Editor’s note: This article has been updated from the one that appeared in the May 4 print edition of the Marion County Record to correct information about the industrial revenue bond process that was inaccurate or could be misleading. The Marion County Record regrets the error.
Marion city council provided a boost to the planned development of the Historic Elgin Hotel by agreeing Monday to issue up to $800,000 of industrial revenue bonds for the project.
IRBs are not financed by the city. Rather, the bonds will be provided to The Historic Elgin Hotel LLC, the company created by Jeremy and Tammy Ensey to purchase and operate the hotel. In turn, the company will sell the bonds to one or more buyers and use the proceeds to purchase the hotel and complete modifications and renovations.
Revenue from hotel operations will be used to pay off the bonds, with the specific procedures and agreements to be finalized once bond purchasers are identified, Tammy Ensey said.
The agreement was ironed out at Marion city council meeting, following a public hearing during which nobody objected to issuing IRBs.
The approved resolution provides a 10-year property tax abatement. It also includes a sales tax exemption when bond funds are used to purchase supplies and services for construction,
Sarah Steele, of public finance law firm Gilmore and Bell, told the council that the cost/benefits analysis conducted by Municipal Consulting, Pittsburg, is favorable.
“Benefits are still showing to be quite good,” Steele said.
The 18-factor analysis showed that over 10 years, the city would see net benefits of about $114,000. Other taxing districts would benefit by the plan as well. The county would benefit about $287,000, and Hospital District No. 1 would benefit about $62,000.
According to a broader economic impact projection included in the report, local incomes are projected to go up about $484,000 and increases in local sales are estimated at $4.2 million.
Council member Chad Adkins asked the Enseys if they plan to have a restaurant in the Elgin.
Tammy Ensey answered that the couple hopes to recruit a restaurant with the same goals in mind as the Enseys, but will consider other options if that cannot be done.
“If we don’t find a restaurant, we plan to use that space as an additional venue,” she said.
Tammy Ensey said she believes development of the Elgin is key to Marion.
This is not the first time the city has issued IRBs for the Elgin.
“In 1976, an IRB converted it to an apartment complex,” city administrator Roger Holter said.
Mayor Todd Heitschmidt raised the idea of forging a five-year IRB agreement with the option of renewing the agreement for the following five years, but Tammy Ensey voiced doubts.
“I think there’s a question whether we’d do the IRB if it was only five years, because there’s already the three-year abatement,” she said.
According to Steele, the city cannot be stuck paying off the bonds if the project is not successful.
“Whoever purchases the bonds, the holder of the bonds would end up bearing the loss,” Steele said. “That could be a bank that loans them money. It may be the Historic Elgin Hotel directly. In no event is the city responsible.”
The motion to issue bonds passed with four votes in favor and council member Chris Costello abstaining because his company, Tampa State Bank, could be involved in the deal.