The developers of a boutique hotel at the former Vandivort office building are asking Springfield City Council to approve up to $9.9 million in industrial revenue bonds to support their redevelopment plans.
Through MBH LLC, siblings Billy and John McQueary are remodeling the 107-year-old downtown Springfield building, 305 E. Walnut St., into a 50-room, $13.4 million boutique property dubbed Hotel Vandivort. The owners say they need assistance in the form of property tax abatement to make the project financially viable.
At last night’s council meeting, the brothers, through Husch Blackwell attorney Shawn Whitney, formally asked council members to sign off on 100 percent abatement for 10 years and at least 50 percent property tax abatement for the following 15 years.
Springfield Economic Development Director Mary Lilly Smith introduced the proposal. As part of a tax impact analysis conducted due to the request, Smith said the value of the abatement would be $2.8 million, and as much as $3.5 million should the building secure Leadership in Energy and Environment Design silver certification when renovations are complete. The Chapter 100 bond request calls for 75 percent abatement for years 11-25 should a LEED silver designation be achieved on the building remodel.
Smith said the move is similar to a Chapter 353 tax abatement, except the property, which was remodeled in the mid-1980s, was not deemed to be suffering from blighted conditions. Chapter 353 abatement is designed to offer tax relief to redevelopers of blighted properties. Chapter 100 bonds allow for tax abatement on real property and equipment purchases, where the city actually owns the property while the developer pays back the bond debt.
“They will be required to make payments in lieu of taxes based on the taxes that are currently being paid on that property, so there is no loss to the taxing jurisdiction on the taxes being paid. They are not requesting personal property tax exemptions on furniture or equipment and they are not requesting a sales tax exemption on construction materials. Both of those items are permissible under Chapter 100, but they are not requesting that,” Smith said.
Kraft Foods most recently received approval for industrial revenue bonds dedicated to equipment upgrades at its east Springfield plant. Last year, Kraft was granted a $26 million abatement on new equipment, and in July of this year, the manufacturer received approval to work with the city on a $70 million tax abatement plan.
During the course of the 25-year Hotel Vandivort abatement, Smith said property taxes would still increase thanks to the improvements. According to the tax impact analysis, she said nearly $723,000 would be collected through 25 years of property taxes if no redevelopment occurred, while $1.56 million would be collected with the abatement in place, assuming no LEED silver status. If redevelopment occurs and the abatement is not in place, property taxes are estimated to be $4.4 million. With a LEED silver designation in place, $909,000 would be paid through the total abatement period.
Whitney said the project would create 70 new jobs, not counting construction jobs, with at least 20 of those being full-time positions.
Councilman Craig Hosmer said the East Walnut property had received 25 years of tax abatement before, beginning when the Vandivort was remodeled in the '80s to attract office tenants.
“It seems like the taxing jurisdictions never get the money out of these projects. We’ve been told after 25 years that the taxing jurisdictions are going to get this windfall out of these projects because they increase the value [of the property] so much. Yet, every 25 years we can give a new abatement,” Hosmer said.
Smith, however, said this is the first instance in Springfield where the same property could receive two rounds of 25 years worth of tax abatement.[[In-content Ad]]
