Newton City Council amends agreement with Hotel Maytag developer for the ninth time

Before the Newton City Council moved forward with or discussed the amended development agreement with Hotel Maytag Investors, developer Jack Hatch wanted to show officials a short video that he felt showcased what the project was all about and would set the tone for their conversation that night.

It was a video posted on the city’s YouTube channel, and it was titled “Get to Know Historic Hotel Maytag.” The three-minute video — now six years old by this point — featured council member Mark Hallam and a voiceover by the city’s economic development specialist, Craig Armstrong, explaining the history.

Hallam goes on to say how much the city has invested into Hotel Maytag, and that it will be home to both workforce housing units and market rate apartments. Other occupying businesses, like the Capitol II Theatre, received renovations, too. Today, a number of other businesses have opened up shop.

Video footage shows what Hotel Maytag had looked like back in its heyday before the renovation. Snippets of news broadcasts revealed what the building had become. The video even mentions how Hotel Maytag was the first motel west of the Mississippi River to have air conditioning. That was in the 1930s.

Of course Armstrong gives mention to the ballroom and the cameo room, and their reputations for hosting large parties, weddings and other events. He points out these historic charms to highlight the importance of keeping the building alive and well in downtown Newton. He sums it up perfectly:

The historic Hotel Maytag will be restored to its former glory, and be given the respect it deserves as an iconic part of Newton’s past, present and future.

When the video finished, Hatch noted what he wants to talk about is the future. Hatch said the renovated Hotel Maytag received five awards — one national award, three state awards and one local award — and it fulfilled promises made by both the developer and the city. He called it an extraordinary project.

“But it was very difficult,” Hatch said to council members during their April 21 meeting at City Hall. “We’re here today because we have to restructure the financing, including the agreement we have with you, our agreement with the state and with our investors. All are very willing and wanting to do this.”

Newton City Council held a public hearing to consider another amendment to the agreement with Hotel Maytag Investors, LLC, which has requested another seven years of rebates from fiscal year 2025 through fiscal year 2031 to assist with an unexpected rise in property valuations.

Unfortunate timing drove a wedge into the Hotel Maytag project. Commercial properties in Newton had not seen dramatic increases to their assessments for almost two decades. The agreement with the developer could not account for these higher valuations, which complicated matters.

“The taxes based on the assessment — which we thought was reasonable at the time we first made that agreement — have increased dramatically,” Hatch said. “And we are here because we want to be able to abate the new assessment, not the ones that we agreed to in the beginning. We will still pay that.”

According to city documents, the requested property tax rebate amount for the additional seven years is $400,000. But with this accommodation, the developer is still required to pay the taxes in full before receiving the TIF rebate, which will not include debt service taxes from local governments.

Originally, the developer would not pay property taxes over the base value of $515,370, which was Hotel Maytag’s total property valuation in 2018 and 2019. Information published on the county assessor’s office website shows the total value increased to $2.3 million in 2020. It is now valued above $3.1 million.

Extending the developer a TIF rebate is a comprise solution addressing the unforeseen increase to the minimum assessment.

Although Hatch was frank and said Hotel Maytag has not made a profit, he is confident in former Newton Mayor Mike Hansen serving as the new facility manager for the property. Deferred maintenance has been repaired. The apartments are full. Plans are being made for the ballroom.

“As Mike has said to you for many years — and continues to say — that building brings life to this community,” Hatch said. “The more people see the beauty of the ballroom and what we can do, I think it’s going to make us believe that this is accomplishing what we set out to do six to seven years ago.”

Council member Randy Ervin asked if the original agreement with the developer had a specific end date attached. Newton City Administrator Matt Muckler said the original agreement went through fiscal year 2034. A similar agreement was made with the building for Arcosa, setting its minimum assessment to $8 million.

“It stayed that way forever until just recently or within the last year it changed,” Muckler said. “Some of those minimum assessments, once they were put in, we never saw a number higher than that … The assurance we made with Hatch Development is they would pay taxes on the base of the building.”

Before Hatch invested $16 million into the building, it was worth $515,370. Hatch agreed to pay the taxes on that, which he has done. Muckler said anything above the $515,370 would be abated or rebated by the city. Muckler said the new resolution makes good on the original promise from the city.

Hatch said the other thing the agreement does is make him responsible for paying back the $400,000 loan from Iowa Finance Authority.

“We will take that over,” he said. “That will be assigned to us for the abatement of the higher assessment.”

Ervin made sure he was following along correctly.

“This was a commitment to the future the previous city councils had made that we will charge you taxes on a certain dollar figure,” he said. “As that dollar figure has went up, what you’re asking for us to do is stick to the original agreement of this will be the cost of the building no matter what the assessed is going forward.”

To him, Hatch wasn’t coming to the city asking for a handout, but rather asking the two commitments made years ago to be made whole.

“Is that a good summation?” Ervin asked.

Hatch said, “Yes, that is correct.”

The council voted 6-0 to amend the agreement.