Letter of Intent relating to Development of WaterWalk Hotel

Fairfield Inn and Suites Hotel Developer – Four-G LLC (James E. Korroch) Development rights to 0.8 acres south of WaterWalk Place (NW corner of Main & Dewey) 130 rooms (not less than 115 rooms) Limit service hotel – with room service Total development cost - $12,000,000 Non-binding Letter of Intent for City financial assistance

Letter of Intent Guest Tax Bonds Community Improvement District Industrial Revenue Bonds 99-year Ground Lease Parking Management Market Study

Guest Tax Bonds City Contribution to Development Costs Not-to-exceed $2,500,000 Bond amount determined by transient guest tax revenue generated by this hotel 120% coverage factor Guest tax funds equal to amount generated by hotel will be transferred to Debt Service Bond structure will mitigate City risk of having to use other funds Previously used for Hyatt and Hotel at Old Town

Community Improvement District New economic development financing tool Subject of Workshop discussion later today Allows up to 2% special sales tax or special assessments w/in district, for up to 22 years Can be used for any capital improvement and some operating costs Funding methods include bonds or pay-as-you-go LOI limits CID to 2% sales tax for 22 years on pay-as- you-go basis Subject to City Council approval of citywide policy governing use of CID

Industrial Revenue Bonds IRBs will provide sales tax exemption on construction and FF&E – est. $329,000 IRBs privately placed with bank and/or developer Not-to-exceed $12,000,000 (covers all debt and equity) No City funding until all private funding is in place WSU Fiscal Impact Study – 1.77 to one benefits to City

99-year Ground Lease Terms similar to WaterWalk Ground Lease Lease directly to Four-G LLC Base rent of $1.00 per year Additional rent – 25% of cash flow (profits) in excess of 20% return on development cost

Parking Management WaterWalk LLC will provide hotel guest parking in WaterWalk Place Parking Garage 405 total public spaces – meets agreement WaterWalk will restrict access to 95 public spaces on top level of parking garage Under LOI, Four-G agrees to management practices to optimize hotel use of top level

Market Study Allowed by WaterWalk Development Agreement Study of the impact any WaterWalk Hotel on Hyatt Regency Hotel Negative impact could lead to prohibition of hotel development Study by PKF Consulting underway Letter of Intent contingent on outcome

Next Steps Four-G LLC will finalize plans, secure private financing City Council will consider Community Improvement District Policy Detailed Development Agreement will be negotiated and presented to City Council for approval IRB documents drafted; IRBs issued Hotel construction

Recommendation Approve the Letter of Intent