An economic incentives package requested for a proposed Hilton Garden Inn and convention center near north Vine Street in Hays moved a small step forward Thursday. The Hays City Commission agreed at the work session to move items regarding a possible Tax Increment Financing district and transient guest tax retention on next week’s agenda for a vote.
Hays Hotel LLC and Mitra Developers LLC have requested a 20-year TIF, which would collect incremental property tax revenues. The developers have secured financing themselves, and are not asking the city to incur debt as part of the incentives.
Twenty years is the maximum duration allowed by state law. The requested TIF is expected to generate approximately $4 million during that time.
A 2-percent Community Improvement District sales tax also is requested for 22 years, and only would be implemented at the hotel property. CID-eligible expenses for the project are estimated at approximately $14 million.
For the first time in city history, the developer also is requesting the city to rebate a 5-percent transient guest tax collected from hotel guests for a period of 20 years.
Plans call for a 75,000-square-foot, 100-room hotel including a large convention space and on-site lounge and restaurant. It would be located just behind Walmart on property recently annexed into city limits.
Hays City Manager Toby Dougherty said the city identified the need for a convention center many years ago. The incentives are requested in part because the actual convention space is not likely to turn a profit, he said.
“Sales tax revenue obviously is important to us. Our general fund is funded primarily by sales tax, so the creation of a hotel, convention facility with the potential for outlot restaurants is extremely important to us,” Dougherty said. “A convention center is something the community has been asking for ever since the Holiday Inn dropped its flagship in Hays and we started losing out on conventions. Unfortunately, the private sector has been slow to provide a convention center because they don’t make any money.”
The city also needs additional hotel rooms in order to continue hosting large events and conferences, such as an annual Special Olympics tournament, he said.
The land is undeveloped, meaning roads, water and sewer lines also will need to be created.
Commissioners questioned what rights the city would have to ensure any retained taxes are used for qualifying expenses, such as maintenance and capital improvements.
A development agreement will be drafted as part of the process, allowing the city to address any concerns, said Kevin Wempe, an attorney with Gilmore Bell, the city’s bound counsel.
The commission will vote next week to set a public hearing for the TIF establishment and consider a resolution allowing the developer to keep guest taxes generated on site. The legal process for establishing economic incentives is lengthy, and is expected to continue until late April if everything moves forward.
The developer, Raju Sheth of Wichita, also wants to develop a sit-down restaurant and shopping center in the same location. Total project costs, including future development, are estimated at $19 million, Wempe said.
Several commissioners spoke in favor of the proposed project and its potential to draw visitors to Hays. Vice Mayor James Meier noted he has received questions about the requested incentives, but reiterated the developer is not asking the city to assume any bond debt.
“They’re only collecting what they are able to generate themselves … as opposed to some previous plans that were proposed for a convention center where there would be a lot of people paying for it who perhaps weren’t using it,” Meier said. “This is really just a best-case scenario for the city where we get a great, outstanding facility that the city doesn’t have to maintain long-term, and all we have to do is give up the transient guest tax for it. It’s really the best of all worlds.”