$20M hotel planned for downtown wins funding assistance for public improvements
Citing benefits to the downtown district, the Missoula Redevelopment Agency’s board of directors on Thursday unanimously approved $1.8 million in tax increment financing to make public improvements to the corner of Pattee and Main streets as part of a $20 million hotel project.
The funding covers work to remediate and deconstruct a garage that’s been vacant on the site for more than a decade. It also funds street lights and trees, work to shore up an historic property next door during construction, and bring modern utilities to the site, among other things.
“We’re going to see those things on virtually every redevelopment downtown,” said Ellen Buchanan, director of MRA. “Utilities are an issue down here if you want to go multistory, and land is too expensive downtown not to go multistory. All the public right-of-way that hasn’t been done in the last decade or so needs improvement.”
HomeBase Montana plans to break ground on the AC Hotel by Marriott in June, so long as the City Council approves the revenue bond needed to cover the TIF allocation approved Thursday.
Buchanan said the increase in taxable value generated by the six-story AC Hotel will be more than enough to cover the debt service generated by the bond.
“Our analysis was to make sure the property tax revenue generated by this hotel is more than enough to satisfy the debt service on the bonds, and in this case, it is,” Buchanan said. “Financially, we’re going to see a very different picture after this year when we get the new taxable values in.”
The new hotel will be the second built by HomeBase Montana in downtown Missoula. Groundbreaking will follow the recent opening of the Residence Inn by Marriott, located next door. Together, the two projects represent a private investment north of $40 million.
HomeBase developer Andy Holloran said placing such projects side-by-side represents an industry trend and is common in other cities.
“A number of projects throughout the U.S. are gravitating to this dual-brand concept,” he said. “It enables properties like this that are adjacent to one another to really operate as one.”
While the Residence Inn offers families and business travelers an extended stay, the new AC Hotel is geared toward a younger clientele. The project includes 105 rooms, along with coworking space, a basement restaurant, or speakeasy, and a rooftop bar overlooking downtown Missoula.
“For us, it casts such a wide net for those guests looking to come downtown,” Holloran said. “We really have everything to offer, and I think it’s just a tremendous complement. It’s a very exciting, dynamic project to bolster that particular corner.”
Holloran said the new project also has taken steps to address parking. HomeBase has purchased 93 lease spots in the Park Place Garage for both the Residence Inn and AC Hotel. It also secured a 20-year lease on the parking lot at Pattee and Broadway.
That parking lot could accommodate 120 vehicles, Holloran said, bringing to nearly 200 the number of spots reserved for the two projects. HomeBase has also secured the first-right of refusal for the parking lot itself, suggesting it could eventually develop the site as its third downtown project.
“I know there’s been a lot of public opinion about the lack of parking,” Holloran said. “While we as a community don’t have a parking minimum downtown, I think it would be irresponsible for somebody to develop a project without thinking about the impact on the community and the impact on downtown and really, the success of the project.”
While the project received unanimous support for TIF funding from MRA’s board, the revenue bond must still pass the City Council.
And on Thursday, three members of the council were present, with two of them seeking a breakdown in costs related to the allocation of TIF funds approved for the project.
“The way I see MRA and TIF money in this stage of its long career is that it primes the pump, leverages private investment and starts to create the tax increment to raise that base,” said council member Gwen Jones. “We prime the pump, but I also really want to see not all the increment going back into private investment.”
Jones, along with council member Bryan von Lossberg, pointed to the eventual conversion of Front and Main streets to two-way traffic, as well as the city’s future plans for the library block. That property was donated to the city earlier this month and represents what Jones described as a “huge game-changer in this district.”
“We want to have all the tools at our disposal to get our most bang for the buck,” said Jones.
Buchanan said that even with a bond to cover public improvements associated with the AC Hotel, the district will have a large enough increase in taxable value to fund other projects.
The ROAM student housing project stands among them, as does the Residence Inn, which is expected to generate an additional $180,000 annually after debt service.
“The Merc is going to have a significant spinoff beyond debt service,” Buchanan said. “ROAM will have access after debt service. When we see the numbers in the late summer or early fall for Fiscal Year 2020, I think it’s going to be a sea change from what we’ve seen in this district, because of that excess beyond the debt service requirements for these big projects.”