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HomeMy WebLinkAboutOrdinance 4663ORDINANCE NO. 4663
AN ORDINANCE ADOPTING THE PROJECT PLAN
FOR THE HIGHWAY 71 EAST SQUARE
REDEVELOPMENT DISTRICT NUMBER ONE,
FINDING THE PLAN IS ECONOMICALLY FEASIBLE,
REPEALING ORDINANCE 4646 AND DECLARING
AN EMERGENCY
WHEREAS, on July 27, 2004, the Fayetteville City Council held a Public
Hearing concerning the creation of the Highway 71 East Square Redevelopment District;
and
WHEREAS, on August 17, 2004, the City Council passed Ordinance No. 4608
creating the Highway 71 East Square Redevelopment District and authorized preparation
of a Redevelopment Project Plan; and
WHEREAS, the City with input from the proposed redevelopers of a Twenty -
Two Million Dollar hotel project to be constructed after removal of the blighted
Mountain Inn has prepared a proposed Project Plan attached as Exhibit "A'; and
WHEREAS, on November 30, 2004, the City held a Public Hearing on the
Project Plan proposed for the Redevelopment District; and
WHEREAS, on December 7, 2004, the City had a further public hearing on.the
Project Plan and passed Ordinance 4646 adopting the Project Plan; and
WHEREAS, because of a minor, technical notification discrepancy, the City
determined the need to renotify all statutorily required officials and republish notice of
the public hearings for the Redevelopment District.
WHEREAS, the City Council after 15 day published notice has held another
public hearing at which all interested parties were given the opportunity to express their
views on the proposed adoption of the Project Plan for the Highway 71 East Square
Redevelopment District Number One of Fayetteville, Arkansas; and
WHEREAS, prior to publication, a copy of said notice was sent by first-class
mail to the chief executive officer of all local governmental and taxing entities having the
power to levy taxes on property located within the proposed Highway 71 East Square
Redevelopment District Number One of Fayetteville, Arkansas, and to the school board
of any school district which includes property located within the proposed Highway 71
East Square Redevelopment District Number One of Fayetteville, Arkansas; and
WHEREAS, the Project Plan includes:
ti
iJ-
of real property, demolition of blighted/vacant.buildings, and sale
of the cleared land to the redevelopers;
(b) an economic feasibility study;
(c) a detailed list of estimated project costs;
(d) a description of financing including tax increment bonds;
(e) a certification of the county tax assessor of the base value, ad
valorem rate, debt service ad valorem rate, and ad valorem rate for
the redevelopment district;
(f) no other funds are expected to be deposited into the special funds;
(g) a map showing existing uses and conditions of real property in the
district;
(h) a map of proposed improvements and uses in the district;
(i) no zoning changes are anticipated;
0) reference to the Downtown Master Plan;
(k) non -project costs include financial advice, bond costs, economic
forecasting;
(1) no persons are anticipated to be displaced;
(m) the amount of TIF indebtedness;
(n) the amount of tax increment estimated to be generated by the
project;
(o) no other revenues are anticipated to be used to secure the tax
increment financing.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF
THE CITY OF FAYETTEVILLE, ARKANSAS:
Section 1: That the City Council of the City of Fayetteville, Arkansas hereby
finds that the Project Plan for the Highway 71 East Square Redevelopment District
(attached as Exhibit A) is economically feasible.
Section 2: That the City Council of the City of Fayetteville, Arkansas hereby
adopts the Project Plan for the Highway 71 East Square Redevelopment District and
determines it has complied with all requirements set forth in A.C.A. §14-168-306.
Section 3: That upon the effective date of this ordinance, Ordinance No. 4646
originally adopting the Project Plan for this Redevelopment District is hereby repealed.
Section 4: Emergency Clause. If this ordinance is not immediately effective, the
goal of the Redevelopment District and its Project Plan to remove a dangerous,
dilapidated firetrap could fail due to lack of time -sensitive funding. The City Council,
therefore, determines and declares an emergency exists which would imperil the public
peace, health or safety, and consequently this ordinance shall be in full force and effect
from the date of its passage and approval.
PASSED and APPROVED this 28`h day of December, 2004.
By:
COODY, Mayor
ATTEST:
/� r���'.•G�S Y •O c • GF
SONDRA SMITH, City Clerk c ;FAYETfEVILLE;
a
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"The Mountain Inn Reborn'
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RECEIVED
DEC 2 2 2004
CITY OF FAYETTEVILLE
MAYOR'S OFFICE
RECEIVED
DEC 2 3 M
CITY OF FAYETTEVILLE
CITY CLERK'S OFFICE
Riellgrd a�mlLtcx
Phm 479-521-9198
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Phm :479-s3a6799
TO: STEPHEN DAVIS, FINANCE & INTERNAL SERVICES DIRECTOR
DATE: DECEMBER 21, 2004
SUBJECT: HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PER YOUR REQUEST PLEASE FIND ENCLOSED:
1. FEASIBILITY STUDY PREPARED BY INTERNATIONAL HOSRTAIJTY ADVISORS, INC. AND SUBSEQUENT
UPDATE LETTERS FOR THE DEVELOPMENT OF THE HOTEL PROJECT AT THE CURRENT MOUNTAIN INN SITE.
2. HEARTLAND RENAISSANCE COMMITMENT LETTER ounDaNG $8,000,000 NEW MARKET TAX CREDIT
AuDcATION FOR THE HOTEL PORTION OF THE PROJECT TO THE BANK OF FAYETTEVILLE.
3. ANALYSIS OF POTENTIAL TAXES GENERATED BY THE DEVELOPMENT OF THE MOUNTAIN INN PROJECT.
AS WE DISCUSSED IN OUR MEETING THIS MORNING THE BANK OF FAYETTEVILLE WILL ACTUALLY FUND THE
PROJECT BY FIRST FUNDING HEARTLAND RENAISSANCE FUND SUB U. LLC — QUALIFIED EQUITY
INVESTMENT. IT IS THIS CDE (COMMUNITY DEVELOPMENT ENTERPRISE) THAT ACTS AS THE CONDUIT FOR
THE FINANCING FOR THE HOTEL PORTION OF THE PROJECT.
ALSO, PURSUANT TO THEIR COMMITMENT TO HRF, BOF IS REQUIRED TO POND $4 MILLION OF THE NEW
MARKET TAX CREDIT ALLOCATION PRIOR TO DECEMBER 31, 2004 OR THE PROJECT WILL LOSE THE SAID
TAX CREDIT ALLOCATION. AS A PRACTICAL MATTER ANY DELAY IN RE -PASSAGE OF THE PROJECT PLAN PAST
DECEMBER 28m WILL SERIOUSLY JEPARDEZE THE FUNDING FOR THE PROJECT.
DEVELOPERS ALSO HAVE PRELIMINARY FINANCING COMMTMENTS FROM TWO AREA BANKS FOR THE
CONDOMINIUMS, PARKING DECK AND MEETING/CONVENTION PORTIONS OF THE PROJECT. THESE
COMMITMENTS ARE SPECIFICALLY SUBJECT TO THE PASSAGE OF THE HIGHWAY 71 EAST SQUARE
REDEVP.I.ORdENT DISTRICT PROJECT PLAN, THE ISSUANCE OF BONDS AS OUIUNED IN THE PROJECT PLAN
AND THE SALE OF THE SUBJECT PROPERTY BACK TO THE DEVELOPERS. ADDITIONALLY, DEVELOPERS HAVE
THE NECBASSARY CASH EQUITY FOR ANY REMAINING PORTION OF THE FINANCING FROM QUALIFIED EQUITY
INVESTORS.
PURSUANT WTTIVOUR MEETING WITH THE CITY ATTORNEY IT WAS THE DEVELOPERS UNDERSTANDING THAT
SUBSEQUENT TO THE PROJECT PLAN , THE CITY AND THE DEVELOPERS WOULD ENTER INTO AN AGREEMENT
WHEREBY THE CITY WOULD SELL THE SBJECT PROPERTY TO THE DEVELOPERS AT AN AGREED PRICE AND THAT
AT THE TIME OF THE SALE AND AS A CONDITION OF ANY SAIL', THE DEVELOPERS WOULD DEMONSTRATE TO
THE CITY IN A FORM SATISFACTORY TO THE CITY THAT THE DEVELOPERS WILL BE ABLE TO COMMENCE AND
COMPLETE THE PROJECTAS OUMNED IN THE PROJECT PLAN.
IT IS IMPORTANT TO NOTE THAT THE PROJECT RAN AS PREVIOUSLY PASSED SPECIFICALLY DID NOT RELY ON
ANY INCREMENTAL GROWTH IN TAX COLLECTIONS FROM THE MOUNTAIN INN REDEVELOPMENT PROJECT OR
ANY OTHER KNOWN DEVELOPMENT PROJECTS PLANNED IN THE DISTRICT. HOWEVER, THE ATTACHED
ANALYSIS OF POTENTIAL TAXES OEN TED LISTS A RETURN TO TAXPAYERS OF OVER $35 MILLION
DOLLARS. IF WE MAY PROVIDE ADDMO L INFORMATION PLEASE DO NOT HESITATE TO REQUEST IT.
SINCERELY,
THE
11
November 16, 2004
Mr. Fred Shefte
Bank of Fayetteville
Fayetteville, AR
Re: Heartland Renaissance Fund Sub II, LLC - Qualified Equity Investment
Dear Fred:
We are pleased to inform you that, subject to the terms and conditions set forth in this letter of
interest, the Governing Board of Heartland Renaissance Fund, LLC, ("HRF") has approved Bank of
Fayetteville ("BOF") to acquire an ownership interest in Heartland Renaissance Fund Sub II, LLC
("Sub II"), a subsidiary allocatee of HRF, up to but not more than $8,000,000 ("QEI"). This
ownership interest will be deemed a Qualified Equity Investment if all requirements are met in
accordance with Section 45D of the Internal Revenue Code ("Code").
HRF has received a $15 million allocation of New Markets Tax Credits ("NMTC") from the Community
Development Financial Institutions Fund ("CDFI Fund") pursuant to an Allocation Agreement between
HRF and CDFI Fund. Sub 11 has been certified as a "Subsidiary Allocatee" of HRF by the CDFI Fund.
Pursuant to the terms and conditions proposed herein, HRF would agree to suballocate up to
$8,000,000 of its allocation of New Markets Tax Credit ("NMTC") to Sub 11 in accordance with the
Allocation Agreement.
This letter is based on certain assumptions and information that is material to and has been relied
upon by HRF in connection with the issuance of this letter of interest. The suballocation is
conditioned upon final approval of this letter of interest by the Governing Board, satisfactory
conclusion of HRF's due diligence review process and successful documentation and closing of the
transaction. At closing, HRF Management, LLC, an affiliate of HRF, will enter into the Sub II Operating
Agreement and related agreements that will incorporate the terms and conditions set forth below
and include other customary or necessary terms, subject to HRF's review and approval.
Material Assumptions:
Membership Interests
Heartland Renaissance Fund Sub II, LLC
HRF Management, LLC
Bank of Fayetteville
Heartland Renaissance Fund, LLC (CDE)
HRF Management, LLC
Arkansas Capital Corporation
Y c 06• : M. . a = a - 1
00.01% Managing Member
99.99% Non -Managing Member
1% Managing Member
99% Non -Managing Member
The total Qualified Equity Investment for NMTC purposes is estimated to be $8,000,000 ("QEI").
This QEI is projected to generate $3,120,000 of NMTC. HRF makes no representations concerning
the ability of BOF to use the NMTC. BOF should consult with its legal and/or tax counsel to
determine the qualification of the investment for NMTC and its ability to benefit from the NMTC. The
final suballocation amount is subject to determination by HRF upon a review of the investment
proposal to be provided by BOF.
Subject to final approval by HRF, Sub II will be capitalized with an equity contribution of up to
$8,000,000 from BOF with a closing to occur on or before December 15, 2004. Due to NMTC
requirements that the investments in the project are made within 12 months of issuance of the QEI,
it may be determined by HRF that BOF's contribution will be made in two installments with
approximately $3 million contributed at closing on or before December 15, 2004 for acquisition
costs, and up to $5 million at the commencement of construction. The timing of the QEI(s) will be
determined upon review by HRF of the investment proposal. Subject to compliance with NMTC
requirements, the equity contributions will be designated as one or more QEIs. The equity
contributions will be made under terms and conditions acceptable to HRF and in compliance with
Section 45D of the Internal Revenue Code. BOF would commit pursuant to the Sub II Operating
Agreement to make the full amount of the QEIs within six (6) months of closing.
Prior to disbursement to the project, the QEIs shall be held at an account in the name of Sub II.
Interest earned thereon until disbursement of the QLICI shall be used as a credit towards Sub ll's
reasonable operating expenses.
Proceeds of the equity contribution will be used to make a loan to and/or an equity investment in
East Square Redevelopment Project ("ESRP") located in downtown Fayetteville, Arkansas, and to pay
fees to HRF Management, LLC as described below. ESRP must meet the requirements to be defined
as a Qualified Low -Income Community Investment ("QLICB") under Section 45D of the Code. The
expected proposed general terms of the loan and/or investment shall be presented by BOF to HRF
within fourteen (14) days of the execution of this Letter of Interest and shall be subject to HRF's
Page 2 of 7
approval in its sole discretion and must constitute a Qualified Low -Income Community Investment
("QLICI") as defined under Section 45D of the Code. Such proposal shall include a statement of the
proposed sources and uses of the project, the terms of the proposed QLICIs (equity and/or debt),
commitment letters from other financing sources, a construction schedule, and projected cash flows
from the project during the 7-year NMTC recapture period. The documentation of the actual loan
and/or investment shall also be subject to HRF's review and approval in its sole discretion. The party
responsible for documentation of the QLICIs shall be determined, provided that the reasonable legal
costs incurred may be funded out of the QEI, and the documents shall include such provisions as
HRF shall require in order to comply with the NMTC program.
The terms of the loan and/or investment shall include flexible, non -conventional or nonconforming
terms with reference to standard practice in the applicable market as required by HRF's Allocation
Agreement. The loan and/or investment must meet the requirement of being located in one of the
target areas listed in Section 3.2(h) of HRF's Allocation Agreement. The terms of the loan and/or
investment shall also require ESRP to provide such information as is reasonably required by HRF for
purposes of compliance with HRF's NMTC reporting requirements and to monitor performance. A
cash penalty may be imposed by HRF upon ESRP for failure to provide information in a timely and
satisfactory manner.
BOF acknowledges that pursuant to Section 45D of the Code, the QLICIs have to be issued within 12
months of the issuance of the QEI(s) for BOF to be eligible to claim the NMTC. BOF represents to
HRF that it is reasonably anticipated that the QLICI with respect to acquisition costs shall be made
within two (2) months of issuance of the QEI of approximately $3 million. Contingent upon HRF's
review of the investment proposal, HRF may determine that approximately $5 million of the
estimated $8 million to be contributed shall be funded pursuant to the Sub II Operating Agreement
at the commencement of construction, with disbursement to occur pursuant to construction draws
during a 12-month period. BOF agrees that any portion of the construction QLICI not disbursed
within 12 months of issuance of the QEI may be placed in a reserve in the borrower's name and
withdrawn subject to approval by BOF and HRF. HRF anticipates that BOF will exercise construction
oversight, inspection and disbursement responsibilities.
The second installment of up to $5 million may be subject to certain conditions relating to the
feasibility of the project at the time of commencement of construction. If the second installment of
the QEI is not made, BOF and HRF may negotiate the right to withdraw the initial investment from the
project, provided the parties agree to reinvest in a qualified investment in the appropriate time
period to avoid NMTC recapture. These terms are subject to HRF review of the investment proposal
and its due diligence investigation.
BOF agrees to facilitate issuance of the QLICIs within 12 months of the applicable QEI to the project
or to another qualified project within the applicable time period to prevent a recapture of NMTC. BOF
accepts full responsibility for the timely closing of the QLICIs and any recapture of NMTC that occurs
as a result of a delay in closing the QLICIs unless caused by the gross negligence, willful misconduct
or fraud of HRF. HRF agrees to cooperate with BOF to facilitate timely closings of the QLICI.
BOF shall not expect HRF to perform any due diligence investigation of the QLICI and shall not rely on
any due diligence investigation conducted by HRF. HRF's role shall be limited to providing a
suballocation of NMTC and performing management and NMTC compliance responsibilities. HRF is
Page 3 of 7
40
not responsible for and will not make any representations regarding the operational results,
commercial viability or financial performance of the QLICI and BOF shall have no recourse against
HRF or its affiliates for any failure by the QLICI to achieve projections or provide any investment
return.
The QLICI documents shall provide that HRF shall have a role in the administration of the QLICI
including compliance with the NMTC program and the exercise of remedies in the event of default,
workout or foreclosure.
HRF Fees
HRF shall be entitled to the fees set forth below as compensation for its role in the QEI and its
provision of services in support of the transaction:
Closing Fee: Concurrent with the closing of the QEI in Sub II, HRF shall be entitled to a closing fee
equal to 5% of the QEI to be funded by the QEI.
Administration and Compliance Fee: On or prior to the first day of each calendar quarter following
the closing of the QEI, an administration and compliance fee equal to .1071% of the QEI ($8,571)
shall be payable to HRF in consideration for NMTC administration and compliance services to be
rendered by HRF. This fee shall be funded by cash flow from the project and shall accrue to the
extent unpaid.
HRF shall perform such services as may be required to maintain compliance with the NMTC
requirements. HRF shall be responsible for maintaining the status of HRF and Sub II as Community
Development Entities, including maintaining accountability to residents of low-income communities
and the submission of certifications, notices and reports to the CDFI Fund. HRF shall provide BOF
with copies of all such submissions. HRF shall provide to BOF a semi-annual calculation regarding
satisfaction of the requirement that substantially all of the QEI remains invested in the QLICI. BOF
agrees to cooperate with HRF to assure ongoing compliance with this requirement. Based upon
recommendations provided by HRF, HRF and BOF shall reach a mutual agreement regarding
permissible distributions by Sub II to BOF as may be required to comply with the NMTC program.
Termination Fee: A termination fee shall be payable to HRF in cash equal to 2.0% of the QEI upon the
withdrawal of BOF from Sub II which shall occur as soon as it is feasible after the seven-year
anniversary of the closing of the QEI. ESRP shall guarantee payment of this fee.
