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TIF Commission Will Hear Broadway Hotel Expansion Proposal Wednesday

The Broadway

Broadway Hotel owner David Parmley's request for tax increment financing to help him build a second hotel tower is up for a public hearing before the Tax Increment Financing Commission at 6 p.m. Wednesday.

Parmley would build the tower on the lot behind the existing hotel at 1104 E. Walnut St., next to the Short Street Garage. Parmley's company is renting the office building on the property for storage space.

Parmley applied for tax increment financing, known as TIF, in April. He is asking the city for about $2.1 million in assistance to defray some of the $20 million projected cost of the second tower.

The TIF Commission's hearing will be in the City Council chambers at the Daniel Boone City Building, 701 E. Broadway.
The commission will vote on whether to recommend the city council approve the TIF.

Christine King is one of two Columbia School Board representatives on the TIF Commission. She said the council will make the final decision.

"If the TIF Commission says, ‘No, we don’t like this proposal,’ the city council can still vote to do it,” King said.

"I get the impression the council will vote 'yes,'" King added. "Now, I could be wrong on that."

According to previous Missourian reporting, Parmley said building the second tower wouldn't be feasible even with $2 million in TIF help. He said he would seek additional financing before moving forward.

How TIF works

Tax increment financing is a way for the city to encourage developers to build on run-down property when it otherwise is economically infeasible.

Because these properties are run-down, property values are relatively low. When the developer builds, the property value rises, along with the developer's property tax obligations.

TIF sets aside the difference between the taxes the developer would pay based on the new, higher property value, and what the developer would pay based on the original, lower property value. This money is designated “payments in lieu of taxes” (PILOTS) and is put in a designated fund.

Money in the fund either goes directly back to the developer or is used to pay off loans to the developer. The developer would use that money to pay for construction costs.

Parmley’s TIF application says it is too early to know what specific costs the TIF would pay for, but it would not pay for acquiring land. Parmley expects to buy the lot and the building that stands on it for just over $1 million.

A developer must meet certain conditions to qualify for TIF, according to the TIF Act. Parmley must prove that the property he plans to develop fits at least one of three categories: "blighted area," "conservation area," or "economic development area."

The redevelopment plan for Parmley’s project asserts the property at 1104 E Walnut St. qualifies as a "conservation area" under the TIF Act. A "conservation area" is a property that is more than 35 years old and is in danger of becoming run down and a threat to public health or safety.

The building that stands on the property is over 35 years old, and is obsolete due to ongoing vacancy, according to the plan.

Parmley's company has been renting the office building on the lot since 2012. He used it as office space while the Broadway hotel was under construction.

The assessed value of the property has been $57,120 since 2003, when the assessment was raised from $49,689, according to records provided by the office of the Boone County Collector.

The TIF Commission must also consider the “but for” clause of the TIF Act. The act states that no plan should be accepted if the redevelopment area “would not reasonably be anticipated to be developed without the adoption of tax increment financing.”

“The real question that needs to be answered is: ‘Why does he need to use the TIF for that amount of the whole project?’” King said.

Parmley’s application says that construction costs have risen since he built the hotel’s first tower in 2012 and that makes the project cost prohibitive. The application says lenders aren’t interested in funding the project without some TIF assistance.

Parmley received TIF assistance to replace the old Regency hotel with the Broadway in 2012, according to previous Missourian reporting.

“Doing the Broadway TIF was very important because, I mean, it was very run down, the old Regency,” King said. “I mean, obviously it was a boost to the city and everything, but it’s not doing as well as he had thought.”

Parmley said he appreciated the support of the community when building the first tower.

"With this new tower we hope that the city will again place their trust and confidence in our vision and plans for growing downtown Columbia,” Parmley said.

The Broadway Two

The proposed eight-story tower would have six floors with 80 new guest rooms and suites, according to the redevelopment plan Parmley’s company, Broadway Lodging Two, LLC, submitted to the city. Parmley hopes to open the second tower in the fall of 2019.

The ground floor would include meeting rooms, which Parmley said would accommodate larger groups than the current space allows. The top floor would feature a ballroom “with expansive windows providing panoramic views of Downtown,” according to the redevelopment plan. 

