By TED CARTER
Two of the three convention center hotel proposals presented to the Jackson Redevelopment Authority rely heavily on public-sector backing for development loans, though both forgo asking for direct financial contributions from either the City or JRA.
A JRA-appointed review committee will look over the proposals and recommend a developer to the Authority in time for a selection or rejection of all proposals on Oct. 29. The final decision on a developer is up to the mayor and City Council.
A third proposer, MS Block Development, did not detail financing for the project and equity it would put into the deal. The developer said it must first do a market feasibility study to determine the scale of its participation.
MS Development’s absence of detail on the investment it will bring to the deal could get its proposal tossed. MS Development estimated the cost of the hotel it would build at between $85 million and $130 million.
The developer also wants to use the full range of City and JRA incentives outlined in the request for proposal. These include tourism sales tax rebate, possible contributions from the Jackson Convention Center Commission, tax increment financing, ad valorem tax abatements and New Market Tax Credits.
The request for proposals also noted the JRA’s willingness to consider “other options for addressing funding gaps.”
The RFP asks for a summary of the “proposer’s approach to financing the development… and the commitment by the proposer and members of the development team to provide all or a portion of financing.”
The RFP also indicates the redevelopment agency wants interested developers to address “approximately $3.8 million of outstanding debt of the Authority relating to the properties” on which the hotel and enclosed parking structure will be built. The $3.8 million is U.S. Department of Housing and Urban Development money for which the city has been on the hook since beginning its hotel quest nearly 10 years ago.
The selected developer is also asked to cover the City’s investment in a second adjoining parcel that it had to buy back from an earlier hotel developer candidate, Transcontinental Realty Investors of Dallas. The Texas developer ended up owning both of the Pascagoula Street parcels through a puzzling arrangement with the late Mayor Frank Melton.
To make the land acquisition less burdensome on the developer, the JRA is offering to give a lease on the property or defer payment of the purchase price.
None of the development proposals includes plans for a covered connector from the Convention Complex across Pascagoula Street to the hotel. The RFP specified that proposals should include the enclosed connector. The proposals did into say why a connector is not included. The RFP, however, request developers who left out a connector to explain why.
Design Engineering Technologies, based in Washington, D.C., and several cities in the Southeast, and Red Leaf Development of Herndon, Va., gave details on their funding plans and say they can build a hotel without direct money contributions from the City.
Design Engineering Technologies and local partner Mississippi Developers estimate they can build the 300-room hotel the JRA wants for $75.1 million.
Both Design Engineering Technologies and Red Leaf Properties propose urban redevelopment loans of around $41 million, with Design Engineering asking for JRA backing of a $41.3 million loan and Red Leaf $41.8 million.
Additionally, Design Engineering wants an $11.2 million loan backed by either the City or JRA, an amount that accounts for 15 percent of the project’s cost.
Both proposers want to use tax increment financing by which taxes collected on increases in the land’s taxable value above current value would go toward project costs. Design Engineering estimates it will need $11.2 million from tax increment financing. Red Leaf puts its tax increment financing need at $25 million.
Each proposer will rely on New Market Tax Credits, which are sold by certified Community Development Entities to companies and organizations in need of lowering federal income tax payments. For instance, a developer could buy $100 in tax credits for, say, $75.
Design Engineering wants $3.7 million in New Market credits and Red Leaf $7.9 million.
Also, the JRA is offering to let a 30 percent share of a convention center hotel’s 1 percent tourism tax on lodging and restaurant sales to go toward development costs.
Both developers say they will bring their own money to the deal. Design Engineering says it will put in $7.5 million, or 10 percent of its project costs. Red Leaf put its equity contribution at $8.8 million.
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