Plans to convert the historic Federal Reserve tower at 925 Grand Blvd. to a 301-room Embassy Suites hotel got a major boost Wednesday from a City Council committee.
The Planning, Zoning and Economic Development Committee unanimously recommended that the full council approve a multifaceted public incentive plan to help the private developers on the project.
A $146 million redevelopment project was proposed for a building that’s been vacant for eight years. The committee sent the ordinance for final council consideration on Thursday with an “advance and do pass” recommendation.
Language in the ordinance includes an accelerated effective date, according to council member Katheryn Shields, which means it cannot be subject to a referendum petition.
Shields said after the meeting that financing for the project might fall apart if it wasn’t approved quickly.
“We’ve had at least one, if not two developers who’ve tried to get it done before these people …,” she said. “This is a 90-plus-year-old building right in the heart of downtown. We need to act and get it done.”
The entire plan includes a four-story building, a courtyard and a parking garage adjacent to the tower.
The proposal includes authorization for the city to sell taxable industrial revenue bonds in an amount not to exceed $135 million to help finance the project. The public financing also would include tax increment financing, a capture of sales taxes at the hotel and historic tax credits.
The city incurs no liability under the plan.
The vote indicated that committee members agreed with the developers and third-party cost analysts that the 95-year-old tower, heavily damaged by neglect, flooding and vandalism, would not be renovated without public assistance.
“This is one of the more complex projects we’ve faced,” said council member and committee chairman Scott Taylor. He added that the Ninth and Grand area “isn’t quite the area of downtown that has been revitalized quickly.”
If public assistance isn’t approved, Taylor said the alternative “is that the site would sit vacant for another 20 or 30 years” and the city would have to pay to tear it down.
After more than two hours of presentations by city staff and the development team about the proposal, only one person spoke against the plan.
Jan Parks, representing a coalition of citizens who successfully brought a petition action that held up and stopped a previous downtown redevelopment proposal for a new BNIM office, said $124 million in deferred maintenance for Kansas City Public Schools should take priority.
But Kevin Masters, who represents the school district on the Kansas City Tax Increment Financing Commission, said the district “supports the project and commends the developer” for working with the city and taxing districts to come up with an agreed financing plan.
Council member Heather Hall expressed concern about whether the market will exist for the hotel, given nine other announced hotel projects for the downtown area.
Council member Quinton Lucas said he hears from many constituents who want the city to focus on infrastructure and school improvements rather than assist private developers. But both joined Taylor and council members Shields and Lee Barnes in approving the project.
“There’s no pot of school district money that we’re dipping into,” said Douglas Stone, attorney representing the developer, Colorado-based Delta Quad Holdings LLC. “We’re taking a building that’s falling apart and turning it into a productive asset. … We’re only asking what’s necessary to get to an average rate of return.”
The TIF Commission in December narrowly authorized approval of the Grand Reserve Hotel TIF Plan, which would divert about $15.8 million in sales, earnings and economic activity tax revenue for 23 years to help cover project costs.
The full $52 million incentive package sought by the developer includes property tax and personal property tax exemptions, a Community Improvement District sales tax surcharge, a city plan to direct sales taxes it receives from the property and a sales tax exemption on the purchase of construction materials.
The city also is committing $570,000 in public improvements to the streetscape and lighting around the block.
With the incentive package, the developers could expect about a 10.4 percent return on investment, according to a study by Springsted, a third-party analyst hired to do a study that attempts to determine if a project would be pursued without incentives. The developers could expect a 7 percent return without public assistance, the report said. The 10.4 percent is consistent with national averages for such projects.
The Federal Reserve Bank of Kansas City left the building for a new headquarters to the south off Main Street.
The Star’s Dave Helling contributed to this report.