New Hotel Could Fill Lax Tax Till

February 28, 2005
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GRAND RAPIDS — Alticor Inc. said its new hotel going up at Pearl Street and Campau Avenue will create 250 new jobs, buy over $2.5 million worth of supplies from local vendors each year, and help to draw larger conventions to the city.

But perhaps the most important economic contribution the hotel will make, at least in the eyes of Kent County officials, is that it will be worth $650,000 in additional revenue annually to the county's lodging-excise tax. And the account can use the infusion.

Receipts from the levy, also known as the hotel-motel tax, rose for the first time in four years last year to $4.21 million. That total was an increase of 2.8 percent from 2003, with 2.7 percent of that gain coming during the last three months of 2004.

Still, the fund needs to grow at an annual rate higher than 2.8 percent.

The county Finance Committee recently heard that revenue from the tax needs to rise by 3.8 percent each year to match the annual increase of the zero-coupon bonds that helped build DeVos Place. The lodging-excise tax receipts are the primary source backing that $92 million bond package.

That means the account needs to take in $4.37 million this year, a 3.8 percent increase of $160,000 from the 2004 figure. By 2010, revenue from the hotel-motel tax will have to reach $5.27 million to keep pace with hikes in the bond payments.

The new Alticor-owned, Marriott-operated hotel is set to open in September 2007. So 2008 would be the first full calendar year that the new downtown hotel could contribute $650,000 in lodging-excise revenue, if the hotel's occupancy rate meets projections.

That extra $650,000 would arrive in a year when the account would need an increase of $186,000, if the levy's revenue grows by 3.8 percent in 2005, 2006 and 2007. If receipts to the fund don't rise by that figure for each of those three years, the projected tax from the new hotel would help the county make up some lost financial ground from those years.

The county had to dig into the lodging-excise tax reserve fund for $1.04 million to cover the account's 2004 deficit. The reserve fund, or fund balance, stood at $5.77 million at the end of 2004. The tax comes from a 5 percent surcharge that operators of hotels and motels in the county add to each guest's bill.

Planning commissioners approved the razing of the Israels Building at 226 Pearl St. last week. But they didn't agree to allow the project to have overhead walkways from the existing skywalk system to the hotel and from the hotel to its parking deck, or to build a helistop on the roof of the hotel's four-story ballroom.

Earlier, the city's Historic Preservation Commission found there wasn't any architectural or historical merit to the Israels Building and ruled the structure could come down.

City commissioners will get the next look at the project.

Alticor estimates that it will cost from $60 million to $70 million to construct the 340-room, 24-story hotel. The firm will spend up to another $10 million on a 700-car parking structure to be built south of the hotel. A groundbreaking ceremony is planned for this summer.    

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