Willits owner proposes deal with Basalt
March 25, 2014
The developer of Willits Town Center sent a give-and-take proposal to the Basalt town government Friday to try and end an impasse over construction of a hotel and associated affordable housing.
In the proposal, Mariner Real Estate Management proposed to give the town the financial guarantee it sought that Mariner will start construction of affordable housing by the time its finishes the hotel.
In return, Mariner wants the town to commit that funds generated by the hotel through a new lodging tax or sales tax revenues can be used for parking-lot construction and other improvements associated with the project.
The Town Council is scheduled to sort through the complex proposal and make a final decision tonight at Basalt Town Hall.
The Town Council is scheduled to sort through the complex proposal and make a final decision Tuesday night at Basalt Town Hall.
The council gave conditional approval of the 113-room hotel on March 11. All of the council members said they want to see the hotel proceed, but the majority demanded some type of guarantee that Mariner will start construction of a 50-unit affordable-housing complex by the time the hotel is finished. A town consultant advised securing a $2.3 million letter of credit to ensure that the affordable housing materializes.
Mariner representatives said the requirement was a deal breaker. They said they wouldn't start construction on the hotel if they had to put up $2.3 million for the housing.
Mariner's representatives said the company's pledge to start the affordable housing next — before any other building — should be enough of a guarantee. The town also has leverage because it could withhold a certificate of occupancy for any building other than the affordable housing.
Council members directed their staff two weeks ago to seek a compromise on the financial-guarantee stalemate.
In a memo submitted to the town on Friday, Mariner attorney Jody Edwards said the development firm is willing to provide a $500,000 letter of credit as surety on the affordable-housing project — with major caveats.
Mariner doesn't want to face a deadline to start construction of the 50 units of affordable housing until March 31, 2017. The town has, to this point, required that construction on the housing start by the time the hotel is finished, anticipated being the summer of 2015.
Mariner's proposal said if it doesn't start the housing by March 31, 2017, the town could use the $500,000 for housing at Willits.
Mariner repeated its guarantee that the first building started after the hotel would be the affordable housing.
Mariner's latest proposal also asks the town to commit to allowing Mariner to use a tax subsidy to pay for parking improvements for the Willits hotel.
Mariner wants the revenues generated by its hotel from a new 2 percent lodging tax or existing sales taxes to pay itself back for money it will invest in the parking-lot infrastructure.
The council already has agreed conceptually that land dedicated for public use at Willits can be used for exclusive parking for Mariner's hotel. Mariner asked the town to spend the funds necessary to convert the land into a parking lot. The town declined.
Now Mariner wants to increase the existing 2 percent lodging tax by another 2 percent and use the new revenues generated by its hotel to pay for the parking-lot improvements. However, increasing the lodging tax would need approval by town residents.
In lieu of that increased lodging tax, Mariner wants the council to permit use of sales tax revenues generated by the hotel to be used to construct the parking lot. Essentially, the lodging or sales tax revenues that typically would go into the town's general fund would be passed through directly to Mariner under this scenario.
Edwards' memo to the town said Mariner needs the tax subsidy plus an increase in the proposed hotel's average daily rate to generate a high enough internal rate of return to justify the investment in the hotel.
"The pass through is important because it is less of a burden on guests than just increasing the rate," Edwards' memo said.
None of the lodging tax proceeds or sales tax proceeds generated elsewhere in Basalt would be given to Mariner to complete the hotel project under the firm's proposal. The town as a whole will benefit from increased visitation and sales spurred by the hotel, Mariner claimed.
One member of the council already has criticized the complexity of juggling financial guarantees and tax subsidies. Councilman Rob Leavitt said at the March 11 meeting that the town should eliminate the letter of credit for the affordable housing but also reject a tax subsidy.
Bruce Kimmel, a consultant to the town on public finance issues, advised the council in a memo to remain on the simplest course. Combining a reduced letter of credit for $500,000 for affordable housing with an elimination of the tax reimbursement "is a fair and practical outcome," Kimmel wrote in his memo to the council.