Parmley said the additional meeting space would more than triple what the hotel has now and allow the hotel to host small to medium-size meetings and conventions. The top-floor ballroom would seat more than 300 people, which would make the Broadway a destination for weddings.

“Most brides invite 200 plus people for her wedding,” Parmley said. “So that kind of precludes us from doing that with our current space.”

Meghan McConachie is strategic communications manager at the Columbia Convention and Visitors Bureau. She said having this space downtown would help draw meetings to the city. 

“Being able to stay in one of the areas that we feel is one of our biggest attractions is always a helpful selling point for us,” McConachie said.

McConachie said the bureau doesn’t always know why groups choose not to meet in Columbia, but one reason is a lack of available meeting space. And the bureau always considers available space when seeking new business.

“We focus on making sure the business we’re seeking is something we can accommodate,” McConachie said. “We definitely never want to go out and pursue a business, and then find out we don’t have the space to accommodate them.”

Katie Essing, executive director of the Downtown Community Improvement District, said the district's board would support the addition as long as the TIF Commission determines it meets the legal requirements. Parmley is a member of that board.

In 2016, 77 percent of the Downtown Community Improvement District's funding came from a half-cent sales tax downtown. District revenue took a hit from declining retail sales in 2017. Essing said more people shopping downtown means more revenue.

"When you’ve got tourists that are coming and staying overnight, if they eat and go to the entertainment venues and shop, that’s a potential boost to the sales in the downtown area,” Essing said.

Parmley said Columbia has "a vibrant downtown." He noted that the hit in sales tax revenue is probably due to online shopping, or what he called "the Amazon effect."
Parmley said he thinks his development would help out downtown businesses.

“We’ve got something pretty special in downtown Columbia,” Parmley said. “People want to come here and enjoy, and partake in shopping, theater, concerts, art, dining, drinking, and the way I can see it, that’s something Amazon can’t deliver any time soon.”

Parmley said he wants his hotel to be the "jumping off point" and "landing pad" for visitors to downtown.

Cost-benefit

Pat Nasi of Development Dynamics is working as a consultant for Parmley on his TIF proposal. He said that even with the $2 million tax incentive, the addition would bring in more tax revenue to the city.

Nasi said it can be difficult to project revenue without knowing how the hotel will do. The analysis projects ongoing growth for hotel business.

“In essence, what you’re trying to do is project out based on estimates of investment and occupancy and essentially business activity that would likely occur in the location,” Nasi said. “What it tries to do is provide a picture in the event, based on the various assumptions that are stated in the plan, how the revenues would go.”

A cost-benefit analysis prepared by Development Dynamics for the city outlines projected revenue for three scenarios: the property remaining as is, the second tower being built with TIF assistance and the second tower being built without TIF.

TIF collects the additional real property tax generated by the development. It would not collect any additional personal property tax or sales tax associated with the development.

According to the cost-benefit analysis, the development would bring in a projected total of about $1.6 million to city taxing districts over 23 years, or about $69,300 each year. Without any development, the property would generate a total of about $13,500 to the city over 23 years, or about $600 a year.

Columbia Public Schools, with a property tax levy of $6.04, would see the most impact by far. According to the cost-benefit analysis, the development would bring a projected total of about $288,000 over 23 years to the schools, or about $12,500 a year. With no development, the property would generate a total of about $89,000 over 23 years, or about $3,900 a year.

Parmley will present his proposal to the school board on Oct. 9.

King said the board will vote at its November meeting on how she and Helen Wade, the other school district representative, should vote on the commission.

The board could consider school revenues when voting, King said.

“I think the board will kind of take in everything,” King said. “It all depends on the board member, and what’s important to that board member. So I think that discussion on the ninth will be telling.”

Parmley said the TIF would bring revenue to the taxing districts without an investment. He said TIF funding is not guaranteed by the city because it is based on revenue created by the development, so all the risk falls to him as the developer.

“The concept of TIF is fairly straightforward, but sometimes it can be hard for the public to fully understand,” Parmley said. “The key is that TIF doesn't affect any existing revenues the taxing districts receive. The $2 million from the TIF is money I’m generating by developing this property.”

Supervising editor is Scott Swafford.