Developers explore financing options for Oread Inn

Taxing options would help pay for infrastructure

Plans for a new seven-story hotel at the edge of the Kansas University campus have an added twist.

City officials revealed Monday morning that developers are seeking to use a special taxing authority to help build the approximately $30 million project.

At a study session of the City Commission, County Commission and the School Board, City Manager David Corliss said developers have asked that the city approve a tax increment financing district and a transportation development district for the project.

The transportation development district – which would be a first for the city – would create a special sales tax rate for the hotel project and the restaurant that is planned as part of it. The hotel would charge an additional 1 percent sales tax on top of the normal sales tax rate in the city. The revenue generated from the extra sales tax would be used to help pay for road improvements near the 12th and Indiana site.

The development group – which is led by executives of Gene Fritzel Construction Co. – also want to use tax increment financing. That concept involves the city, the county and the school district agreeing to give up future increases in tax revenue from the property for 10 or more years while street, parking and other infrastructure improvements are paid for.

A TIF essentially allows a development to earmark any property and sales tax revenues that are above the amount generated by the property today. The earmarked tax money then is used to pay for infrastructure projects specifically related to the project.

In this case, the proposal has an interesting wrinkle in that one of the improvements proposed to be paid for is the hotel’s underground parking garage. The garage would not be a public parking garage, but state law allows TIFs to be used to finance private parking garages.

But the proposed TIF deal is different from the one other TIF that has been used in the city – to redevelop the 900 block of New Hampshire Street.

In the hotel proposal, developers have agreed to sign paperwork that would protect the city in case future tax revenues aren’t sufficient enough to pay for the bonds, which would be backed by the city. The development group would submit a letter of credit from a bank ensuring that the development group or the bank would make up any shortfall.

The development group is not asking that the city use any city at-large funds to pay for the infrastructure improvements in the area.

The City Commission is scheduled to discuss the special taxing options at its Nov. 6 meeting. Ultimately, the School Board and the County Commission will have to approve the TIF concept. Both have veto power over the TIF idea.