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Events center stalled

Worthington City Hall. (Brian Korthals/Daily Globe)

WORTHINGTON -- The city's financial advisers presented suggestions for pushing forward the stagnant events center project at the council's special meeting Monday, but none of the options are overly appealing to council members, who face a dearth of developers willing to invest in the project.

The project was to include a convention center with adjoining hotel, both to be managed and operated by a private developer. A half-cent local option sales tax approved by voters in the Nov. 4, 2008 general election is currently being collected to fund the physical "bricks and mortar" construction of the complex.

Plans with the city's original partner, Ruhr Development, and another interested party, are being held at a standstill because lenders are now requiring as much as 50 percent equity before they will invest in high-risk development projects.

The council tasked Dave Calmister and Rebecca Kurtz of Ehlers and Associates with investigating other financial incentives that might help move the project along.

"In a good market ... investors are willing to invest money, but they want a 20 percent return (on hotel investment) for their money," said Calmister, referring to conversations with Openheimer, which has experience in special financing. "That's where the private side comes in. But even in a good economy there would have to be some kind of subsidy, whether a tax abatement or city contribution."

The city could take advantage of new legislation that allows funds earned on Tax Increment Financing districts over a nine-year period to be used on any type of project.

"If construction can begin by July 1, 2011, you can create an economic development district with an estimated $160,000 to $170,000 in annual increment," added Kurtz.

If the city and the county approves, taxes on the property could be abated for up to 20 years following decertification of the district. Or, abatement could be used alone for any project-related expenses. Any government unit can abate up to $500,000 in taxes in any given year.

Even with the sales tax collected, the funding gap is large: after taxpayers' $5 million-plus contribution, the issuance of Hotel Revenue Bonds and about $1 million in developer's equity, a $3.2 million gap remains in the roughly $8-million hotel project.

Calmister suggested Economic Development Authority funds or revenues from other city project could help make up the difference.

There's another option, too.

"Could we build the events center and let that hotel come to us later?" asked Alderman Ron Wood. "We know there's a need for a gathering place. These numbers sure look like the hotel may need to wait."

But with the hotel expected to form a mutually beneficial relationship with the center, some members questioned whether that would be best.

The city could also choose to build on to an existing hotel or motel structure in the community.

"While that may be a possibility, that is not what we presented to pass the sales tax," Alderman Lyle Ten Haken cautioned.

In other business, the council at its regular meeting on Monday:

- Approved a resolution appointing three alternate election judges for the Aug. 10 primary election and the Nov. 2 general election.

- Heard a presentation of the Minnesota Pollution Control Agency GreenStep Cities Program from Jeff Vetsch, the West Central/Southwest CERTs Coordinator. The program is designed to promote municipal policies that help meet the state's greenhouse gas emissions reduction goals. Each city wishing to participate must pass a resolution agreeing to take part in the program, form a committee to ensure compliance with varying numbers of the 28 voluntary best practices, and take steps to complete those practices.

- Heard an update on the city's Bioscience Training and Testing Center, and the progress of its proposed 7,500-square-foot addition. The build-out is scheduled to be completed by November 2011.

- Adopted an updated Mutual Aid Agreement between the city of Worthington and Nobles County Emergency Management.

- Amended special sewer user agreement with JBS. Amendments account for the plant's increased water consumption, the physical capacity of which was reached in 2008.

- Accepted contract for architectural and engineer services with Short Elliott Hendrickson Inc. in the amount of $61,300 for the Bioscience Training and Testing Center.