Progress is being made on making a hotel/conference center in Newton a reality. The Newton City Commission received the financing feasibility study for the project during the meeting Tuesday evening.


Progress is being made on making a hotel/conference center in Newton a reality. The Newton City Commission received the financing feasibility study for the project during the meeting Tuesday evening.

The proposed development will include a conference center containing about 14,000 square feet, a hotel containing between 70 and 80 guest rooms and two out lots for possible future use.

Bob Myers, city attorney, went over the financing feasibility study with commission members.

The plans for the conference center, which would be paid for by the city, will not exceed $3.55 million to construct and furnish, Myers said. It will take about $3.34 million in construction costs, and furnishings, fixtures and equipment will cost about $210,000.

“(Government obligation) bonds will be used to finance the conference center in order to obtain the lowest possible interest rate,” Myers said. “Then the bonds would be repaid using a combination of incremental increases in property-tax revenues for the redevelopment area and a dedicated portion of the city’s bed tax.”

Myers said the revenues used to finance and reimburse the cost of the conference center will consist of an incremental increase in the ad valorem tax revenues from the properties in the redevelopment district other than the conference center.

In other words, these funds will come from the hotel and commercial out lots; all the transient guest or bed tax from the hotel facilities in the redevelopment district, which has been increased from 5 percent to 6 percent; and the increased bed tax from all other hotels within city limits, which also will be raised to 6 percent.

“Only the additional 1 percent from other hotels will be used toward repayment of debt,” Myer said. “This is justified because the other hotels will benefit from the conference center through additional overnight guests associated with events hosted at the conference center.”

According to plans submitted by the developers, the hotel construction costs will be about $3.55 million. That puts the entire project at $7.1 million — the city paying for only the conference center and the developers putting forward the money on the hotel.

At the current city mill levy rate, this will produce estimated annual tax revenue of $112,713, which will be dedicated to the repayment of bonds, Myers said.

To help lessen the annual debt burden, Myers suggested the commission consider an up-front payment. Three debt service repayment projections were presented to the commission.

With a $500,000 up-front cash payment, the principal amount of the bonds would be $3.05 million. At the assumed interest rate of 4.75 percent, this would require an average of $244,923 annually in debt service. With the estimated revenue, there wouldn’t be enough to cover payments, Myers said.

Putting forward $750,000 and assuming the 4.75 percent interest rate, the annual debt service would be $224,811 per year, which would be covered by revenue. The third option, giving $1 million up front, would require an average debt payment of $204,711 per year.

Myers said the commission didn’t need to decide the amount of the up-front payment yet, but should be thinking about it and understand at least $750,000 would be needed to sufficiently fund the conference center.

In other business, the commission:

• Discussed railroad quite zones.

• Accepted a bid from Wray Roofing of North Newton of $81,988 to reroof Newton City Hall and a storage annex.

• Accepted a bid from Koehn Painting Co. of Newton of $69,610 to renovate the exterior of the Warkentin House.