Corvallis officials are considering investing $4.2 million in a public-private partnership that would result in a 155-space, city-owned parking garage as part of a riverfront hotel project.
The idea, first discussed by the City Council in executive session in September, emerged into public view Monday night after another closed-door discussion just prior to the regularly scheduled council meeting.
The council began the open session by voting 8 to 0 (with Hal Brauner absent) to make information about the proposal public. The matter is scheduled for a discussion and possible decision at the council’s next regular meeting June 2. No public hearing is planned.
As proposed, the city would team up with a group of local real estate investors who want to build a Hyatt Place hotel on a vacant 0.71-acre parcel on Southwest First Street between Adams and Washington avenues.
Plans for the hotel initially called for a five-story structure with 130 guest rooms and a 109-space garage, but that plan has now morphed into a seven-story structure with 121 rooms and a 155-space garage. The parking spaces would occupy a rear portion of the ground floor and all of the second, third and fourth floors, with guest rooms on the fifth, sixth and seventh stories.
The price tag has grown as well, from initial estimates of $14 million to $23 million today, with about $9 million of the total costs pegged to the parking garage.
Dan Whitaker, one of the developers behind the deal, said the plan didn’t pencil out without some public investment. But he also argued that the city would benefit from the additional parking spaces downtown, where empty spots are scarce during peak hours.
“We’re overbuilding the parking lot,” he said. “It’s a lot of parking.”
The hotel would reserve a certain number of spaces for its guests, but Whitaker and his partners — Corvallis investors Alan Wells, Rich Carone and Mark Hauck and Springfield hotel developer Richard Boyles — say there would be plenty left over for use by the paying public.
By their estimates, there would be a minimum of 63 public spaces available at night, when the hotel’s needs are greatest, and 100 or more during the day.
The financial arrangement is complicated.
The city would put a nonrefundable $200,000 in an escrow account up front to help the developers secure bank financing. When the project is finished, the city would sell $4 million worth of bonds to complete the purchase of the parking garage, paying off the debt over 25 or 30 years.
Tom Nelson, who heads the Corvallis-Benton County Economic Development Office, said Monday night that revenues associated with the project should cover the annual debt service on the bonds, which city revenue officials estimate at up to $325,000 a year, depending on borrowing costs.
The hotel would manage the garage and get the revenue from parking charges (the rates haven’t been set yet), while making lease payments to the city of $70,000 a year. Other revenues would come from room tax and property tax collections.
The room tax revenues, however, could vary significantly depending on how successful the hotel is. At 80 percent average occupancy, the city’s financial projections predict a $7,900 annual net gain, but at 60 percent occupancy it translates to a net loss of $56,100 a year.
Nelson called the financial projections conservative and said he was confident the city would more than cover its costs on the deal while helping to spark additional economic activity downtown.
In the final analysis, he argued, the benefits outweigh the potential costs.
“The only risk we take initially is the $200,000 we’re putting in escrow,” Nelson said.
“That’s pretty low-risk when you consider the return: We’re getting not only a blighted piece of property developed, we’re getting a downtown hotel (and) we’re getting additional parking.”
Oregon’s open meetings law allows public bodies to discuss certain subjects, including real estate transactions, in private as long as no decision is reached. Members of the media are permitted to observe such executive sessions as long as they don’t report what is discussed.
In this case, the council voted to make the content of Monday’s closed-door discussion of the parking garage proposal public.