Hotel Incentive Package Approved

The Fredericksburg City Council approved an incentive package worth up to $310,000 for the development of a hotel next to the 's Eagle Village. The motion passed by a vote of 5-1, with Ward Three Councilor Fred Howe voting against the measure, saying that it was a misuse of the incentive program. 

Howe suggested tabling the measure to hold a work session to discuss financial aspects of the project with representatives from the University of Mary Washington Foundation. Howe's request was not taken up. 

"Why the foundation, with an $11 million investment, has a problem making a $31,000 per year additional cost," said Howe, was a topic which needed further scrutiny. For the record, the project is estimated to cost between $13-$14 million, but the incentive package being offered for the hotel requires at a capital investment of at least $11 million. 

At-large Councilor Kerry Devine praised the project, saying that she did not have an issue with the incentives. 

"It's a good return on investment," said Devine. "We've had great success with the Marriott downtown. I think another hotel in a walkable area of town where we can hold conferences and all sorts of programs can be held is a huge plus for the city."

The UMW Foundation is planning a four story, 96-room hotel on a two acre site between the existing Phase I of Eagle Village and the Giant Supermarket. The hotel would be located along a planned connector road to Sam Perry Boulevard. It is expected that the hotel will mostly serve the University and hospital communities as well as business travelers and other visitors. The hotel would be owned by the UMW Foundation but day-to-day operations of the hotel would be contracted out to a third-party management company.

In order to be eligible for the city incentive package, the UMW Foundation must open the hotel by Dec. 31, 2014. The project must also involve a capital investment of at least $11 million, create and sustain at least 40 permanent jobs, generate at least $130,000 in tax revenues for the city per year, and provide free space for rotating exhibits of local artists. The hotel must also file annual performance reports and stay in good standing with city laws, regulations and taxes. 

The estimated $13-$14 million project would create approximately 55 full time jobs and 15 part time jobs. The UMW Foundations hopes to open the hotel around mid-21013. 

A letter from Jeff Rountree, CEO of the UMW Foundation, says that the incentives are essential to moving forward with the project.

"Due, in part, to the difficult economic environment, obtaining financial incentives for this project from the city of Fredericksburg is essential," said Rountree. "In order for us to proceed with this project, we definitely need to find ways to lower the costs of construction and/or lessen operating expenses in order to make our numbers work."

A memo distributed to City Council members projects average annual tax revenues of $327,000 from the hotel once it gets up and running. 

The incentive package being considered by City Council would reimburse hotel operators all of the local sales tax revenues generated at the hotel for 10 years. In the end, the hotel owners and operators could expect to get approximately $31,000 per year back from the city. The proposed city incentive packages is capped at $310,000 over the 10 year span. 

Additionally, the hotel could qualify for a new state incentive package which goes into effect on July 1. Under the new provision, the hotel could receive a 25 percent reimbursement of state sales tax revenues generated there. However, as part of a required local match, the project could only apply for the new state incentives if the city approves the local incentive package. 

Together, the two incentive programs could generate $620,000 in sales tax reimbursements for the project.