|By Bill Strother, Herald-Times,
Bloomington, Ind.McClatchy-Tribune Regional News
March 15, 2009 - Construction on the Hotel Indigo, a keystone in the redevelopment of downtown Bloomington's south side, likely won't get started for another year.
When plans for the 105-unit boutique hotel on the corner of South College Avenue and Third Street were first announced, developer Peter Dvorak said he hoped the project would get under way in the fall of 2008, with doors opening later this year.
But that project and another Dvorak project, a hotel at Ninth Street between College and Morton Street, have been put on hold by the recession.
Both sites have been cleared and city planners have given their OKs, with only a request to vacate an alley still to deal with. Just don't expect to see either building rising from the ground anytime soon.
"We had secured a $14 million commitment and were working with the IEDC (Indiana Economic Development Corp.), he said. ". As we continued to work with the state, the financial markets melted down and our lender got into a position that they were unable to keep their commitment for the financing."
He said the same concern, the drying up of financing, especially for hotel construction, will delay the start of Candlewood Suites, a 100-unit extended-stay hotel that would target business visitors whose stays would stretch beyond a week.
That project, which will include a parking garage for general use and a restaurant not connected to the hotel, was set to get under way sometime this spring.
"At this point, we're still excited about both projects," Dvorak said. "We think they're both integral to the continued success of downtown in both those areas -- the Indigo for the whole BEAD district and for the whole SoCo (South College) area," he said. "Candlewood is a complement to the tech park and ProCure and other projects that are happening on the north of downtown.
"They're still good projects," he said. "Until the credit markets improve we've got to keep them on hold. I anticipate that at this point, we're talking about 12 months -- that we would not start construction until spring of 2010 and open in 2011 unless something changes.
"I don't think at this point it can get any worse, so there might be factors that allow us to move forward on a faster schedule -- but at this point, that's where we are with both of those."
A continuing concern with the Indigo project -- and one that still could jeopardize plans for the hotel -- is whether the state will approve a request by Dvorak's company, Pinnacle Properties, for more than $2 million in tax credits for construction of the hotel.
The hotel site falls within one of the city's two Community Revitalization Enhancement Districts (CREDs), the first of which was established to help in redevelopment of the former Thomson Consumer Electronics site on the near southwest side, and the second that contains much of the downtown, including the Indigo site.
Such districts are state-financed tools to encourage redevelopment that creates jobs. It does that in two ways, through local capture of increased state sales and income taxes generated from within the district, with those dollars then financing infrastructure improvements in the district, and through the award of state tax credits for the cost of construction in the district that meets the state's guidelines.
It is those credits that are key for Indigo.
Dvorak estimates that the credits would total about $2.5 million -- 25 percent of the $10 million in eligible costs for the $16 million to $17 million project.
"Those CRED dollars were going to assist in bridging the final gap to get the project started," Dvorak said.
The credits, which could either be applied to the company's state tax liability or sold to other enterprises looking for ways to reduce their own tax commitments, would effectively subsidize the project by that amount. That, along with the $14 million in private financing, would allow the building to go forward.
The Hilton Garden Inn, also in the downtown district, was built with the benefit of CRED tax credits.
But since that time, eligibility guidelines have changed, with the state no longer considering such "hospitality" projects good candidates for the credits.
"They took the position that hotel and retail generally would be uses that should be disqualified from CRED credits -- at least initially," Dvorak said. "The hurdle is higher."
Pinnacle and the Indiana Economic Development Corp., the agency that will act on the credits, have been negotiating their positions for some time. At this point, Dvorak said, he is waiting to make a final application until the Legislature completes next year's budget, probably at the end of April.
Blair West, spokeswoman for the Indiana Economic Development Corp., said that while she could not comment specifically on the Pinnacle case, "The general idea is that the state wants to be providing support for new jobs." An office block or manufacturing facility would be a natural for consideration, she said, where the incentive of a substantial tax credit might help drive a decision to build in a particular area or even in Indiana rather than in some other state.
Sites for hotels and retailers, on the other hand, usually are driven more by market forces and by potential traffic than on whether the incentive will be there, she added.
Tax credit eligibility rules were revised in 2006 from those in place when the Hilton was built, West said. But even though a hotel generally does not now meet current guidelines, "that doesn't preclude them from the application process," she said.
There are only 10 Community Revitalization Enhancement Districts in the state, she said, and because of the potential drain on state revenues, the state budget office has placed a moratorium on creation of additional districts. Neither is the concept one that the economic development corporation is pushing hard right now, she said.
Dvorak sees the Indigo, which would be just across the street from the convention center, as a legitimate revitalization project that will bring life back to the area, a project deserving of the credits.
And that's the case Pinnacle will make, he said. "The feedback from the state is not that they won't do it but that they want to see the equivalent return on the investment."
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