As reported in the Wall Street Journal last month, developers who have undertaken hotel projects similar to Media's Hampton Inn project are finding it extremely challenging in securing the needed financing. During the height of this type of development, which was back in mid-2000, lenders often financed 80% of the cost of construction. Today, that falls to about 60% making for a big gap that isn't nearly as attractive to developers who will have to seek alternative capital or carry higher debt.
|Springfield's Hotel is expected to be completed this summer 2013|
These types of hotel are still being built, but the whole developmental model has changed to become something more of a public/private cooperative. As found by the Wall Street Journal, local governments have become more inclined to offer tax incentives to make these projects feasible and profitable. In the article, one administrator was even quoted at saying that their 107-room Four Points Hotel by Sheraton couldn't be built or done without the city's assistance. Another developer of a Hampton Inn and Suites in Owensboro, KY went on to explain that state tax incentives that could amount to more than $5 million made the $20 million project possible. Perhaps most compelling is a quote from one group who stated, "These things are largely uneconomic without significant public incentive."
What's interesting is that in addition to financing, Media's Hampton Inn will have to compete with a Springfield hotel that received a county tax incentive through a payment-in-lieu-of-taxes (PILOT) agreement. Essentially, a tax break. Since Springfield's hotel is being built on non-taxable township land, the agreement was considered appropriate by the county, developer and the township. The three story, 92-room hotel will not only bring yearly lease payments and a 3% occupancy tax, mercantile and business taxes, but jobs and services that are expected to help the area. The hotel is expected to be completed in the summer of 2013.
|After 7 years, Media's Hotel is no closer towards getting done than 3rd St. Bridge||!|
In 2012 we had a potential of getting a Super Wawa, that didn't require tax incentives and would have brought 35 jobs, millions in development fees and a steady tax revenue. Problem was, Mayor Bob McMahon and Borough Council weren't organized enough to further explore the matter and Wawa retracted their proposal. With development projects in this day and age, that might be looked upon as a golden opportunity squandered. At this time, there are no proposed alternatives or ideas for the site.
After reading the Wall Street Journal's article and seeing the situation in our area, it looks like what is really needed is effective municipal communication, cooperation and leadership that's out in front of these projects and setting expectations. Can Media's Hampton still be built and prove profitable after seven years, especially against a new Springfield hotel with tax breaks? Time will tell, but in the meantime while local officials in Springfield are collectively working together to have rooms ready by summer, Mayor Bob McMahon and Council President, Brian Hall don't have the slightest idea what's going on with Media's Hotel.