Before the City Council approved a plan for tax-increment financing to help build a second tower for the Broadway Columbia hotel on Monday night, Mayor Brian Treece tried and failed to put more teeth into a job requirement provision.
Treece was also the only vote against the agreement.
Tax increment financing, or TIF, funnels the additional property tax revenue generated by a development back to the developer. Effectively a tax break, the incentive reduces the cost of improving a property, and is meant to promote redevelopment of blighted areas.
Under the redevelopment agreement approved at Monday night’s City Council meeting, David Parmley, owner and developer of the Broadway hotel, will get back a projected $4.3 million over the life of the TIF, including interest on the $2.2 million principal.
Fifth Ward Councilman Matt Pitzer offered an amendment to change the proposed fixed interest rate to a variable rate, similar to the city’s previous TIF agreements. The council approved his amendment, with only Treece voting against.
Job requirements and clawbacks
The new tower must create at least 37 additional full-time-equivalent jobs for the Broadway hotel. The hotel only has to meet the requirement once, by the end of the third quarter in the year after the new tower opens.
Treece’s failed amendment would have required the 37 jobs every year over the life of the TIF. He argued that Parmley had touted job creation when pitching it to the Tax Increment Financing Commission and the City Council.
Robert Hollis, an attorney representing Parmley, said Monday night that Treece’s proposal would effectively make the TIF useless. If Parmley asked a bank to issue him a loan with the TIF as a guarantee, the persistent job requirement would make the investment too risky for a bank.
Hollis said the hotel doesn’t have the ability to move jobs from another location, as a company like IBM can if they have a similar facility somewhere else.
“So, (if IBM promises) 37 jobs, the economy changes for whatever reason, and now they’re down to 33, it’s the same jobs they have in Des Moines, they just move somebody from Des Moines, and problem solved,” he said.
He said if the hotel had to let people go, it would be because of financial difficulties. Treece’s amendment for a persistent job requirement would not give the hotel the flexibility to survive economic distress, he said.
Treece said Hollis’ model worked for the private sector, but said Parmley “forfeited the private sector model” when he agreed to take public financing.
“Look, I didn’t pull the 37 FTEs out of thin air,” Treece said, adding that this was the number Parmley told the council his project would create.
In December after council originally approved the TIF, Treece instructed staff to include clawback provisions in the agreement. These let the city recoup money if the building’s construction comes in below budget. Under the approved agreement, for every $5 below the projected $20.25 million cost, the city can recoup $1.
A long process
Parmley applied for TIF help in April 2017 so he could build a second tower for his Broadway hotel. The second tower will have 80 additional rooms and 7,000 square feet of meeting space, which Parmley and some business groups have said will make downtown Columbia a destination for small and medium-sized business meetings.
Months of scrutiny by a skeptical TIF commission ended in December when the council approved $2.2 million in TIF to help fund the $20 million hotel tower, with Mayor Brian Treece and Fourth Ward Councilman Ian Thomas the only votes against. The city also gave Parmley $3.2 million in TIF funding in 2011 to help turn the old Regency hotel into the Broadway.
Testimony from some of Parmley’s employees at the decisive council meeting in December painted him as a job-creator who cares about his employees and the community. First Ward Councilman Clyde Ruffin, whose ward includes The Broadway, cited the testimony as part of his justification to vote for the financing, according to previous Missourian reporting.
The city approved the incentives over the objections of the TIF commission, which is required by state law to review each TIF application and report to the City Council whether it meets two requirements:
- That the property is in danger of becoming a public health and safety hazard without development.
- That the property won’t be developed without TIF funding.
The commission determined the Broadway’s application did not meet legal requirements for TIF in an 8-3 vote.