Questions stall hotel tax break
BY BOB OKON firstname.lastname@example.org June 28, 2013 10:20PM
Signs posted at the site of a future hotel complex show how close it will be to Heroes West, whose owner says city tax incentives would be used to create competition since the development is likely to include a sports bar and grill. The site is at Rock Creek Boulevard and Commerce Lane. | Bob Okon~Sun-Times Media
Updated: August 2, 2013 7:02AM
A $2.4 million tax break for a proposed hotel and conference center in Joliet has been stalled by questions about its impact on competing businesses.
The tax incentives were to go to the city council for a vote as early as Monday but have been pulled off of the agenda so they can be given a closer look. Meanwhile, scuttling the incentives also could put the project at risk.
Owners of the new development would pay none of the city’s hotel, sales and food and beverage taxes for the first three years of business under the terms of the incentive package. And it would pay no more than 40 percent of those taxes in the first 10 years.
The owner of Heroes West Sports Grill, which is located nearly next door to where the new complex would be, contends that incentives amount to using city money to create a competing restaurant, since he has been told that the hotel also is likely to contain a sports bar and grill.
Heroes West owner Joseph Pecora sent a letter to city officials that reads in part “if the city of Joliet’s providing tax rebates to help one business directly harms several other businesses, the city is overstepping the boundaries of the decision a municipality should be making.”
Pecora did not want to comment for this story but said he planned to speak to the city council on the matter at its workshop meeting Monday.
The new hotel would be built near the Houbolt Road interchange with Interstate 80, where several hotels are located now. It would also compete with the Holiday Inn Express hotel and conference center at the Larkin Avenue interchange with I-80 and even would take its brand.
John Seo, owner of the Holiday Inn, is making arrangements to affiliate with a different hotel group as Holiday Inn plans to switch its brand to the new hotel and conference center.
Seo called the tax package “unfair” because the new hotel would get back the 7 percent hotel tax that competitors tack on to their room rates.
“Seven percent makes a difference in the price,” Seo said. “That’s not right.”
City Manager Thomas Thanas defended the tax package, saying communities typically develop incentives for hotel and conference centers because of their ability to bring business to town.
He said some communities have spent city money to build and own conference centers while bringing in private companies to run the hotels and meeting space. Thanas said he wanted to avoid putting city money at risk by investing in the project.
“I think the decision to pursue the conference center (for Joliet) was made many years ago,” Thanas said. “We want to be able to attract those mid-sized associations that have conferences and meetings that bring in a couple of hundred members.”
Those out-of-town visitors, Thanas said, also are likely to spend money at other businesses, including restaurants, and even stay at other hotels if the host hotel is full.
“A lot of times, on the restaurant side, people don’t want to eat at a hotel restaurant,” Thanas said. “They’ll ask at the front desk where’s a good place to eat, and they’re likely to hear Heroes has a great plate of food and a fun atmosphere. I was taking the perspective that the hotel/conference center would help Joe’s restaurant (Heroes). But he has obviously taken a different perspective.”
Thanas said that he pulled the tax package off of the agenda for the Monday-Tuesday meetings of the city council to allow more time to consider any questions raised about the incentives. However, he said the matter was likely to be discussed at the Monday meeting.
Thanas said he believes the incentives are necessary to make the project work and that the hotel and conference center would not be built without them. Representatives from Hospitality Guru Group in Aurora have said repeatedly that they have also looked at other communities, including Romeoville. They also say that they have not yet closed on the land acquisition in Joliet.
Hospitality Guru Group plans to build two hotels — a Holiday Inn and a Candlewood Suites — with a total of 200 rooms. There would also be a banquet room of 6,000 to 9,000 square feet with breakout meeting rooms. The complex would also have the restaurant, and management has also said that there could be a fitness center open to the public.
Such a project should be good for Joliet, said Angela Milburn, a local hotel manager and president of the Will County Lodging Association.
Burt Milburn said her group is concerned that it would take a few years to begin booking conferences that would bring extra business to Joliet and that the new hotel in the meantime would be competing for existing business.
Milburn said the lodging association, which includes area hotels, would like to see some commitment to use the tax rebates from the city to market Joliet and attract new business into town.
“Usually a hotel will take anywhere from three to five years to get new business into the area,” Milburn said. “Most of that time, you’ll get people who are already here, and they just want to try the new hotel.”