City OKs first step for developers seeking public funds for new Eola Hotel; work expected to begin sometime this year
Published 7:50 pm Wednesday, February 22, 2023
NATCHEZ — By a four-to-one vote, the Natchez Board of Aldermen approved the first of what are expected to be a number of measures to direct public money to the developers and investors of the Eola Hotel property.
The measure approved in a special meeting Wednesday night will send money in the form of tourism taxes collected and paid by the hotel once it is open, to go back to the hotel to pay off bond funds required to develop the property.
In August 2021, it was announced that a development team involving Hayes Dent, president of Public Strategies and an affiliate with Endeavour Corp., a development group owned by Randy Roth, and Robert Lubin, who owns the Eola Hotel and originally developed the Magnolia Bluffs Casino, which he has since sold, would renovate and reopen the 1927-built Eola Hotel. Dickie Brennan, the famed New Orleans restaurateur was and remains a part of the Eola project, said Natchez Mayor Dan Gibson.
Development of the property was held up as construction costs soared and changes to the project and additional investment were made necessary because of those high costs.
At a special meeting of the Mayor and Board of Aldermen Wednesday night, Natchez Inc. Executive Director Chandler Russ and Chris Gouras, an economic development consultant who works for the Eola’s developers, discussed the complexity of public and private funds that will go into the project.
It is expected the project will cost $32 million from start to finish. Developers are seeking about $4 million of that from taxpayer funds.
“This is a wonderful project as you know, the redevelopment of the Eola — a $32 million project that will create 75 permanent jobs here. Part of the process here, which you will see myself and Mr. Gouras at least three more times for this project regarding both this program and also for a TIF (tax increment financing) program in the future. This is vital to this. Look at it from a snowball standpoint here. The company is entitled to these proceeds. The investment is monitored and will be tracked by the Mississippi Development Authority,” Russ said. “In order to qualify, the minimum guidelines for a project of this magnitude is $15 million and $200,000 per guest room, so they will easily qualify. We are excited about it. It’s kind of the kickoff to the Eola project and something all of us are eager to see get under way.”
Gouras said, “a mix of state programs will be brought to bear to bring this project into reality. It is anticipated it will be new market tax credits, historic tax credits, traditional bank financing, cash equity, some of which has already been invested in Mr. Lubin’s acquisition of the property, and then, importantly, we need a bond structure, whether it be tax increment financing or an urban renewal structure, they are very similar under Mississippi laws.
“This is a very important piece of the public participation in the project. Under Mississippi law, 7 percent sales tax is collected at the point of sale at the register. The city gets 18.5 percent of that money back and under this program, the city agrees to support the financing and the state matches those city dollars three-to-one.”
What that means is the city will direct its portion of the sales tax collected by the Eola once it is open back to the project’s developers, who will use that money to pay off bonds it will require to develop the hotel. And, under the program, the state as an incentive, will match the city’s sales tax dollars sent to the project three to one.
“We predict that in year one that being about $258,000 a year through year 15 about $400,000. In lieu of that money going back to my client, the developer, that money will go to repay the bonds that ultimately the city will be asked to initiate,” Gouras said.
He said if the city approves the move, the developer would be the entity actually making the application. However, the city’s support and acknowledgment is required.
Gouras said the King Edward Hotel in downtown Jackson, the Westin Hotel in downtown Jackson, the Sheraton Hotel and Conference Center in Flowood, Bass Pro Shop and Trustmark Park in Flowood are examples in the state of how various state programs support projects similar to the Eola.
Alderwoman Felicia Bridgewater Irving asked how much the salaries would be for the 75 new jobs expected to be paid here.
“Will they be a wage $15 or more for a living wage,” she asked.
Gouras said he most of the jobs created by the Eola project will be service-related jobs, and that he did not know what wage they will carry.
Alderman Dan Dillard asked if the $4 million in public participation the Eola’s developers seek would all come from the city.
“Is the $4 million what the city will have in the project,” Dillard asked.
That’s a great question, Gouras said.
“At the moment, what we’ve been asked to help to do at this early stage — though it doesn’t seem early to you because two years ago y’all were talking about this project, but I’m new. Because of the fact the tourism rebate is set to expire, we are hopeful the state will extend it, but if they do not, this application will be submitted and processed. It is a foundational piece,” Gouras said.
“My clients have asked the city to deliver $4 million into the construction fund. In order to do that, you will have to borrow a little more than $4 million. There are going to be capitalized interest, debt service reserve and there are going to be issuance costs and at the end of the day, a constructional period of about a year. Once it becomes operational, those sales tax dollars that are remitted by my client to the Department of Revenue will go into the grant fund and they will come back every January and July until 30 percent of the project costs are reached or 15 years passes. And we don’t think there will be enough revenue to get the full 30 percent, so every January and July, we believe the tax will come back and my client will be assigning that to the bond trustee or the city to assist in repaying the bonds. We think this is the majority, major portion of the revenue,” Gouras said.
He said the board was not being asked to issue bonds Wednesday nor would it be obligated after approving the application to issue bonds.
“We are going to come back once we have information from the tax assessor’s office and we are going to meet with your bond lawyer and the administration advisors and Chandler and see if there is enough money in that pot? My client may have to accept $3.8 million or $3.75 million,” Gouras said. “You are allowing my client to go forward and make this application.”
The question was called and the application was approved by a five-to-one vote, with Frazier voting nay.