SIOUX CITY -- The City Council gave the Warrior Hotel and Davidson Building renovation project the green light Monday by voting to amend an existing agreement with the developer.
The council voted 3-1 to amend the agreement and guarantee $16.5 million in historic tax credits, bringing the city's total financial commitment to the project to nearly $30 million in assistance. Councilman Pete Groetken cast the lone dissenting vote. Councilman Dan Moore, who has abstained from past votes on the project because his law firm represents the developer, Lew Weinberg, was absent.
In March, the City Council approved an economic development agreement package for the Warrior project that offered more than $12 million in assistance in the form of a loan, grant and property tax rebates. Then, Weinberg requested that the city consider additional support for the project in the form of a $16.5 million historic tax credit guarantee until the project receives the anticipated funding from the state. The exact amount of tax credits the project will receive remains unknown.
If the $65 million project fails to receive the historic tax credits, the city could be required to make up the difference to Cedar Rapids Bank and Trust Co. and would be liable for repayment if the developer defaults on the bridge loan.
Before the vote, Groetken said he thinks the proposed Warrior Hotel and Davidson Building renovation is a "terrific project" conceptually that would be "great for downtown Sioux City," but he expressed concern over the city guaranteeing payment if something were to happen that would lead the developer to default.
"We don't know what the state is going to do in terms of awarding the tax credits. I know that there is a conditional approval for $14.5 million, but the amount requested now is $16.5 million. It seems to me that we've got the cart in front of the horse," he said. "It would be more appropriate to approve the development agreement when we know what the tax credits will be, as opposed to not knowing."
Weinberg needs the guarantee to help the project secure a bridge loan to complete its construction financing process in time. According to documents filed with the city, Weinberg has arranged for a bridge loan between the Aminell Anne Harris Gill and Amrit Bir Singh Gill Joint Revocable Trust and Cedar Rapids Bank and Trust Co.
"The project has been put up for bid. We put a lot of money and time up front to make sure we were ready to do this project and ready to roll as soon as possible," Weinberg told the council.
Councilwoman Rhonda Capron said Weinberg needs the money and the city needs the Warrior Hotel renovated.
"The way I look at it, this is a last chance. It's been sitting there for 40 years. I think we need to jump on it and get it moving," she said.
If the state awards the project $14.5 million in November, as the developer anticipates, City Attorney Nicole DuBois told Groetken the city's obligation would be reduced by that amount and potentially $2 million would be left for the city to guarantee. Come spring, if the state awards the project an additional $2 million, DuBois said the city's obligation would be complete. Weinberg said he plans to modify his application for historic tax credits and resubmit it to the state in October.
"There hasn't been a set number, as you had stated. As of now, we don't know," DuBois said of the historic tax credits. "For example, if the state were to award something less, like $5 million, and there's a default down the road, the city's obligation would be up to the $11.5 million."
Sioux City businessman Dave Bernstein, who sits on the Iowa Economic Development Authority Board, told the council that in the case of historic tax credits, generally, the amount applied for is what's awarded.
"It's a question of when you're awarded the allocation. Ultimately, you don't get the credits to use until the project's completed. The program has always, in general, funded the amount that the developers ask for and that amount continues to advance as time goes on," he said. "The project should be up for award coming up here in November, seemingly, therefore, this is just to bridge these guys' obligation with the banks until they're awarded the allocation from the state. Once they are, it would relieve the city."
City Finance Director Donna Forker said the guarantee won't impact the city's debt capacity, as long as the state allocates all of the $16.5 million to the project before the city goes out for bonding in April.
"If we have any portion of that, I do have to include that as committed debt and use that in my calculations, so it could affect bonding capacity," she said. "Whatever action you take tonight doing the guarantee, I have to set aside $16.5 million in bond capacity. As the allocation of the credits happen, it will reduce that liability."