DeKalb City Council Supports Tax-Sharing Proposal for New Hotel

Plans for a new Marriott-branded hotel in DeKalb, Illinois, received preliminary support from the City Council this week. As project leaders seek a proposed tax-sharing agreement, they cited tariffs and inflation as key factors contributing to rising construction costs. While no final decision was made, a vote on the matter is expected in the near future.

The City Council had previously approved the development plan for the TownePlace Suites and Fairfield Inn by Marriott Hotel, located at 902 Peace Road. This site is strategically positioned between a Bumper to Bumper auto parts store and a Fast Stop Express gas station. The project, led by Pramit Patel of EO5 Hotels, is estimated to cost $23.2 million, with an additional $4 million in costs attributed to unexpected economic conditions.

DeKalb’s City Manager, Bill Nicklas, noted that the project is facing a “funding gap” due to the rising costs of materials and labor. He explained, “A gap is owing to conditions we face now, which were probably not, which we know were not existing a year and certainly not two years ago.” This situation has prompted Patel to propose a hotel tax-sharing agreement to help cover the increased expenses.

The hotel will consist of 61 rooms branded as Fairfield Inn and Suites by Marriott and 59 rooms branded as TownePlace Suites by Marriott. According to city documents, the hotel will feature a shared lobby, front desk, meeting room, and swimming pool. Construction on the 2.5-acre vacant property is expected to commence in early September 2023, following a groundbreaking ceremony held on Tuesday.

Despite the hotel being located in the DeKalb County Enterprise Zone, it may not qualify for local property tax abatements, as it is classified as a non-industrial use. Nevertheless, project leaders may retain state-level exemptions on sales tax for building materials.

Patel’s proposal includes a 10-year agreement for sharing hotel-motel tax revenues, with payments beginning at 90% in the first year, decreasing to 50% in subsequent years until the agreement expires. The total payment over the decade is capped at $2 million.

Support for the proposal emerged from various council members. Second Ward Alderwoman Barb Larson, who serves as a city representative to the DeKalb County Convention and Visitors Bureau, expressed her backing, stating, “I would support this because I do know that there are some events that we’re not even in the running for because we don’t have enough hotel rooms.” Larson underscored the necessity for more quality accommodations to attract events to the area.

Mayor Cohen Barnes echoed these sentiments, highlighting the missed opportunities for events due to limited hotel capacity. He noted, “Not only do we miss out on events, but we have multiple events that every hotel room is taken.” Barnes emphasized that expanding the hotel inventory would retain visitors locally and contribute to generating hotel-motel tax revenue.

The City Council reached a consensus to direct city staff to prepare an ordinance aimed at solidifying the proposed deal. If the agreement is approved, the hotel-motel tax-sharing arrangement would take effect upon issuance of the hotel’s occupancy permit. A final vote on the ordinance is anticipated in September 2023.