Hotel Maytag developer seeks city aid

Hotel Maytag developer Jack Hatch is asking the City of Newton to become a co-guarantor with the developer on an $8 million construction loan.

Hatch addressed city council during a special workshop Thursday, explaining Congress will likely repeal two pieces of financing directly affecting the rehabilitation process of the historic Newton building.

“Between October and December, Congress decided they were going to pass, or try to pass, a tax reform bill,” Hatch said. “In that tax reform bill, they identified two programs that were going to be repealed that directly affect the financing of this.”

The first piece is a 4 percent Private Activity Bond for workforce housing. For the project, it is a $2.5 million hit if it remains repealed.

The second piece involves the House repealing the Federal Historic Tax Credit Program. Funds from that program provide 20 percent of the equity, based on construction costs, or a $3.8 million hit.

In order to protect the project, Hatch said he decided to try to complete closing on the financing of the redevelopment before the end of the year. The project would then be grandfathered in with the Private Activity Bond and Federal Historic Tax Credit Program and the funding it brings.

“Hotel Maytag, which is clearly one of the icons of your community, is getting an extraordinarily acceptable review from other developers, bankers, investors. They know how important it is to you,” Hatch said. “We are doing something that no other project in Iowa has done and that is speed up the closing of this loan from a nine month process to a 45 day process.”

In order to complete the process, Hatch is asking the city to amend the agreement with Hotel Maytag Investors with three new requirements. The first requirements would reduce the number of installment payments from the city to the developer from five to four. In the original agreement, the city agreed to provide $2.75 million in economic development grants in five installments over the course of the project.

To accommodate the expedited closing, the fourth installment and fifth installment would be combined into one final installment of $1.05 million.

“The issuance of the Certificate of Occupancy and 90 percent occupancy (stabilization) were expected to occur simultaneously and city staff was already planning to recommend to the city council to bond for both installments at the same time,” city administrator Matt Muckler said. “This revision therefore represents a minor change to the agreement.”

The second change makes the City of Newton a co-guarantor with the developer on an $8 million construction loan from Bankers Trust Company. The guaranteed amount will be reduced as the tax credit funds are received by the developer.

The city will be substantially released as a co-guarantor on or before Dec. 31, 2018 and be completely released as a co-guarantor on or before June 30, 2019.

The third change is to the development project description. The renovation will include nine market-rate apartment units and 36 workforce housing units, raising the overall capacity from 50 percent workforce units to 80 percent workforce units.

“The 36 workforce housing units are meant to be affordable units for households at or below 60 percent of the median income for Jasper County,” Muckler said. “Jasper County’s median household income is $55,503. The 36 units will be available to renters who make $33,300 or less.”

Muckler said there is a possibility the median income for Newton, instead of Jasper County, will be used with calculating the workforce housing rate. Those numbers are less than the county’s statistics.

City council would consider the proposed changes at its regular meeting on Monday.

“When Jack brought this to me, I directed the administrator, Lisa (Frasier) and Craig (Armstrong) to sit down and look at where we were at, what our commitments are for the next 18 months, what are the capital needs from our departments, all of that and come up with a number that you are comfortable with to report back to Jack that we could comfortably guarantee,” mayor Mike Hansen said. “Hatch said that everything is falling in place for the early ‘soft’ closing to be completed but that everyone involved has to agree.”

If city council chooses to not move forward with the changes, and Congress does eliminate one of the funding sources, Hatch said the options for the city narrow greatly.

“If they do pass legislation that takes one of these off, I would have to come back to you and say the only way of doing this is cash from you,” Hatch said.

Hansen agreed with Hatch on the future of the project should the funding options dry up.

“The risk is that if the tax credits and the funding that we are relying on does not survive Congress, we’re in trouble, we’re in big trouble trying to figure out how we are going to pick up all of that money in order to move this project forward,” Hansen said. “This was the best of the options that we have available with us taking Congress out of the picture and getting this done by the end of the year.”

Contact Jamee A. Pierson at 641-792-3121 ext. 6534 or jpierson@newtondailynews.com