In addition, Sub II's audit and accounting expenses, as well as expenses incurred in connection with
extraordinary events, including the pursuit of remedies relating to the QLICI, shall be recoverable.
The terms of the QLICI will be structured to cover Sub 11's reasonable annual operating expenses,
including third party audit, compliance and accounting expenses. These fees are estimated at
$13,500-$15,000/year. BOF shall agree to reimburse Sub II for its reasonable expenses incurred in
connection with extraordinary events, including the exercise of remedies with respect to the QLICI
and legal action taken by Sub II at the request of BOF.
Page 4 of 7
• BOF agrees to comply with HRF's Allocation Agreement with the CDFI Fund by signing this
Letter of Interest
• Execution of the Sub II Operating Agreement in a form satisfactory to HRF and issuance of QEI
in an amount of up to $8,000,000 by December 15, 2004
• Receipt of an investment proposal from BOF within fourteen (14) days of the date hereof.
• Satisfactory due diligence is conducted by HRF of the proposed QLICI. HRF shall have
fourteen (14) days to review the proposed terms of the QLICI and underlying due diligence
documents provided by BOF to HRF regarding the proposed QLICI.
If the foregoing requirements are not met, HRF shall have the right to terminate this letter of interest,
or to request modifications. Termination shall be deemed effective three (3) business days after
mailing of written notice by first class mail, the first day following placement with an overnight
delivery service, or the day of facsimile transmission by HRF.
HRF shall have no liability to BOF with respect to any NMTC recapture event attributable to the
actions or inactions of BOF or ESRP. Pursuant to the Sub If Operating Agreement, BOF will have
approval rights regarding distributions from Sub II and reinvestment of any principal payments
received from the QLICI in order to minimize risk of potential recapture events. HRF and BOF will
reasonably cooperate to reinvest the proceeds in a manner that will not result in NMTC recapture in
the event of a default or foreclosure.
The QLICI loan/investment documents shall include an obligation of ESRP to maintain compliance
with the QLICI requirements and if required by BOF, an obligation to indemnify BOF for any recapture
of NMTC, with interest, that results from the actions or inactions of ESRP.
Distributions, if any, shall be made by Sub II to BOF on a monthly or quarterly basis, after payment of
Sub II's reasonable operating expenses and any fees due to HRF, in amounts to be determined
based upon the investment proposal.
For a twelve (12) month period after the 7th anniversary of the QEI, BOF shall have the right to put its
interest in Sub 11 to HRF for a nominal amount. After expiration of the put period, HRF shall have a
call option for a period of twelve (12) months to purchase BOF's interest in Sub II for an amount
equal to the fair market value of its interest.
XT, , = re)u -rac r- a MMN
The Sub II Operating Agreement shall
provide BOF
with the
right to
remove the managing member of
Sub II for gross negligence or willful
misconduct
likely to
have a
material adverse effect on BOF;
provided that if such removal would
result in a
violation
of the
Allocation Agreement or a NMTC
Page 5 of 7
recapture event, BOF shall not have a removal right, but shall have the right to appoint a second
manager to cure the default
HRF shall have thirty (30) days within which to cure a default, provided that if such default is
incapable of cure during that period, HRF shall have such longer period as may be required provided
that HRF is diligently pursuing a cure. Any fees earned prior to removal shall be paid as a result of
the removal.
Legal and Consuting Fees
BOF shall be responsible for payment of its own legal and consulting fees and out-of-pocket
expenses incurred in connection with the closing of the QEI and each separate QLICI; provided that
such fees up to a fixed amount may be paid out of the QEls subject to HRF review of the investment
proposal.
In the event that BOF accepts the terms set forth herein and HRF is prepared to suballocate NMTC to
Sub 11, if BOF chooses not to proceed or fails to close with HRF by December 15, 2004, BOF shall be
responsible for HRF's actual out-of-pocket third party fees and expenses, including but not limited to
attorneys' and consultants' fees and expenses, incurred in connection with evaluating and closing
the QEI; provided however such reimbursement shall not exceed $15,000 in the aggregate.
Tax Opinion
Garvey Schubert Barer, counsel to HRF shall provide the tax opinion to BOF satisfactory to BOF which
shall be delivered at closing. Tax opinion fees shall be paid at closing of the QEI, to be funded by
BOF.
Reporting Requirements
HRF shall provide such reports as BOF and HRF mutually agree which shall include provision on an
annual basis of all necessary tax reporting information; copies of Sub It's tax returns, audited
financial statements and reports submitted to the CDFI Fund.
In addition to the above, BOF and HRF acknowledge that the transactions will be structured to
comply with the NMTC program and all related rules and regulations. Furthermore, BOF reserves its
rights to monitor ongoing compliance and reporting with respect to the NMTC Program.
You agree and understand that HRF has spent substantial time on the proposed investment from
BOF. Accordingly, you agree that with respect to the specific investment in ESRP as submitted to
HRF for review, BOF shall not make such investment directly to ESRP without HRF's consent for a
period of ninety (90) days from the date of your acceptance of this Letter of Interest unless we
mutually agree to discontinue our efforts to complete the investment.
You acknowledge that this letter of Interest contains confidential information and agree not to
disclose either orally or in writing its contents to any third party other than your accountant(s) and/or
attorney(s), without the express written consent of HRF and you further agree to advise your
Page 6 of 7
representative that such representatives shall not disclose either orally or in writing the contents of
this letter of interest.
If the terms and conditions outlined herein are agreeable, please countersign this letter where
indicated below. We look forward to working you. This offer is valid for ten (10) days from the date
or this letter.
Sincerely,
Todd Brogdon
Chief Operating Officer
0
2
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4
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9
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ANALYSIS OF POTENTIAL TAXES GENERATED
BY THE REDEVELOPMENT PROJECT
x
z
lIX94
7S35.000.00
r.
x
x
z
x
s
S 110.882.00
S 218,5S4.00
,0 00.00
S 27,S00.00
f 8 55,936.00
$ 436,360.00
S 226,193.00
$ 212,430.00
f 38,325.00
S 30,112.50
f 943,420.50
S 475,221.00
$ 234,110.00
f 232,610.85
$ 41,965.88
S 32,973.19
f 1,016,880.91
$ 489,656.00
$ 242,303.00
S 2S4,708.88
$ 45,952.63
S 36,105.64
$ 1,068,726.15
S 504,090.00
$ 2S0,784.00
f 278,906.22
$ 50,318.13
f 39,535.68
S 1,123,634.03
f 518,524.00
S 250,266.00
$ 305,402.32
S 55,098.36
$ 43,291.57
$ 1,180,582.24
f S34,069.00
S 265,996.00
$ 334,415.64
$ 60,332.70
S 47,404.26
$ 1,242,217.50
S 554,724.00
S 273,984.00
$ 366,185.01
$ 66,064.31
$ 51,907.67
$ 1,312,864.99
$ 567,379.00
S 282,239.00
$ 400,972.59
S 72,340.42
S 56,838.90
$ 1,379,769.90
$ 584,034.00
S 290,768.00
$ 439,064.98
$ 79,212.75
$ 62,238.59
$ 1,455,318.33
S 598,634.65
S 298,037.20
S 480,776.16
$ 86,737.97
$ 68,151.26
$ 1,532,337.43
$ 613,600.72
$ 305,488.13
f 526,449.89
$ 94,978.07
$ 74,625.63
$ 1,615,142.45
$ 628,940.74
$ 313,125.33
$ 576,462.63
S 104,000.99
$ 81,715.06
$ 1,704,244.76
$ 644,664.26
f 320,953.47
$ 631,226.58
$ 113,881.08
$ 89,477.99
$ 1,800,203.39
$ 660,780.86
S 328,977.30
$ 691,193.11
$ 124,699.79
$ 97,978.40
$ 1,903,629,47
f 677.300.39
$ 337,201.74
S 756,856.45
$ 136,546.27
$ 107,286.35
$ 2,015,191.19
$ 694,232.90
S 345,631.78
$ 828,757.82
$ 149,518.16
$ 117,478.66
$ 2,135,619.21
S 711,588.72
$ 354,272.57
S 907,489.81
$ 163,722.39
f 128,639.02
$ 2,265,712.51
$ 729,370.44
S 363,129.39
$ 993,701.34
$ 179,276.01
$ 140,859.73
$ 2,406,344.90
$ 747,612.90
$ 372,207.62
f 1,088,102.97
$ 196,307.24
$ 154,241.40
$ 2,558,472.12
$ 766,303.22
$ 381,512.81
$ 1,191,472.75
$ 214,956.42
$ 168,894.33
f 2,723,139.54
$ 785,460.80
$ 391,050.63
f 1,304,662.66
$ 235,377.28
$ 184,939.29
f 2,901,490.67
f 805,097.32
f 400,826.90
S 1,428,605.61
f 257,738.13
$ 202,508.S3
f 3,094,776.48
TIF Proceeds Land Appraised Proposed Return to
Value Purchase Taxpayers
E 3,500,000.00 $ 213,000.00 $ 300,000.00 $ 37,065,654.67
Note: All numbers are preliminary and based upon assumptions that may or may not actually occur
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7 .
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1�
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21
22
27
zo
28
ANALYSIS OF POTENTIAL TAXES GENERATED
BY THE REDEVELOPMENT PROJECT
Total Room Taxes
Food8 Beverage
Ta.es
Property Tan
Increases (Hotel �
Property Tax
Ineases (Courts
u
Building)
Property Tat
Increases Parking
Deck
Tax
Tool Newns
Collections
S 14,138,535.10
5 7.055.611.88
S 14424454.16
5 2.602.349.98
5 2,044,703.55
5 40.265.654.67
® ®l®
T-. —
0
i
NAME OF FILE: Ordinance No. 4663
w/exhibits
CROSS REFERENCE
Item # Date Document
1
12/16/04
Staff Review Form
2
memo to Steve Davis
3
letter to Fred Shefte
4
analysis of potential taxes generated
5
faxed letter to Stephen L. Goodman
6
letter to Ms. Shanna Moline
7
copy of International Hospitality Advisors overview
8
memo to Kit Williams
9
Affidavit of Publication (ordinance)
10
Affidavit of Publication (public hearing)
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
NOTES:
Tft
a e evi le
ARKA NSAS
DEPARTMENTAL CORRESPONDENCE
To: Kit Williams
City Attorney
From: Clarice Buffalohead-Pearman4k
City Clerk Division
Date: January 7, 2005
Re: Ord. No. 4663
City Clerk Division
113 West Mountain
Fayetteville, AR 72701
Telephone: (479) 575-8323
Fax: (479) 718-7695
city—clerk@ci.fayetteville.ar.us
The City Council approved the above ordinance on December 28, 2004. Attached is a copy of
the ordinance adopting the project plan for the East Square TIF District. I don't have an original
project plan to attach to this ordinance. Please see that the city clerk's office gets one to attach
for record.
I'm sorry for the delay in returning this earlier, I've been out of the office and trying to play catch
up.
If anything else is needed please let the clerk's office know. Thanks.
/cbp
attachments
6-dep
CITY AARNEY AGENDA REQUESTIPORM /Z p r 16
�Ry -7/
Pro)., J )
FOR: COUNCIL MEETING OF DECEMBER 28, 2004
FROM:
KIT WILLIAMS, CITY ATTORNEY
ORDINANCE OR RESOLUTION TITLE AND SUBJECT:
An Ordinance Adopting The Project Plan For The Highway 71 East Square Redevelopment
District, Finding The Plan Is Economically Feasible, Repealing Ordinance 4646 And Declaring
An Emergency
APPROVED FOR AGENDA:
Attomey Date
i
Z'
Date
•
rI
:ir"n
tCl �'� u
A tl.
11� r i n
WltlSltll
�M1
• • MM
L • • N, ,• ,.�M
NT
�'
P
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••N �L••tl Q.A �:mTheMountain•
•
• 9
tl tl.ib
:; Y 3
TO: STEPHEN DAVIS, FINANCE $ INTERNAL SERVICES DIRECTOR
DATE: DECEMBER 21,2004
SUWECr HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PER YOUR REQUEST PLEAs6 FIND ENCLOSED:
1. FEASIBILITY STUDY PREPARED BY INTERNATIONAL HOSPITALITY ADVISORS, INC. AND SUBSEQUENT
UPDATE LETTERS FOR THE DEVELOPMENT OF THE HOTEL. PROJECT AT THE CURRENT MOUNTAIN INN SITE.
2. HEARTLAND RENAISSANCE COMMITMENT LETTER OUTLNING $8,000,000 NEW MARKET TAX CREDIT
ALLOCATION FOR THE HOTEL PORTION OF THE PROJECT TO THE BANK OF FAYETTEVILLE.
3. ANALYSIS OF POTENTIAL TAXES GENERATED BY THE DEVELOPMENT OF THE MOUNTAIN INN PROJECT.
AS WE DISCUSSED IN OUR MEETING THIS MORNING THE BANK OF FAYETTEVILLE WILL ACTUALLY FUND THE
PROJECT BY FIRST FUNDING HEARTLAND RENAISSANCE FUND SUB U. LLC — QUALIFIED EQUITY
INVESTMENT. IT is THIS CDE (COMMUNITY DEVELOPMENT ENTERPRISE) THAT ACTS AS THE CONDUIT FOR
THE FINANCING FOR THE HOTEL PORTION OF THE PROJECT.
ALSO, PURSUANT TO THEIR COMMTPMENT TO HRF, BOF IS REQUIRED TO FUND $4 MILLION OF THE NEW
MARKET TAX CREDIT ALLOCATION PRIOR TO DECEMBER 31, 2004 OR THE PROJECT WILL LOSE THE SAID
TAX CREDIT ALLOCATION. AS A PRACTICAL MATTER ANY DELAY IN RE -PASSAGE OF THE PROJECT• PLAN PAST
DECEMBER 28m WILL SERIOUSLY JEPARDIZE THE FUNDING FOR THE PROJECT•.
DEvELk)PERs ALSO HAVE PRELIMINARY FINANCING commrrmENTs FROM1 ATHE
REA BANKS FOR
YI 11 1 DFxx AND MEurmo/comvwnow PORTIONS OF THE PRcuEcT. THESE
COMMITMENTS ARE SPECIFICALLYTo THE PASSAGE OF THE IhGHWAY 71 FAST SQUARE
1 THE SALE OF THE SUBJECT PROPERTYY 1 THE DEVELOPERS.11 1 DEVELOPERS
i1 t' '< •1' • 1 1 I f •1 1 I I
.Ili-y V :r
PURSUANT WITH OUR MEETING WIIH THE CITY ATTORNEY IT WAS THE DEVELOPERS UNDERSTANDING THAT
SUBSEQUENT TO THE PROJECT• RAN , THE CITY AND THE DEVELOPERS WOULD ENTER INTO AN AGREEM ENT
WHEREBY THE CITY WOULD SELL THE S9IECT PROPERTY TO THE DEVELOPERS AT AN AGREED PRICE AND THAT
AT THE TIME OF THE SALE AND AS A CONDITION OF ANY SME, THE DEVELOPERS WOULD DEMONSTRATE TO
THE CITY IN A FORM SATISFACTORY TO THE CITY THAT THE DEVELOPERS WILL BE ABLE TO COMMENCE AND
COMPLETE THE PROJECT As OUTLINED IN THE PROJECT RAN.
IT IS IMPORTANT TO NOTE THAT THE PROJECT PLAN AS PREVIOUSLY PASSED SPECIFICALLY DID NOT RELY ON
ANY INCREMENTAL GROWTH IN TAX COLLECTIONS FROM THE MOUNTAIN INN REDEVELOPMENT PROJECT OR
ANY OTHER KNOWN DEVELOPMENT PROJECTS PLANNED IN THE DISITICr. HOWEVER, THE ATTACHED
ANALYSIS OF POTENTIAL TAXES GgmPJPTED LISTS A RETURN TO TAXPAYERS OF OVER $W MELON
DOLLARS. IF WE MAY PROVIDE ADDMO*L INFORMATION PLEASE DO NOT HESITATE TO REQUEST IT.
SINCERELY,
THE
k(' YL(IAId -AIf:SmKila
Pho .479.531.9188
)CAMAIo:
Pbm :479-530-6799
November 16, 2004
Mr. Fred Shefte
Bank of Fayetteville
Fayetteville, AR
Re: Heartland Renaissance Fund Sub II, LLC - Qualified Equity Investment
Dear Fred:
We are pleased to inform you that, subject to the terms and conditions set forth in this letter of
interest, the Governing Board of Heartland Renaissance Fund, LLC, ("HRF") has approved Bank of
Fayetteville ("BOF") to acquire an ownership interest in Heartland Renaissance Fund Sub II, LLC
("Sub II"), a subsidiary allocatee of HRF, up to but not more than $8,000,000 ("QEI"). This
ownership interest will be deemed a Qualified Equity Investment if all requirements are met in
accordance with Section 45D of the Internal Revenue Code ("Code").
HRF has received a $15 million allocation of New Markets Tax Credits ("NMTC") from the Community
Development Financial Institutions Fund ("CDFI Fund") pursuant to an Allocation Agreement between
HRF and CDFI Fund. Sub II has been certified as a "Subsidiary Allocatee" of HRF by the CDFI Fund.
Pursuant to the terms and conditions proposed herein, HRF would agree to suballocate up to
$8,000,000 of its allocation of New Markets Tax Credit ("NMTC") to Sub 11 in accordance with the
Allocation Agreement.
This letter is based on certain assumptions and information that is material to and has been relied
upon by HRF in connection with the issuance of this letter of interest The suballocation is
conditioned upon final approval of this letter of interest by the Governing Board, satisfactory
conclusion of HRF's due diligence review process and successful documentation and closing of the
transaction. At closing, HRF Management, LLC, an affiliate of HRF, will enter into the Sub II Operating
Agreement and related agreements that will incorporate the terms and conditions set forth below
and include other customary or necessary terms, subject to HRF's review and approval.
