|By Steve Lackmeyer, The Daily
OklahomanMcClatchy-Tribune Business News
Nov. 28, 2006 - Increased costs for materials because of Hurricane Katrina and unexpected restoration demands are being blamed for a $5 million increase in the price tag for renovating the Skirvin Hotel.
The Oklahoma City Council will consider a request today to tap into the downtown tax increment finance district fund to pay $4 million. Another $1 million will be recovered through tax credits. The $5 million increase brings the total renovation to $56.3 million.
"The increase is disappointing," Mayor Mick Cornett said. "There is a demand for raw materials because of all the construction going on in the Gulf Coast, and it's a global issue with China doing so much construction. And this is a building where you never know what you're going to find."
The additional funding, if approved, would increase the city's participation to $22 million.
Brent Byrant, the city's business manager, said the developer, Skirvin Partners, did consider paying the additional costs. But that scenario, he said, might have complicated the city's efforts to fully recover TIF dollars already pledged to the project.
Bryant said the developer's cost to cover the increase would have been higher than the city's. An analysis being submitted to the council shows the city might have been left unable to recover up to $9.6 million of its subsidies had the increase been privately funded. By increasing its equity participation, Bryant said a conservative estimate on the hotel's operations would leave the city unable to recoup $2.9 million.
Under previous agreement, the city's ability to recoup its investment is backed by a second mortgage and retained ownership of the ground under the building, which will be leased to Skirvin Partners.
The Skirvin opened in 1911 and closed in 1988, and is on the National Register of Historic Places. The Skirvin Hilton is set to reopen in February.
Scott Whiles, director of Project Management for Marcus Resorts and Hotels, which will operate the Skirvin Hilton, said Monday he does not foresee any further cost increases.
"With historic projects like this, you get into a renovation and you're working with 50 percent design documents when you're putting the numbers together," Whiles said. "You're kind of flying by the seat of your pants."
Cornett said he still thinks the city has made a good investment. The deal does not include any money from the city's general fund. The tax increment financing was created to assist downtown development.
"It all comes back to the funding question," Cornett said. "Did we want to save the Skirvin or tear it down? We did not want to leave it boarded up. Talking to the community, I heard a very high interest in the saving it, and we feel that in the end these dollars will be put back into the economy."
Copyright (c) 2006, The Daily Oklahoman
Distributed by McClatchy-Tribune Business News. For reprints, email email@example.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.