The Lenexa City Council has granted $4 million in requested public incentives to the developers of a proposed Home2 Suites by Hilton hotel and office project on the southwest corner of Rosehill Road and 96th Terrace.
The project comprises renovation of a two-story, roughly 19,000-square-foot office building and related improvements in a first phase, and construction of a four-story, 99-room Home2 Suites hotel and related improvements in a second phase. The project’s roughly 5.63-acre site is within the I-35 and 95th Street TIF District.
At its Tuesday meeting, the council unanimously approved a tax-increment financing (TIF) redevelopment project plan and a development agreement with the developers, KWB LLC, which owns KWB Hotels and is based in Sioux Falls, S.D., and Stag’s Pass LLC.
The project’s reimbursable TIF expenses total nearly $8 million, half of which will go to the developers and half to the city for street improvements in the district, City Administrator Eric Wade said. Lenexa Chief Financial Officer Doug Robinson prepared a feasibility study on the project and estimated the increment of new tax revenue from it would be $6.9 million over the TIF’s 20-year term. That estimate is conservative, Wade said in a Tuesday memo to the council.
“The TIF costs exceed the expected TIF increment but this is done by design as the assumptions utilized in the feasibility study are conservative,” according to the memo. “The TIF increment plus other available revenues and funds are expected to be sufficient to pay for the approved TIF reimbursable expenses.”
TIF is a public financing tool by which a developer of a blighted property is reimbursed for eligible development and infrastructure costs using the increment of new property or sales tax revenue generated by the development. TIF involves the “but-for” principle, which means considering whether a development wouldn’t be financially feasible but for TIF.
The developers are required to meet several performance standards on the project, including:
- Start the first phase by Oct. 31 and finish it by Oct. 31, 2019.
- Achieve “substantial completion” of the second phase by Dec. 31, 2020.
- Be a dues-paying member in good standing of the Lenexa Chamber of Commerce.
- Make an annual contribution to the Lenexa Foundation, earmarked for public art, in an amount the developer will determine but that must be at least 0.5 percent of the annual distribution of TIF revenue.
- Sponsor at least one city festival or other city event or activity.
KWB also redeveloped the project directly north of the Home2 Suites site. It included demolition of blighted property and construction of a Holiday Inn Express and Candlewood Suites.