Material Assumptions:
Membership Interests
Heartland Renaissance Fund Sub II, LLC
HRF Management, LLC
Bank of Fayetteville
Heartland Renaissance Fund, LLC (CDE)
HRF Management, LLC
Arkansas Capital Corporation
00.01% Managing Member
99.99% Non -Managing Member
1% Managing Member
99% Non -Managing Member
The total Qualified Equity Investment for NMTC purposes is estimated to be $8,000,000 ("QEI").
This QEI is projected to generate $3,120,000 of NMTC. HRF makes no representations concerning
the ability of BOF to use the NMTC. BOF should consult with its legal and/or tax counsel to
determine the qualification of the investment for NMTC and its ability to benefit from the NMTC. The
final suballocation amount is subject to determination by HRF upon a review of the investment
proposal to be provided by BOF.
Subject to final approval by HRF, Sub II will be capitalized with an equity contribution of up to
$8,000,000 from BOF with a closing to occur on or before December 15, 2004. Due to NMTC
requirements that the investments in the project are made within 12 months of issuance of the QEI,
it may be determined by HRF that BOF's contribution will be made in two installments with
approximately $3 million contributed at closing on or before December 15, 2004 for acquisition
costs, and up to $5 million at the commencement of construction. The timing of the QEI(s) will be
determined upon review by HRF of the investment proposal. Subject to compliance with NMTC
requirements, the equity contributions will be designated as one or more QEIs. The equity
contributions will be made under terms and conditions acceptable to HRF and in compliance with
Section 45D of the Internal Revenue Code. BOF would commit pursuant to the Sub II Operating
Agreement to make the full amount of the QEIs within six (6) months of closing.
Prior to disbursement to the project, the QEIs shall be held at an account in the name of Sub It.
Interest earned thereon until disbursement of the QLICI shall be used as a credit towards Sub II's
reasonable operating expenses.
Proceeds of the equity contribution will be used to make a loan to and/or an equity investment in
East Square Redevelopment Project ("ESRP") located in downtown Fayetteville, Arkansas, and to pay
fees to HRF Management, LLC as described below. ESRP must meet the requirements to be defined
as a Qualified Low-income Community Investment ("QLICB") under Section 45D of the Code. The
expected proposed general terms of the loan and/or investment shall be presented by BOF to HRF
within fourteen (14) days of the execution of this Letter of Interest and shall be subject to HRF's
Page 2 of 7
approval in its sole discretion and must constitute a Qualified Low -Income Community Investment
("QLICI") as defined under Section 45D of the Code. Such proposal shall include a statement of the
proposed sources and uses of the project, the terms of the proposed QLICIs (equity and/or debt),
commitment letters from other financing sources, a construction schedule, and projected cash flows
from the project during the 7-year NMTC recapture period. The documentation of the actual loan
and/or investment shall also be subject to HRF's review and approval in its sole discretion. The party
responsible for documentation of the QLICIs shall be determined, provided that the reasonable legal
costs incurred may be funded out of the QEI, and the documents shall include such provisions as
HRF shall require in order to comply with the NMTC program.
The terms of the loan and/or investment shall include flexible, non -conventional or nonconforming
terms with reference to standard practice in the applicable market as required by HRF's Allocation
Agreement. The loan and/or investment must meet the requirement of being located in one of the
target areas listed in Section 3.2(h) of HRF's Allocation Agreement. The terms of the loan and/or
Investment shall also require ESRP to provide such information as is reasonably required by HRF for
purposes of compliance with HRF's NMTC reporting requirements and to monitor performance. A
cash penalty may be imposed by HRF upon ESRP for failure to provide information in a timely and
satisfactory manner.
BOF acknowledges that pursuant to Section 45D of the Code, the QLICIs have to be issued within 12
months of the issuance of the QEI(s) for BOF to be eligible to claim the NMTC. BOF represents to
HRF that it is reasonably anticipated that the QLICI with respect to acquisition costs shall be made
within two (2) months of issuance of the QEI of approximately $3 million. Contingent upon HRF's
review of the investment proposal, HRF may determine that approximately $5 million of the
estimated $8 million to be contributed shall be funded pursuant to the Sub 11 Operating Agreement
at the commencement of construction, with disbursement to occur pursuant to construction draws
during a 12-month period. BOF agrees that any portion of the construction QLICI not disbursed
within 12 months of issuance of the QEI may be placed in a reserve in the borrower's name and
withdrawn subject to approval by BOF and HRF. HRF anticipates that BOF will exercise construction
oversight, inspection and disbursement responsibilities.
The second installment of up to $5 million may be subject to certain conditions relating to the
feasibility of the project at the time of commencement of construction. If the second installment of
the QEI is not made, BOF and HRF may negotiate the right to withdraw the initial investment from the
project, provided the parties agree to reinvest in a qualified investment in the appropriate time
period to avoid NMTC recapture. These terms are subject to HRF review of the investment proposal
and its due diligence investigation.
BOF agrees to facilitate issuance of the QLICIs within 12 months of the applicable QEI to the project
or to another qualified project within the applicable time period to prevent a recapture of NMTC. BOF
accepts full responsibility for the timely closing of the QLICIs and any recapture of NMTC that occurs
as a result of a delay in closing the QLICIs unless caused by the gross negligence, willful misconduct
or fraud of HRF. HRF agrees to cooperate with BOF to facilitate timely closings of the QLICI.
BOF shall not expect HRF to perform any due diligence investigation of the QLICI and shall not rely on
any due diligence investigation conducted by HRF. HRF's role shall be limited to providing a
suballocation of NMTC and performing management and NMTC compliance responsibilities. HRF is
Page 3 of 7
not responsible for and will not make any representations regarding the operational results,
commercial viability or financial performance of the QLICI and BOF shall have no recourse against
HRF or its affiliates for any failure by the QLICI to achieve projections or provide any investment
return.
The QLICI documents shall provide that HRF shall have a role in the administration of the QLICI
including compliance with the NMTC program and the exercise of remedies in the event of default,
workout or foreclosure.
HRF shall be entitled to the fees set forth below as compensation for its role in the QEI and its
provision of services in support of the transaction:
Closing Fee:
Concurrent
with the closing
of the QEI in Sub II, HRF shall be entitled to a closing fee
equal to 5%
of the QEI to
be funded by the
QEI.
Administration and Compliance Fee: On or prior to the first day of each calendar quarter following
the closing of the QEI, an administration and compliance fee equal to .1071% of the QEI ($8,571)
shall be payable to HRF in consideration for NMTC administration and compliance services to be
rendered by HRF. This fee shall be funded by cash flow from the project and shall accrue to the
extent unpaid.
HRF shall perform such services as may be required to maintain compliance with the NMTC
requirements. HRF shall be responsible for maintaining the status of HRF and Sub II as Community
Development Entities, including maintaining accountability to residents of low-income communities
and the submission of certifications, notices and reports to the CDFI Fund. HRF shall provide BOF
with copies of all such submissions. HRF shall provide to BOF a semi-annual calculation regarding
satisfaction of the requirement that substantially all of the QEI remains invested in the QLICI. BOF
agrees to cooperate with HRF to assure ongoing compliance with this requirement. Based upon
recommendations provided by HRF, HRF and BOF shall reach a mutual agreement regarding
permissible distributions by Sub II to BOF as may be required to comply with the NMTC program.
Termination Fee: A termination fee shall be payable to HRF in cash equal to 2.0% of the QEI upon the
withdrawal of BOF from Sub II which shall occur as soon as it is feasible after the seven-year
anniversary of the closing of the QEI. ESRP shall guarantee payment of this fee.
In addition, Sub II's audit and accounting expenses, as well as expenses incurred in connection with
extraordinary events, including the pursuit of remedies relating to the QLICI, shall be recoverable.
The terms of the QLICI will be structured to cover Sub II's reasonable annual operating expenses,
including third party audit, compliance and accounting expenses. These fees are estimated at
$13,500-$15,000/year. BOF shall agree to reimburse Sub II for its reasonable expenses incurred in
connection with extraordinary events, including the exercise of remedies with respect to the QLICI
and legal action taken by Sub II at the request of BOF.
I0-M-Int!
Requirements:
• BOF agrees to comply with HRF's Allocation Agreement with the CDFI Fund by signing this
Letter of Interest
• Execution of the Sub II Operating Agreement in a form satisfactory to HRF and issuance of QEI
in an amount of up to $8,000,000 by December 15, 2004
• Receipt of an investment proposal from BOF within fourteen (14) days of the date hereof.
• Satisfactory due diligence is conducted by HRF of the proposed QLICI. HRF shall have
fourteen (14) days to review the proposed terms of the QLICI and underlying due diligence
documents provided by BOF to HRF regarding the proposed QLICI.
If the foregoing requirements are not met, HRF shall have the right to terminate this letter of interest,
or to request modifications. Termination shall. be deemed effective three (3) business days after
mailing of written notice by first class mail, the first day following placement with an overnight
delivery service, or the day of facsimile transmission by HRF.
HRF shall have no liability to BOF with respect to any NMTC recapture event attributable to the
actions or inactions of BOF or ESRP. Pursuant to the Sub II Operating Agreement, BOF will have
approval rights regarding distributions from Sub II and reinvestment of any principal payments
received from the QLICI in order to minimize risk of potential recapture events. HRF and BOF will
reasonably cooperate to reinvest the proceeds in a manner that will not result in NMTC recapture in
the event of a default or foreclosure.
The QLICI loan/investment documents shall include an obligation of ESRP to maintain compliance
with the QLICI requirements and if required by BOF, an obligation to indemnify BOF for any recapture
of NMTC, with interest, that results from the actions or inactions of ESRP.
Distributions, if any, shall be made by Sub II to BOF on a monthly or quarterly basis, after payment of
Sub II's reasonable operating expenses and any fees due to HRF, in amounts to be determined
based upon the investment proposal.
0
For a twelve (12) month period after the 7th anniversary of the QEI, BOF shall have the right to put its
interest in Sub II to HRF for a nominal amount. After expiration of the put period, HRF shall have a
call option for a period of twelve (12) months' to purchase BOF's interest in Sub 11 for an amount
equal to the fair market value of its interest
The Sub II Operating Agreement shall
provide BOF
with the
right to
remove the managing member of
Sub II for gross negligence or willful
misconduct
likely to
have a
material adverse effect on BOF;
provided that if such removal would
result in a
violation
of the
Allocation Agreement or a NMTC
Page 5 of 7
recapture event, BOF shall not have a removal right, but shall have the right to appoint a second
manager to cure the default
HRF shall have thirty (30) days within which to cure a default, provided that if such default is
incapable of cure during that period, HRF shall have such longer period as may be required provided
that HRF is diligently pursuing a cure. Any fees earned prior to removal shall be paid as a result of
the removal.
Legal and Consultin
BOF shall be responsible for payment of its own legal and consulting fees and out-of-pocket
expenses incurred in connection with the closing of the QEI and each separate QLICI; provided that
such fees up to a fixed amount may be paid out of the QEls subject to HRF review of the investment
proposal.
In the event that BOF accepts the terms set forth herein and HRF is prepared to suballocate NMTC to
Sub ll, if BOF chooses not to proceed or fails to close with HRF by December 15, 2004, BOF shall be
responsible for HRF's actual out-of-pocket third party fees and expenses, including but not limited to
attorneys' and consultants' fees and expenses, incurred in connection with evaluating and closing
the QEI; provided however such reimbursement shall not exceed $15,000 in the aggregate.
Tax Opinion
Garvey Schubert Barer, counsel to HRF shall provide the tax opinion to BOF satisfactory to BOF which
shall be delivered at closing. Tax opinion fees shall be paid at closing of the QEI, to be funded by
BOF.
Reoo�g Requirements
HRF shall provide such reports as BOF and HRF mutually agree which shall include provision on an
annual basis of all necessary tax reporting information; copies of Sub II's tax returns, audited
financial statements and reports submitted to the CDFI Fund.
In addition to the above, BOF and HRF acknowledge that the transactions will be structured to
comply with the NMTC program and all related rules and regulations. Furthermore, BOF reserves its
rights to monitor ongoing compliance and reporting with respect to the NMTC Program.
You agree and understand that HRF has spent substantial time on the proposed investment from
BOF. Accordingly, you agree that with respect to the specific investment in ESRP as submitted to
HRF for review, BOF shall not make such investment directly to ESRP without HRF's consent for a
period of ninety (90) days from the date of your acceptance of this Letter of Interest unless we
mutually agree to discontinue our efforts to complete the investment.
You acknowledge that this letter of interest contains confidential information and agree not to
disclose either orally or in writing its contents to any third party other than your accountant(s) and/or
attorney(s), without the express written consent of HRF and you further agree to advise your
Page 6 of 7
representative that such representatives shall not disclose either orally or in writing the contents of
this letter of interest.
If the terms and conditions outlined herein are agreeable, please countersign this letter where
indicated below. We look forward to working you. This offer is valid for ten (10) days from the date
or this letter.
Sincerely,
<"U ,
Todd Brogdon
Chief Operating Officer
E
ANALYSIS OF POTENTIAL TAXES GENERATED
BY THE REDEVELOPMENT PROJECT
Total Now Tax
Collections
7�3�5,000.00
x
x
X.
x-
.
x
x
x
a
$ 110,882.00
$ 118,554.00
$ 194,000.00'
$27y500:00
':$ 885,936.00
$ 436,360.00
$ 226,193.00
$ 212,430.00
f 38,325.00
$ 30,112.50
$ 943,420.50
$ 475,221.00
$ 234,110.00
$ 232,610.85
$ 41,965.88
$ 32,973.19
$ 1,016,880.91
S 489,656.00
$ 242,303.00
$ 254,708.88
$ 45,952.63
S 36,105.64
$ 1,068,726.15
$ 504,090.00
$ 250,784.00
$ 278,906.22
$ 50,318.13
S 39,535.68
$ 1,123,634.03
$ 518,524.00
$ 258,266.00
$ 305,402.32
S 55,098.36
$ 43,291.57
S 1,180,582.24
S 534,069.00
S 265,996.00
$ 334,415.54
$ 60,332.70
$ 47,404.26
$ 1,242,217.50
$ 554,724.00
$ 273,984.00
$ 366,185.01
$ 66,064.31
$ 51,907.67
$ 1,312,864.99
$ 567,379.00
$ 282,239.00
$ - 400,972.59
$ 72,340.42
$ 56,838.9.0
S . .1,379,769.90
$ 584,034.00
$ 290,768.00
$ 439,064.98
f 79,212.75
$ 62,238.59
$ 1,455,318.33
$ 598,634.85
$ 298,037.20
$ 480,776.16
$ 86,737.97
$ 68,151.26
$ 1,532,337.43
$ 613,600.72
S 305,488.13
$ 526,449.89
$ 94,978.07
It 74,625.63
9 1,615,142.45
$ 628,940.74
$ 313,125.33
$ 576,462.63
$ 104,000.99
$ 81,715.06
$ 1,704,244.76
S 644,664.26
$ 320,953.47
$ 631,226.58
$ 113,881.08
$ 89,477.99
$ - 1,800,203.39
S 660,780.86
$ 328,977.30
$ 691,193.11
$ 124,699.79
$ 97,978.40
$ 1,903,629.47
$ 677,3D0.39
$ 337,201.74
$ 756,856.45
$ 136,546.27.
'$ 107,286.35
S 2,015,191.19
$ 694.232.90
$ 345,631.78
$ 828,757.82,
$ 149,518.16
$ 117,478.56
$ 2,135,619.21
S 711,588.72
f 354,272.57
$ 907,489.81
�$ 163,722.39
$ '�128,639.02"
$ 2,265,712.51
$_ 729,378.44
$ 363,129.39
$. 993,701.34
$ 179,276.01
$ 140,859.73
$ 2,406,344.90.
$ 747,612.90
$ 372,207.62
-$ . 1,088;102.97'.
S 196;307,.24
S 154,241.40
S 2,558,472.12
$ 766,303.22
$ 381,512.81
It 1,191,472.75
S " 214,956.42
'$' 168;894.33
S 2,723,139.54
S 785,460.80-
$ 39'1,050.63'
$ 1;304X62.66
S" 235,377.281
$ 184,939.29
$.. 2,901,490.67-
S 805,097.32
S 400 826 90
$ 142860561
$ ',. 25773811
S 202,508.53
S 1,094,776:46
1
1
.1
1• 1
1
TIFroceedsV , a7a°d Appraised Proposed Return toy,
.a•:�s®: Value Purchase lax a ors
�
f 3,500,000.00 $ 213,000.00 $ 300,000.00 $ 37,065,654.67
Note: AN numbers are preleninary and based upon mumptions Out may w may not actually occur
Via Facsimile Transmission
March 7, 2002
Mr. Stephen L. Goodman
RiskPRO
4695 Chabot, Suite 114
Pleasanton, CA 94588
Re: Proposed 125-Room Crowne Plaza
Hotel - Fayetteville, Arkansas
Dear Mr. Goodman:
In accordance with the terms of our proposal agreement and subsequent conversations,
this letter provides you with the findings of our primary market research conducted
during the week of February 11, 2002, in connection with the abovementioned project.
The purpose of the update was to determine if current market conditions had changed
materially since the completion of our "Study of Potential Market Demand and
Statements of Estimated Operating Results for the Re -Development of the Closed
Mountain Inn Located in Fayetteville, Arkansas to an 105-Unit Crowne Plaza -Affiliated
Boutique Hotel" that was issued in August 2000. In addition, given the increase in room
inventory to 125 units we have prepared revised statements of estimated annual operating
results. This letter should be read in conjunction with our August 2000 report.
As per your request, we further prepared a valuation of the proposed hotel based on
current market factors, the revised estimates of potential operating results and an income
approach to value analysis.
Salient Observations
Following are our observations that are salient to the overall market and the proposed
project based on our primary research.
• The proposed site and its conditions as described in our market study remain
unchanged.
Stephen L. Goodman 2 February 26, 2002
• Opened in November of 1998, Northwest Arkansas Regional Airport (NWARA)
is the principal commercial airport in the region. The airport is served by
American Eagle, Atlantic Southeast Airlines (Delta Connection), TransWorld
Express, Northwest Airlines and US Airways Express. Plans call for the
expansion of the terminal building in early 2003 with should increase the number
of carriers servicing the airport. In 2001, passenger enplanements and
deplanements totaled 735,822 as compared to 702,568 representing a growth of
4.7 percent despite a significant decrease in September 2001.
