Assistance: Jackson hires two law firms to help navigate hotel TIF obligations

Jackson City Council has approved the hiring of two law firms to help the city issue a funding method to reimburse the developer of a hotel in Fondren for infrastructure improvements.

Law firm May and Watkins & Eager will provide expertise in reviewing plans and issuing $1 million tax increment financing (TIF) bonds.

The bonds will allow Wealth Hospitality Group, a private Ridgeland business development company specializing in hotels, to be reimbursed for infrastructure upgrades related to the construction of Homewood Suites By Hilton in Fondren.

The 125-room extended-stay property at 2815 N. State St. opened in August 2020.

TIF bonds are an important incentive for developers, said Christiana Sugg, in-house counsel at Gouras & Associates, a financial advisory firm in Ridgeland employed by Wealth Hospitality Group.

“It’s often the case, it will make or break a project,” she said. “They are really an incentive to develop a project. This puts the risk on the developer. The developer doesn’t get any refunds unless they build something that pays taxes. »

TIF bonds are secured solely by a pledge of increased ad valorem taxes on real estate and personal property generated by a project.

School taxes and some special assessments cannot be used to service bonds, and bonds issued under a TIF are not general city or county bonds, which means that only income from ad valorem tax and district sales tax TIF may be pledged to secure the bonds.

Fondren’s hospitality project, as the hotel development initiative was known, was supposed to cost $15 million, but ended up paying $22.5 million.

Estimates based on the $15 million projected cost for the hotel would increase property and personal taxes for the City of Jackson and Hinds County as well as Jackson Public Schools property taxes from $23,438 per year to $299 $086 per year, according to the project’s TIF plan. Jackson City Council passed in June 2018.

The annual ad valorem tax for the city of Jackson was estimated at $7,901 at the start of the project and is expected to be $99,522 after the project, according to the plan. The Hinds County ad valorem tax was estimated at $5,146 at the start of the project and $65,652 after the project. School district property taxes were $10,491 at the start of the project and estimated to be $133,911 after the project.

The project was expected to generate approximately $4.2 million in sales per year, which would generate annual sales tax rebates of $54,390 for the city.

Documentation required after a project is built will provide actual numbers rather than projections, said Chris G. Gouras Jr., principal/consultant at Gouras & Associates.

Construction of the hotel represented a construction payroll of about $4.5 million and 58 new full-time and part-time permanent jobs, according to the plan. Fifty-eight new jobs, both full-time and part-time, were expected from the project.

Wealth Hospitality Group is eligible to be reimbursed for building sidewalks and a retaining wall, utility work, storm drainage improvements and demolition, Sugg said.

Wealth Hospitality Group will receive about 85% or 90% of the $1 million TIF bonds, Gouras said, explaining that some of the funding will go to debt service reserve funds.

Watkins & Eager has estimated that its fees for its services as co-bond adviser will not exceed 3% of the maximum principal amount of the bonds actually issued. The company will also invoice the City for reimbursement of expenses, including telephone, travel, photocopying and delivery costs, which should not exceed $3,000.

Developments in Jackson such as the King Edward Hotel, The Westin and The District at Eastover, Renaissance at Colony Park in Ridgeland and Dogwood Festival Marketplace in Flowood have benefited from TIF bonds, Gouras said.

Mike Peters, who is responsible for developments at Fondren Corner and Duling School, said TIF bonds can be useful when setting up financing for a project.

“It’s an important piece of the puzzle,” he said, “and ultimately they cost nothing.”

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