A tax increment reimbursement agreement by the Redevelopment Agency of Tooele City was approved on June 19, which helps pave the way for apartment housing in the former Broadway Hotel.
The agreement allows the developer, Broadway-Heritage Village Apartments 2017, to be reimbursed a portion of the tax increment on the redeveloped property up to $360,000 or 10 years. The reimbursement would be used to meet the debt service coverage required by the bonds issued to fund the project to prevent default.
Tax increment refers to the additional property tax revenue created by an increase in property value. The city’s RDA is entitled to a portion of the tax increment and the resolution approved last month allows the agency to reimburse some of the tax increment to support the project.
According to the RDA resolution, the concept plans for the project include renovation and redevelopment of the former Broadway Hotel to create 30 bedroom units and construction of 18 new units, with a mixture of one, two and three bedroom units.
RDA consultant Randy Sant said the developer will be required to submit a yearly budget including revenue, expenditures, net operating income, and debt service. If the project produces enough revenue to meet the debt service coverage, the developer won’t receive any reimbursement.
Sant said based on projections, the increment will likely only be given for 3-4 years. The agreement also requires the developer to operate for at least five years after they receive the final tax increment payment.
The agreement also requires the developer to begin construction on the project by April 2020. Sant said the developer has a buyer for the bond and an equity partner lined up and intends to begin construction shortly after those agreements are finalized in September or October.
Construction will likely begin with the existing hotel building and is expected to be completed by the end of 2021.
During the work session of the June 19 meeting, RDA chairman Brad Pratt thanked those involved in the Broadway Hotel redevelopment over the course of the project. The RDA board adopted a resolution approving the Broadway Community Development Project Area plan back in September 2007.
“The improvement or rebuild of that hotel will be major,” Pratt said. “That will be a real boost to that area and I also appreciate the fact that it’s affordable housing.”
During the RDA business meeting following the City Council meeting, Tooele City Mayor Debbie Winn said tax increment agreements can be controversial but are necessary for some projects. Tooele County and the Tooele County School District are also involved in the tax increment agreement.
“This will bring to our city some affordable housing … and we are very grateful to everyone that has seen the vision of this project and will help make it work,” Winn said.
The RDA board unanimously approved the tax increment reimbursement agreement on a motion from board member Dave McCall, seconded by board member Steve Pruden.