About the Hotel Project
Nephi City is engaged in a number of economic development strategies to increase the tax base and encourage existing businesses. One of those efforts has been to encourage the development of a mid-tier hotel with an available conference space to Nephi. Nephi City has recently made investments to additional recreational facilities and provides substantial assistance to the numerous summer events with the goal of increasing the number of visits to the community. The City Council began to look at this hotel possibility back in 2013 and contacted a company who specialized in city economic development to assist with this project. In 2015 a feasibility study was conducted that showed that, with some public assistance, a mid-tier hotel could locate in Nephi. The State of Utah allows cities to pursue economic development options like this using a tool called a "Community Reinvestment Area" or CRA. The city set up a CRA for the hotel project in 2017. The economic incentives set up for this project are as follows:
- The governing agency of the CRA would borrow $1.3 million dollars in a public assistance loan and provide that to a hotel developer for infrastructure improvements on the project. The rest of the project cost would be provided by the hotel developer and is estimated to be around $7 million.
- The CRA worked with all taxing entities in the area (Juab School District, Nephi City, Juab County, East Juab Water Conservancy District, Juab Special Service Fire District, and the Central Utah Water Conservancy District) to agree to use tax revenues generated from the hotel project to be used to pay debt payments on the public assistance loan. The annual tax revenue projections were estimated to be 25% higher than what would be needed to pay the debt payment each year.
- While working with the bank who would lend the money for the public assistance loan, they found that they needed an additional guaranty to make the loan meet federal guidelines for risk. Nephi City agreed in January of 2019 to provide this guaranty. This allows for the CRA to seek competitive interest rates on the public assistance loan but also carries a risk associated with the project. If the CRA does not generate sufficient tax revenues, the city would need to provide funding to meet any shortfall. The city has already agreed to place any current year tax surplus into a holding account for this possibility. The risk that the city would need to provide this funding for a shortfall is estimated to be low.
Commonly Asked Questions
Are tax dollars being spent to fund this project?
Why did Nephi City offer a guaranty to the bank for the project?
What does the "guaranty" by the city mean?
Why is having a conference space important?
Why is the government involved in a private venture?
How will this project affect the Recreation projects and recently passed Parks, Arts & Recreation (PAR) tax?
Why can't this money be used to fund other things in the city?
- "Planning commission being kept busy with several proposed projects" [Trauntvein, M. [August 23, 2017] Nephi Times News].
- "Nephi City approves Parameters Resolution for Electric Fund Projects" [Trauntvein, M. [September 27, 2017] Nephi Times News].
- "Council Hears Public Comments On Proposed Community Reinvestment Area" [Trauntvein, M. [October 25, 2017] Nephi Times News]
- "Economic growth in Richfield could serve as an example to Nephi" [Trauntvein, M. [November 8, 2017] Nephi Times News].
- "Nephi City adopts parameters resolution for new hotel construction" [Trauntvein, M. [November 15, 2017] Nephi Times News].
- "Nephi City holds public hearing for the issuance of bonds for new hotel construction" [Trauntvein, M. [December 12, 2017] Nephi Times News].
- "Nephi City recently updated moderate income housing plan" [Trauntvein, M. [January 3, 2018] Nephi Times News]. @(Model.BulletStyle == CivicPlus.Entities.Modules.Layout.Enums.BulletStyle.Decimal ? "ol" : "ul")>