About $150,000 of previously bonded city funds has been reallocated to developers of the Hotel Maytag rehabilitation project due to “unforeseen structural challenges.” Council action Monday has provided Hotel Maytag Investors, LLC with a forgivable loan to defray a portion of those cost overruns.
The City of Newton entered into an agreement with Hotel Maytag Investors on Oct. 2, 2017, to renovate the historically significant building. After an investment of more than $16 million, the structure — now known as the Historic Hotel Maytag Apartments & Event Center — held its grand opening June 6, 2019.
Following the completed renovations, Newton City Administrator Matt Muckler said Newton has “an anchor to our downtown square that we can all be proud of.” The importance of the building and the future success of the downtown district, he added, “cannot be overstated.”
Financing for the rehabilitation work is complicated. The project contains 13 different layers of financing, which Muckler claimed is more than any other project the city knows of and is connected to tax credits. Developer and owner of the building, Jack Hatch, was “very willing to listen to the community’s input.”
Since the project began, developers have amended the agreement with the city six times. The $150,000 Hotel Maytag Investors was asking for is “much less than what the developer’s bringing to the table,” Muckler said. The seventh and seemingly final amendment represents less than 1 percent of the project cost.
Councilman Mark Hallam said he heard from several people questioning the forgivable loan from the city. He also wanted clarifications of these unforeseen structural challenges mentioned in the agenda documents and why they require additional funding. Hatch said investments are related to the historic renovation.
“We underestimated the budget 18 months ago, and as a result the State Historic Preservation Office agreement required us to meet more standards,” Hatch said. “For example, they wanted us to do more for the lobby and the walls interior to the theater, the south wall of the building needed extreme tuckpointing.”
The ballroom and cameo room in the lobby of the facility were upgraded, too. Hotel Maytag Investors also assumed the complete cost of the cafe restoration in order to keep the existing operator — Midtown Cafe — in the space, since efforts to find a replacement restaurant were not successful.
“I, as the developer and owner of the building, had to put in an additional $1,050,000 of my money to complete the project,” Hatch said.
Councilwoman Evelyn George wanted to better understand the financing of the project, particularly if the loan would fit into the city’s existing budget; especially during the COVID-19 pandemic when council isn’t sure what next year’s changes may be. City Finance Officer Lisa Frasier addressed those funding mechanics.
“When we bond again, we’ll need to bond this additional $150,000 out of the North Central TIF District,” Frasier said. “We can structure that bond so those payments will be later on in the years when that TIF district will have more capacity, so we can kind of push those payments off a little bit.”
Conditions for the forgivability of this loan aligns with the 15-year compliance period for the tax credits. Hatch said if Historic Hotel Maytag Apartments & Event Center succeeds in the next 15 years, and the tax credits are all applied and developers comply with it, that would signify a few things to the city.
• Developers successfully completed the restoration of the building
• Developers provided low-to-moderate workforce housing tax credits
Newton City Council voted 6-0 to approve the loan between the city and the development group. Council members also unanimously approved the seventh amendment to the city’s agreement for private development of Hotel Maytag.
Newton Mayor Mike Hansen praised the development group’s achievement.
“Thank you for, again, all of the efforts — your staff and everyone — in developing the Hotel Maytag project,” Hansen said. “It was difficult. We understand the issues that were encountered in this massive restoration project. But we certainly have a gem in our downtown that we can continue to build on.”
Contact Christopher Braunschweig at 641-792-3121 ext. 6560 or email@example.com