ROCHESTER – The conversion of a city center hotel into student accommodation has heightened concerns about future convention business.
While the University of Minnesota plans to lease nine floors of the DoubleTree Hotel by Hilton at 150 S. Broadway Ave. to accommodate students at the University of Minnesota Rochester, blocks of hotel rooms once dedicated to conventioneers would have to disappear.
“The Doubletree change is pressure, but it’s not new pressure on being able to book and sell conventions in our downtown area,” Rochester City Administrator Alison Zelms said Monday. on the Rochester City Council.
She said Rochester’s unique hotel market, with many downtown hotel rooms occupied by Mayo Clinic patients, has long created stress for convention organizers, who must also secure blocks of rooms. mid-week.
She said the city has seen the number of conventions more than double in recent years, but halls need to be booked years in advance to maintain momentum.
Zelms said a recent report indicates local hotels are seeing operations return to less than 95% of pre-pandemic levels, which is a good sign but also adds to future pressure.
To address the increased need for hotel rooms near the Mayo Civic Center, city staff asked Rochester City Council members if they would be willing to overturn a 2019 ordinance that reduced the use of funding by tax increase for the construction of hotels.
The decision came as market analysis indicated that Rochester had enough downtown hotels in the pipeline to meet Destination Medical Center’s needs through 2024.
Rochester City Councilman Nick Campion said he would be cautious about reversing course after the city offered help to various downtown hotels.
“What we’ve seen when we incentivize hotels is an increase in the cost of land acquisition,” he said, adding that rising property values are increasing pressure on landlords to proximity, who saw their tax bill increase.
“We want to be very careful turning on the downtown tap,” he said.
The city is currently picking up $7.1 million in increased property taxes from developments to help fill funding gaps for private projects, but senior administrative analyst Brent Svenby said several major projects are expected to close in the near future. years.
Financing through tax increases captures tax revenues that would not exist without the associated development. A portion of the funds is returned to the developer to cover a funding shortfall, as long as the project is deemed to be in the public interest.
Josh Johnsen, Rochester’s acting director of community development, said any changes to the city’s current TIF policy would focus on the specific need for hotel rooms that can accommodate the needs of the Mayo Civic Center.
“We would still want guide rails,” he told the council.
Deputy City Administrator Cindy Steinhauser said the potential changes would help leverage the city’s investment in the $80 million Mayo Civic Center renovation project completed in 2017 into new business for hotels and parts of the hospitality industry.
Rochester Mayor Kim Norton raised concerns about the incentive to build hotels as a hotel popular with conventioneers planned to change its business model.
“I just feel like there’s a disconnect,” she said.
Johnsen said the transition addresses the need for student housing, which likely benefits the landlord and the university, but leaves the existing need,
He said the request for additional flexibility to support a potential hotel project is not an effort to foreshadow anything already underway, but he noted that potential hotel space on the former grounds of the Post Bulletin near the Civic Center was discussed.
He said any development on the site at the southwest corner of Civic Center Drive and East Center Street would likely include other projects, such as housing, which could also lead to potential demand for TIF.
“Nothing has progressed that far,” he told the council.
Councilman Shaun Palmer also pointed out that the city has developable land north and south of the Mayo Civic Center, which was seen as a way to attract private development.
He said he would support an effort to find a way to encourage hotel development in a market characterized by high room rates and low availability for many visitors.
“I don’t think having more rooms available is a bad thing for us,” he said.
Johnson said no specific recommendations were prepared, but community development staff wanted to gauge the council’s interest.
Possible changes to the TIF policy, which could also include incentives for historic preservation and infill development, could be made before the end of the year, according to Svenby.
What happened: Rochester City Council received an update regarding tax increase funding during its weekly study session. The discussion included a proposal to consider using TIF to help create hotel rooms to meet the needs of the Mayo Civic Center.
Why is this important: The municipality has chosen to reduce financial support for hotel development in 2019, with the most recent use of the TIF being dedicated to supporting the creation of affordable housing.
And after: City staff will continue to review options and get back to council with a recommendation.