Memo/Patrick/Hilton Garden InnCity of Kalispell
Post Office Box 1997 - Kalispell, Montana 59903-1997 - Telephone (406) 758-7000 Fax - (406)
758-7758
REPORT TO: Honorable Mayor and City Council
FROM: James H. Patrick, City Manager
SUBJECT: Hilton Garden Inn
MEETING DATE: April 24, 2006
BACKGROUND: The City and Gateway Hospitality Group have been negotiating the
placement of a Hilton Garden Inn, Convention Center, restaurant, and casino on the current
"Armory" site. The City's motivation is to further stimulate the tourism trade associated with the
convention center and capitalize on the location adjoining the City Airport to provide, among
other things, opportunities for "fly -in" conventions and benefit the airport.
The projected convention center will be large enough to accommodate 800 visitors for a
sit down meal and up to 1,200 visitors in a theater seating arrangement. There is no similar
facility in Northwest Montana. The next closest location is in Missoula. A conservative
estimate of the economic impact to the City from the convention guest revenue stream would be
approximately $1,350,000 annually. Assume 500 conference attendees a week for only 30
weeks out of the year and each of those guests only spends $30.00 during their stay on more than
room and meals. Economists estimate that a dollar imported to the community is turned over by
as much as seven times — assume these dollars are only turned three times. (500 x 30 x 30 x 3).
This facility is expected to benefit other area hotels as it will not be able to accommodate
all of the convention attendees and guests on site. This will bring additional paying guests to
other area hotels.
The City would like to encourage a hotel and conference center next to the City Airport
for increased airport usage. The idea would be to market the airport as an attraction for "fly -ins."
The developer will pay a lease fee on the land to the airport for parking space.
Development of this location south of the City balances development to the north of
downtown. It brings urban renewal to the south end of the City. It will assist in bringing
additional customers to the downtown businesses. It is well situated to accommodate businesses
in Old School Station Industrial Park by providing guest accommodations.
This facility will more than double the Lodging Tax Revenue for the funding of the
Visitors and Convention Bureau and assist in further advertising the region.
A national chain, Hilton Hotels, will be involved in actively marketing and booking
conventions for this facility.
The project is 117,000 sq. ft. of which about 1,700 sq. ft. is dedicated to casino. This is
an existing liquor and casino license under the City of Kalispell quota system and therefore, no
additional casino will be coming in to the Kalispell area. It will be a part of the project but not
obtrusive with minimal signage and limited access.
There is a city park within 300 feet of the property boundary. However, there is a five -
lane highway providing separation within that 300 feet. Depot Park is within 300 feet of the
Center Mall/West Coast Hotel and Casino as well as the Magic Diamond Casino. There is also a
casino immediately across the street from Woodland Park.
The City is proposing a PUD to address the casino issue and the hotel height
issue. The PUD is a legitimate zoning tool to address idiosyncrasies to the zoning code without
adjusting the entire zoning ordinance, which in turn affects the entire City. The Planning Board
considered changing the zoning ordinance to allow casinos within three hundred feet of a park
and it was unanimously defeated since they did not want to control the placement of casinos in
other parts of the City. They directed Planning Staff to return with wording that may exempt
casinos form the three hundred foot from parks rule if they are separated by a substantial man
made or natural barrier. Planning Board unanimous recommends that Council approve the PUD
for this project.
The Armory was appraised in August 2005. The appraised value is $1,087,500 for the
land only or $1,216,000 to include all the buildings on the property. Using the $1,216,000 price,
this comes out to an estimated $7.25/sf. Comparable land sales cited in the appraisal ranged
from a low of $2.79/sf to $11.03/sf. The mathematical mean was $7.43/sf and the mathematical
median was $6.91/sf. The developer has no use for the existing buildings even though he
offered the full purchase price.
The City's Request for Proposal required bidders to submit a bid on the property and
show the economic benefit to the City (taxes, jobs created, payroll, and economic value added
development) derived from the development. Gateway bid the appraised price for the land and
buildings. He will create 112 jobs with a projected payroll of over $2,700,000. The projected
property taxes will be approximately $260,000 a year.
The developer would like to build a hotel in Kalispell. He has several location options
for the hotel. He would prefer to construct a hotel, restaurant, convention center and casino. To
accomplish this he needs to locate the facility on the Armory land due to land costs in the north
and the availability of land in developments like Hutton Ranch Plaza. To facilitate a convention
center of this size, the City needs to participate with the developer on the armory location. The
use of TIF money for the demolition of the buildings, infrastructure improvements, landscaping,
and City well fagade improvements would assist in the attraction of the convention center. The
improvements on the City Airport owned property would consist of paving, lighting, and
landscaping. This parcel would then be leased to the developer for parking space. We would
like to improve the well house fagade to make it more attractive and complement the
development. The Developer's Agreement places a cap of $890,000. The City will have a
return on this investment in less than 3 and one-half years. There is no bonding that needs to be
done. The developer has also agreed to reimburse the City 10% of the net proceeds if/when the
complex is sold or refinanced. This would be money going back into the general fund at a future
time.
RECOMMENDATION: That Council approve the sale of the Armory property to Gateway
Hospitality Group, approve the Developer's Agreement, and adopt a zoning change. The
Developer must know as soon as possible to close on the liquor license or proceed with another
location for a hotel only.
FISCAL EFFECTS: Approval will allow the sale of City property in the amount of
$1,216,000, lease of airport property, approximately $260,000 in annual property taxes,
$2,700,000 in new payroll and jobs created, approximately $1,350,000 impact to the economic
base of the City, approximately $48,000 in bedroom taxes, and a yet to be determined amount in
net proceeds if/when the complex is sold or refinanced. In return the City would pledge up to
$890,000 for demolition, parking, infrastructure improvements, and well fagade upgrades.
ALTERNATIVES: As suggested by the City Council.
Respectfully submitted,
James H. Patrick, City Manager