tax revenue.
If the project fails and the revenue doesn't come through as projected, then it's the Puri Group that "lose their shirt."
By law, the developer recaptures 100 percent of the increased property value and 50 percent of the sales tax from the food and beverages sold on the property.
School districts receive the majority of their revenue from property tax, which is why the district hasn't been in favor of the proposed TIF.
"The property tax is heavy, yes, it is," Puri said. "But we're not allowed, by law, to change the sales tax percentage. The law is vague, but no one seems to want to set a precedent and do it. We've explored the options."
One misconception Puri wanted to clear up is that the district will not receive any additional revenue from the TIF until it expires.
If the TIF is approved in its current form, the school district would gain $1.69 million in revenue.
JCPS, however, is concerned about the $11.6 million in new property tax revenue it would forfeit with the approval of the TIF. Those funds will be redirected to the developer over 23 years.
Puri challenged that the district is only receiving $486,312 in property tax revenue right now, and that figure likely will decline if the project doesn't move forward.
If the TIF is approved, $2.17 million in property taxes will funnel to the district over 23 years, which includes the $486,312 the district already receives. After the TIF is completed, the school system will see an additional $656,763 each year.
If the TIF fails, he said, the district is essentially losing out on a potential $1.69 million in additional property tax revenue over the 23-year period, plus what they could receive after the TIF expires.
JCPS previously said that it was not in favor of the TIF unless the property tax reimbursement was lowered from 100 percent.
Puri said they've met with Chief Financial Officers Jason Hoffman and Superintendent Larry Linthacum twice and they did not ask the group about lowering the reimbursement rate.
"We are open to them and we have an open mind," Puri said. "We want to be good partners."
Linthacum said they did discuss some other potential financial options, and it's something they'd still like to explore as they weigh the pros and cons.
Forfeiting potentially $11.6 million is still a real number for the school district, he said.
If another developer built a hotel without a TIF, then obviously the school district would receive more revenue from property taxes.
"We don't know if another hotel would go in, but supply and demand says it would," he said.
The Puris have said in the past they will walk away from the project if the TIF is not approved.
If the TIF moves forward, Puri said, the projected local benefit is $96.1 million injected into the local economy. About $62.8 million will come from hotel payroll, and $33.29 million is from an increase in tax revenue.
"If the project does well, the TIF will end sooner," Puri said. "It's a win-win for Jefferson City and all tax jurisdictions. We're here today to partner with you and so you can let us know what you would like from us."
Board member Pam Murray handed Puri a three-page list of questions and issues affecting the district. She said while the city has been involved in the TIF process for a year, the district is coming into the conversation late in the process.
The board took up the TIF for the first time last month.
"As far as coming in late, that was not our intention," Puri said. "We thought the city was already talking with you."
In meeting with Linthacum and Hoffman, Puri said he realized there has been some miscommunication. He said the group will review Murray's questions, and because she took the time to put it together, they will take their time and give her thoughtful answers back.
Linthacum said he and Hoffman plan to meet with the Puris and the city next week to discuss the TIF further.
The board will have a work session at 6 p.m. Monday and may discuss the TIF.
The TIF commission plans to meet on May 31, and Linthacum said he assumes the 11-member board will want take a vote to approve or deny the TIF.