Hotel shareholders look for financial aid options

City Council
By: 
Kim Brooks
Express Editor

     It appears COVID-19 is impacting many sectors of the Monticello community now, including the Cobblestone Inn & Suites hotel.

     John Harms, representing the local stakeholders of the hotel project, addressed the council during the April 20 Monticello City Council meeting.

     Five years ago when Boulders Inn & Suites proposed the idea of a hotel chain in Monticello, several local residents purchased shares (one or more) at $25,000 each. That local investment helped to kick start the project, to the tune of $850,000.

     Harms said when the hotel opened and later changed hands from Boulders to Cobblestone a year ago they’ve seen an increase in usage, but not significant enough to offset the indebtedness.

     “It’s a bit disappointing,” he said.

     As COVID-19 spread across the country and the state, businesses started to tank even more.

     “Our board of directors got a clear message from our financial lender,” Harms said. “We needed to find creative ways to get back in the swing of things.”

     Harms said currently the hotel does not generate enough revenue to cover the debt and expenses.

     He explained when they went from Boulders to Cobblestone, a bigger player in the small-town hotel chain, that increased the number of hotels within the franchise.

     “We thought we could address things by additional revenue from brand recognition,” said Harms. “It seemed like a no-brainer to enter into an agreement with Cobblestone.”

     However, at this point, Harms said the investors “are pretty well done with the investment part of the operation.”

     On behalf of the shareholders, Harms asked the council if they would consider looking at the city’s TIF agreement and rolling the rebates back to the starting year. (The agreement is currently in its third year.)

     “That could generate a few thousand dollars if we do that and start over,” Harms said. “Every little bit helps. That is one segment from the city standpoint that would help us along.”

     City Administrator Doug Herman said if the council agreed to amend the development agreement with the shareholders, it would require a public hearing, as well as notice to the school district and county due to its impact on TIF.

     “Basically we’d be starting the agreement over again from the rebate standpoint,” explained Herman. The reimbursements of Hotel/Motel Tax would continue to come to the city. (However, at this time, there is not a lot of Hotel/Motel Tax being generated.)

     Council member Candy Langerman said doing something like this could set precedence for other businesses impacted by COVID-19 in the city’s TIF districts. Council member Dave Goedken agreed.

     Both Herman and Mayor Brian Wolken said the hotel’s financial issues started before COVID-19.

     “The community investment of the hotel makes this unique because they’re local investors,” said Wolken.

     “We’ve been toying with all kinds of different ideas for a number of months,” admitted Harms, “to help carve our debt out. We’re at the point where we’re looking at every conceivable thought process to relieve the cash flow.” He said they even thought about bringing additional shareholders on for $25,000 a share, but at this time, no one would be willing to step up to the plate.

     “The reality is we’re backed up against a wall,” continued Harms.

     Herman said if this financial situation doesn’t correct itself, the hotel could falter to the bank and end up on the market, being sold for a much lower price than shareholders invested. “They’ll lose everything they’ve put into it,” he said.

     The TIF agreement only stays with the hotel under current ownership. If it transfers owners, the agreement is over. Herman said the hotel generates roughly $40,000 a year in taxes.

     Herman offered to put together a list of the city’s current development agreements, as well as some language to amend the current agreement with the hotel. This item will be on the council’s May 4 agenda for further action.

In other city business:

   • The council approved rescinding their previous action from April 6 concerning the N. Maple Street sidewalk, and approved replacing it with a 4-foot sidewalk, not impacting the trees in the right of way.

     If the Fair Board felt a 5-foot sidewalk would suit the area better, the council is agreeable to 5 feet, with the Fair Board contributing the $1,300 difference, so long as it does not impact trees.

     The council’s mind changed on this matter after Herman informed them that City Code requires a sidewalk to be replaced if so many panels were broken into multiple pieces.

     “It’s worse than I originally thought,” noted Wolken.

     • Mayor Wolken and the council agreed to extending the mayor’s original proclamation made in March to coincide with Gov. Kim Reynolds should she extend the current COVID-19 emergency declaration beyond May 1.

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