It looks like a Hampton Inn hotel will be built on Shapiro Drive south of Hwy. A on Larry Goodwin’s planned-unit development in Festus now that the City Council has agreed to offer the developer tax abatements to help finance the multimillion-dollar project.
The Festus City Council voted 7-0 Feb. 27 to issue $10 million in Chapter 100 industrial revenue bonds, which would provide the tax abatements and reduce the developer’s overall cost to build the hotel.
The deal calls for the property’s real estate taxes to remain the same for 10 years, despite an increase in the property’s value because of the addition of the hotel.
Festus Hospitality LLC Property is the hotel developer, according to the ordinance approving the use of the Chapter 100 bonds.
The Festus Hospitality LLC Property organizers are Dharmesh Sharma and Vadilal Bhagat, both of St. Louis, with Bhagat also listed as the company’s registered agent, according to the Missouri Secretary of State website.
The developers could not be reached for comment.
Festus Mayor Mike Cage, on the other hand, was happy to talk about the project.
“I’m excited about it,” he said. “Within, probably, 90 days you’ll see building materials on site and, then, building will start. This is a 100-percent certainty.”
Goodwin’s planned-unit development includes 50 acres overlooking I-55. The PUD’s first tenant was a KFC restaurant that opened in December 2018. An existing nearby business, R.P. Lumber, was the second company to announce it was entering the PUD when its owners decided to extend their property into Goodwin’s development.
Hampton Inn, which would be the third business in the PUD, is slated to be built at 199 Shapiro Drive, south of the KFC, and will be a substantial construction project, Festus City Administrator Greg Camp said.
“The estimated construction cost is $4 million,” Camp said. “They’re looking at a four-story, 94-room hotel with a total of 65,000 square feet.”
Camp said this is the first time Festus has agreed to use Chapter 100 industrial revenue bonds.
“Chapter 100 allows for the city to assume ownership on paper of the subject property. Once that happens, the property becomes tax exempt,” he said. “The city will more or less lease the property to the Hampton Inn owners.
“The total amount of savings to the developers, just for the real estate taxes, is $1.2 million (over the 10 years). They will be paying the amount for the current assessment, before improvements.”
By offering the abatements to the developer, cities, school districts and other taxing entities, which receive revenue from real estate taxes, would not see an increase in funding that normally would result when improvements are made to properties in their areas.
According to the Chapter 100 agreement for the Hampton Inn development, the city of Festus would “forego” $145,011 in additional tax revenue the improvements would generate over the next 10 years if no abatements were in place.
The Festus R-6 School District would forego the largest amount, $818,921 in additional tax revenue.
Following is a list of other entities that would forego additional tax revenue: Jefferson County Revenue, $1,684; Jefferson County Parks, $5,969; Jefferson County Health Unit, $23,593; Jefferson County Disability, $20,007; Jefferson College, $72,505; Jefferson County Mental Health, $20,007; Festus Special Road, $39,358; JPAD, $31,005; state of Missouri, $6,560; surtax, $52,477.
He said that city officials believe that while the city and other taxing entities won’t see an increase in real estate tax revenue from that particular property over the next 10 years, the abatements will pay off in the long run.
“Hotels bring other types of businesses we want to encourage, like restaurants,” he said.
Festus R-6 Superintendent Link Luttrell said school district officials understand why the abatements are being offered and support the plan.
“The city informed us about this deal before it happened,” he said. “We knew they had to make concessions to secure an anchor for the development. We were OK with it.”
Joachim-Plattin Ambulance District Administrator Curtis Stueve said he, too, believes the deal may be a boost to the area.
“I think it could be a good thing,” Stueve said. “It will be adding a business to the city and the hope is it will attract other businesses that will generate more tax revenues.”
However, due to a state statute, fire and ambulance districts may opt out of up to 100 percent of applicable real estate tax abatements as part of such deals, and JPAD chose to opt out at 50 percent.
When the abatements end in 10 years, the property will be assessed at its full rate, Camp said
“After 10 years, the deal expires and the lease arrangement ends and they will pay the full assessment,” he said.
Camp said the deal does not cover all types of taxes for the developers.
“The personal property taxes will still apply for items such as furnishings for the hotel,” he said.
Camp said the Hampton Inn developers also would be exempt from paying sales taxes on construction materials purchased in Missouri, and projections show those savings could be about $330,000.
“It depends at the end of the day on construction costs,” he said. “If they purchase materials for construction of the hotel anywhere in the state of Missouri, they are exempt from the sales tax. If they go outside of Missouri, it does not apply. So, they get some upfront savings on their construction costs.”
While it is the first time for the city of Festus to issue Chapter 100 bonds to assist a developer, other entities in the county have used them.
In 2015, for example, the city of Arnold issued Chapter 100 bonds to help Anheuser-Busch InBev finance the expansion of its can plant there.
Another use occurred in 2005, when the Jefferson County Commission approved incentives for the River Cement Co. to build a new, modernized plant south of Festus.
Festus Ward 4 Councilman Jim Tinnin did not attend the Feb. 27 meeting.