Council approves GrandStay tax abatement request; Was rejected by County, School Board

Published 8:53 am Wednesday, August 21, 2019

The Austin City Council voted 4-2 to approve a tax abatement request from GrandStay Mower County Development Group, LLC during its regular meeting Monday evening.

The abatement request for a proposed 56-unit hotel to be built on Fourth Avenue Northeast, west of The Tendermaid, was discussed with the council in April. The estimated cost of the project is roughly $6.5 million and an abatement request of up to $200,000 was made for consideration. Of the total, the city’s share would be about $85,000 with a payback time of 2.8 years if all taxing entities participated, according to City Administrator Craig Clark.

The approval came despite rejection from the Mower County Board of Commissioners on July 15 and from the Austin School Board on Aug. 12.

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Craig Hoium of the Mower County Development Group made the case for the abatement.

“With our requested tax abatement, we are looking strictly at site improvement,” he said. “Any building that would be built on that site would have to have soil corrections done. If you look at the guidelines for approving tax abatements, that’s specifically to improve blighted areas of the community, whether it’s tearing down structures, which has already been done on this site, or soil corrections. It’s just an extra cost for the development and the development team would like to move forward with the project even with the denial of the County and the School District.”

Councilman Jeff Austin asked Hoium if financing was available to cover the expense of the abatement not granted by the County and School Board, to which Hoium replied, “We have been continuously recruiting investors for the project.”

Mayor Tom Stiehm said the hotel would be good for the development of the Fourth Avenue Northeast corridor and expressed a desire to help any project that could be a magnet to the area.

“It’s a perfect fit for what we’re trying to do on Fourth Avenue, “ he said. “Something like this will help further development down the road.”

Councilman Jason Baskin also voiced his support for granting the abatement, saying it would drive more people into the downtown area and provide a better glimpse of what the city has to offer.

“I can’t tell you how many conversations I have with people who come to visit Hormel on business who have never seen anything of the city other than Jimmy Johns and the Holiday Inn,” he said. “We’re full from a hotel perspective most of the time and people end up staying in Rochester, which just pains me to hear. From an economic standpoint, we give an abatement and get that paid back within three years, and in perpetuity, we’ve got a $6 million plus building.”

Austin, who along with Councilman Paul Fischer cast a dissenting vote, felt granting the abatement request was unfair to other projects in town.

“We’ve invested a lot of money on Main Street to upgrade buildings and store fronts and it doesn’t create a competitive advantage one way or the other for those businesses that have participated in that program that I can see,” he said, citing past abatement requests. “We’ve got other projects in town, hotel projects specifically, that, granted, are not downtown, but they’re building on their own financing with no concessions from the city. As (Baskin) mentioned, if there is a need for the rooms, then there should be financing brought forward from the financial group or the ability to get backing without having to come to the city. I’m kind of questioning whether we need to invest in this.”

“To me the downtown location is the factor that makes it worth supporting; those other hotels didn’t come to us asking for it and we said no,” said Councilwoman Laura Helle.

“They will be now,” Austin replied. “We have one that’s in the process of building that paid full price for the land and did not ask for anything else.”

With the council’s approval, Clark said the city will have to request the Port Authority reconsider their position requiring all three taxing jurisdictions to approve the abatement. The project could stand on the requirement of all three jurisdictions and possibly move forward without the abatement or fail to move forward.