• Established in 1871, the University of Arkansas is situated in downtown
Fayetteville approximately two miles from the subject site. Of particular
significance to the lodging market dynamics is the recent renovation completed in
2001 of the football stadium. With an investment of $200.0 million, the stadium's
capacity has been increased from 62,000 to 78,000 spectators. As a result, many
of the university's home football games for the year 2002 and onward have been
relocated from Little Rock to the Fayetteville stadium. Five home games are
slated to be played in Fayetteville in 2002, which should generate additional
lodging demand during those respective weekends.
• In July 2001, the new, "state-of-the-art" Town Center convention facility was
opened and is located approximately two blocks from the subject site. The
facility offers 14,000 square feet of column -free space on one level, 10,000 square
feet of show offices, and extensive pre -function and support services. The facility
should be an important generator of additional hotel room nights for hotels in the
downtown Fayetteville area. In 2001, the facility hosted 89 events with a total of
22,800 attendees. Based on conversations with management, these events
typically last for two days, thus generating one room night. In 2002, the facility
already has 89 scheduled events with a goal of 180 for the entire year. Examples
of such events include a Coaches' Clinic (three nights) for 2,000 persons in June
and a Gospel Choir Show in July for 8,000 visitors (Wednesday through
Saturday).
• Fayetteville is slated to be the site of the Arkansas Business and Technology Park.
The first phase of this project is scheduled for 2003 and will cost approximately
$5.8 million and generate 1,500 jobs.
• In April 2002, a new scenic highway (71/I540) is slated to commence
construction. This highway will link the surrounding counties with Fayetteville
further improving overall road networks and access.
• Business travel to the area is largely fueled by the presence of the headquarters of
Walmart in Bentonville, Tyson Foods in Springdale and J.B. Hunt in Lowell, all
of which are located in close proximity to NWARA.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
Mr. Stephen L. Goodman 3 February 26, 2002
• There are three primary competitors to the proposed Crowne Plaza: the Radisson
Hotel (formerly Hilton Hotel), the Ramada and the Clarion. In 2000, these
properties achieved an aggregate occupancy of 51.0 percent at an average daily
room rate of $72.00 for a Revenue per Available Room (RevPAR) of $37.00.
The Hilton (now the Radisson) was the front-runner with an occupancy of 55.0
percent at an average daily rate of $89.00.
In 2001, as with most hotel markets due to the terrorist incidents of September
which resulted in a severe cutback of business travelers and related hotel
occupancies during the last four months of the year, the Fayetteville market was
negatively affected. However, the effects were not as dramatic as in other parts of
the nation with the three hotels finishing the year at an aggregate occupancy level
of 47.0 percent at an average daily rate of $66.00.
Based on our interviews with the
hotels, it
appears that the
market is recovering
quickly with forecasts for 2002 to
match the
results achieved
in 2000.
• As with most lodging markets, hotels in Fayetteville are subject to seasonal
fluctuations in demand. The off-season corresponds to the months of January and
December when students at the University of Arkansas are away on break and
most business travelers are also on vacation. Differences between weekday and
weekend demand tends to be less pronounced for hotels in Fayetteville due to
positive impact of major sporting events at the University which are usually held
on weekends. This is particularly true during the football and basketball season.
In addition, with the addition of the convention facility, the city is now a host to
many events held over off-season and weekend periods.
Conclusion
Based on our research and an evaluation of the primary lodging competition, it appears
that Fayetteville is recovering more rapidly from the September 11, 2001 incidents as
compared to other destinations throughout the country. hi addition, the contribution of
room nights to be derived from the expansion of the football stadium and resulting home
games and the opening of the convention facility will be extremely beneficial to the
downtown Fayetteville hotels due to their proximate locations to both facilities.
As reflected in the aggregate occupancies and average daily room rates forecasted for
2002, the market should return to previous levels of growth starting in 2003. As such, the
effect of September 11, 2001 is expected to be short-term in nature with growth being
fully restored to pre-2001 levels in 2004, the first full year of operations for the subject
hotel.
As such, we
are of the
opinion that
the market findings presented in our original market
study remain
valid and
the resulting
estimates of occupancy and rate are
still achievable.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
• •
Mr. Stephen L. Goodman 4 February 26, 2002
However, due to the increase in inventory to 125-keys, an adjustment has been made to
the overall occupancy curve to reflect a stabilized occupancy at 65 percent.
Projected Operating Performance
Based on our evaluation of the local lodging market, the envisioned project concept as
recommended and local market dynamics, we have estimated the following patterns of
occupancy and average daily room rates for the subject hotel over the defined projection
period.
stimated Per o manc
)rJo ed
5-uni C«ro a ' ote
o town
a, et eville, ran a
Uninflated
Cumulative
Inflated
Estimated
Average
Inflation
Average
Year
Occupancy
Room Rate
Factor
Room Rate
2004*
58%
$80.00
1.061
$84.75
2005
62
90.00
1.093
98.25
2006
65
95.00
1.126
107.00
2007
65
95.00
1.159
110.25
2008
65
95.00
1.194
113.50
2009
65
95.00
1.230
116.75
2010
65
95.00
1.267
120.25
2011
65
95.00
1.305
124.00
2012
65
95.00
1.344
127.75
2013
65
95.00
1.384
131.50
First full year of operations
[source:
International Hospitality Advisors
Estimated Operating Results
We have utilized the same
parameters for
other departmental revenues and overall
expenses
as indicated in our
original market
study. The revised 10-year estimates of
potential
operating results are
attached.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
Mr. Stephen L. Goodman 5 February 26, 2002
Income Approach to Value
As requested, we have further prepared a valuation of the hotel based on an income
approach to value as is typical for hotel operations given the fact that they are "going
concerns". Our valuation methodology utilizes the discounted cash flow and reversion
analysis approach to value. The discounted cash flow analysis is based on our revised
ten-year projection of operating results.
Current Capitalization Rates
The capitalization rate is a mathematical relationship which exists between the net
income derived by a property and the value or price which an investor would pay for the
right to receive that net income stream. Influences most affecting value are quality,
quantity and probable duration of the net income expectancy.
Based on a recent survey (Winter 2001/2002 USRC Hotel Investment Survey) of 29
major investors who are active in the lodging industry throughout the country,
capitalization and discount rates for full -service hotels have increased since 2000. The
increase has occurred despite the decline in interest rates and the prime rate. The
increases are due to the higher risk associated with hotel investments particularly since
the September 11, 2001 attacks which have caused a short-term decline in travel and
related hotel usage.
The survey indicated that investors are utilizing a direct capitalization rate for full -service
hotels of 11.6 percent which is 90 basis points higher than the average for 2000/2001
survey of 10.7 percent. The capitalization rate has two components: equity and debt.
With interest rates declining, and the overall rates showing an increase for full service
properties, this indicates that the equity capitalization rates have risen strongly.
Weighing the subject hotel's proposed location and market niche, orientation and
positioning and overall room inventory, an overall capitalization rate of 11.5 percent
would be appropriate. Due to the increase in risk associated with the passing of time,
forecasting a reversionary capitalization rate usually requires a premium of 50 to 100
basis points over overall rates. In determining a terminal capitalization rate for the
proposed hotel, a 50 basis point spread over the overall rate is considered appropriate.
This equates to a terminal capitalization rate of 12.0 percent.
Discount Rates
The discount rate reflects the overall rate of return expected by an investor, weighing the
relative risk of the investment in relation to other investment vehicles and the perceived
risk of each component in the operation of the facility. The projected net operating
income for each of the subsequent ten years needs to be discounted to reflect the risk
inherent in receiving future cash flows. The deferred return of the initial investment
(reversion) when the property is estimated to be sold ten years in the future is also
discounted.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
Mr. Stephen L. Goodman 6 February 26, 2002
According to recent investor surveys, discount rates currently range between 9.0 and 20.0
percent with an average of approximately 14.6 percent. This suggests that a spread of
100 to 250 basis points between the terminal capitalization and discount rate is
appropriate. Thus, due to the factors discussed previously, a discount rate of 14.0 percent
was deemed appropriate for the subject property.
Discounted Cash Flow and Reversion Analysis
The Discounted Cash Flow and Reversion Analysis takes into account the array of
market factors and external variables that influence the proposed property. This
technique converts the annual cash flow and sale proceeds over a typical holding period
into a value estimate using current market -derived yield rates.
Taking into consideration the revised 10-year estimates and the following assumptions, a
discounted cash flow analysis has been prepared including the calculation of the
hypothetical sale at the end of the ten-year holding period and the discounting procedure
used to estimate the opinion of value for the subject hotel.
Assumptions:
First Year of Operation: 2004
Estimated Stabilized Occupancy: 65.0%
Average Daily Room Rate (2002) Dollars: $95.00
Inflation: 3.0%
Terminal Capitalization Rate: 12.0%
Sales Cost: 2.0%
Discount Rate: 14.0%
A table showing the Discounted Cash Flow and Reversion Analysis is included after the
revised ten-year estimates of potential operating results.
Opinion -of Value Conclusion
Based on the assumptions detailed previously and the future positioning of the subject
hotel, it is our opinion that the value of the 125-room Crowne Plaza hotel would be:
$12,682,000
(Twelve Million six hundred eighty two thousand U.S. dollars).
INTERNATIONAL HOSPITALITY ADVISORS, INC.
Mr. Stephen L. Goodman 7 February 26, 2002
We thank you for the cooperation extended to us during the overall assignment. Should
you have any questions or comments, please do not hesitate to contact us.
Sincerely, Sincerely,
Desmond Pinto Derek J. Pinto
Director Managing Director
attachments
INTERNATIONAL HOSPITALITY ADVISORS, INC.
February 1, 2002 ('Via Electronic Moil)
Ms. Shanna Moline
Rish,PRO
4695 Chabot , Suite 114
Pleasanton, CA 94588
Re: Update and Assessement of Capitalization
Rate and Valuation of the proposed 105,unit
Crowns Plaza hotel — Fayetteville, Arkansas
Dew Ms. Moline:
As per. our telephone conversation, the following confirms the scope of work in
connection with the abovementioned project. The scope of our work will entail an update
of the "Study of Market Demand and Statements of Estimated Annual Operating Resuds
for the Re -Development of the Closed Mountain Inn Located in Fayeteville, Arkansas to
a 105-Unit Crowne Plaza -Affiliated Boutique Hotel".
Scope of Work
The purpose of the update is to determine if current market conditions have changed
materially since the completion of the study dated August 2000 and whether the
projections contained in the report are still valid and achievable.
In addition, based on. current investment and valuation parameters, we will provide you
with an indication of capitalization rates that are typically used in the assessment of value
of assets such as the type under consideration.
Our findings will be presented in a brief letter report that should be read in conjunction
with the original market study.
]nternatlonal Hospitality Advisors e 2625 Ponce do Leon Boulevard • Suite 280 • Coral
Gables, FL 33134
Telephone; 305.444.4491 • Facsimile; 305.444.4510 • Email: dpinto®lbaglobal.com
.Plent by: Cooper and Cook 925 463 3784; 02/01/02 14:43;
Page Two
February 1.2002
Limitations of the Engagement
Our reports would be subject to the following standard limitations:
JetEm p32; Page 2/3
We are not obligated to update our findings regarding changes in market
conditions which occur subsequent to the completion of our primary
research.
2. Our report and the material submitted may not be including as part of a
prospectus or in printed material or advertising used in connection with
the sale of securities or participation interest to the public.
3. Drafts or preliminary information communicated to you during the course
of the assignment are for your internal management use only and may no
be disclosed to outside parties without our prior written consent.
4. The report will be based on estimates, assumptions and other data
developed from our knowledge of the industry and information provided
by others. The sources of the information and the bases of our findings
will be stated within the reports. All information provided by others will
be accepted without audit or verification and will be assumed to be
correct.
S. Some assumptions inevitably will not materialize, and unanticipated
events and circumstances may occur, therefore, actual results achieved
will vary from the analyses, and the variations may be material.
6. We cannot be held liable in any cause of action resulting in litigation for
any dollar amount which exceeds the total fees collected from this
individual engagement. Any legal expenses incurred in defending or
representing ourselves concerning this assignment will be the
responsibility of the client.
Based on our schedule, we would comme= primary research within one week of
receiving authori2ation to proceed. We would plan to issue the letter report
approximately one week after the completion of our primary research.
Our professional fees for the assignment described herein would be $10,000.
International Hospitality Advisors . 2625 Ponce de Leon Boulevard • Suite 2Eo . Coral
Gables, FL 33134
Telephone: 305.444.4491 • Facsimile: 305.444.4510 9 Email: dpinto®thaglabal.com
'Sent by: Cooper and Cook
• 925 463 3784; 02/01/02 1�; JgffvA p32; Page 3/3
Page Three
February 1, 2002
In addition to our professional fees, we would be reimbursed for any out-of-pocket
expenses incurred by our professionals during the course of the assignment such as
airfare, meals and lodging, communication costs, postage and report production.
As is typical in assignments of this nature, we require a retainer of $6,000 prior to
scheduling the engagement. Final payment will be due at the time we issue the letter
report.
If the proposal colr Wy states the nature of the work to be done at this time and if the
arrangements are satisfactory, please sign below and return an�copy to us along with the
requested retainer as our authorization to proceed. If you have any questions or require
revisions to this proposal, please call us. We appreciate the opportunity to submit this
proposal and look forward to working with you.
DJP/mnc
Sincerely`,
Derek J, Pinto
Managing Director
APPROVED ANDACCEPTED:„� `
DATE: 9, — '*- — o •-t-.
COMPANY: R.3�2C-o aJ�
International Hospitality Advisors . 2625 Ponce de Leon Boulevard e Suite 280 . Coral
Gables, FL 33134
Telephone: 305.444,4491 . Facsimile: $05.444.4510 4 Email: dolnto»thaalobal.com
0 0
I
E
STUDY OF POTENTIAL MARKET DEMAND
AND STATEMENT OF ESTIMATED ANNUAL
OPERATING RESULTS FOR THE RE -DEVELOPMENT OF
THE CLOSED MOUNTAIN INN LOCATED IN
FAYETTEVILLE, ARKANSAS TO AN 105-UNIT CROWNE
PLAZA -AFFILIATED BOUTIQUE HOTEL
Prepared by:
International Hospitality Advisors, Inc.
8390 Northwest 53rd Street, Suite 312
Miami, Florida 33166
AUGUST 2000
TABLE OF CONTENTS
PAGE
NUMBERS
SECTION I
INTRODUCTION
Scopeof the Study............................................................................................ .
ProjectConcept..................................................................................................
Study Approach and Methodology.....................................................................
SECTION II
EXECUTIVE SUMMARY
MarketFeasibility............................................................................................
Summary of Conclusions................................................................0......0.........
SECTION III
SITE EVALUATION
Property Location and Description....................................................................
Salient Characteristics of the Site ..:........... ............ .... ..... ....6... ...........................
Conclusion.........................................................................................................
SECTION IV
AREA OVERVIEW OF FAYETTEVILLE
Introduction........................................................................................................
Population..........................................................................................................
Employment...........................................................................................0...........
University of Arkansas.................................................................0.0......0............
Arkansas Research and Technology Park..........................................................
Town Center Convention Facility......................................................................
Infrastructure.........................................................................................0....0.......
Conclusion............................................................................0............................
TABLE OF CONTENTS (Continued)
I,
PAGE
NUMBER
j SECTION V
1 ' HOTEL MARKET SUPPLY AND DEMAND
Introduction........................................................................................................ V -1
Comparable Lodging Supply............................................................................. V -1
r Additions to the Lodging Supply....................................................................... V -4
Lodging Demand Analysis .......... !,.v................................................................... V -5
Conclusion......................................................................................................... V -8
r
SECTION VI
ESTIMATED MARKET POSITION
MarketPosition.................................................................................................. VI- 1
Subject Property Performance............................................................................ VI- 3
Average Daily Room Rate................................................................................. VI- 4
Conclusion......................................................................................................... VI- 5
�.
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SECTION VII
` ESTIMATED OPERATING RESULTS
Introduction........................................................................................................ VII -1
I, Methodology...................................................................................................... VII-1
Inflation.............................................................................................................. VII -2
Income and Expense Projections.;.,................................................................... VII -2
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T STELLA BELLA PLAZA, LLC
FAYETTEVILLE, ARKANSAS
1 . SECTION I
INTRODUCTION
1,
(. AUGUST 2000
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INTRODUCTION
SCOPE OF THE STUDY
1-1
International Hospitality Advisors, Inc. (IHA) has been engaged by Stella Bella Plaza, LLC of
Fayetteville, Arkansas, to assess potential market demand for the redevelopment and repositioning of
the closed Mountain Inn Hotel located in downtown Fayetteville to a 105-unit, Crowne Plaza -
affiliated boutique hotel. The engagement objectives were to determine current and potential future
demand for the development based on our current knowledge of existing and potentially competitive
facilities; to evaluate the market share that could reasonably be attained by the subject development;
and to make recommendations regarding the extent and type of facilities which we believe would be
most appropriate within the context of the current project concept and plans. The engagement
further called for the preparation of statements of estimated annual operating results for the
redeveloped hotel over the first ten years of operation.
PROJECT CONCEPT
Built in the 1920's and later expanded with a new hotel section in 1968, the seven -story Mountain
Inn Hotel has remained closed for several years. The hotel was recently purchased by Ms. Stella
Moga, the project developer, with the intention of redeveloping it as a downtown hotel property. As
envisioned, the redeveloped hotel is to be positioned as a full -service, boutique -oriented, Crowne
Plaza -affiliated hotel targeted at the upper end of the corporate and leisure segment currently visiting
Fayetteville. When completed, the redeveloped hotel will contain the following elements:
❑ 105 well-appointed guestrooms and suites;
❑ Approximately 15 one-, two- and three -bedroom condominium units ranging in size between
1,400 to 1,800 square feet that will sold or leased to the public. Unit owners would have
access to the hotel's facilities and services;
❑ A multi -purpose restaurant containing approximately 75 seats. This room could also be
utilized for banquets or meetings, as needed;
❑ A lobby area lounge containing approximately 40 seats;
❑ Flexible meeting space totaling 4,500 square feet. It should be noted that a former lounge
located in the basement, could be used for additional banquet and meeting space;
❑ A well-equipped fitness center totaling approximately 1,200 square feet;
INTERNATIONAL HOSPITALITY ADVISORS, INC.
t,
INTRODUCTION I-2
❑ A well-equipped business center;
❑ A swimming pool on the third level of the building;
❑ Selected retail outlets with direct public access totaling approximately 13,000 square feet;
❑ A six -story parking structure with parking for 98 cars. Two additional levels of parking could
be added bringing the total parking capacity to 141 spaces.
