July 20, 2011--A private developer plans to build a $10 million hotel in downtown Phenix City, city leaders said Tuesday.

Construction on a Courtyard Marriott Convention Center could begin as early next spring, said Steve Smith, the city's finance and public utilities director. The hotel is set to be located at 14th Street and Third Avenue.

The city also is planning to build a parking garage near the hotel to accommodate riverfront development. The city announced plans for the hotel along with a number of capital improvement projects it is undertaking, including a new recreational facility at Idle Hour Park and a sports complex at the Phenix City Boys & Girls Club.

The city recently completed its purchase of the abandoned Phenix Regional Hospital, and has discussed building a multimillion-dollar municipal complex in its place that would shift government offices off Broad Street.

To help pay for the projects, the city is planning to borrow several million dollars. On Tuesday, Phenix City Council introduced a proposal to increase the city's sales tax to 8.75 percent from 8 percent, a measure expected to pass when put to a vote. Mayor Sonny Coulter said the increase, which would take effect Oct. 1, marks the first time in 15 years the city has increased the sales tax.

Council members, at their next meeting, also intend to vote on a new 1.5 percent sales tax on owners of rental property. People who own just a handful of properties likely would be exempt from the tax, which is expected to generate about $400,000 a year in additional revenue, Smith said.

"I think what all the citizens of Phenix City are being asked to do is to pay a little bit," said Councilman Jimmy Wetzel. "Nobody's being asked to pay a lot."

"For us to have anything new and useful, I think it's going to take something like this make it happen," Councilman Max Wilkes said.

Council also gave final approval to a 2 percent increase in the city's lodging tax, a measure Smith said is projected to generate an additional $180,000 in tax revenue annually without the new Marriott. The new downtown hotel on its own is expected to generate $250,000 in lodging taxes a year, he added.

Smith said the city has agreed to provide a credit enhancement -- a "worst-case scenario backstop" -- for the hotel to be limited to the city's lodging tax. The developer, whom Smith declined to name, will put up $2.5 million in cash.

"In today's market, the problem you've got is hotel properties throughout the nation, a lot of them have failed. So banks right now just won't loan money for hotel projects," Smith said.

He said the city ultimately is at risk for the debt on the hotel, but he stressed that the project is being funded by a "very high net worth developer" and that Marriott is "one of the strongest names in the business."

"That's the only way you can get it financed at this point in time," he said. "The worst-case scenario is that we'd have to pay the debt service but we'd own a $10 million hotel.

"The revenue we'll generate will far exceed the risk that we're taking," Smith added.

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