City rejects hotel's request for additional funds

Whitefish City Council decided not to give additional funds to developers of the Firebrand Hotel for work completed on streetscaping at the hotel.

Council last year approved $147,000 in tax increment finance funds to pay for improvements that would create a public promenade around the building at the corner of Spokane Avenue and Second Street. However, citing unexpected costs as part of that portion of the project developers returned to Council last week to ask for an additional $23,000.

“The estimate for the project was low and what we actually spent was $170,000 on public amenities,” said Jeffrey Badelt, representing developers the Whitefish Hotel Group. “The design, architectural and shipping fees were omitted from that original estimate, but there were also savings too — everything was evaluated and scrutinized. We’re just trying to recoup those public amenities that are part of a hotel that is an economic diver for downtown.”

The money was used to create a wider sidewalk, curb and gutter, along with adding street trees, benches, a trash can and other landscape improvements in the city’s right-of-way. Part of the improvements include the wider sidewalk that can be used in the future for the bicycle promenade that is called for in the city’s 2015 downtown master plan update.

Mayor John Muhlfeld urged Council to approve additional funds for the project.

“If the city was a partner on the promenade then paying part of the cost is only equitable,” he said. “If we’re part of this than we should cover those costs.”

A motion to add additional funds to the project failed 1-4 and then another motion to table the issue for 30 days failed on a 2-3 vote. Finally council seemed to deny any additional funds for the project when no other motions were brought to the floor.

After the meeting Sean Averill, one of the partners in Whitefish Hotel Group, said creating the public area was the right thing to do, but he is disappointed in the Council’s decision.

“We are somewhat disappointed that the city wasn’t really a partner and took the something for nothing approach when presented with actual expense of creating a public promenade,” he said. “Recouping expenses over an estimate that didn’t include all facets isn’t fair to the hotel group. We did not charge any management fee and there were no mark ups. In the end this won’t make or break the new hotel. We are happy with the hotel we created and think sliding the building over 18 feet for the increased public area was the right thing to do.”

City Manager Chuck Stearns provided Council with his 2015 estimate showing that the hotel, then estimated at a $7.5 million building, would likely generate an estimated $157,000 in TIF funds by the end of the TIF district in 2020. Last week he said if the hotel is a $9 million building, as developers have said now, it could generate $200,000 in TIF funds.

“Appraisals can vary widely,” he said. “We won’t know until [the Department of Revenue] asses the valuation of the property.”

Councilor Pam Barberis complimented the hotel saying she would be willing to increase the city’s contribution by $10,000 based on Stearns’ earlier estimate.

“The project turned out well,” she said. “We are a partner in this and I would like to see other developers make improvements like this. If the hotel will contribute that amount of money to the TIF, I’m willing to go up to $157,000.”

Barberis was the only councilor to vote in favor of her motion.

Councilor Richard Hildner blamed poor accounting on the increase in costs.

“It seems somebody didn’t do their due diligence on this,” he said. “I don’t know whether the city should bear those costs.”

Councilor Frank Sweeney said he has to weigh taxpayers versus the hotel.

“I’m trying to figure out where the equity is,” he said. “We gave and gave, and now they want more. They asked for a specific amount and we gave it to them.”

Councilor Katie Williams moved to table the issue for 30 days, but that failed on a 2-3 vote. Williams and Sweeney were the only two to vote in favor of delaying the issue.

Williams’ motion appeared to come from public comment earlier in the meeting.

John Ellis, a member of the city Planning Board, addressed Council earlier in the meeting asking it to look into alleged deficiencies in the hotel’s requirements to meet its conditional use permit.

He claimed the hotel is violating a condition of its permit by not installing a fence along the full east side of the property. He also said the hotel is using a gravel parking lot created by tearing down a house to the east on Kalispell Avenue and is in violation of the zoning.

“I have no problem with them receiving the funds, but I ask that you continue this for 30 days for them failing to comply,” he said. “We all knew parking was going to be an issue — the gravel lot is not the solution. If we don’t protect the east side of Kalispell Avenue and we get rid of the Kalispell Avenue [neighborhood] then why not Columbia Avenue and so on.”

Planning Director Dave Taylor said he will be looking into both issues. He did note that the fence along the property line is part of the hotel’s plan submitted to the city and that the gravel lot can’t be used for commercial parking.

“We will have to talk to them about it,” he said.

A downtown hotel has long been considered a “catalyst” project for downtown development and redevelopment. The project qualifies as an “urban renewal project” in the city’s 1987 Urban Renewal Plan, according to the city.