STUDY APPROACH AND METHODOLOGY
Our approach to the engagement was as follows:
❑ A review of the project concept and discussions with the developer;
❑ A physical evaluation of the subject site and an economic evaluation of Fayetteville and
Northwest Arkansas. The potential for the project was evaluated on the basis of
accessibility, convenience to major demand generators and area attractions. The relative
economic stability and growth of the area was evaluated by compiling and analyzing
economic indicators for the region, and by analyzing pertinent statistical data and by
interviewing local officials;
❑ Research of the primary market. Information on potential markets was obtained by
inspections and evaluation of competitive operations, conversations with industry
representatives, and discussions about the current market situation with individuals familiar
with the area's lodging and tourism industry;
❑ Preparation of supply and demand estimates. Demand estimates were prepared on the
basis of the foregoing research and analysis of historical growth trends in demand sources.
Estimates of performance were based on the experience of comparable facilities, as well as,
the configuration attributes unique to the subject development;
❑ Project recommendations. Based on the project concept and prevailing market conditions
we developed opinions regarding the subject development and provided recommendations
concerning services and amenities which we believe best meet market demand;
❑ Preparation of estimated annual operating results for the first ten year's of operation.
These statements were prepared for each defined component based on the operating
experience of comparable level facilities in the United States, resulting in a "bottom line" of
income before depreciation, amortization, interest on debt financing and taxes.
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INTERNATIONAL HOSPITALITY ADVISORS, INC.
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STELLA BELLA PLAZA, LLC
FAYETTEVILLE, ARKANSAS
SECTION II
EXECUTIVE SUMMARY
AUGUST 2000
INTERNATIONAL HOSPITALITY ADVISORS, INC.
EXECUTIVE SUMMARY
MARKET FEASIBILITY
Our analysis of potential market demand and estimates of operating results indicate that the
development of an 105-unit, Crowng Plaza -affiliated, boutique hotel that ideally combines
reasonable room rates, high -quality accommodations, focused services and excellent value is feasible
from a marketability standpoint. In the following paragraphs, we present the major conclusions of
the study.
SUMMARY OF CONCLUSIONS
Site Location
❑ The subject seven -story property is located at the intersection of College Avenue and
Mountain Street in Downtown Fayetteville, Arkansas overlooking the landmark Old
Courthouse Building and the John Paul Hammerschmidt Federal Building. The site is
rectangular shaped with approximately 102.6 feet of frontage on College Avenue and 200
feet of frontage on Mountain Street.
❑ Location in the heart of historic downtown Fayetteville, which is undergoing a major
renaissance characterized by the renovation and re -development of numerous buildings, road
improvements and significant investment in retail, dining, residential condominiums and
recreational facilities;
o Proximity to the University of Arkansas campus, the principal demand generator for hotel
accommodations in Fayetteville. The University is situated less than two miles from the
subject site;
❑ Proximity to Dickson Street, the premier dining and entertainment thoroughfare in
Fayetteville and the surrounding two -county area. Dickson Street, located within walking
distance of the subject property is part of a major redevelopment effort designed to make the
street more pedestrian -friendly and entertainment -oriented;
❑ Excellent frontage on both College Avenue and Mountain Street, two principal streets in
downtown Fayetteville;
o Easy access to all points within the city and to the Interstate highway system;
❑ Excellent visibility from College Avenue, Mountain Street and Center Street providing for
maximum exposure to the public;
INTERNATIONAL HOSPITALITY ADVISORS, INC.
EXECUTIVE SUMMARY 1 II-2
❑ Within walking distance of the 14,000-square foot Town Center convention facility which is
currently under construction and scheduled for completion in mid-2001. The Center is
expected to serve as a catalyst for new room night demand into the downtown Fayetteville
lodging market;
❑ Proximity to other area demand generators including the Federal Building, the County
Courthouse and area companies;
r
o Availability of all utilities to the site including water, electricity, sewerage and telephone
hook-up; w
❑ Adequate parking in a six -story parking garage facility located adjacent to the hotel;
Area Review
❑ Northwest Arkansas is one of the wealthiest regions of state with a stable, diversified,
economy and low unemployment. The region's economic stability is fueled by the presence
of the University of Arkansas, the headquarters of several major companies including
Wa1Mart, Tyson Foods and J.B. Hunt, as well as, thriving manufacturing and retail sectors;
❑ The recent opening of the Northwest Arkansas Regional Airport and Interstate-540 through
Ithe area is expected to serve as a further catalyst to the economic development of the region;
1 r ❑ The seat of Washington County, Fayetteville is nestled against the Boston Mountains
(foothills to the Ozark Mountains) in northwest Arkansas approximately 25 miles from the
Missouri state line and 15 miles from Oklahoma;
r
❑ Fayetteville is the largest city within the two -county Metropolitan Statistical Area (MSA)
which comprises Washington and neighboring Benton county. The city's population has
i increased from 42,099 persons in 1990 to an estimated 58,200 persons in 1999, representing
a compound annual growth rate of 3.6 percent. By comparison, the population for the MSA
has increased from 210,908 persons in 1990 to an estimated 275,300 persons in 1999
i representing an annual increase of 3.0 percent;
l
❑ The MSA enjoys the lowest unemployment of any region in the State of Arkansas. In May
r 2000, the unemployment rate in the MSA stood at 2.0 percent.
Lodging Supply in the Fayetteville Area
i
❑ The total lodging supply in two -county area comprising Washington and Benton counties at
' the end of June 2000, consisted of 55 lodging facilities with a total of approximately 4,154
available rooms. Fayetteville accounts for approximately 1,522 of the available rooms or 37
percent of the total.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
r
EXECUTIVE SUMMARY a II-3
,
❑ The vast majority of the local lodging market is comprised of chain -affiliated, or non-
affiliated limited -service properties of less than 100 rooms. Most of these hotels are located
at major intersections along Interstate-540;
' ❑ Hotel chains currently represented in market include Baymont Inns, Best Western, Comfort
Inn, Clarion Inn, Courtyard by Marriott, Days Inn. Econolodge, Fairfield Inn & Suites,
Hampton Inn, Hilton, Hilton Garden Inn, Holiday Inn, Holiday Inn Express, Motel 6, Park
Inn, Quality Inn, Ramada Inn, Red Roof Inns, Scottish Inns, Sleep Inn, SpringHill Suites and
Super 8;
o Prior to the opening of the Northwest Arkansas regional Airport (NWARA) in late 1998,
Drake Field located south of Fayetteville served as the principal commercial airport in the
region. Following the opening of the new airport in Benton County, there has been a marked
increase in the number of new hotels. Much of this new hotel development has occurred in
the cities Bentonville and Rogers both of which are located in Benton County;
❑ Despite a reasonably well-deateloped critical mass of lodging inventory in the area, there is a
distinct lack of high -quality hotel accommodations in Downtown Fayetteville of the caliber
envisioned for the subject hotel. The most closely comparable property to the envisioned
subject hotel is the 235-unit Hilton Hotel which appears dated despite recent renovations.
Demand for Lodging Accommodations
o Business travelers and demand generated through the various programs at the University of
Arkansas, account for the majority of lodging demand. The remaining demand is comprised
of leisure travel, SMERF demand, convention groups and airline crews;
i ❑ Business travel to the area is largely fueled by the presence of the headquarters of WalMart
in Bentonville, Tyson Foods in Springdale and J.B. Hunt in Lowell, all of which are located
in close proximity to NWARA. Following the opening of NWARA, there was a marked shift
in corporate demand away from hotels in Fayetteville in preference for hotels located in
Springdale or Bentonville. As such, many hotels in Fayetteville experienced significant
1 declines in corporate demand for much of 1999;
o The University of Arkansas through its various academic and athletic programs is a major
generator of lodging demand for the hotels in Fayetteville and the surrounding area. The
University's football and basketball programs are important sources of weekend demand
particularly during the fall and spring months;
o Overall citywide hotel occupancy levels for Fayetteville averaged 49.2 percent in 1999 down
from 53.1 percent in 1998. Average room rates for the market reached $58.61 in 1999, up
from $54.64 the previous year. RevPar in 1999 reached $28.84, down from $29.00 in 1998,
or a decline of 0.6 percent. Year-to-date through May, occupancy levels reached 51.9
percent, up 7.0 percent over the same period last year while average daily room rates reached
$62.82, up 11.0 percent over the same period in 1999.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
i • •
EXECUTIVE SUMMARY II-4
I'
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o As with most lodging markets, hotels in Fayetteville are subject to seasonal fluctuations in
demand. The off-season corresponds to the months of December and January when students
at the University of Arkansas are away on break and most business travelers are also at
' home. Differences between weekday and weekend demand tends to be less pronounced for
I i hotels in Fayetteville due to positive impact of major sporting events at the University which
are usually held on weekends. This is particularly true during the football and basketball
season. In contrast, hotels in Bentonville are much more likely to experience significant
variations in demand between weekdays and weekends.
T
i
c
Subject Property Performance
❑ On the basis of our evaluation and analysis of existing and potential demand in the local
lodging market, the subject hotel's location, concept and orientation, we have estimated the.
following patterns of occupancy for the subject hotel's first ten years of operation as
presented in the following table.
Estimated Occupancy
Proposed 105-unit Crowne Plaza Hotel
Downtown Fayetteville, Arkansas
Year
Occupancy %
2002
60%
2003 -
64
2004
68
2005
68
2006-2011
68
Source: International Hospitality Advisors
❑ The foregoing occupancy levels were estimated based on the assumption that the subject
hotel will generate its demand from the following demand segments during a representative
year as follows.
Market Segmentation — Representative Year
Proposed 105-unit Crowne Plaza Hotel
Downtown Fayetteville, Arkansas
Ratio
Market Segment
to Total
Individual Corporate Demand
65.0%
Leisure Demand
25.0
Group/Other Demand
10.0
Total
100.0%
Source: International Hospitality Advisors
INTERNATIONAL HOSPITALITY ADVISORS, INC.
EXECUTIVE SUMMARY II-5
❑ We have estimated an annual average daily room rate of U.S. $95.00 in current value 2000
1 dollars. Assuming 2002 to be the first full year of operations and applying inflation and
appropriate discounting, we believe this would equate to U.S.$95.50 for that year, increasing
to U.S.$131.50 in 2011, the tenth year of operation.
I:
Estimated Operating Results
❑ Our estimates of income and expenses for the first ten years of operation, considering
inflation and other market factors, reflect a profit before other deductions such as
I i depreciation, amortization, ii dome taxes and interest as detailed in the following table.
c
Estimated Operating Results
Redeveloped 105-unit Crowne Plaza Hotel
Downtown Fa etteville, Arkansas
Income
Before Other
Deductions*
Estimated
Average
Total
Ratio to Total
Per Available
Year
Occupancy
Daily Rate
$000
Revenues
Room $
2002
60%
$ 95.50
$ 761,000
30.0%
$ 72248
2003
64
103.75
987,000
33.9
%400
2004
68
107.00
1,0951000
34.5
10,429
2005
68
110.25
1,105,000
33.8
10,524
2006
68
113.50
1,137,000
33.8
109829
2007
68
116.75
1,170,000
33.8
11,143
2008
68
120.25
112052000
33.8
11,476
2009
68
124.00
12245,000
33.8
11,857
2010
68
127.75
112823000
33.8
12,210
2011
68
131.50
19318,000
33.8
123552
* Other deductions include interest, depreciation, amortization, and income taxes.
Source: International Hos itali `Advisors
Recommendations
On the basis of our analysis of existing comparable properties, we submit the following
recommendations and comments for consideration in order to assist the subject property in
establishing a quality reputation within the indicated markets.
❑ Guests Rooms -The subject hotel will offer 105 well-appointed guest rooms and suites that
meet Crowne Plaza Hotels' size requirements. In consideration of the anticipated demand
mix for the subject hotel, we recommend a room mix as follows:
INTERNATIONAL HOSPITALITY ADVISORS, INC.
EXECUTIVE SUMMARY
Guest Room Mix
Proposed
105-unit Crowne Plaza
Hotel
Downtown Fayetteville, Arkansas
Unit Type
Room Mix
Percent
King
55
52.0%
Double/Double
20
19.0
Junior Suites
30
29.0
Total
105
100.0%
International Hospitality Advisors
II-6
In addition to meeting Crowne Plaza Hotels' room amenity requirements, the following should be
considered for all guest rooms and suites:
➢ Electronic card door locking system;
➢ High -quality toiletries sucMas shampoos, conditioners and moisturizers;
➢ Wall -mounted hair dryer;
➢ In -room hospitality center featuring a microwave, mini refrigerator and coffee maker;
➢ Bottled mineral water;
➢ Remote -controlled cable television;
➢ Oversized towels and choice of pillows;
➢ Full-length mirrors, make-up mirrors and a selection of hangars;
➢ In -room safes for guest valuables;
➢ Seating area offering an easy chair and ottoman;
➢ Direct -dial telephones, twp per guest room (workdesk and bedside) with voice mail, dual
line, speaker phone capabilities and data ports;
➢ A spacious, efficient work desk with ergonomic chair, desk -level electrical outlets,
adjustable halogen desk light and computer -ready layout;
➢ Utility saving devices.
➢ Non-smoking rooms should also be provided within each room type.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
( EXECUTIVE SUMMARY II-7
I.
❑ Recommended Room Rates - Given the quality of facilities and services proposed (and
recommended) at the subject property, we recommend published room rate ranges be
established as follows in 2000 dollars:
Recommended Published
Room
Rates
Proposed 405-unit Crowne Plaza
Hotel
Downtown Fayetteville,
Arkansas
Published
Discount
Room Type
Rates
Rates
King
$105.00
$
75.00 - $ 95.00
Double/Double
$115.00
$
80.00 - $110.00
Junior Suites
$115.00
$
80.00 - $110.00
Source: International Hospitality Advisors
❑ Food and Beverage Facilities - We recommend the following food and beverage outlets.
I�
➢ A casual multi -purpose restaurant containing approximately 75 seats;
i ➢ A comfortable spill -over lounge containing approximately 40 seats;
➢ A poolside bar and grill with seating for approximately 25 persons;
Ix
It should be noted that two restaurants (Hoffbrau and A Taste of Thai) located on Center Street are
Ipart of a building that is owned by the developer and can be accessed directly from the hotel.
❑ Meeting and Banquet Space- The following meeting and banquet space is recommended
t for the subject hotel:
l ➢ A main ballroom of 2,000 square feet divisible into two sections and capable of
i accommodating 100 persons banquet -style;
,r
Lc
➢ Several smaller breakout rooms totaling approximately 2,000 square feet;
➢ A well-equipped boardroom of approximately 500 square feet;
➢ A former lounge located in the basement of the hotel could provide additional space for
banquets and meetings, as required.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
it • •
I.
EXECUTIVE SUMMARY II-8
o Other Guest Services and Amenities - Other facilities and services recommended for the
redeveloped hotel include:
(i ➢ A well-equipped, 1,200 square foot fitness center and spa offering an exercise room, a
I sauna, massage facilities and beauty salon;
i ➢ A state-of-the-art business center;
➢ A swimming pool on the third level of the building;
➢ Selected retail with direct public access totaling approximately 13,000 square feet;
F ➢ A six -story parking structure with parking for 98 cars. As mentioned previously, two
t additional levels could be added bringing the total parking inventory to 141 spaces;
i ➢ 18-hour room service;
i ➢ In-house valet/laundry facilities;
i
Management and Marketing
t , To adequately establish a reputation as a first-class, boutique hotel, it will be necessary for the
, subject property in addition to providing quality facilities and services, to maintain aggressive, on-
going advertising and promotional programs aimed at the key demand sources. Fundamental to the
4 i projections presented in this report is the assumption that the subject hotel will be affiliated and
t i managed by a well -recognized international hotel company such as Crowne Plaza that offers access
to,a worldwide reservation and marketing network. Furthermore, we have assumed a strong and
aggressive management team that is experienced in the operation and marketing of downtown,
1 commercially -oriented hotels.
I'k
` INTERNATIONAL HOSPITALITY ADVISORS, INC.
u
EXECUTIVE SUMMARY II-9
I'
I.
j
Condominium Sales
Given the strength of the local real estate market, we recommend the inclusion of approximately 15
one-, two- and three -bedroom condominium units ranging in size between 1,400 and 1,800 square
feet. Based on an analysis of the local condominium market, it is our opinion that these units could
be sold for between $180.00 - $185.00 per square foot or between $252,000 to $324,000 per unit.
It
The following table presents our recommendations of unit mix and pricing for the condominium
component.
I i u
r
1
Condominium
Component
Proposed Crowne Plaza Hotel
Downtown Fayette illeArkansas
Unit Type
Unit Mix
Unit Size
Sales Price
One -Bedroom
3
12400
$2527000
Two -Bedroom
10
1,600
296,000
Three -Bedroom
2
12800
3242000
1�
Source: International Hos itali
Advisors
INTERNATIONAL HOSPITALITY ADVISORS, INC.
STELLA BELLA PLAZA, LLC
FAYETTEVILLE, ARKANSAS
SECTION III
SITE EVALUATION
AUGUST 2000
INTERNATIONAL HOSPITALITY ADVISORS, INC.
SITE EVALUATION III-1
PROPERTY LOCATION AND DESCRIPTION
The subject seven -story property is located at the intersection of College Avenue and Mountain
Street in Downtown Fayetteville, Arkansas overlooking the landmark Old Courthouse Building and
the John Paul Hammerschmidt Federal Building. The site is rectangular shaped with approximately
1 102.6 feet of frontage on College Avenue and 200 feet of frontage on Mountain Street.
