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Waco City Council approves $5.5 million in tax rebates for AC Hotel

Waco City Council approves $5.5 million in tax rebates for AC Hotel

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The Waco City Council has voted to add $1 million to a $4.5 million tax break approved last year for an AC Hotel by Marriott planned at Sixth Street and Mary Avenue.

The council voted Tuesday to give the developers of the 182-room conference hotel up to $5.5 million, based on a 70% rebate of the estimated hotel occupancy tax the project would create over 10 years.

Under the so-called Chapter 380 agreement, SRH Hospitality Downtown Investments would add $47.9 million in capital improvements and 40 new full-time jobs.

The Chapter 380 financing is in addition to an $8.7 million Tax Increment Financing Zone contribution previously approved, bringing the total public contribution to $14.2 million, or nearly 30% of the total project cost.

District 3 Council Member John Kinnaird cast the lone vote against the measure. He said he is “very much” in favor of the Marriott AC project and the previous version of the Chapter 380 agreement, but he still thinks the city has done enough investing in hospitality projects.

“Just this amendment, I’m not in favor of giving any extra money over and above that,” Kinnaird said.

Waco City Manager Bradley Ford said even with the rebates, the hotel would bring in an estimated $2.1 million in hotel occupancy tax revenue to the city over 10 years, and an additional $2 million for the new Tourism Public Improvement District.

“The developers’ substantial investment alongside the TIF and Chapter 380 agreements really enable a number of positive community benefits, including the activation of Mary Avenue and 6th Street, street-level retail in accordance with the Imagine Waco plan,” Ford said.

The developers had estimated a cost of about $40 million when they initially won TIF board approval in August 2019.

Economic Development Manager Kent George said the higher cost estimate is tied to trends in the construction industry.

“There’s been an effect on supply chains, and construction costs have increased since the original went through,” George said.

The hotel will include 182 rooms, a restaurant, bar, pool, courtyard, 17,000 square feet of conference space, a shared parking garage with 145 public spaces, six public electric car charging stations and solar panels on the hotel’s rooftop. The hotel will also provide the Waco Convention Center & Visitors Bureau with room blocks for local conventions.

Ford said the public parking spaces represent “significant savings” for the city because building a separate parking garage would be much more expensive.

The public parking is a requirement of the TIF agreement.

Under the Chapter 380 agreement, the hotel must create at least 85% of the promised jobs or the contract could be canceled. The developers also must hold a job fair to reach out to city core residents for positions. Thirty percent of the new employees must be residents of the city core, an area bounded by Business 77, La Salle Avenue, 26th Street, and Herring/Lyle Avenue.

The city core includes the Alta Vista, Austin Avenue, Baylor, Brook Oaks, Brookview, Carver, Dean Highland, Downtown, North Waco, North East Riverside, Oakwood, Sanger Heights and University neighborhood associations.

“If the developer were to not hit those targets, the percentage of hotel occupancy would decrease based on language provided in the contract,” Ford said.

After the meeting, George said the city has entered two similar deals over the past three years.

In 2018, the city awarded KB Hotels a $3.2 million TIF contract and a $4.8 million hotel occupancy incentive over seven years for three hotels in East Waco. The following year, Embassy Suites was awarded $7.3 million in TIF funding and up to $4.5 million in occupancy taxes over 10 years.

The Embassy Suites agreement includes the same 5% bonus rebate encouraging the hiring of city core residents.

The item drew a number of comments from environmental activist Alan Northcutt, who urged the city to require Level 2 electric chargers at the hotel.

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