NORTH ADAMS — As an investment group pours a promised $5.3 million into renovating the former Redwood Motel, the city will offer it a tax incentive.
The city council unanimously signed off on a five-year Tax Incremental Financing (TIF) agreement with motel owner Beyond Place, LLC, on Tuesday night.
The agreement will offer the developer varying levels of commercial real estate tax exemptions on new growth the developer starts mostly from scratch to create a nearly 50 room recreational and lodging destination on State Road.
A group of investors led by lead developer Ben Svenson of Broder Properties in Boston purchased the motel in 2015. Since the purchase, Beyond Place LLC has expanded its vision to include other parcels, such as the Blackinton Mill and land near the Hoosic River, surrounding the Redwood Motel.
The parcel is currently assessed at $739,900 and was responsible for approximately $28,064 in property taxes. It will continue to pay taxes on the current assessed value, but receive exemptions on future value added.
The TIF substantially mirrors an agreement passed earlier this year with the developer of the nearby Greylock Mill, though Beyond Place's deal expires in only half the time.
Project Manager Eric Kerns estimated that the motel would employ approximately 10 people initially, and add another each year of the agreement.
Kerns also stressed that, though the company will receive relief in property taxes, it will continue to pay a two percent tax on every room rented. That is expected to generate an additional $25,000 to $30,000 annually that the city is currently not bringing in. The room tax is not incorporated in the TIF agreement.
"The opportunity for us to be able to take these funds that we would be spending on prop taxes, and spend those dollars on marketing those come back directly to the city through that rooms tax," Kerns said.
Alcombright suggested that during the years the owners continue to invest in the operation, they will likely investing more than revenue generated.
"While they're going to be investing this money, their return on this investment is quite low," Alcombright said.
The mayor implored the council to "take advantage" of this investment in the city. If a developer had purchased the property and only made superficial renovations to the motel, the city would not have been looking at the same potential for economic impact, Alcombright noted.
Beyond Place receives an exemption of 90 percent in each of the first two years, 80 percent in year three, 50 percent in year four, and 25 percent in year five on new value added to the project.
Under the agreement, Beyond Place agrees to submit biannual reports to the city detailing its investment. The developer also agrees to attempt to work with local institutions, including the regional employment board, to utilize local employees.
The developer must meet its investment schedule, which calls for $5.3 million to be invested in the property by 2021.
The real estate tax money saved during the initial years of construction will allow the motel to invest in marketing, Kerns noted. The business, he said, is creating something that will have the ability to attract people to come and stay in the area.
Councilor Robert Moulton, Jr., supported to agreement and noted he is generally in favor of them, though he did recognize how the proposal appears given increases proposed to water and tax rates the very same night. He requested that the motel owner's twice-yearly reports be presented to the council.
The city has previously entered tax agreements with the lodging businesses, including the Porches Inn, Councilor Keith Bona noted.
"We actually did those when there was not the hotel tax, so that is a benefit that we do still get that," Bona said.
Councilor Ronald Boucher also backed the plan.
"It's like a partnership. You made a major investment in the city," he said.
The agreement must be approved by the state to become official.
Contact Adam Shanks at 413-496-6376