Ramada Inn approved for $8.6 million tax financing redevelopment project
By: Darrell Todd Maurina
Much of the Ramada Inn would be torn down under a redevelopment proposal.
SAINT ROBERT, Mo. (Nov. 30, 2009) — The Ramada Inn, one of St. Robert’s oldest chain hotels, is positioned at one of the city’s most prominent intersections facing Missouri Avenue between Old Route 66 and Interstate 44. It’s still generating $1.2 million per year in revenue, though there’s been a slow downward trend in recent years.
However, members of the St. Robert Tax Increment Financing Commission voted unanimously on Monday evening to recommend that the city designate the five-acre parcel as a “blighted area” eligible for special tax benefits that would redirect $2.5 million worth of property and sales tax revenue over a period of up to 23 years to the hotel company owned by Steve Ehrhardt, who runs a number of other hotels on St. Robert Boulevard and has proposed to buy the Ramada Inn and redevelop it at a cost of $8.6 million, of which $3.55 million represents the cost to purchase the hotel from its current owner, TW Cloud, Inc.
The owners of TW Cloud also own the Area 151 nightclub and a restaurant formerly known as Adonia’s, and plan to remain in business in the St. Robert community.
In an Oct. 23 letter, Mike Dunbar of Security Bank stated that bank personnel are confident in Ehrhardt’s ability to complete the Ramada redevelopment project and are willing to provide the additional private financing required apart from the TIF district funds.
Ehrhardt proposes building two restaurants of about 4,000 square feet per restaurant, a 14,500-square-foot pharmacy, and a pedestrian bridge across Interstate 44, and will be privately financing at least $5.6 million of the project costs. An additional 1 percent sales tax is expected to be levied on the area, either through a community improvement district or a transportation development district, to support the TIF project with an additional $500,000 worth of revenue; an alternative development plan without the additional 1 percent sales tax projects $6.6 worth of private investment and $2 million to come from the TIF redirection of existing taxes.
TIF districts are a special type of tax district which allow cities to continue to collect the existing “baseline” taxes generated by pre-development revenue, but additional post-development revenues from property taxes and part of the sales tax revenues can be redirected to the developer for up to 23 years to finance needed improvements. However, TIF districts can only be created for limited purposes, including “blighted” properties, and a special TIF commission composed of representatives of the city, county, school district, and other taxing entities must review a TIF district before it is approved by a city.
In a Nov. 2 report submitted to the St. Robert TIF Commission by a St. Louis consulting firm, project analysts argued that “blight” is present on the Ramada Inn property because of deterioration, unsafe conditions and economic liability. Redevelopment costs involved in demolition, construction, “removal of obsolete utilities” and “the cost required to construct public infrastructure capable of supporting redevelopment” consistent with Ehrhardt’s plan are factors cited by the consultants as qualifying the Ramada Inn property for redevelopment since without redirection of tax revenues to the developer, “the area would not be subject to growth and development by private enterprise in a manner consistent with the development goals and objectives for the area,” according to the report.
The current property has 82 rooms, the Shenanigan’s bar, and various other facilities, the oldest of which were built in the 1960s. Not all of the property will be torn down; 70 of the rooms will be used in a new hotel.
According to the report, the Ramada Inn has significant water damage caused by roofing problems, up to and including buckled floors and cracks in concrete support beams with rust showing, an indicator of water damage to the interior steel rebar in the support beams. Other problems include potholes and cracked concrete, significant rust damage to stairways, walkways and porches, standing water in utility rooms, and a determination by St. Robert building officials on Sept. 4 that “in its current condition if built today under our adopted building codes, (the Ramada Inn) would not meet the minimum safety and construction standards required” by building codes and handicapped accessibility standards.
Many of the problems, according to the report, were caused because the Ramada Inn was expanded over the years by owners who did not increase the utility carrying capacities, causing the plumbing to be inadequate to meet the needs of hotel guests. It also “may present a danger in the event of a fire should the condition of the hotel’s water delivery utilities not be able to pump water through the hotel’s fire suppression system.”
The report also cites 20 police calls to the Ramada Inn — five in 2007, 10 in 2008, and five in the first 10 months of 2009, for offenses such as theft, assault, property damage, public intoxication, domestic disputes, verbal arguments and fights — as evidence that the Ramada Inn area “exhibits a significant amount of criminal activity” and that “such a level of public misconduct and criminal activity indicates that the area presents a menace to the public health, safety and morals.”
Most of St. Robert’s TIF districts have been for areas that are generating little or no tax revenue for the city. However, the project analysts noted that under state law, “economic underutilization,” not only the complete lack of any revenue, warrants the redirection of tax revenues to a private developer to assist in redevelopment costs.
The Ramada Inn’s 2009 assessed valuation is $1,008,700 for property tax purposes and it is generating $91,853 per year, $51,228 of which goes to the state and $40,625 for the city, county, 911 board, and ambulance district, from $1.25 million worth of annual sales.
Project analysts estimate that after the hotel is redeveloped and the proposed restaurants and pharmacy are built, the total assessed value will be $1.5 million. However, the revenue stream eligible for sales tax will be significantly different — while the Ramada Inn generated $1,037,460 from room revenue and $166,040 in lounge revenue from Shenanigans, the new owners expect $983,675 per year from a smaller 70-room hotel with 70 percent occupancy at a $55 average room rate. Most of the property’s revenue is expected to come from different sources: $4 million per year from a pharmacy, $1.2 million from one of the two restaurants, and $2 million from another restaurant “assumed to be a St. Louis Bread Company or similar higher-end fast food restaurant.” Taxes levied against hotel room charges will not be redirected under TIF rules to Ehrhardt’s redevelopment work, but the other sales taxes can be redirected for that purpose.
According to the TIF proposal, the market value of the property is expected to increase from $4,685,700 in 2011, which corresponds to an assessed value of $1.5 million, to a market value of $6.489 million and an assessed value of $2.076 million in 2032. That’s nearly double the current assessed value of $1.009 million. Projected taxable sales volume is expected to be $7.2 million in 2011, rising to $9.697 million in 2031.