May 18, 2011--The Hutchinson City Council unanimously approved issuing $6.3 million in industrial revenue bonds for a new Fairfield Inn on Tuesday, but not before a court-appointed receiver for the Ramada Hotel and Conference Center questioned the need for another hotel.

Receiver Joe DePalma of Arlington, Texas, said the Ramada is not able to make debt service payments and is struggling to cover operational costs as a result of low occupancy.

The Ramada, formerly the Grand Prairie Hotel and Conference Center, is on Lorraine Street, north of the Fairfield Inn site at 11th Avenue and Lorraine.

DePalma has operated the hotel since being appointed receiver in 2008, when First Westroads Bank of Omaha took legal action against HPA Associates to collect more than $16 million it was owed on the Grand Prairie.

DePalma contended that the threshold for building a new hotel is when occupancy of existing hotels is between 62 and 65 percent. For the most recent 12 months, he said, Hutchinson's hotel occupancy was only 54 percent.

However, Raju Sheth, one of the developers of the Fairfield Inn, disagreed with DePalma's assessment of the market for a new hotel. He said that for the 12 months ending in April, franchise hotels in Hutchinson, with the exception of the Ramada, had an occupancy rate of 71 percent. Noting that he and his partners have more than 20 years' experience in the hotel business, Sheth said they wouldn't be investing $2 million of their own money in the bonds if they didn't think there was a market for a new hotel.

The council originally approved $5.5 million in bonds for the Fairfield Inn last June. But the developers asked that the amount be increased to $6.3 million because of a new Fairfield Inn concept with larger rooms and more amenities.

Mayor Ron Sellers noted that when the council originally approved bonds in June, the reason was that there were not enough quality hotel rooms in the city for events the city attracts. And Councilman Dean Brigman, who offered the motion to increase the bond issue to $6.3 million, said he was doing so because he was convinced the Ramada was struggling because of the quality of its rooms.

In other business Tuesday, by a series of 5-0 votes, the City Council:

--Approved a $ 1 million contract for the purchase of 67 acres from Richard and Gary Walsten for expansion of the Salt City Business Park south of its current boundary to U.S. 50. The purchase becomes final Aug. 1, but the city already has hired an engineering firm to develop plans for extending city streets, water and sewer service and a rail spur into the new area, where city and county officials and the Hutchinson/Reno County Chamber of Commerce hope to attract industrial suppliers for the Siemens Wind Power plant in the northern portion of the business park.

The city also has obtained a $1.36 million grant from the U.S. Economic Development Administration to cover part of the construction and land acquisition costs, and Reno County has pledged $500,000 over 10 years. The city also has applied for a $500,000 grant from the Kansas Department of Transportation.

Total cost of the project, as estimated in the EDA grant application, was $2.72 million, assuming land could be acquired for the appraised price of $472,150. The higher cost of land will push the project over $ 3 million.

--Authorized the city Engineering Department to remove a traffic signal at Third Avenue and Maple on a six-month trial basis. City engineer Brian Clennan said a study found that there wasn't enough vehicular and pedestrian traffic at the intersection to warrant a signal. City workers will install signs informing the public that the signal will be removed.

After one week, the signals will be set to a flashing mode for one more week. Then the signals will be bagged and stop signs installed during the six-month evaluation period, after which the engineering department will report back to the council.

--Approved an ordinance changing liquor licenses for drinking and dining establishments from one-year to two-year terms and doubling the existing annual fee for covering two years.

--Approved conditional use permits for ADM to construct two 1 million-bushel steel grain storage bins adjacent to its grain elevators at 1700 N. Halstead and 1 N. Halstead.

--Approved a $95,585 contract with H.W. Lochner Inc. for design and engineering services for repairs to the Fourth Avenue bridge over Cow Creek. Those repairs are on the city's construction schedule for 2013 and are estimated to cost $1 million.

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