Published: Midland Reporter-Telegram
By Joesph Basco
The city of Midland released the terms of its master developer agreement with the developers of the downtown Santa Rita Hotel, revealing a $9.65 million incentive to get the downtown revitalization project going on the former Midland County Courthouse property.
On Wednesday, the city announced the agreement terms through its website and Facebook page while also letting the public know that three public meetings will be held throughout the next eight days, before the April 14 City Council meeting in which the master developer agreement will be voted on.
Midland Development Corp., an economic development entity that makes incentive agreements using sales tax revenue it collects, will be a significant public participant in the project. It plans to spend $3.5 million for downtown public infrastructure improvements such as streets and sidewalks, utilities, drainage and site improvements, according to the announcement.
The city of Midland’s role will be selling the old courthouse to MDC for $2.2 million, which was the appraised value of the land back in 2013 when the city bought the property from Midland County. After owning the land, MDC will then lease the land to Santa Rita Hotel developers during construction until the development is ready enough to open.
Once hotel developers reach substantial completion and receives a certificate of occupancy, MDC will transfer the property to Santa Rita Hotel developers.
On Wednesday, At-large Councilman Spencer Robnett, one of the three council members who was part of the negotiating committee, said there was a legal matter with the title of the courthouse property. He explained that MDC has the legal “flexibility” to give the title to the hotel developers once it is complete, whereas the city does not have that ability.
“When a developer comes in and finances a project, they want to know that they have a clear and free title to the property they’re developing,” Robnett said. “Because of course, if they build a project and they don’t own the land, it’s a complete mess.”
Robnett further explained that one of the city’s goals when it was negotiating the agreement was to retain the courthouse property as long as possible until the hotel is built, so that’s why developers will be leasing from MDC during construction.
The city also plans to renovate Centennial Plaza itself, using the $2.2 million it will receive from MDC and $1.8 million of hotel and motel tax funds. Robnett said the renovations will entail landscaping and redesign that will match the design of Santa Rita Hotel.
“For $4 million, you can build a world-class park,” Robnett said. “The idea behind the Centennial Plaza (renovation) is to flow and work in conjunction with the hotel property and for both to be designed and landscaped with each other in mind. It’s going to be a true city center, a place where you can walk and bring you kids, have lunch and watch movies during the summer.”
The Tax Increment Reinvestment Zone No. 1, a downtown revitalization taxing entity in its final months of operation, will fund the $1.4 million demolition of the courthouse, as previously reported. A contractor for the demolition was selected during the March 24 City Council meeting. Additional TIRZ funding has also been allocated for the demolition of two vacant office buildings that the city owns at the intersection of North Big Spring Street and West Illinois Avenue.
Permitting fees for the Santa Rita Hotel project, valued at $750,000, will be waived, according to the announcement.
In total, the $9.65 million is roughly a 10-12 percent portion of the $80 million to $100 million project cost. In contrast, the city was planning to provide a $60 million incentive package for the $300 million to $500 million Energy Tower development two years ago, before the project was canceled. Overall, the Santa Rita Hotel developer agreement is more strict and less lucrative than the Energy Tower agreement.
Robnett said the negotiating committee worked hard to be diligent on behalf of the city.
“We pushed back on these guys pretty hard during the process,” Robnett said. “The original ballpark (incentive) number was somewhere in the $20 million range. I said to them that number was not going to work, and we have to find a way to skin the rabbit.”
To give an example of how the committee stood firm during negotiations, Robnett said, the agreement includes the requirement that developers place a $250,000 “good faith” deposit as a symbol of their commitment to making this project happen.
“We were appreciative of that,” Robnett said. “That made us feel good about the project.”
To ensure that the project continues along after the April 14 agreement approval, developers will have to meet several design deadlines and secure financing in the 18 months following the council approval.
In the event that the developers default on the project and don’t meet expectations, they forfeit the deposit, Robnett said.
The announcement also stated that developers have to break ground by Oct. 31, 2016 and complete the project by Aug. 31, 2018.
Santa Rita Hotel is a mixed-use development by a consortium of developers from Overland Partners, Bond Partners, OGX Resources, Design Workshop, Arup, and The Round Table Group. It is currently designed to be a hotel greater than 10 stories with a fitness center, spa facility, high concept restaurant and whiskey bar, gourmet food market and special event space.
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