Tax plan for hotel garners approvals

The Superior City Council approved Tuesday a financial plan to help make a waterfront hotel a reality.

The Council approved the creation of a tax increment district to pay for infrastructure improvements and provide incentives to ZMC Hotels of Duluth.

Councilors also approved transferring land to the city’s Redevelopment Authority to facilitate the sale for the project.

The company, which also owns the Bridge View in Superior’s North End near the Blatnik Bridge, is planning to build a 75-room Hampton Inn between Perkins and the Richard I. Bong Veterans Historical Center on Superior’s waterfront.

Taxes paid on the increased value within the district go to a city-managed fund to repay the city its costs for infrastructure improvements for the hotel and provide incentives. At the end of its 20-year life, the new value benefits all of the taxing entities including the school district, county and Wisconsin Indianhead Technical College, said Sean Lenz, a financial adviser with Ehlers Associates, which worked on the plan with the city. Neighboring residential property is included in the district for possible future development, Lenz said.

“It’s really a revenue obligation of the city,” Lenz said. Under the plan, once the taxes are paid on the property, the city pledges to pay back up to about $964,000 in incentives over 20 years.

“What this is not is a general obligation of the city of Superior,” Lenz said. He said if revenue generated by the project is not sufficient to make the incentive payments, the city has no obligation to get the revenue from taxpayers.

There is no plan for the city to borrow money to support the improvements, said Jason Serck, economic development, port and planning director.

Infrastructure costs would come from city funds, and paid back over the life of the TIF, Lenz said.

Zamira Simkins, an area resident who holds a doctorate in economics, challenged the findings of the tax increment plan, and a notation in the report that states the city could issue general obligation debt, which a taxpayer-funded obligation.

If general obligation debt is used within the TIF, Serck said it would not be issued in connection with the hotel project; it could be used for future residential development within the district boundaries.

Simkins submitted a petition signed by more than 100 people - several identifying residency outside the city limits and state - opposing creation of the special tax district.

“If the city approves this TIF, over the next 20 years over $2.2 million in tax revenue would be diverted away from local schools, roads and other public projects,” Simkins said, calling it a misuse of taxpayer money to finance a private project.

“First, the but-for test has not been met because the city never openly auctioned the property,” Simkins said. “Had it done so, it might have identified a buyer who might have purchased it without public assistance.”

Simkins questioned the findings of the report, stating that larger, comparable hotels in the area don’t generate the revenue expected in the findings by Ehlers.

However, councilors accepted those findings from the firm that has long provided financial advice to the city and approved the finance district.

The Joint Review Board, a panel of representatives from each of the affected taxing entities, approved the boundaries of the tax district Thursday.

In other business, the Council approved a cooperation agreement with the Redevelopment Authority in connection with a planned project in the Winter Street Industrial Park. Guardian Pest Solutions of Duluth plans to build a fleet maintenance facility and offices at Halvor Lane and Susquehanna Avenue next summer.