RACINE — The team behind the Edgewater boutique hotel in Madison is interested in developing and running the hotel and event center proposed for Downtown Racine, city officials announced Monday. And it’s a firm not unfamiliar to Racine officials — the Hammes Co.
Mayor Cory Mason called a special City Council meeting on Monday night so that City Administrator James Palenick and City Development Director Amy Connolly could update aldermen on the progress city staff have made on 10 benchmarks set by the council for the proposed arena project.
Those benchmarks are:
Developing an agreement with a private-sector developer to build a hotel.
Development of a new Tax Increment District for the hotel.
Development of an agreement that stipulates the city and Real Racine, the county’s tourism promotion agency, can use 100 percent of the hotel occupancy taxes to pay off event center debt.
Solicitation and development of a naming rights partner.
A tenant agreement with a United States Hockey League team to base at the arena.
A capital improvement plan detailing the impacts of diverting intergovernmental shared revenue funds to paying off the event center debt.
An agreement to secure roughly $365,000 annually from outside sources, be that governmental, private or otherwise.
The immediate creation and staffing of an advisory committee to the mayor.
The city creating a citywide master capital plan that addresses other capital projects and bonding.
Any debt repayment sources that exceed estimates be used to alleviate the tax impact on citizens.
Opening the meeting, Mason said the goal was to have a “robust discussion” in advance of Tuesday night’s City Council meeting, during which the council could vote to override Mason’s veto on the project.
Palenick and Connolly reported that out of the 10 benchmarks, city staff have fulfilled six, including developing an agreement with a private developer to build a hotel.
The city put out a call for bid responses for the project in October and received four “good” ones, according to Connolly. Out of those four, two were interviewed on Nov. 17. Connolly recommended that should the proposal go forward, the city select the team from The Edgewater which is affiliated with Hammes Co. of Brookfield.
The Hammes Co., founded by Racine native Jon Hammes, has had involvement in the event center project since its early stages.
As part of the first phase of the project, the city awarded Hammes Co. up to $600,000 to allow the company to evaluate the feasibility of an arena/convention center.
Hammes officials said that in addition to developing and running the privately owned hotel, which they would build without tax increment financing, they would also like to run the event center.
However, Hammes Co. has not been without controversy.
In June, The Journal Times reported that last year, the Edgewater Hotel Co., owned and operated by Hammes Co. Sports Development President Robert Dunn, was ordered by an arbitration panel to pay nearly $15 million to a contractor and architect for the renovation of the downtown Madison hotel, 1001 Wisconsin Place. Hammes Co. was the project manager for that project, a nearly identical role to the one it played with the event center project in Racine.
The arbitration panel’s 51-page ruling alleges that Edgewater and Hammes, through Dunn, hired an “all-star team” of design and construction professionals, but did “everything they could to cause their own project to fail.”
“Despite all of this, the team managed to get the hotel open on time, although at substantial additional cost,” wrote the arbitrators, led by Kendall Schoonover.
Agreement close on hockey team
Palenick reported a tenant lease with a minor league hockey team franchise is nearly complete. According to the terms of the agreement, the approximate gross per-game operational lease would be $4,000, the net per-game capital lease payment would be $3,000 and capital ticket surcharge would be no less than 75 cents.
A capital improvement plan has been drafted that Connolly characterized as showing the city could afford to spend $800,000 of its intergovernmental funds (from the suburban sewer agreement) on the project’s debt.
The mayor’s advisory council and citywide capital plan were completed during the previous administration.
The one initiative that failed was to have the hotel’s occupancy tax be used to pay down the arena’s debt. Real Racine receives the city’s occupancy taxes in exchange for promoting tourism in the area according to their contract with the city. Real Racine’s board voted against returning funds from the hotel/arena project to the city to pay down the debt, 12-3.
This prompted a discussion over the city’s partnership with Real Racine. Palenick said the occupancy tax, also known as a room tax, has to be used to promote tourism, but not necessarily with Real Racine.
Connolly said the city’s tax increment district for the arena is almost done. The city hired Ehlers and Associates for $5,700 to look at a TID study and after two months, they’ve written up a draft which Connolly said was doable. The naming rights partner, has been put on hold until the project has been ultimately decided though Palenick said that he was confident the city would be able to get a naming partner for $334,000 a year or more.
An agreement to secure roughly $365,000 annually from outside sources has been put on hold because Connolly said the current financing picture for the project does not call for funding from either outside sources or taxpayers.
First District Alderman Jeff Coe, in support of the arena, held up a recent Journal Times article about the Milwaukee Bucks minor-league affiliate, which is playing in a new arena in Oshkosh. Racine had been in the running for the G League team.
“Don’t worry, if we vote this down we’ll be making news again,” said Coe. “Somebody else will be building this center.”
Ninth District Alderman Terry McCarthy said that during a recent trip to Detroit, he saw firsthand the positive effect the city’s new arena had had.
“I walked through neighborhoods, nothing but bars, neighbors, people,” he said. “I saw the evidence of such a facility.”
Mason said that while he was campaigning for mayor, the majority of constituents he spoke with were against the project, and he had concerns that if any of the funding streams fell through, that taxpayers would be on the hook. Plus with Foxconn coming to the county, Mason wasn’t convinced the arena was the best priority.
“There’s a lot of other exciting opportunities in the city,” he said. “I think it’ll be a missed opportunity if we spend the next six months working through this proposal.”
The City Council is scheduled to meet at 7 p.m. Tuesday at City Hall, 730 Washington Ave., Room 205.