The property is bordered to the east by College Avenue and the Old Courthouse Building, to the
south by Mountain Street and the John Paul Hammerschmidt Federal Building, to the north by
t Center Street and to the west by East Avenue. Access to site, is considered excellent. The hotel can
be easily accessed via College Avenue, Mountain Street and Center Street. Visibility along these
l i thoroughfares is also considered excellent. Photographs of the subject property and a site location
map are presented at the end of this section.
I,
SALIENT CHARACTERISTICS OF THE SITE
t Site Advantages
The subject site benefits from several significant advantages:
I,
❑ Location in the heart of historic downtown Fayetteville, which is undergoing a major
1 ` renaissance characterized by the renovation and re -development of numerous buildings, road
improvements and significant investment in retail, dining, residential condominiums and
recreational facilities;
❑ Proximity to the University of Arkansas campus, the principal demand generator for hotel
accommodations in Fayetteville. The University is situated less than two miles from the
subject site;
❑ Proximity to Dickson Street, the premier dining and entertainment thoroughfare in
1 Fayetteville and the surrounding two -county area. Dickson Street, located within walking
distance of the subject property is part of a major redevelopment effort designed to make the
T street more pedestrian -friendly and entertainment -oriented;
t ❑ Excellent frontage on both College Avenue and Mountain Street, two principal streets in
downtown Fayetteville;
a Easy access to all points within the city and to the Interstate highway system;
❑ Excellent visibility from College Avenue, Mountain Street and Center Street providing for
maximum exposure to the public;
INTERNATIONAL HOSPITALITY ADVISORS, INC.
I
SITE EVALUATION III-2
o Within walking distance of the 14,000-square foot Town Center convention facility which is
currently under construction and scheduled for completion in mid-2001. The Center is
expected to serve as a catalyst for new room night demand for hotels in downtown
Fayetteville;
o Proximity to other area demand generators including the Federal Building, the County
Courthouse and area companies;
o Availability of all utilities to the site including water, electricity, sewerage and telephone
hook-up;
❑ Adequate parking in a five -story parking garage facility located adjacent to the hotel;
Site Disadvantages
In our opinion, the site suffers from no material disadvantages.
CONCLUSION
It is our opinion that the location and physical attributes of the existing property are well -suited for
redevelopment as a chain -affiliated, boutique hotel, as envisioned and recommended.
r
r INTERNATIONAL HOSPITALITY ADVISORS, INC.
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STELLA BELLA PLAZA, LLC
FAYETTEVILLE,ARKANSAS
'SECTION IV
w
AREA OVERVIEW OF FAYETTEVILLE
AUGUST 2000
INTERNATIONAL HOSPITALITY ADVISORS, INC.
AREA OVERVIEW OF FAYETTEVILLE IV-1
c
INTRODUCTION
The seat of Washington
County, Fayetteville is
nestled against
the Boston Mountains (foothills
to the Ozark Mountains)
in northwest Arkansas
approximately
25 miles from the Missouri state
line and 15 miles from Oklahoma. Fayetteville is the largest city within the two -county
Metropolitan Statistical Area (MSA) which comprises Washington and neighboring Benton
counties. „
Northwest Arkansas is one of the wealthiest regions of the state with a stable, diversified,
economy and low unemployment. The region's economic stability is fueled by the presence of
the University of Arkansas, the headquarters of several major companies including WalMart,
Tyson Foods and J. B. Hunt, as well as, thriving manufacturing and retail sectors.
1012O WN 11I01►l
The Fayetteville -Springdale -Rogers Metropolitan Statistical Area (MSA). includes both
Washington and Benton Counties and is currently ranked the eighth fastest growing MSA in the
country. The population of the MSA has increased from 246,300 persons in 1995 to 275,300
persons in 1999, representing a compound annual growth rate of 2.8 percent. By comparison,
the population for the State of Arkansas has increased from 2,466,300 persons in 1995 to
2,552,100 persons in 1999, represeiting a compound annual growth rate of 0.86 percent. The
population of the city of Fayetteville has grown from 53,900 persons in 1997 to 58,200 persons
in 1999, representing a compound annual growth of 3.9 percent. The MSA's population is
projected to increase to 305,600 persons by 2004, a growth rate of 2.1 percent.
EMPLOYMENT
The strength of an area's economic character is partly reflected in the distribution of its
employment base by industry sector. Total non-agricultural employment for the MSA has
increased from 110,475 persons in 1990 to 139,900 persons in 1999, representing a compound
annual growth rate of 2.7 percent. As evidenced in the following table, retail trade,
manufacturing and services represent the largest sectors of the local economy.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
I
AREA OVERVIEW OF FAYETTEVILLE IV-2
The following two tables present a breakdown of non -farm employment in the MSA for May
2000 and a list of major employers.
Non -Farm Employment by Industry Sector —May 2000
Fayetteville -Springdale -Rogers MSA.
Arkansas
Sector
Employed
Percent
Construction
6,500
4.2%
Manufacturing
353900
23.2
Transportation & Public Utilities
1%600
6.9
Wholesale Trade
5,700
3.7
Retail Trade
38,200
24.7
Finance, Insurance & Real Estate
5,700
3.7
Services
31,300
20.3
Government
20,600
13.3
Total
154.500
100.0%
Source: Fayetteville Chamber of Commerce
Major Area Employers
Northwest Arkansas
Company
Location
Product
Employees
Wal-Mart Stores
Bentonville
Corporate Headquarters
5,000 +
University of Arkansas
Fayetteville
Education
2,500 +
George's, Inc.
Springdale
Poultry Processing
29500 +
Tyson's — Three Plants
Rogers
Poultry Processing
I,800 +
First Brands
Rogers
Glad Bags
1,000 +
Simmons Corp.
Siloam Springs
Poultry Products
12000 +
Superior Industries
Fayetteville
Cast Aluminum Wheels
I,000 +
Danaher Tool Group
Springdale
Small Hand Tools
900
Emerson Electric
Rogers
Motors
850
Viassic Foods
I Fayetteville
Frozen Foods
800
Source: Fayetteville Chamber of Commerce
The unemployment rate for the MSA has declined from 4.0
percent in
1990 to 2.4 percent in
1999. Year-to-date though May 2000,
the unemployment
rate stood
at 2.0 percent. The
following table presents historical trends
in unemployment for
the period
1990 through 1999.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
I •
♦ "V w Al1L'DlliL'li/ ! V CA VC1r9rVX111r r Ti
Historical Unemployment Trends
Fayetteville -Springdale -Rogers MSA.
Arkansas
Year
Rate
1990
4.0%
1991
3.9
1992
3.7
1993
3.0
1994
2.7
1995
2.6
1996
2.6
1997
3.2
1998
3.4
1999
2.4
Source: Fayetteville Chamber of Commerce
UNIVERSITY OF ARKANSAS
Established in 1871, the University of Arkansas situated in downtown Fayetteville offers more
than 230 undergraduate and graduate degrees in more than 150 fields of study. In the Fall 1999,
enrollment totaled 15,226 students. Demand generated through academic and athletic events at
the University account for the largest source of room nights for hotels in the Fayetteville area.
ARKANSAS RESEARCH AND TECHNOLOGY PARK
Fayetteville is the site of the first new high-tech "fiberpark" installed by Southwestern Bell
Telephone Company in Arkansas. The first of several projects throughout the state, it is
designed to make Northwest Arkansas more attractive to new industry.
TOWN CENTER CONVENTION FACILITY
Currently under construction on Faybtteville's downtown square is the new state-of-the-art Town
Center convention facility scheduled for completion by mid-2001. The facility offers 14,000
square feet
of column -free space all on one level; 10,000 square
feet of show offices, pre -
function and kitchen area and extensive support services. When
completed,
the facility is
expected to
serve as an important source of new room night demand
for hotels in
the downtown
Fayetteville area.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
AREA OVERVIEW OF FAYETRVILLE • IV-4
I. INFRASTRUCTURE
Highways
The Fayetteville area is well served by federal, state, county and city roadways. Major highways
r in the area include Interstate-540 and Highway 71B. The newly completed Interstate-540,
connects the cities of Bentonville, Rogers, Springdale and Fayetteville with Interstate-40 to the
r south while Highway 71B (College Avenue) serves as the principal business corridor through
Fayetteville, Springdale and Rogers.
Airports
i Opened in November 1998, Northwest Arkansas Regional Airport (NWARA) is the principal
commercial airport in the region. The airport, built at a cost of $107 million, is served by
r American Eagle, Atlantic Southeast Airlines/Delta Connection, TransWorld Express, Northwest
Airlink and US Airways Express. These carriers provide convenient daily connections to Dallas,
(` Chicago, Atlanta, St. Louis, Memphis and Kansas City. In 1999, passenger enplanements and
deplanements totaled 653,000 persons. Year-to-date through June 2000, passenger volumes have
increased 24 percent over the same period in the previous year. The new airport is expected to
I
serve as a major catalyst for new investment and development throughout the MSA.
I,
CONCLUSION
Overall, the Fayetteville -Springdale -Rogers MSA has grown significantly over the past five
years. The area growth is attributabYe to several factors which include the continued expansion
! r of the University of Arkansas, the presence of major corporations such as Wal-Mart and Tyson
Foods and the opening of the new Northwest Arkansas Regional Airport. This growth is
expected to continue at a strong pace as new development occurs throughout the MSA.
l:
INTERNATIONAL HOSPITALITY ADVISORS, INC.
i�
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f'
f STELLA BELLA PLAZA, LLC
i FAYETTEVILLE, ARKANSAS
SECTION V
HOTEL MARKET SUPPLY AND DEMAND
AUGUST 2000
i*
�t
(I
It
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L:
_i INTERNATIONAL HOSPITALITY ADVISORS, INC.
HOTEL MARKET SUPPLY A DEMAND • V-1
INTRODUCTION
The total lodging supply in the two -county area comprising Washington and Benton Counties at
I!
the end of June 2000, consisted of 55 lodging facilities with a total of approximately 4,154
available rooms. Fayetteville accounts for approximately 1,522 of the available room supply or
�r
i 37 percent of the total.
A vast majority of the local lodging market is comprised of chain=affiliated, or non-affiliated
limited service properties of les&= than 100 rooms, most of which are located at major
i
intersections along Interstate-540. Hotel chains currently represented in the market include
Baymont Inns, Best Western, Comfort Inn, Clarion Inn, Courtyard by Marriott, Days Inn,
E
Econolodge, Fairfield Inn & Suites, Hampton Inn, Hilton, Hilton Garden Inn, Holiday Inn,
r Holiday Inn Express, Motel 6, Park Inn, Quality Inn, Ramada Inn, Red Roof Inns, Scottish Inns,
SpringHill Suites, Sleep Inn and Super 8.
r
Following the opening in late 1998 of the new Northwest Arkansas Regional Airport in Benton
County, seven new hotels totaling 586 rooms have been added to the local lodging market. All
of this new hotel development has occurred in the cities of Bentonville and Rogers both of which
r are located in Benton County. Specifically, new hotels that have opened within the last two
j years include a Clarion Inn, Holiday Inn Express & Suites, Sleep Inn, SpringHill Suites, Superior
t Inn, Hilton Garden Inn and a Hampton Inn.
COMPARABLE LODGING SUPPLY
As mentioned previously, a vast majority of the local lodging inventory in both Washington and
Benton counties is comprised of chain -affiliated, limited -service properties located along
Interstate-540. Furthermore, with the exception of the 235-room Hilton Hotel, there are presently
E no high -quality, full -service hotels located in the downtown Fayetteville area.
t
As such, given the current lack of existing hotels in the two -county area that would be truly
` competitive and comparable to the proposed Crowne Plaza Hotel, we believe that a strictly
' textbook analysis of the marketability of the subject property would not provide a clear
` indication of the project's potential. In a typical situation, we would compare within a narrowly
I: -
INTERNATIONAL HOSPITALITY ADVISORS, INC.
i
HOTEL MARKET SUPPLY A D DEMAND • V_2
r-
defined geographic market, the growth in the supply and demand for competitive hotel rooms.
Through the application of market penetration factors, which indicate our opinion of the
1 ; proposed hotel's ability to penetrate the various demand segments being captured in the area, we
would then derive estimates of occupancy levels that we believe could be achieved by the
I'
i proposed hotel.
r
Since there is no adequate set of comparable hotels in the two -county area, it would be
r impossible to form a realistic conclusion regarding the potential marketability of the subject
hotel based on these standard and normally accepted analytical techniques. As such, we have
((T evaluated the subject hotel project based on the following methodology:
I`t
t ❑ Selected chain -affiliated hotels within the local lodging market were grouped together to
provide indications of the potential performance of the proposed hotel;
Ir ❑ We then identified specific properties within the local lodging market that would compete
directly with the subject hotel for some or all of the demand segments; or would be
comparable to the subject hotel in terms of scope of operations but might not compete
(r directly for the same set of potential guests. We used the operational characteristics of
� these hotels to measure the propensity of the targeted demand segments to seek
accommodations in the individual sub -markets, rather than as a away to catalogue actual
demonstrated demand captured within the sub -market. Though these hotels are not
(; directly comparable to the subject in every aspect, each property's performance and
ability to capture the desired demand segments, is indicative of the potential success of
r the proposed hotel. As such, the performance of these hotels, were used primarily as
I benchmarks for the rates and occupancy levels expected to be achieved by the subject,
rather than points of direct comparison;
I l o Based on the aforementioned analysis, we estimated occupancy levels that we believe the
proposed hotel could achieve in its first ten years of operation, beginning in the year
2002. Our analysis was based on such specific factors as:
i
Ir ➢ Proposed management,- chain -affiliation, location and envisioned product
t offering of the subject hotel;
➢ The current and future economic environment for Northwest Arkansas;
I:
➢ Access from principal feeder markets;
r
r ➢ The diversity of the area's lodging base;
fr
INTERNATIONAL HOSPITALITY ADVISORS, INC.
(r
i
➢ The quality, orientation and product offering of existing hotels;
➢ Historical trends in market occupancy, average daily room rate and
REVPAR;
➢ The achieved occupancy and average daily room rates of selected local
hotels; `
➢ The potential impact of additional comparable hotels that could be
developed during the projection period;
➢ The potential impact of the Northwest Arkansas Regional Airport on area
development and the location of new lodging additions to the marketplace.
o Once we identified the market segmentation the subject hotel could achieve during a
representative year of operation, we estimated the average daily room rate in current
value 2000 dollars. The average daily room rate was based on the net room rates
achieved by selected hotels in the local area, modified to reflect characteristics unique to
the subject hotel that would influence rates such as location, size of property, quality
level, orientation, affiliation and facilities offered.
Fayetteville Lodging Market
Based on our fieldwork, the selected chain -affiliated hotel supply in Fayetteville includes a mix
of nine full -service and limited -service hotels with a total of 1,053 available rooms. The selected
lodging market has experienced a significant increase in hotel room supply over the last several
years. Specifically, room supply has increased from 296,380 available rooms in 1994 to 384,345
rooms in 1999, representing a compound annual growth rate of 5.3 percent. Much of the lodging
additions in Fayetteville occurred during the latter half of 1995, with smaller additions in 1997.
Market demand has however, not kept pace with supply, increasing from 178,336 room nights in
1994 to 203,982 room nights in, 1998 and declining to 188,959 room nights in 1999, representing
a compound annual growth rate of only 1.1 percent. The decline in room night demand in 1999,
can be directly attributed to the significant increase of new hotel rooms in the Bentonville area
following the opening of the Northwest Arkansas Regional Airport. The following table lists the
selected chain -affiliated hotels in Fayetteville and their respective number of rooms.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
a
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i
LODGING DEMAND ANALYSIS
Introduction
In this portion of the report, we evaluate the level of demand for lodging accommodations in
Fayetteville and the characteristics of that demand. The results are based on specific primary
research conducted for this project, as well as, our in-house database.
Historical Lodging Market Performance
As discussed previously in the section,
total
occupied
room nights
for the
selected
chain -
affiliated hotel in Fayetteville increased
from
178,336 room nights in
1994 to
188,959
room
nights in 1999, representing a compound annual growth rate of only 1.1 percent. Market
occupancy also declined from 60.2 percent in 1994 to 49.2 percent in 1999, reflecting the
negative impact of significant new room supply in the neighboring Bentonville area following
the opening of the new regional airport. It should be noted however, that this trend appears to be
reversing itself as the new supply is absorbed by the market and existing hotels reposition
themselves. For the first five months of 2000, room night demand has increase 6.9 percent over
the same period in the previous year, while occupancy levels increased 7.0 percent over the
previous year.
Despite significant declines in occupancy levels the average daily room rate for the selected
market increased from $49.57 in 1994 to $58.61 in 1999, representing a compound annual
growth rate of 3.4 percent. Year-to-date through May 2000, average daily room rates reached
$62.82, up 10.9 percent over the same period in the previous year. Over the medium term, we
estimate a modest increase in average daily room rates as a moderate amount of new hotel supply
is added to the market and existing new supply is absorbed by the marketplace.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
HOTEL MARKET SUPPLY � DEMAND V-6
RevPar (Revenue per Available Room) achieved by the selected market decreased from $29.83
in 1994 to $28.82 in 1999, representing a decline of 0.68 percent. The decline is attributable to
the significant increase in new room supply over the past two years. Year-to-date through May
2000, RevPar for the selected market reached $32.60, up to 18.9 percent over the same period in
1999. The
following
table presents the
historical trend in occupancy, average daily room rate,
occupied room nights
and RevPar for the
selected market.
Historical Performance - Selected Market
Fa etteville Arkansas
Occupied
Average Daily
Year
Occupancy
Room Nights
Room Rate
RevPar
1994
60.2%
178,336
$49.57
$29.83
1995
57.3
184,832
$51.84
$29.73
1996
50.2 `'
1929064
$51.79
$26.00
1997
52.7
202,436
$52.05
$27.42
1998
53.1
203,982
$54.64
$29.00
1999
49.2
188,959
$58.61
$28.82
CAG 1994-99
3.9%
1.1%
3.4%
0.68%
YTDMay 1999
48.5%
77,165
$56.62
$27.46
YTD Ma 2000
51.9%
82,465
$62.82
$32.60
Growth %
7.0%
6.9%
10.9%
18.7%
t't Compound Annual Growth
Source: International Hospitality Advisors
Market Segmentation
Through interviews with management at the hotels listed previously in this section, we have
determined that demand for local lodging accommodations currently emanates from the
following sources:
a Corporate Demand: This segment represents the largest overall source of demand for
the selected hotels in Fayetteville, as well as, the neighboring cities of Springdale, Rogers
and Bentonville. Demand from this segment is comprised of business professionals, sales
personnel and technical persons visiting the corporate headquarters of major corporations
such as WalMart, Tyson Foods and J. B. Hunt, as well as, other manufacturing and retail
establishments in the area. The University of Arkansas, through its various academic
programs is also a major generator of corporate lodging demand for hotels in the area.
