Title
Resolution approving a Cooperation Agreement between the Economic Development Authority of the City of Hampton (“EDA”) and the City of Hampton (the “City”) funding grant incentives to T Peninsula Hotel VA, LLC (“Developer”) for the Development and Operation of a minimum 120 room Element Hotel or a comparable “City/EDA approved Brand” with a minimum of 1,000 square feet of meeting room space on a Portion of the Former Macy’s Site located at the Peninsula Town Center (LRSN 13002082), and authorizing the City Manager or her Designee to execute Same
Purpose
PURPOSE/BACKGROUND/DISCUSSION/IMPACT:
Hampton’s current hotel stock is high in low performing accommodations, including extended stay and limited service accommodations, which do not necessarily meet the demands of event attendees, convention planners and regional tourists considering Hampton. The number of quality hotel accommodations is insufficient to support current and future needs and consequently constrains other tourism related activities in Coliseum Central and throughout the City of Hampton.
A recent study by Hunden Strategic Partners concluded that business at Hampton Roads Convention Center plateaued over the past three to five years due to limitations of the room block potential. According to the study, there are only 440 quality hotel rooms within walking distance of the Hampton Roads Convention Center and a grand total of 850 quality hotel rooms in the City. The appropriate room block for the Hampton Roads Convention Center is 1,500 rooms.
Having new hotel product will improve these metrics, allowing the City to retain more of its tourism-related hotel nights and attract new convention business to the City. In addition to having a net positive benefit to tourism-related activity in Coliseum Central, the project will support other tourism-related assets and activities throughout the entire City of Hampton.
In 2016, the EDA sold property in Coliseum Central for the development of a new 109 room hotel. While this activity creates new hotel rooms in the City, additional new hotel room development is necessary to create the appropriate room block of 1,500 rooms for the Hampton Roads Convention Center.
Developer has proposed to design and construct a new Element Hotel or a comparable “City/EDA approved Brand” with a minimum of 120 rooms and a minimum of 1,000 square feet of meeting room space (the “Hotel”) at the Peninsula Town Center on a portion of the former Macy’s site.
Staff has determined that development of quality hotels such as the Element will not occur without incentives to private developers. Accordingly, staff has negotiated the terms and conditions for the incentives (“Grant Agreement”) necessary to induce private investment and complete the development of the Element Hotel or a comparable “City/EDA approved Brand”. The term sheet for the Grant Agreement defines a comparable “City/EDA approved Brand” as one of the following comparable types: Upscale, Upper Mid-Scale, and Upper Upscale hotel, which is the terminology used in the hotel industry.
To induce the development of the Hotel, the EDA will provide through the Grant Agreement a maximum of $2,089,940.00 in discretionary grants as follows:
• $1,200,000.00 one-time grant to be paid to the Developer after (i) a copy of the Certificate of Occupancy issued by the City is provided to the EDA, (ii) the Hotel opens for business (“EDA Lump Sum Grant”) and (iii) the Hotel has in existence a minimum of 5 new full time jobs at the Hotel that have a combined average salary of $35,000.00 plus benefits; and
• Maximum grant of $889,940.00 payable over a 10-year period in installments that equal 75% of lodging taxes paid to the City of Hampton during the calendar year from the Hotel not to exceed $88,940.00 annually (the “EDA Installment Grant”). The first EDA Installment Grant shall be made after the first full calendar year of Hotel operations, and each calendar year thereafter, as applicable, and it is subject to reduction by non-EDA grants, tax credits,, and offsets.
The Developer will make a minimum capital investment of $11,304,103.50 million dollars and create a minimum of 5 new full-time jobs at an annual salary of $35,000.00 plus benefits for the Hotel.
The City will work with the Developer to utilize the Virginia Tourism Zone Gap Financing program as well as the Virginia Enterprise Zone grant program.
A Cooperation Agreement is needed to support the EDA’s obligations under the Grant Agreement.
Recommendation:
Rec
Approve the Resolution
Body
WHEREAS, the City of Hampton’s current hotel stock is in need of quality accommodations to meet the current and future demands of event attendees, convention planners and regional tourists considering the Coliseum Central area of the City;
WHEREAS, the Developer has submitted plans to the City to own, develop and operate a Starwood/Marriott Element Hotel or may submit plans for a comparable “City/EDA approved Brand” (the “Hotel”) on a parcel in Peninsula Town Center to be owned by Developer that will allow the City to retain more of its tourism-related hotel nights and attract new convention and retail business to the City;
WHEREAS, in addition to having a net positive benefit to tourism-related and retail-related activity in Coliseum Central, the Hotel will support other tourism-related and retail-related assets and activities throughout the entire City;
WHEREAS, the Economic Development staff and the EDA recommend an incentive to the Developer equivalent to the maximum amount of $2,089,940.00 consisting of a one-time, lump sum grant of $1,200,000.00 and an additional grant in the maximum amount of $889,940.00 payable in equal installments over a ten year period all of which shall be paid only upon satisfaction of certain development and performance criteria and which may be offset by any other local grants, local incentives, state grants, state incentives received by the Developer, for the purpose of inducing the Developer to construct and operate the Hotel and in accordance with the performance grant term sheet (“Term Sheet”) attached hereto and made a part hereof;
WHEREAS, the City Council is willing to financially participate in the development of the Hotel by entering into a cooperation agreement with the EDA (“Cooperation Agreement”) to meet the obligations of the EDA under the performance grant agreement (“Grant Agreement”) to be entered into pursuant to the Term Sheet (subject to appropriations), and the EDA desires to enter into the Cooperation Agreement with the City; and
WHEREAS, the City Council finds that the terms and conditions of the Term Sheet and Cooperation Agreement attached hereto are acceptable and the development and operation of the Hotel is strategic for the support of the current and future needs of tourism-related and retail-related activity in the Coliseum Central area and other similar assets throughout the City.
NOW, THEREFORE, BE IT RESOLVED, by the Council of the City of Hampton, Virginia, as follows:
1. That it approves the attached Cooperation Agreement with the Economic Development Authority; and authorizes the City Manager or her designee to execute same.
Adopted at the regular meeting of the Council of the City of Hampton, Virginia held on March 22, 2017.