September 10, 2014
From The Kansas City Business Journal

By Rob Roberts

Incentives for a 115-room Home2 by Hilton proposed at 20th and Main streets in the Crossroads Arts District passed narrowly during a Wednesday meeting of the Tax Increment Financing Commission of Kansas City board.

The board voted 4-3 to approve $2.38 million in tax increment financing for the $19.3 million project.
Tax increment financing allows new property tax and economic activity tax revenue generated by a project to be diverted for as long as 23 years to cover eligible development expenses.

A cost-benefit analysis conducted on the Home2 by Hilton project, however, indicated that TIF revenue would need to be diverted for only about nine years to cover the $2.38 million in eligible reimbursement costs.

Kevin Masters, a TIF Commission board member who represents the Kansas City school district, said he supports the project, which will transform a blighted surface parking lot into an extended-stay hotel on the city's new downtown streetcar starter line.

But Masters said he cast one of the three "no" votes against the TIF project because he doesn't think it should have come before the board until the matter of a billboard on the property was settled.
In April, the Kansas City Council voted to pursue condemnation of the billboard, which is owned by Lamar Advertising, so that it could be removed from the site. A motion to revoke the city condemnation ordinance was later made and tabled, however.

Roxsen Koch, a Polsinelli PC attorney representing the developers of the proposed hotel, said there are two options for condemning the billboard — via the city ordinance or through the TIF process.

But Masters said he thinks city staff already has decided to foist the condemnation issue onto the TIF Commission and its legal staff. He and Scott Jacoby, a TIF Commission board member who represents Jackson County, both said the condemnation should remain a city issue. But Jacoby left the meeting before the hotel issue was voted on.

If the issue proceeds to court, a Jackson County circuit judge would create a commission to determine the value of the billboard. But Koch said the developers are hopeful that neither the city nor the TIF Commission will have to pursue condemnation. She said a settlement may be reached with the billboard owners within the month. That would allow construction of the project to begin next year and wrap up in 2016.

Sunflower Development Group of Kansas City is developing the project for the True North Hotel Group, which is based in Overland Park.

Ken Jaggers of Integra Realty Resources said the developers could expect a rate of return of 5.6 percent without incentives. He said industry standards call for an 8 percent return to justify risks and acquire financing for hospitality projects like the proposed Home2 by Hilton.

In addition to clearing the billboard hurdle, the hotel developers also must buy an adjacent right of way from the city. It is occupied by a viaduct that runs from Main to Walnut streets. The viaduct has been closed for two years and will need to be demolished to make room for the hotel.

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