The CRA board of directors has requested a work session to review the grant award and consider the continued restoration of the Hacienda Hotel.

Part I - Hacienda Grant Award

The $100,000 Small-Matching and $750,000 Special Category Grant agreements from the Division of Historic Resources are in place. Time allotted for the Small-Matching is one year. Time allotted for the Special Category Grant is two years. Bender and Associates is currently working on bid documents for both grants. Additionally, The Division of Historic Resources has approved construction of the Historic Bank Street Wall, a project primarily funded by Friends of the Hacienda.

The current scope of restoration work are as follows:

• Restoration of the Historic Patio (Small Matching Grant)

• Restoration of the Historic Lobby Stairway (Small Matching Grant)

• Installation of Structural Beam Inside Dining Room Archway. (Small Matching Grant)

• Manufacturing of Windows and Doors. (Special Category Grant)

  • Please note, cost to manufacture all windows and doors is likely to exceed the Grant Amount of $750,000 and may take between 6 -9 months to manufacture.

• Historic Wall Reconstruction – Engineering completed and approved by Historic Resources.

Staff has applied for a $100,000 Small-Matching Grant for Florida Fiscal Year Starting July 1, 2018. The Division of Historic Resources has ranked this grant application 11^th out of 81 statewide submissions. The scope includes stucco repair in areas that do not conform to the original mullet pattern, such as below each window, and the removal of the courtyard fencing, a non-conforming addition.

Part II – Restoration Completion

In 2004, the Community Redevelopment Agency purchased the Hacienda Hotel as an economic development driver for downtown revitalization. In the 2012 CRA work plan the following is stated; “This is the most important activity currently available to the City to rejuvenate Main Street and greater downtown. A hotel will provide a place for visitors to stay in a quality accommodation. It will resurrect a place that is important in the City’s history, provide activity on Main Street, create new jobs . . .” The city has made several attempts to redevelop the property. However, for a variety of reason, such as the Great Recession, market conditions and construction costs have inhibited the progress of the restoration.

As part of an effort to support the investment risk often associated with restoring a historic property, staff secured Historic Preservation funds. The amount raised so far is $2.07 million. This additional funding, in combination with vastly improved economic conditions, has improved the chances of completely restoring the Hacienda.

As a result, two firms with extensive experience in restoring and operating historic hotels have contacted the city and expressed interest. Each has a different approach with advantages and disadvantages to each. Staff has been researching a way to finally complete the Hacienda restoration and wish to present them to the CRA board for discussion.

1. Tax-Exempt Financing

Rev Rule 63-20 is a form of tax-exempt financing available to government entities for such economic redevelopment projects and is similar to an Enterprise Fund. This will require the Hacienda deeded into a single-purpose, non-profit entity. A governing board of directors would hire the contractor and hotel operator. It is estimated the cost to complete the Hacienda could be as high at $5 million.

Once opened as a historic boutique hotel, operating profits would liquidate the debt, with the excess distributed to the CRA. Ownership, after the debt is paid, must be return to the city as a condition to securing the debt. The debt instrument can be issued where there is no recourse to the city. However, should the non-profit default, the Hacienda could be foreclosed. To protect against such an action, the CRA can serve as financial support if such a situation occurs. Additionally, while the property remains in the non-profit, Historic Preservation Grant funds can be pursued.

         II.  Sell the Hacienda to Historic Boutique Hotel Operator.

The sale recaptures at least a portion of the CRA’s investment in the Hacienda. The buyer can use the 20% historical tax credit and their personal income tax rate of 35% to recapture a significant portion of their investment. If $5 million were invested, $2.75 million would be tax dollars redirected to the Hacienda.

There is a stewardship concern, should the property be sold. A mechanism should be put into place to assure the perpetuity of the Hacienda is in the best interest of residents. 

         III.  Incremental Approach.

The CRA invest in a manner that upgrades the Hacienda to where the property can be leased for various events and venues. Improvements would be life/safety related. The estimated cost to achieve this would be between $1.5 and $2 million. Historic preservation grants can be pursued.

        IV. CRA Completes Restoration

The Hacienda remains as a CRA Asset and operates as an Enterprise Fund. The Board of Directors continues its role as governing body. Historic Preservation grant awards, Penny for Pasco, Tax Increment Revenues, Charitable Contributions and Operating Profits are utilized to complete the restoration.

As described in the Market Rate Analysis, the anticipated net operating income can be as high as $800,000. The advantage is, funding is less complicated to assemble with excess profits available to the CRA. The primary disadvantage is that residents are on the hook for any losses.