What is the Real Value of the Hotel Incentive Package?

4


Widely Reported Incentives of $8 Million could exceed $18 Million

It has been widely publicized that the incentive package offered by the City of Evansville is only $8 Million but a further examination of the best description of the plan yields a much higher conclusion when all things are considered.

Direct Up Front Assistance: We will confirm that the $8 Million as reported is exactly what is stated in the January 4th minutes of the Evansville Redevelopment Commission. There are however several other forms of direct assistance on a delayed basis along with strategic uncertainties that are left out of the tabulation of costs.

Tax Abatement: A full 10 year tax abatement is approved for the project. The way that works the taxes for the property are phased in linearly over a ten year period where the first year you pay ZERO and the last year you pay the full amount. Assuming that the property will be assessed at the advertised construction price of $32 Million and using the 3% cap for commercial property the annual taxes on the building would be $960,000. Over 10 years the taxes would be $9.6 Million. With a 10 year phase in period the total taxes abated will amount to half of the total or $4.8 Million.

Direct Aid plus Tax Abatement = $12.8 Million

Here are the uncertainties that may raise the cost to the City of Evansville even more:

1. Demolition: Demolition was not included in the list of obligations of the developer. If the City of Evansville ultimately pays for the demolition of the parking garage and the hotel that will ad according to Mr. John Kish about $1.5 Million.

2. Bridge to the Centre: There is no requirement for the developer to install a bridge to the Centre and Arena as the layout on the Woodruff proposal showed. If the City of Evansville ultimately pays for the bridges the cost could be as high as $3 Million according to other estimates.

3. Executive Inn lot Improvements: The lot that will be beneath the footprint of the old Executive Inn will need some improving. Will it be a park or a loading area for the Arena or maybe handicapped parking? Whatever it is it is going to cost some money so lets conservatively estimate that $1 Million will need to be spent to make it whatever it is made into.

Grand total of Direct Incentives, Tax Abatements, and Uncertainties = $18.1 Million

Now which budget will that be applied to? The Arena? General Fund? We can’t wait to see which shell this pebble is under.

Demolition:

RELATED ARTICLESMORE FROM AUTHOR

4 COMMENTS

    • What I hear is taking out loans against several other non-performing properties to cover the downpayment needed to secure financing to complete this deal. When you buy a Welborn building for $10 that will most certainly appraise for several million and you rent out 5% of the Whirlpool building at a rate that allows you to pro forma it into a $10M value for loan purposes then you have the capacity to pull the wool over a bankers eyes. Actually you give the banker the paperwork he needs to pull the wool over his own eyes.

      This is a $40 Million project. The City of Evansville is absorbing at least $12.8 Million of that expense. If Kunkel can hock their other properties enough to get their hands on $10 Million in cash some foolish banker will pull the wool over their own eyes and finance this thing. If not we are back to an open bidding process like we were last May.

      By the way creative and financing have no business being used next to each other after what this country just went through. Either Kunkel has the resources to do this by conventional ways or the City needs to move on to someone else.

      • That’s not very “creative”, that’s just the practical, obvious, to “get” the deal – started.

        Then, Kunkel needs to get made “whole”…

        Think COIT, think mega budget over runs, think off the books payments?

        Have you learned nothing from the CCO reporting? “Conventional ways” are totally out already, because of the obvious cost-valuation differences. If you think a contractor taking a 12.8 Million kickback, to do a deal is “conventional”, you live on a different planet.

  2. A little off story but…Here is a thought on tax abatement. Take it out of the political gamesmanship. Pass a new law giving the same full 10 year tax abatement automatically for EVERY new & remodel project, personal & business that applies for permits as required. If anything would spur development that would! As it sets now, only the big corporations & small business that spend money on lawyers get the tax abatements, yet the cost is spread among all property tax payers. This would also help code enforcement because all projects would need a permit! We all know there are many small projects done without permits; this would help eliminate that problem.

Comments are closed.