Orange Beach council spells out tax break city ready to offer for resort

Originally Published by the Mobile Press Register

Link: http://www.al.com/news/press-register/metro.ssf?/base/news/1249463760269250.xml&coll=3


Wednesday, August 05, 2009

By RYAN DEZEMBER

Staff Reporter

ORANGE BEACH — In a unanimous vote, the City Council on Tuesday approved the basic terms of a multimillion-dollar tax abatement package that developer K.C. Chiang said will enable him and his partners to build a 500-room Gulf-front hotel and convention center.

Better than a handshake, but far from a guarantee, the 12-page letter of intent spells out the tax concessions that Orange Beach is willing to offer, as well as what it expects of the developers in return. City leaders said Tuesday's vote essentially allows Chiang to tell his lenders that Orange Beach is "serious" about doing business, and green-lights lawyers on both sides to begin drafting a voluminous development agreement between the parties.

Once complete, that document must be approved by the council and ratified by a Baldwin County circuit judge before the deal is final.

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Should the terms outlined Tuesday remain intact, Chiang will be able to recoup half of the municipal sales and lodgings taxes generated at the resort for 30 years, as well as levy additional taxes of up to 4 percent on its hotel rooms and at its shops and restaurants.

The Mobile businessman has said that he and his partners — Chicago-based Centrum Properties and the Wyndham Hotel chain — have a promise for a $110 million loan, but in order to see that money, their lenders required them to raise $50 million through tax-exempt bonds. To do so, the developers need the city to create a special tax district on their 9-acre Gulf-front property.

If that happens, Chiang will finance the 30-year bonds in part with the tax revenue Orange Beach rebates to him — likely more than $30 million over the course of the deal — and the additional levies charged at the resort.

Mayor Tony Kennon said that while he and other city officials harbored "great concern" about becoming involved in a private venture, the prospect of new jobs and tax dollars won their support.

"It was a difficult decision for all of us, but we do believe that because of the economic climate this project could not go forward without tax abatements," Kennon said. "The potential economic stimulation and financial gain was important enough to create that partnership."

Designs for the Wyndham & Winfield Resort Hotel and Convention Center, which Chiang said is a temporary name, were approved by the council last month.

Those plans call for a four-star hotel housed in a pair of towers — one 18 stories, the other 17 — convention space for 1,200, two restaurants, a dinner theater that will be marketed as a wedding chapel, a 20-lane bowling alley fit for professional tournaments, and a 6,000-square-foot spa.

Chiang said Tuesday that he hopes to break ground in spring, and when he does he will have to pay between $4.5 million and

$5.5 million in permit fees to the city. It will take some 800 workers two years to build the $160 million project, and once it opens, the resort will employ 300 and generate upward of $2 million annually in municipal taxes even after the split, he said.