The following points define the salient characteristics of corporate travelers to
Fayetteville and the neighboring communities:
INTERNATIONAL HOSPITALITY ADVISORS, INC.
HOTEL MARKET SUPPLY A DEMAND • V-7
➢ Preference for hotels within close proximity to the respective place of business;
➢ Corporate demand is largely comprised of individual travelers, which translates
into a low double occupancy factor;
➢ Typical length of stay is two to three nights with the highest demand occurring
from Monday throughrThursday nights;
➢ Preference for accommodations that provide for a strong sense of security in
addition to typical business and recreational facilities.
t ❑ Leisure Demand: Demand from this segment is largely derived through the various
athletic programs at the University of Arkansas. In particular, the University's football
and basketball programs are important sources of weekend demand particularly during
1 the fall and spring months. Area hotels are usually sold out well in advance and command
+ premium rates during these events. Several regional recreational events such as the War
Eagle Crafts Fair (held in May and October) are also important sources of leisure demand
for area hotels.
t
❑ Group/Other Demand: Included in this segment is demand originating from corporate
t groups, state association conventions, airline crews and other non -specified demand.
Based on conversations with local hoteliers and meeting coordinators, the months of
April and October are the preferred months for meeting and convention activity. The
scheduled opening of the Town Center convention facility in downtown Fayetteville in
I t mid-2001 is expected to serve as a major catalyst for attracting more regional
conventions to the benefit of hotels in Fayetteville, particularly those located in the
downtown area.
i Seasonality and Timing of Demand
Conversations with hotel operators and tourism officials in Fayetteville indicate that the local
lodging market is impacted by seasonality of demand considerations. Generally speaking, the
1
months of December and January represent the slowest periods of the year. For the rest of the
year, demand remains relatively consistent. Furthermore, given the predominantly commercial
orientation of the market, there are marked variations in occupancy levels between mid -week and
1 weekend nights. Differences between weekday and weekend demand however, tends to be less
pronounced for hotels in Fayetteville due to the positive impact of major sporting events at the
t University which are usually held on weekends. This is particularly true during the football and
basketball season. In contrast, hotels in the Bentonville are much more likely to experience
significant variations in demand between weekday and weekends. The following table presents a
breakdown of market seasonality by month.
Ir
is
INTERNATIONAL HOSPITALITY ADVISORS, INC.
!t
c
i
1
Selected Hotels
Seasonality of Demand
Fayetteville, Arkansas
Month
Days
Peak Season
April
30
May
31
June
30
October
31
Sub -Total
122
Shoulder Season
February
28
March
31
July
31
August
31
November
30
Sub -Total
151
Low Season
January
31
December
31
Sub -Total
62
Total
365
Source: International HospitalityAdvisors
CONCLUSION
Our review of the local lodging market indicates sufficient existing and potential demand to
support the operation of a 105-unit, Crowne Plaza -affiliated boutique hotel as recommended.
Area hotels, particularly in Fayetteville, have been negatively impacted by a significant increase
in new lodging supply over in neighboring Bentonville and Rogers over the past two years
following the opening of the Northwest Arkansas Regional Airport. Nevertheless, market trends
suggest that the new supply is being absorbed by the marketplace and only a limited amount of
new additions are scheduled for development over the medium term. Continued economic
strength and growth of traditional source markets, coupled with the emergence of new demand
segments and aggressive marketing efforts by local civic leaders should bode well for continued
growth in lodging demand for Fayetteville.
„ INTERNATIONAL HOSPITALITY ADVISORS, INC.
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FAYETTEVILLE, ARKANSAS
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-SECTION VI
lESTIMATED MARKET POSITION
r AUGUST 2000
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INTERNATIONAL HOSPITALITY ADVISORS, INC.
MARKET POSITION
In a typical market study, the projected occupancy of a proposed hotel would be estimated based on
our opinion of its ability to penetrate the competitive lodging environment and capture its share of
demand. This penetration analysis would result in a penetration ratio defined as the percentage of
room nights captured relative to the property's fair share. A property's fair share, in turn, is
determined by dividing the subject property's number of guestrooms by the total number of
guestrooms in the competitive supply (including the subject property).
Market penetration is based on the attributes of a hotel relative to the competitive marketplace and is
defined as the percentage of demand allocated to a given property on the basis of such competitive
characteristics as location, appearance, rate structure, age, affiliation, reputation, facilities, services
and amenities. The higher the penetration, the higher the occupancy. Factors indicating a hotel
would have competitive advantages- 3uggest market penetration in excess of 100 percent, while
competitive weaknesses are reflected in penetration ratios of less than 100 percent. Given the nature
of the comparable/competitive market we are addressing in this engagement, we believe such an
evaluation would not present a clear representation of the proposed hotel's potential marketability.
Therefore, in lieu of a traditional penetration analysis, we present here a list of factors that, taken as a
whole, we believe demonstrates the potential marketability of the proposed 85-unit, Crowne Plaza -
affiliated boutique hotel at the levels projected.
Contributing Factors
❑ Site: The location and configuration of the subject property is most conducive to a small,
mixed -use development of the type proposed and recommended;
❑ Downtown Fayetteville: The do•amtown Fayetteville area is undergoing a major renaissance
with the redevelopment of many historic buildings and the creation of an entertainment core
along Dickson Street. As such, downtown Fayetteville has evolved into the preferred
entertainment and recreation destination in the Northwest Arkansas region. A testimony to
the success of these redevelopment efforts is the strength of the retail market and a growing
trend by residents to purchase apartments in the downtown core at premium prices;
❑ Product Offering: A vast majority of the existing and recently opened lodging supply in the
competitive market is comprised of chain -affiliated, limited -service properties that are all
very similar in product offering, orientation and location. A notable exception is the highly
successful, 49-unit Inn at the Mill located in nearby Johnson. The Clarion Carriage House -
affiliated property offers a unique product offering (incorporated into a historic mill with
INTERNATIONAL HOSPITALITY ADVISORS, INC.
ESTIMATED MARKET POSAN • VI-2
eight one -of -a -kind fantasy suites), a signature restaurant and excellent service. As a result,
the property enjoys a loyal, d"6tporate clientele during the week and local leisure clientele on
f weekends. The property is projected to achieve an annual occupancy in the low 70 percent
i range with an average daily room rate of between $85.00 to $90.00. In our opinion, given
the location, history and configuration of the subject property, an excellent opportunity exists
to provide a unique product offering and lodging experience that caters to a select niche
market;
o Local Lodging Environment: As detailed previously in this report, following the opening
of the Northwest Arkansas Regional Airport (NWARA) several new hotels were opened
primarily in Bentonville. As a consequence, hotels in Fayetteville experienced a significant
(albeit temporary) decline in demand particularly with respect to the corporate segment. As
such, a mixed -use development that combines a small hotel with condominium and retail
components significantly helps to mitigate the development and market risk associated with
the project while enhancing the overall economics and funding potential for the
development;
1 ❑ Lack of Direct Competition: The 235-unit Hilton Hotel is the most closely comparable
lodging property to the subject in downtown Fayetteville. The Hilton is projected to achieve
an annual occupancy in the mid-50 percent range with an average daily room rate between
$85.00 and $90.00 in 2000. Despite recent renovations, however, the property appears dated
and unattractive. In our opinion, an excellent opportunity exists for the subject hotel to
capture a portion of the demand that currently patronizes the Hilton and become the preferred
` f lodging choice in Downtown Fayetteville;
t
❑ Management and Chain -Affiliation: The subject hotel is to be managed and affiliated with
Crowne Plaza Hotels, a well -recognized international hotel company with extensive
` experience in operating first-class, commercially oriented hotels throughout the world. The
affiliation with Crowne Plaza also provides access to a well -developed global reservation and
lmarketing network. In our opinion, the ability to offer a well -recognized hotel brand coupled
with consistent service, a unique product offering and access to awell-developed reservation
network will provide a needed marketing edge for the subject hotel to compete effectively in
the local lodging market;
It should be noted that there are limiting factors associated with the marketability of the subject
property:
❑ Seasonality and Timing of Demand: The subject hotel will be influenced by seasonal and
timing fluctuations in demand. Management's success in attracting a more diversified base
will be instrumental in reducipg overall seasonality of demand;
❑ Supply Additions: As evidenced, previous supply additions have negatively impacted
overall occupancy and demand levels for hotels in Fayetteville. As such, the ability to
provide a truly unique hotel product and lodging experience will be critical in helping to
distinguish the subject hotel and mitigating the impact of future supply additions.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
I , i
TED MARKET
• VI-3
SUBJECT PROPERTY PERFORMANCE
Estimated Occupancy
As discussed previously, the subject hotel would be impacted by seasonality and tuning of demand
considerations. In the following table we present our estimates of occupancy by market demand
segment for a representative year considering the impact of seasonality and timing of demand.
Occupancy and Market Mix by Season
Proposed 105-unit Crowne Plaza Hotel
Downtown Fayette ille, Arkansas
Segment
Peak
Shoulder
Other
Total
Corporate Demand
% of Demand
69%
62%
65%
65%
Room Nights Captured
6,776
8,470
11694
16,940
Leisure Demand
%of Demand
20%
29%
25%
25%
Room Nights Captured
11955
3,909
652
6,515
Group/Other Demand
% of Demand
11 %
10%
10%
10%
Room Nights Captured
1,042
L303
261
2,606
Total Occupied Room Nights
9,773
13,682
2,606
26,061
Estimated Occupancy
76%
72%
40%
68%
Source: International Hospitality Advisors
Based on the factors presented previously, we believe that the redeveloped 105-unit Crowne Plaza —
affiliated hotel could achieve a stabilized occupancy of 68.0 percent over its economic life. (We
define economic life as the cycle of business activity of the property affected by such factors as
demand, competition, obsolescence and inflation). Using the 68.0 percent stabilized ratio as a
benchmark, we have projected occupancy levels for the proposed hotel's first ten years of operation
as presented in the following table.
Estimated
Occupancy
Proposed 105-unit
Crowne Plaza Hotel
Downtown Fayetteville, Arkansas
Estimated
Year
Occupancy
2002
60.0%
2003
64.0
2004
68.0
2005 - 2011
68.0
Source: International Hospitality
Advisors
INTERNATIONAL HOSPITALITY ADVISORS, INC.
ESTIMATED MARKET POSION
• V14
AVERAGE DAILY ROOM RATE
Methodology
Our estimate of the subject property's average daily room rate, expressed in current value 2000
dollars, is based on an analysis of published and achieved room rates at comparable/competitive
properties, the anticipated mix of business at the subject hotel, seasonality of demand, double
occupancy and market conditions discussed.
Average Room Rate Derivation
We estimate the subject property could achieve an average daily room rate of U.S.$95.00 in a
stabilized year based on current value 2000 dollars. Derivation of this average rate estimate for a
representative year (68.0 percent occupancy) is presented in the following table.
Average Daily Room Rate Derivation
Proposed 105-unit Crowne Plaza Hotel
Downtown Fayetteville Arkansas
Segments
Peak
Shoulder
Off
Total
Corporate Demand
Revenues
$689,500
$800,400
$1519600
$1,641,500
Room Nights
63776
8,470
1,694
16,940
Average Rate19
$101.75
$94.50
$89.50
$97.00
Leisure Demand
Revenues
$2019400
$363,500
$57,400
$622,300
Rooms Nights
1,955
37909
652
6,516
Average Rate"'
$103.00
$93.00
$88.00
$95.50
Group/Other Demand
Revenues
$91,200
$1102800
$20,200
$222,200
Rooms Nights
1,042
1,303
261
2,606
Average Rate(l)
$87.50
$85.00
$77.50
$85.25
Total Revenues
$9829100
$11274,700
$229,200
$2,4869000
Total Room Nights
9,773
13,682
2,606
26,061
Average Rate("
$00.50
$93.25
$88.00
$95.00
t'r Numbers are rounded.
Source: International Hospitality Advisors
INTERNATIONAL HOSPITALITY ADVISORS, INC.
ESTIMATED MARKET POS&N 0 VI-5
t
Applying inflationary factors and first year discounting yields the following estimated average daily
room rates for the property's first ten years of operation.
Estimated Average Daily Room Rate Projections
Proposed 105-unit Crowne Plaza Hotel
Downtown Fayetteville, Arkansas
Average Room
Cumulative
Inflated
Rate in 2000
Inflation
Average Room
Year
U.S. Dollars
FactorP1
Rate
2002
$90.00
1.0609
$95.50
2003
95.00
1.0927
103.75
2004
95.00
1.1255
107.00
2005
95.00
1.1593
110.25
2006
95.00
1.1941
113.50
2007
95.00
1.2299
116.75
2008
95.00
1.2668
120.25
2009
95.00
1.3048
124.00
2010
95.00
1.3439
127.75
2011 1
95.00
1 1.3842 1
131.50
Our assumption of an annual 3.0 percent inflation factor is intended only to
portray the effect of a long-term inflationary trend (over the projected period)
rather than an actual forecast of price movements.
Source: International Hospitality Advisors
CONCLUSION
We have estimated the potential market position of the proposed 105-unit, Crowne Plaza -affiliated
Hotel relative to demand generators and the level of patronage that can be reasonably attracted to the
subject property. It is our opinion that the subject property should achieve a representative
occupancy of 68.0 percent. We further estimate an average daily room rate of U.S. $95.00 in current
value 2000 dollars.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
STELLA BELLA PLAZA, LLC
FAYETTEVILLE, ARKANSAS
SECTION VII
ESTIMATED OPERATING RESULTS
AUGUST 2000
INTERNATIONAL HOSPITALITY ADVISORS, INC.
( S
ESTIMATED ANNUAL OPERATING RESULTS VII-I
Ii
1 INTRODUCTION
On the basis of our evaluation of the market findings relative to the potential demand for the
j proposed project, we have prepared a ten-year statement of estimated annual operating results which
we believe can be generated by the operation of a facility of the type and quality described in our
j market demand report.
f
IAs is the case in estimates of this sort, we are not in a position to guarantee the results nor is
I
warranty intended that they may be achieved. The estimates of revenues, costs and expenses are
based on the size and quality of the facilities recommended, and the operational characteristics
t
thereof. We have further applied, where applicable, the operating ratios of selected similar size and
I1 type facilities, adjusted in our best judgment to reflect the circumstances outlined in our study of the
1
market and the application of sound management and control over costs and expenses.
li
Since these estimates are based on circumstances and events that have not yet transpired, they are
(I subject to variations which may arise as the future operations and related factors actually occur.
Accordingly, we cannot provide assurances that the estimates will be representative of the results
r
i that will actually be achieved during the first ten years of operation.
�l
� METHODOLOGY
The Uniform Systems of Accounts for Hotels, recommended by the American Hotel and Motel
l Association and in general use throughout the industry, has been used in the classification of income
�i
and expenses in this report. In conformity with this system ofclassification, only direct expenses are
charged to operating departments ofthe hotel. The general overhead items which are applicable to
the operations as a whole are classified as deductions from income and include administrative and
general expenses, marketing, energy costs, and property operations and maintenance.
r
INFLATION
i
While we are unable to provide a definitive estimate of future inflationary trends, we do believe that
t the inflation rate will continue to be a significant factor in the ongoing performance of a hotel
T operation. In general, hotels tend to adapt more easily to inflation than other major investments,
INTERNATIONAL HOSPITALITY ADVISORS, INC.
1
ESTIMATED ANNUAL OPERATING RESULTS VII-2
(i
since the rates can be easily adjusted in response to changes in costs. For the purpose of this
(; analyses, we have applied a dollar -based inflation rate of 3.0 percent over the projection period.
{ i INCOME AND EXPENSE PROJECTIONS
On the basis of our estimate of the future occupancies and average daily room rates achievable at the
subject Hotel, together with our analysis of operating data from comparable operations throughout
the United States, we have prepared a statement of annual operating results for the subject hotel in
inflated U.S. dollars. The projections are based on a ten-year estimate beginning January 1, 2002.
Departmental Revenues and Expenses
Rooms Revenue: There are two major factors in the computation of the rooms revenue figure: the
average daily room rate and the projection of an occupancy curve for the subject hotel. Based on our
analysis presented in the Estimated Market Position section of this report, the estimated rooms
(t revenue over the projection period is as follows:
fi
t
i
Estimated Rooms Revenue(l)
Proposed 105-unit Crowne Plaza Hotel
Downtown Fa etteville, Arkansas
Average
Occupied
Estimated
Daily
Room
Rooms
Estimated
Room Rate
Nights
Revenue
Year
Occupancy
(Rounded)
(Rounded)
$000s
2002
60%
$ 95.50
23,000
$2,196
2003
64
103.75
24,500
21545
2004
68
107.00
26,100
29789
2005
68
110.25
262100
2,873
2006
68
113.50
262100
2,958
2007
68
116.75
26,100
3,043
2008
68
120.25
26,100
31134
2009
68
124.00
26,100
3,232
2010
68
127.75
26,100
3,329
2011 1
68 1
131.50
269100 1
3,427
(1) Stated in inflated U.S. Dollars
Source: International Hospitality Advisors
Rooms Expense: We have
estimated rooms expense
to
be
24.0 percent of rooms revenue in a
stabilized year. This equates
to an expense of U.S.$22.80
per
occupied room in the representative
year.
t INTERNATIONAL HOSPITALITY ADVISORS, INC.
_i
ESTIMATED ANNUAL OPERATING RESULTS VII-3
Rooms departmental expenses include salaries, wages and employee benefits for employees in the
front office, housekeeping, laundry, and front service (bellmen, etc.) departments. Expenses also
include guest room supplies such as linen, towels, glasses, ashtrays, shampoo, soap, cleaning
supplies, uniforms for service personnel, and commissions paid to travel agents, as well as, other
expenses as outlined by the "Uniform System of Accounts."
