LENOX >> The Board of Selectmen is weighing a proposal from the Brushwood LLC/Toole Lodging Group for $835,000 in tax breaks over the next decade for the Courtyard by Marriott project under construction on part of the Brushwood Farms property at 70 Pittsfield Road across from Lenox Commons.
Under the state's Economic Development Incentive Program, a decision by the board and town voters is required, followed by a final green light from two state agencies if the tax reduction program is approved locally.
Hotel owner Joseph Toole, whose Lenox properties include the Yankee Inn and the adjacent Hampton Inn & Suites off Routes 7 and 20, appeared at the recent Board of Selectmen meeting to describe the proposed special taxing agreement.
According to documents submitted to the town, Toole would begin paying 100 percent of the projected $157,000 annual local property tax in 2028 after gradually increasing payments over the 10-year period, starting with zero in the fiscal years 2018 and 2019.
With his consulting attorney Richard H. Vinette Jr., of Pittsfield, Toole outlined the tax break proposal for the 92-room hotel, a nearly $8.3 million private investment.
Savings to the developer from the property tax reductions would total $835,000 during the decade.
Toole Lodging prefers the tax savings to be front-loaded in the first several years, according to the documents, "in order to assist the developer in the first critical years of startup operation when risk is highest in the hotel business and cash flow is most impacted."
Toole pointed out that once it's open, the hotel is expected to pump about $250,000 a year in lodging tax revenue into Town Hall coffers. Sewer and water connection fees would add another $412,000 over the next several years. The town will also collect about $70,000 in one-time building permit fees.
He depicted the room occupancy tax benefits as "a wonderful way for municipalities to receive income without any direct cost."
Selectman David Roche said that preliminary discussions have been held with Toole over the past six to eight months about the tax reduction program, a local and state incentive described by Roche as "not unusual."
He pointed to the Allegrone Construction Co. office park project at the former Edgewood Motor Inn, later the offices of Berkshire Information Systems and the Leaning Center of America, on Pittsfield Road.
Allegrone purchased the site from Legacy Banks for $900,000 in 2010 and began renovating it with a $3 million MassDevelopment bond and a 10-year tax financing agreement approved by voters at a special town meeting in May of that year.
At that meeting, voters approved creation of an Economic Development Opportunity Area along the highway from East Dugway to Lime Kiln Road, as well as a Tax Incentive Financing (TIF) agreement for Allegrone, allowing property taxable rates on the site to start at zero and rise by 10 percentage points a year over a decade.
Toole listed the upfront expenses of the hotel project, including a 30,000-gallon water pumping installation to service the facility at a cost exceeding $450,000. He said the pumping station is required because of low town water pressure in the area.
"That's one of the formidable obstacles," he told the board. "Quite frankly, I didn't realize what I was getting into until we started doing the engineering and sizing up the system. We realized we had quite a project within the project."
Toole also cited costly litigation that delayed the start of construction until disputes with the Mahida Hospitality companies were resolved at Massachusetts Land Court last year.
"Here I am, hat in hand," Toole said. "We've put forth something we would like to see looked upon favorably" in view of water and sewer connection and usage fees as well as future real estate taxes and "discretionary dollars" the hotel's guests will bring to the town.
Since tax incentive agreements require job-creation commitments, Toole estimated a hotel payroll of 40 to 50 within the first five years, with 10 to 15 of the positions "somewhat seasonal." At his two existing hotels, he employs about 60 people.
However, he pointed out, "we're struggling a little bit right now with the economy, so our numbers may be down a little bit."
Selectman Channing Gibson explained that the town's inclusion in a south and central Berkshire economic target zone "obligates us to entertain requests" for special taxing agreements, "not that we wouldn't entertain them anyway."
If the board approves the proposal at its next regular meeting at 7 p.m. Feb. 24, he said, a citizens vote would be taken at the May 5 annual town meeting.
"There are specific benchmarks that businesses have to meet," Gibson said. He also underscored that Toole's companies have agreed to "provide services for future tenancy in the Brushwood Farms area of the Lenox Gateway District."
Toole said that since the district's permitted commercial uses are limited, the Courtyard by Marriott project "fits really well and I'm hoping it's going to look great. I think it's a good fit."
He mentioned a possible walkway to the adjacent Lenox Fit health club and a potential crosswalk allowing pedestrian access to the Arcadian Shop and to the nearby businesses of Lenox Commons.
Gibson also voiced hope that Toole would host a training center for the hospitality industry to provide employment opportunities for young people.
Acknowledging the crucial role of tourism to the town, board Chairman Edward Lane said "We were all happy to see ground broken" for the Courtyard project and promised an intensive review of the tax break proposal ahead of an expected vote next week.
The Marriott is one of four hotels proposed or under development in the immediate area.
• The Elm Court Inn resort proposal in Stockbridge, with a Lenox entrance and frontage, remains tied up in Massachusetts Land Court because of a neighborhood group's appeal.
• The Mahida Hospitality Group is preparing an application for a new extended-stay facility to replace the dilapidated Magnuson Hotel on Routes 7 & 20.
• Plans for the Spring Lawn boutique hotel proposed for property adjacent to Shakespeare & Company on Kemble St. are being retooled.
By the numbers ...
Key elements of the Brushwood LLC/Toole Lodging Group proposal seeking a 10-year tax break for the hotel project underway on Routes 7 & 20 in Lenox:
Project cost: $8,285,000 private investment for the 92-room Courtyard by Marriott
Expected employment: 40-50 within five years, including 10-15 seasonal
Tax Incentive Proposal: Zero payment for 2018 and 2019 local property tax, rising step-by-step annually to the full amount of $157,437 in 2028
Savings to developer: $835,000 (10-year total)
Town benefits (estimated)
Annual lodging tax revenue: $250,000
Sewer/water connection fees: $412,000 over several years (estimated)
Building permit fees; $70,000 (one-time)