Though Generally Supportive of Hotel Purchase Agreement, City Council Wants More Time to Study

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 08/27/2016 - 21:16
(left to right) Greg Kloiber, Jim Haessler, James Junga and Mark Kuykendall make their case for an agreement to buy city land to build a hotel and hardware store.

Around 6:50 a.m. Thursday bleary-eyed council members began to filter into the council chamber for their 7 a.m. special meeting on the proposal to sell vacant city land for a Best Western Plus hotel and large Ace Hardware store across from Rentschler Farm in Saline. The meeting was to be brief, to accommodate busy schedules, but it lasted about 95 minutes.

At a table set up in front of the dais sat four men representing the proposed deal: James Junga, owner of Junga’s Ace Hardware, Mark Kuykendall, a Saline resident who would own and operate the hotel, Jim Haeussler, president of Peter’s Building who would do the construction, and Greg Kloiber of Top Gun Advisors.

The unprecedented early morning meeting was arranged Monday night when most of the council said that they could not make a decision without more deliberation. The deal seems to require the city to accept a near term financial loss to realize a potentially lucrative gain.

Several citizens came forward at the start of the meeting to make statements about the project. These included Christin Mitchell, Mary Hess, John Olsen and Chris Frey.

Mitchell and Olsen were in favor of closing the deal. Olsen, the director of the Saline Chamber of Commerce, was the most spirited, saying “I’m giving it a big thumbs up.”

“It comes down to a decision between bean-counting and forward thinking,” Olsen said. “It is important that we look at this as an investment and not as some big cost which is actually coming out of the sale of the property so we’re not digging into the coffers deeper.”

Others were not convinced. Frey was concerned about unnecessary haste and urged caution, not wanting the city to take a “haircut.” Hess, a former Council member, offered a historical perspective.

She said that the land in question had been originally purchased by the city to accommodate a huge manufacturing plant for Philips Display Components Company and they ultimately backed out. She fears a similar bailout in the current project. She also noted that with the recent rezoning of the property there will be more interest from developers.

“To say this is our last opportunity is not true,” Hess said

City manager Todd Campbell kicked off the Council discussion by answering a question raised at Monday’s Council meeting about projected tax revenues from the project. The empty property is currently brining in neither taxes nor local development finance authority funds.

If sold for commercial use, the land would not contribute to the LDFA (which only applies for industrial use), but would generate tax revenue. City Assessor Catherine Scull estimated that the business would generate about $228,000 in real property and $23,000 in personal property tax, about a quarter of which would go to the city.

Junga took the lead in speaking for the developers. He said that the $400,000 he offered for the land was reasonable, but the estimated $225,000 for the city to relocate utilities was “a shock to the whole system.”

He felt that the additional $30,000 he offered to help offset the city’s cost was also reasonable. Moving the power lines would make the property more attractive to other businesses who may want to purchase property there, so it should not all be borne by the hotel and hardware store, he said.

He also noted that as the first tenants to build on the property, they would be footing other expenses that would benefit future tenants. For example, curb cuts and the entrance would be built at their expense.

Some have wondered why moving the power lines is so important.

“The last thing I want is an eyesore in front of it,” Junga said.

Kuykendall spoke next about what a hotel would bring to the community. He said he has two possible plans to go with, a three story 65-room structure and a four story 85-room structure.

The hotel is expected to have gross revenue of between 2.2 and 2.6 million dollars, he said. Property taxes would pay back the cost of moving utilities in a few years. The hotel would hire 25 – 35 employees with salaries totaling $500,000 or more.

He also spoke of the expanded economic benefits of a hotel.

“A hotel brings people to town,” Kuykendall said. “They rent rooms. They also eat at restaurants; they buy groceries, they go to pharmacies; they use gas stations, they use hardware stores; they use a number of different businesses.”

Council members spent about an hour posing questions to the applicants. Those members who had stated they would need to leave early stayed to the end.

Council member David Rhoads asked if the two hotel plans have about the same footprint. “Yes,” Kuykendall said. Council member Janet Dillon wondered when the decision to build the three-story or four-story hotel would be made. In about 30 to 60 days, Kuykendall replied.

Dillon asked where the lines would be relocated to. Campbell replied that they would follow the east property line south to the back of the property, then follow the back border and return north along the west boundary. Why not bury the wires, she asked. Campbell said that putting them underground would be at least $100,000 more costly than moving them.

A few council members asked about the impact of the relocated lines. Would they impact neighbors? Wouldn’t they still be close to the hotel?

Haeussler said that they would run next to his office location and he was not concerned. Kuykendall said that the presentation from the road is most important to the hotel.

 

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Council member Dean Girbach had numerous questions about the purchase agreement. For example, did Realtor Tony Caparese’s assurance that the selling price was reasonable take into consideration the increased saleability of the land after it had been rezoned to SPA-1? Caparese said that he had assumed the rezoning in his appraisal.

In response to further questions by Girbach, Campbell said that if the buyer should back out, the city has the right to buy the property back at the selling cost. Regarding the possibility of the hotel going in but the hardware store reneging, Campbell said a clause covering that possibility could be included in the contract.

Council member Heidi McClelland asked if there could be a scenario where the city spends the money to move the utilities and then the developers back out. The developers said that the utility move would only happen after construction was underway. Haeussler added that a clause could be added to the agreement to protect the city in this eventuality.

After many questions, the members of Council stated their opinions on the proposal.

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Mayor Brian Marl was unequivocally in favor of the sales agreement. He said the decision is not rushed since talks with the developers have been underway since last December. Saline has a reputation for being “very pro-business” and should continue to act that way. City leaders have wanted a theater and a hotel for many years and now they could get both.

“When a city wants to attract the type of investment and services that it deems appropriate, you do have to incentivize,” Marl said.

Council member David Rhoads also supported the sale although he said he would not approve until he had time to read the finalized sales agreement. He noted that the city has previously offered tax abatements to companies that are well in excess of the $225,000 cost of the utilities move. 

Girbach was much less enthusiastic. Regarding Marl’s contention that this has been under discussion for perhaps nine months he noted that many council members were not privy to that conversation. He was concerned that all the data must be analyzed.

“We are rushing it through,” Girbach said. “There’s a lot of information here, a lot of consideration. We have a lot of debt; we have outstanding obligations for the city; we have to look out for our taxpayers. I’ve been called a bean counter I don’t know how many times. But as a result of it, our city is still successful.”

McClelland said that the hotel plan is exciting, but she is worried that the taxpayers are subsidizing it. Council member Linda TerHaar said that due diligence is important and she feels rushed. Dillon agreed, saying, like the others, that she is in favor of proceeding with the process but is not ready to sign.

“To me the nub of the whole matter is this,” said council member Jack Ceo. “We are being asked to forgo some profit on the front end with the sale on a one-time revenue basis for what we hope would be a long term benefit to the city through an attractive development that would not only help the overall business, but then provide an ongoing stream of revenue which we haven’t had from that property for many years.”

Marl stated that for the most part members of Council were “supportive in concept.” He asked the developers if they would be willing to wait until the next council meeting on September 12, giving Council more time to analyze the situation and to review a finalized sales agreement.

“We’ll continue in good faith,” said Junga after conferring with his partners. “We need to keep the process moving. I wouldn’t want to cheat anybody out of an economic consideration . . . assuming you put forward a letter of intent.”      

Bob Conradi's picture
Bob Conradi Is a retired pharmaceutical scientist who has redefined himself as a photographer and journalist. He has lived in Michigan for 36 years and in the Saline area for 10. He enjoys researching and learning about new ideas. Reach him at [email protected] Follow him on Twitter at @RobertConradi.