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.
