By CLINT FOSTER | Lone Star News Group
MINERAL WELLS – Mineral Wells is in the thick of an effort to kick start an unprecedented effort to revive the city’s most iconic and historic structure – the Baker Hotel.
Spearheaded by Southlake businessman Laird Fairchild, of Hunter Chase Capital Partners, the Baker Hotel development team has been creative in gathering the necessary financing for this $56 million project – now six years in the making – from a variety of sources.
A whopping 84 percent of the budget is made up of federal and state incentive capital in the form of federal and state historic tax credits, federal new market tax credits and an Environmental Protection Agency grant for lead and asbestos abatement, just to name a few.
The Baker development team says it has successfully secured all but $4 million of the project’s budget: a sum the City of Mineral Wells has obliged to cover by means of a 4B Economic Development Sales Tax. The city plans to establish what’s called a “Development Corporation” that can issue a $4 million bond, which the city can then pay off over a period of time with a portion of sales tax revenue. City Manager Lance Howerton said it won’t cost the citizens of Mineral Wells an extra dime.
“We’re not suggesting an increase in the sales tax rate, but reallocating the sales tax,” he said. “Essentially what you’re looking at is whatever is collected against the sales tax goes to pay those bonds off. So your property tax is not used to pay off these bonds. You’re not ‘pledging’ that, as they say. It’s a big difference.”
The City of Mineral Wells currently levies a 1.5 percent sales tax, the same rate since 1989.
“Last year, this generated $3.7 million in revenue – all of which went to the city’s general fund – from $250 million in taxable transactions. City officials are suggesting merely pulling one-eighth of a cent from the 1.5 cents of regular sales tax and directing that money toward paying off the investors who purchase $4 million dollar bond to finance the property’s revitalization.
“It’s just financing, that’s all it is,” Howerton said. “It’s like going out and borrowing money for a house or car. It’s just the way that cities borrow money, basically.”
Based on tax revenue from 2013, Howerton said under this plan the city would only have to make up about $300,000 from the general fund to pay off the bond. With a 1.375-percent sales tax, he said the city would need about $270 million in taxable transactions to close that gap, so, it’s not something he feels is a major concern, especially if the economy continues to grow.
Mayor Mike Allen said the plan will be presented to the public at a regular city council meeting on Feb. 18. The council will then vote the following week, Feb. 25, to approve an ordinance calling for this relocation of tax dollars to be placed on the public ballot for the general election in May. If voters approve the plan, then city officials can move forward with reallocating tax dollars and structuring the bond issuance.
“This is kind of the real linchpin to this whole project,” Howerton said of the 4B sales tax. “It’s a very critical piece of the financing. It brings additional equity money into the project because the sales tax is paying this debt, not so much the project itself.
“It also – from the standpoint of the developers – is important because it speaks to the commitment of the community to want to partner with this project and ensure that this project moves forward. For a project of this magnitude, both in scope as well as cost, the developers are pulling financing from every plausible area.”
Allen also spoke to the importance of the vote and the council’s desire to formulate a plan that causes the smallest possible impact on the taxpayers of Mineral Wells.
“The council’s opinion at this point is if we do this, if the public agrees to do this, then we want the impact to the public to be (either) negligible or basically nothing,” he said. “We’re betting that the economy is going to continue to expand. We know we’ll probably have to tighten our belts a little (until then), but we’ve done it before. I think (the 4B Economic Development sales tax) is something we need to do to prove to (the Baker Hotel Development team) that we’re with them.”
Howerton said the 4B plan would not only ensure that the Baker project becomes a reality, but also has the potential to finance further projects to attract business to Mineral Wells and improve the city as a whole.
“We fully believe that if we put this in place, working with the developer, we can make sure the Baker project gets done,” he said. “Assuming the Baker deal gets done and we’re generating more money then what’s needed to pay off the debt for the Baker, then we can begin to generate a war chest for economic development. It could do things such as provide incentives for businesses or industries that are looking to come into Mineral Wells.
“We could also use it for infrastructure improvements, which we do need at this point. So, not only is it the avenue that helps us support the Baker project, but maybe, over time, as well it allows us to generate an ongoing fund to help our industrial solicitation projects.”