Editorial Fort Wayne’s Executive Inn Style Experience

How Much Did it Cost Fort Wayne to get a Convention Hotel?

By: Joe J. Wallace, Hadannah Business Solutions

Fort Wayne has finally celebrated the grand opening of a Downtown Convention Hotel to supplement the $125 Million Harrison Square project. The developer was none other than White Lodging that recently surprisingly submitted a bid to develop a replacement for the Executive Inn in Downtown Evansville. What Fort Wayne scored in the agreement with White Lodging includes a Courtyard by Marriott and a Champions Sports Bar for Downtown Fort Wayne. The agreement stated that the original budget was to have been $35 Million but the Fort Wayne Journal Gazette reports that the hotel portion was completed for a cost of $25 Million. The Gazette has also reported that the Convention Hotel was delayed due to problems with financing. Is this beginning to sound familiar?

As White Lodging is the most experienced developer and operator that responded to the RFP issued by the City of Evansville, it is most interesting to examine the Hotel Development Agreement that was signed by the City of Fort Wayne and White Hospitality prior to starting the construction. The agreement was secured by the City County Observer on Friday October 8, 2010. Following is an item by item analysis of the value of what the City of Fort Wayne agreed to and had to deliver on to attract White Lodging into an effort that culminated in a proud and smiling group of local dignitaries at last month’s grand opening.

ARTICLE I: OBLIGATIONS OF CITY

Section 1.1. Acquisition of Hotel Site. City agrees to acquire, at no cost to Developer,
all parcels of real property…for the hotel.

Section 1.2. Site Demolition and Preparation. Upon acquisition of all parcels
comprising the Hotel Site and Garage Site, the City, at its sole expense, shall demolish and
remove all structures upon the Hotel Site and remove all debris resulting from such demolition.

Section 1.3. Environmental Remediation. The City agrees to undertake, at its sole
expense, and in consultation with Developer, environmental testing of the Hotel Site prior to
demolishing the structures … City agrees to develop a plan to remove, remediate or manage
the Hazardous Materials consistent with the intended use of the Hotel Site.

Section 1.4. Transfer of Hotel Site. Upon acquisition of all Hotel Site parcels pursuant
to Section 1.01, completion of Site Demolition pursuant to Section 1.02, and completion of the
Remedial Measures pursuant to Section 1.03 (if any), the City agrees to transfer fee title to the
Hotel Site to the Developer for a cash consideration of One Dollar ($1.00).

Section 1.5. Parking Facility. The City or its assignee shall construct a new public parking garage on the Garage Site so as to create 250 new parking spaces.

Section 1.6. Contribution of City. In connection with the construction of the Hotel by
Developer, and otherwise in support of the development, construction and operation of the Hotel
by Developer, the City shall provide the following at its sole cost and expense:

A. The City shall transfer title to the Hotel Site and shall deliver the Hotel Site in construction-ready condition as described.

B. The City shall make funds available to Developer to construct sidewalks, streetscape, curbing, trees and other plantings and other infrastructure or improvements on the Hotel Site in areas available to public access, in an amount of One Million Dollars ($1,000,000) in the aggregate.

C. The City shall construct the Parking Facility, to which the Developer shall have access for Hotel guests.

D. The City shall assist Developer in obtaining deductions or abatement of real and personal property taxes to the maximum levels permitted by law.

E. As the Hotel Site is located in a Community Revitalization Enhancement
District (“CRED”), the State of Indiana has allocated a Six Million Dollar ($6,000,000)
CRED tax credit for the Hotel.

F. The Commission shall have agreed to provide additional support to the
Developer of Two Hundred Fifty Thousand Dollars ($250,000) per year, for a term of
twenty (20) years.

G. The City shall have obtained all governmental approvals, and entered into development agreements with other developers for the project.

H. The City shall have designed and agreed to construct, at its sole cost, a physical connection from the proposed Hotel to the GWC (their version of The Centre)

How Much Does all of this Cost?

The following is a conservative estimate of the overall cost to the City of Fort Wayne to accommodate each of the items that had to be agreed to for White Lodging to commence the construction of the Courtyard Marriot.

Land, Demolition, Preparation, Environmental Testing and Remediation: $2M – $5M (depending on the extent of any remediation efforts)

New Parking Garage with 250 Spaces: $5 Million (based on $20,000 per space) It must be noted that with the recent realization that the footprint of the Executive Inn is not large enough to accommodate a parking garage. If private land must be purchased to locate a parking garage the price will increase by the amount that is paid for the land. Estimate: $2 Million

Sidewalk Cash: $1Million

Maximum Tax Phase In: $5 Million (based on 10 year abatement on $35 Million assessed value at 3% commercial property tax rate)

Tax Credit (CRED): $6 Million (direct from agreement)

Operating Cash Assistance: $5 Million ($250,000 per year for 20 years)

Bridge to Convention Center: $1 Million to $3 Million (Range of reported costs for comparable structures)

All of these incentives add up to a package that is worth $25 Million and $32 Million to attract and enable White Lodging to complete a project in Fort Wayne that is essentially the same project that the City of Evansville desires to attract to Evansville. It is unrealistic to have an expectation that White Lodging will come to the table with a proposal that departs from the Fort Wayne agreement by very much. Our markets and needs are similar and our completed values are too.

Fort Wayne’s Convention Hotel project when all things are considered was about a $40 Million project. The City of Fort Wayne incented the deal by at least 63% of the total project value and maybe by as much at 80% of the total deal. Do these numbers sound familiar to the analysis that was published in the City County Observer during August? They should as this project and Evansville’s project are nearly identical in scope.

The real difference is that Fort Wayne seems to have known, understood, and disclosed the entire transaction back in the planning stages in 2007. As you recall, 2007 was a time for announcing a self financed developer in Evansville that predictably did not come to fruition. The other difference is that the planning of Fort Wayne resulted in a grand opening in 2010 as opposed to a dazed a confused realization that economic incentive will be required to bring a quality Convention Hotel to Downtown Evansville.

Every taxing entity within Vanderburgh County will become a target from which to assemble a package to attract a Downtown Convention Hotel. Vanderburgh County owns The Centre that has been suffering losses as a result of the untimely closure of the Executive Inn. The Vanderburgh County Council and the Commissioners should have been consulted on this project from day one. It is a matter of public record that the Vanderburgh County officials and thus the citizens of the unincorporated parts of Vanderburgh County were not consulted during this project. The planning or should we say lack of planning have been totally driven by the Mayor and the City of Evansville. The Executive Inn Dilemma was created by the City of Evansville in a vacuum. The financial solutions that must emerge to solve the Executive Inn Dilemma should likewise come from the vacuum of the City of Evansville. For Vanderburgh County to contribute to this bail out is tantamount to taxation without representation and therefore the City County Observer calls upon the elected officials of both the County Council and County Commissioners to resist both the temptation the pressure to bail out the City of Evansville from the Executive Inn Dilemma that the City of Evansville alone created.

Brace yourselves Evansville, the City of Evansville may be putting a Fort Wayne style incentive package together to assure that the $200 Million invested in the Arena and its surroundings are supplemented by a much needed and necessary Convention Hotel. In conclusion, this is why the City County Observer calls for a moratorium on a decision to max the credit card of the Evansville Convention & Visitors Bureau by committing funds that could be instrumental in attracting a quality Downtown Convention Hotel instead of 8 ball fields. It is our opinion that a Downtown Convention Hotel will add more value, created more permanent jobs, and attract more tourism dollars than 8 little league baseball fields will. There is no urgency to make a decision with respect to Robert’s Stadium. Let’s allow next year’s candidates to discuss that in a public forum.