Feb. 20, 2012--CHAMPAIGN _ The Champaign City Council will consider providing up to $3 million in tax reimbursements to help jump-start development of a $28 million hotel in downtown Champaign.

Hans Grotelueschen of YG Financial Group has proposed developing a nine-story, 150-room hotel at the southwest corner of Church and Neil streets _ the site of the Metropolitan Building that was destroyed by fire in 2008.

Grotelueschen plans to tear down the YG Financial Group building at 115 W. Church St. _ just west of the Metropolitan Building site _ to help make room for the hotel.

If project financing is successful, Grotelueschen "anticipates beginning construction in June of 2012 and completing the structure in July of 2013," a staff memo to the council says.

"The developer is still discussing the brand name for the hotel and details about design and construction," the memo states.

Council members are scheduled to discuss the project at a study session following the regular council meeting at 7 p.m. Tuesday at the Champaign City Building, 102 N. Neil St., C. Public comment will be taken at that time.

Grotelueschen first announced the possible project in September. At that time, he said he envisioned a five- to 10-story building.

Now, Grotelueschen and his investors are asking the city to rebate seven years of taxes generated by the hotel project. City staff has recommended the tax reimbursement be capped at $3 million.

Plans for the hotel show a brick-faced building with "generous glass" on the ground floor. The lobby would be situated close to the corner of Church and Neil, with a small bar-cafe running to the south along Neil.

"The hotel will not have a restaurant or full-size bar. ... Instead, guests in this hotel will dine in downtown restaurants and visit local entertainment businesses and bars," the memo to council says.

The hotel would have internal parking, with cars entering the west side of the building from Church Street. Vehicles could drop off guests on a circle drive inside the building, or proceed up ramps to the parking levels.

Developers say they expect the hotel to be "a nationally branded, high-quality hotel that can take advantage of an established reservation system," according to the memo.

The council has been asked to reimburse the developers for up to seven years of tax revenue.

That would include roughly $1,763,300 in hotel-motel taxes, $1,050,000 in taxes specific to the downtown tax-increment financing district, $178,984 in city real estate taxes and $26,705 in food-and-beverage taxes.

"This support would only be provided when the project is constructed and the tax revenues are generated and received by the city," the memo stated.

The actual amount of tax revenue generated by the hotel would depend on a variety of factors, including the property assessment, the room rates, the occupancy rate and the amount of food and beverages sold on site.

According to figures provided to the council, the hotel is projected to generate $251,900 in hotel-motel taxes annually and $3,815 in food and beverage taxes annually.

City officials figure the hotel would pay $300,000 a year in taxes linked to the tax-increment financing district. But the district will expire in 2017, so developers can count on only 3 years or so of revenue from that, or about $1.05 million.

After the district expires, the city figures the hotel would pay about $51,138 in city real estate taxes per year. Over the last 3 years of the seven-year period, that would amount to $178,984.

Craig Rost, the city's deputy city manager for development, said the project would take place "in an untested downtown market and under economic conditions that have made borrowing money for hotels a very difficult proposition."

But he noted that Grotelueschen has gotten commitments from investors, had a feasibility study done and furnished information on other projects around the country.

In the memo, Rost said the project has the potential to create new jobs, increase business activity downtown and generate tax revenue once the seven years is up. But he noted the hotel might take business away from other hotels in town.

One disadvantage to not proceeding with the project, he said, is the city "may continue to have a hole in the ground" at Church and Neil.

Grotelueschen recently moved some of YG Financial Group's offices to the renovated Blue Line Station building at 804 N. Neil St., C. He plans to relocate the rest of the business there eventually, according to the memo.

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