Calder Hotel Would Be Tax Boost

August 9, 2002
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GRAND RAPIDS — The developers of a proposed Calder Plaza hotel claim they can move city and county officials and administrative staffs from their current locations on the plaza to equitable downtown sites at no cost to taxpayers.

They also estimate that a hotel on the plaza would create 350 jobs and account for about half of the property tax revenue the city has targeted for its SmartZone.

“What our project will pay in property taxes will fund 50 percent of what the SmartZone is targeting for its entire budget for revenue,” said Jack Buchanan, president of Blue Bridge Ventures.

“So it’s a significant impact on that SmartZone.”

And, apparently, that is money the zone could use.

A few weeks ago, the Michigan Economic Development Corp. awarded the city’s zone $300,000 for its business incubator — one of six awards it made that totaled $2.5 million.

At the same time, the MEDC reported that of those six SmartZones, the one in Grand Rapids had raised the least in local resources: $423,000. The MEDC said Houghton, a small Upper Peninsula city that is home to Michigan Tech, had raised $600,000, while Kalamazoo had raised $2.46 million for its zone.

State law allows the city to capture the growth in property taxes within the SmartZone boundary for use within the zone. But a sizable portion of the city’s zone contains non-tax paying institutions, such as schools, government offices and nonprofit organizations.

The proposed hotel falls within the zone’s borders, and its developers have told city officials that they would receive nearly $4 million from it in property taxes over 15 years, or about half the $8 million the city hopes to get in revenue over that period.

Blue Bridge, a local real estate developer, and Hines Interests LP of Houston want to put up a 24-story convention-center hotel on Calder Plaza, across Monroe Avenue from DeVos Place — the new meeting facility currently under construction.

The developers hope to meet again with city commissioners on Aug. 20, and they hope to leave that meeting with a binding option on a buy-sell agreement with the city. Ed Kettle, of Blue Bridge, told the Business Journal that talks with City Manager Kurt Kimball and his staff were going well and that a number of issues concerning the project have been cleared up. He said a few matters still remained to be resolved, though.

In addition to the property tax the hotel would generate, it also would produce income tax, personal property tax and the lodging excise tax. It isn’t certain how much those taxes would total yet because the exact number of rooms the hotel would offer hasn’t been nailed down, and won’t be until the developers arrive at an agreement with public officials.

“We’re planning to do a 400-room hotel. Our designs are for a 400-room hotel. Our financing proposal is based on a 400-room hotel. Our feasibility study is based on a 400-room hotel. But what we have said to the city is that we will do at least a 300-room hotel,” said Buchanan.

“It’s not our intent to carve it back after the fact. We’re having the city look at it as a 300-room hotel and if we do 400 then everyone is going to be happy. Even though our intent is to do 400, we didn’t want to over-promise.”

Rob Buchanan, also of Blue Bridge, pointed to a convention center study done about five years ago that noted the city needed another 1,000 hotel rooms within walking distance of DeVos Place in order to fully leverage the building’s capabilities. He added that the hotel would make the convention center more marketable and spur investment in downtown.

“We propose moving you to a new location at no cost, and you get a new facility,” he told city commissioners.

Hines Interests got involved with the project in 2000, and kept a fairly low public profile until two of its representatives met with city commissioners at a luncheon in July. Buchanan told the Business Journal that Hines’ early involvement in the project was limited to private meetings with city and county officials because they didn’t want to go public until they had put more pieces of the project together and cemented their financing deal.

“In other words, if someone said they are going to do an office building and if they’re not breaking ground quickly, people begin to say, ‘See, I told you they weren’t going to pull it off,’” explained Buchanan.

“So we’ve held off and kept it very quiet until we got to the point where we felt it was inevitable, and a matter of whether they were willing to move from their current facilities to a brand new facility at no cost to the taxpayers,” he added. “If they are, then we’re ready to do a hotel.”     

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