�1 l
r
Food and Beverage Revenue: It is'dur understanding that the food and beverage facilities at the
i subject property are to be leased out to independent operators. The income to be derived has been
II s included under Real and Other Income.
(i
Telephone Revenue: Telephone revenues, generated by both local and long distance calls were
estimated at approximately U.S.$2.25 per occupied room in the representative year.
Telephone Expenses: Telephone expenses have been estimated at 70.0 percent of total telephone
r revenues in the representative year or U.S.$1.55 per occupied room. Such an expense level assumes
that the purchase of the telephone equipment will be capitalized rather than leased.
Other Operated Departments: The income and expenses in Other Operated Departments is based
on the planned configurations of the property and the operating results of comparable properties.
1 Nevertheless, the actual income and expenses in this area are dependent upon the extent of facilities
t provided, the emphasis placed on them by management, as well as, whether they are operated as
t separate entities, as concessions or extensions of the hotel facility. Revenues for the subject property
' were estimated at U.S.$52,500 or U.S.$2.00 per occupied room for the representative year.
r
Other Operated Department Expenses: This department's expenses have been estimated at 70.0
percent of revenues in the representative year.
Rentals and Other Income: Revenues from this category include lease revenue from the retail
space, restaurant and bar, parking, vending machines, currency exchange and other miscellaneous
income. We estimate rentals and other income (net) to be approximately U.S.$235,000 orU.S.$9.00
per occupied room.
INTERNATIONAL HOSPITALITY ADVISORS, INC.
•
ESTIMATED ANNUAL OPERATING RESULTS VII-5
Building and Contents Insurance: Building and contents insurance premiums were estimated at
ft
1 i U.S.$250 per available room based on the experience of similar hotels in Fayetteville.
! Reserve for Replacement: We have deducted a reserve for replacement of furniture, fixtures and
li
equipment as well as other short-lived items such as roof coverings and interior finishes based on the
Ir
following: 2.0 percent of total revenues in 2002, 3.0 percent in 2003, 3.5 percent in 2004 and 4.0
Ir
percent thereafter.
t
1 Condominium Sales Analysis: Our estimates of the sales absorption and pricing of the proposed 15
I; condominium units are based on the actual performance of selected, projects in downtown
t Fayetteville, adjusted to reflect circumstances unique to the subject development. Based on our
I: market research, we estimate a two-year sell -out period with unit prices ranging between $180.00 -
$185.00 per square foot. From the gross sales price, we have deducted appropriate expenses
(i associated with the construction, marketing, administrative and sales of the units.
IThe following tables present our estimates of potential annual operating results for the subject hotel
Ir and income from the sale of the condominium units over the defined projection period.
t
L
INTERNATIONAL HOSPITALITY ADVISORS, INC.
E
II) ESTIMATED ANNUAL OPERATING RESULTS VII-6
l�
T
16
1 41
PROPOSED 105-UNIT CROWNE PLAZA HOTEL
" FAYETTEVILLE, ARKANSAS
STATEMENT OF POTENTIAL ANNUAL OPERATING RESULTS
FOR A REPRESENTATIVE YEAR OF OPERATION IN CURRENT VALUE (2000) DOLLARS
\GE OF OCCUPANCY 68% AT $95.00
DAILY ROOM RATE
AMOUNT/ PER
AMOUNT RATIO ROOM OCCUPIED
ROOMS
FOOD
BEVERAGE
TELEPHONE
OTHER OPERATED
RENTALS 8 OTHER INCOME
TOTALREVENUE
EPARTMENTAL EXPENSES (1)
ROOMS
FOOD 8 BEVERAGE
TELEPHONE
OTHER OPERATED
TOTALDEPARTMENTALEXPENSES
OTAL OPERATED INCOME
NDISTRIBUTED EXPENSES:
ADMINISTRATIVE 8 GENERAL
MANAGEMENT FEE (2)
MARKETING (3)
CHAIN SERVICES FEES
PROPERTY OPERATION 8 MAINT.
ENERGY
TOTAL UNDISTRIBUTED EXPENSES
BEFORE FIXED CHARGES
IXED CHARGES:
REAL ESTATE & PROPERTY TAXES
BUILDING 8 CONTENTS INSURANCE
INCENTIVE MANAGEMENT FEE
RENT
TOTAL FIXED CHARGES
BEFORE RESERVE
FOR REPLACEMENT
BEFORE OTHER DEDUCTIONS (4)
$2,476,000
87.7%
$23,581
$95.01
0
0.0%
0
0.00
0
0.0%
0
0.00
59,000
2.1%
562
2.26
52,000
1.8 %
495
2.00
235.000
8.3%
2,238
9.02
2.822.000
100.0%
26.876
108.28
594.000
24.0%
5,657
22.79
0
#DIV/0!
0
0.00
41,000
69.5%
390
1.57
39.000
75.0%
371
1.50
674,000
23.9%
6,419
25.86
2,148,000 76.1% $20,457 82.42
"
263.000
9.3 %
2.505
10.09
85,000
3.0%
810
3.26
168,000
6.0%
1,600
6.45
198,000
7.0%
1.886
7.60
126,000
4.5%
1.200
4.83
116,000
4.1%
1.105
4.45
956.000
33.9 %
9.105
36.68
1,192.000 42.2% 11,352 45.74
101,000
3.6 %
962
3.88
26,000
0.9%
248
1.00
0
0.0%
0
0.00
0
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INTERNATIONAL HOSPITALITY ADVISORS, INC.
FIDAVIT OF PUBLICATION
do solemnly swear that I am the
Legal CI rk of the A a s Democrat-Gazette/Northwest Arkansas
Times n wspaper, printed and published in Lowell, Arkansas, and that
from my own personal knowledge and reference to the files of said
publication, that advertisement of: -
d _ was
C. e MS
PO#
inserted in the regular editions on
** Publication Charge: $�/`� J��U
Subscribed ibJ//and sworn to before me this
l-Ab day of AU al&'l,, 2005.
otary. Public
My Commission Expires:
Sharlene D. Williams
Notary Public
State of Arkansas
My Commission Expires
** Please do not pay from Affidavit. October 18, 2014
An invoice will be sent.
RECEIVED
JAN 10 2005
CITY OF FAYETTEVILLE
CRY CLERK'S OFFICE
P.O. BOX 1607 - 212 N. EAST AVENUE - FAYETTEVILLE. ARKANSAS 72701 - 479-442-1700 - 479-442-5477 (FAX)
ORDINANCE NO. 73 _- -
NN ORDINANCE ADOPTING THE PROJECT PLAN A, A' L
FOR RDHIGHWAY O N? THE PRREDEVELOP-(GJMENT DISTRICT NUMBER ONE. FINDING THE PLAN
IS ECONOMICALLY FEASIBLE,.REPEALING ORDI-
NANCE4646ANDDECIMNGANEMERGENCY YANKA
WHEIRAEr on Jury 27, 2004. the Fayetsylle City
Coundl held a Public Hearing mnoOrring the creation of the Highway 71 Eesl Spuara RecovelocmOr
DbMct; and
WNKREAE. an August17, 2004, the Ofty Council passed Ordinance No. 4608 creating the Highme
71 East Sµasre RedevNoonnfint District and autwdzed Precession of a Redas"Opnwnl Rolact Pia
and
,.qw to w constructed after
onsinucteld after
0 held a Public Hearing on the Project Plan Proposed far
.I:
.'
.„ .. .-.._—
The ..__.
(N The ". number end ocaforn of ell peNo wanks IX Innpoorrasnm within the
dbtrot Including the acqualaon of real property, danwlhon of b"gMectIll
buildings, and sale of the deamd lad to tlns nedeoelOpas:
(b) an economic feasibility study:
(0 a dataleci Est of mannered project costs:
(Q) a description of funandrg tndhysg tan incranness bonds:
(a) a cenrilOol n Of the county tan assessor of the base value, ad vabram rate, debt
sw&e ad valorem rate, and ad velorem we for the retleeloprnhant district:
(p m other Muds are expected to be deposited into the $pedal fulls:
n a map of proposed inmap Aawing nuses and provamanls and Visas In the district; ions of feel property h the tlismct;
(N are Anticipated:
haion g charges
(I reference to the Downtown Master Ran;
pq mhon.prol6cl
sons costs include tuerbe Iadvice,sPbcs bored mat$, eaxhomo lorecaaerg:
(q m pennons cos entldpeted to be tllslalpmd;
(M the anwnt of TIF indebtadness;
IN the amount of tax ihcrernent esuneted to be generated M the
project;
(0) no other reanues are ardOW d to be used to sedge the tax i arennent fnendrg.
NOW. TNBIIEPORE. BB IT OROAINED R
BY TNB CITY COUNCIL OF THE CRY OF PAYET-
TMLLB. ARKAKBA&
Section 1: That the City Count of fie City of FayeteWe. AMenaas hereby ordi that the Project Pen
for the Highway 71 Fast Squsm RetlevuOPrnent DLstid (attached as E)Nbil A) b emrnn nosey beside.
Section 2: That the Ciry Coumil Of the Gry of Payer lla Aduvsas hereby adopts the Project Plan or
the Highway 71 East Square Redaveoprnent District sntl dats"hunas It base complied with all regdre-
menu ast bM it A.CA 4 14-166-306.
Section 3: That upon tie B6edNa dale of this ordinance, Ordnance No. 4646 Originally Woofing the
Project Plan for this RedavdOprnenl District is thereby repealed.
Section 4: Emergerncy Clause. If this orceneme is col inunaoately atactvop she goal of the
RadavaWnenl Dents shod its project Ran M remO+e a dangenOrs, dilappdated tuatrap cprgtl fail due to
lack of tine-aersKhe funding The City Card, therafere. daternhil and details en ennogeICY erisOS
which worts o h 4erl the publOpeace, health a safety and consequently
arts orcenanCtt SW W in force end $tact hone the We of its passage and approval.
PAYLD Any APPBOYBD his 261h day of December, 2004.
DDAN COODYr Never r
AFFIDAVIT OF PUBLICATION
I, _ , do solemnly swear that I am the
Legal C ark of the as Democrat-Gazette/Northwest Arkansas
Times newspaper, printed and published in Lowell, Arkansas, and that
from:my own personal knowledge and reference to the files of said
publication, that advertisement of:
L C was inserted
PO#
`" Publication Charge: $ 1,33 9,9
Subscribed and sworn to before me this
day of L 2005.
QQ/(/ J
Notary. Public S arlene D. Williams
My
Notary Public
State of Arkansas
Commission5sion E,r{�ires
October 18, 2014
Please do not pay from Affidavit.
An invoice will be sent.
in the regular editions on
RECEIVEC
JAN 10 2005
PURCHASING
A IS HEREBY led§1GNEN that, pursuant to Arkansas rdye uev li.
E IS RE §t4- EN th land §mttoArkans e
heerhg"W canducled on January 25, 2005
1 p.m. In the City AtlMN5Va4m Bue ig, Room ARKANSAS
l MI ee atforded a reasonable opportuNty
their Nevvs on the proposed Amendment No. t to the Highway 71 East Square
ant Olaslct Number One Project Ran.
hearing impehed are available for all gblo meetings. 72 hour rotloe is regiied.
M to request en Imegxeter, please call 479-575-11930.
P.O. BOX 1607 • 212 N. EAST AVENUE • FAYETTEVILLE, ARKANSAS 72701 • 479-442-1700 • 479-442-5477 (FAX)
City of rayetteville, Arkansas
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
11/10/2004
Table of Contents
Introduction
3
Phase 1 5
"Process of removing blight in the former Mountain Inn area -Catalyst Project"
Phase II
"City SWeiscape Improvements — First 10 Year Project"
Economic Feasibility Study
Existing Uses and Conditions Map
City of Fayetteville, AR Ordinance No. 4608
Assessor's Certification
' TIF Financing Strategies
Amendment 78
Local Demographics
District Map and Legal Description
Existing Conditions of Blight
Downtown Master Plan
FA
W
Exhibit 1
Exhibit 2
Exhibit 3
Exhibit 4
Exhibit 5
Exhibit 6
Exhibit 7
Exhibit 8
Exhibit 9
Exhibit 10
City of ragetteville, ArLansas
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
Introduction:
Plan documents have been prepared that are related to a proposed redevelopment of certain land
areas and specific project parcels in the Highway 71 East Square Redevelopment District as adopted
by the Fayetteville City Council on August 17, 2004, with the ordinance effective September 20,
2004. The Project Plan is specifically designed to benefit the City of Fayetteville in the removal of
designated blight coupled with the reinvestment in infrastructure to benefit the project area and the
City of Fayetteville as a whole. The geographical boundaries of the Highway 71 East Square
Redevelopment District are illustrated belo%\ :
I
�1on
■ © pi
LLUM
El
The redevelopment district anticipates incremental growth in tax collections to exceed $35 million
over a twenty five year period beginning in 2004 and ending in 2029 (see Economic Feasibility
Study, Exhibit # 1). The Highway 71 East Square Redevelopment District Project Plan outlines the
public purposes and investments that are targeted in the redevelopment district. The purpose of the
district is to encourage the commercial and residential redevelopment of real property, thereby
preventing the spread of blighted, deteriorated and deteriorating areas, and discouraging the loss of
commerce, industry and employment.
The Project Plan once adopted may be adjusted over time by the Fayetteville City Council in order
to ensure the return to the public is invested in a manner that will ensure economic vitality in the
district, as well as the district's impact on the City of Fayetteville.
There are initially two specific phases for the public investments to be made in the Highway 71 East
Square Redevelopment District. They are:
1.
Phase I -
Process of removing blight in the former Mountain
Inn area -Catalyst Project
2.
Phase II
— City Streetscape Improvements — First 10 Year
Project
The "catalyst" project in the district is the redevelopment of the blighted Mountain Inn area (see
Section One). East Square, LLC, (The Developer) is proposing a $ 22.5 million investment into a
destination hotel/meeting space condominium project. Approximately $19 million of the proposed
redevelopment is from private investments. An additional $3.5 million for the public purpose of
eliminating the existing blight will be secured by Tax Increment Bonds issued by the redevelopment
district. No TIF proceeds will be used for the construction of the buildings of the proposed project
but will be limited strictly to public purposes allowed under the law for redevelopment districts.
The Fayetteville City Council has adopted the Dover Kohl Downtown Master Plan (see Exhibit # 10)
that has as its focus improvements in much of the area now included in the approved TIF District.
The adopted Downtown Master Plan identified as a clear priority the removal of the "eyesore" of the
denigrated Mountain Inn.
In addition to the catalyst project the Highway 71 East Square Redevelopment District Project Plan
will also include a number of streetscape improvements in the district (see Section Two).
City of Fayetteville, Arkansas
PHASE I (Catalyst Project)
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
IMPROVEMENT RECOMMENDATIONS
Section One - Removal of Blight
Phase I of the project plan (the area identified as the Mountain Inn Project) for the Highway 71 East
Square Redevelopment District targets the removal of blight as defined in Arkansas Statute 14-168-
301. It reads as follows:
(3)(A) 'Blighted area" means an area in which the structures, buildings, or improvements, by
reason of dilapidation, deterioration, age or obsolescence, inadequate provision for access,
ventilation, light, air, sanitation, or open spaces, high density of population and
overcrowding or the existence of conditions which endanger life or property, are detrimental
to the public health, safety, morals, or welfare.
(B) 'Blighted area" includes any area which, by reason of the presence of a substantial number of
substandard, slum, deteriorated or deteriorating structures, predominance of defective or
inadequate street layout, faulty lot layout in relation to size, adequacy, accessibility, or
usefulness, unsanitary or unsafe conditions, deterioration of site or other improvements,
diversity of ownership, tax on special assessment delinquency exceeding the fair value of the
land, defective or unusual conditions of title, or the existence of conditions which endanger
life or property by fire and other causes, or any combination of such factors, substantially
impairs or arrests the sound growth of a city, retards the provision of housing
accommodations, or constitutes an economic or social liability and is a menace to the public
health, safety, morals, or welfare in its present condition and use, or any area which is
predominantly open and which because of lack of accessibility, obsolete platting, diversity of
ownership, deterioration of structures or of site improvements, or otherwise, substantially
impairs or arrests the sound growth of the community.
The recently adopted "Downtown Master Plan"
contemplates specific key projects necessary for a fully
revitalized downtown area. The Mountain Inn was
identified as #3 in the list of immediate projects. The
Downtown Master Plan states: "A key opportunity for infill
development is the redevelopment of the Mountain Inn.
The hotel, fronting College Avenue, has been vacant for a
number of years. The existing structure is an eyesore, ..the
location of the Mountain Inn among several other
Downtown landmarks and historic structures offers the
opportunity to create a taller building - a new landmark -
which signals the revival of downtown'.
For many years the remnants of the once premier lodging
facility formerly known as the Mountain Inn have been
decaying with little hope for a change in its blighted condition.
In its day, the hotel was considered the destination of choice for
travelers in the Fayetteville area as well as the hosting of other
community traditions including Sunday brunch, regular
business meetings, club events and wedding parties.
Unfortunately, the hotel through a series of unsuccessful ventures became an inconsistent host and
ultimately an outdated lodging facility. During the same period that the Mountain Inn lost its luster
the Fayetteville downtown area went into a period of degradation and many business operators,
vendors and customers left the area. After years of wasting away, concerned citizens, local
government leaders and developers came together to revitalize the historic Fayetteville downtown
square as well as neighboring Dickson Street. This rebirth has been ongoing for the past fifteen
years with the vast majority of the significant building in the Downtown/Dickson Street area being
revived to support the business, cultural and entertainment center it has become.
In recent years multiple redevelopment projects have transformed parts of the downtown/Dickson
Street area into a hub of culture, commerce and entertainment for northwest Arkansas. New
construction and redevelopment projects of note that have emerged include: The Campbell Bell
Building, The Ozark Theatre Building, The Three Sisters, UARK Bowl, The Bank Of Fayetteville
Building, The Walton Arts Center, The Ozark Brew Pub, Camall Hall, The Ice Plant Building,
Rollston Building, Cooper House, Pyeatt Building, Campbell Terrace, Laundry Building, Bakery
Building, Collier's Drug, The Old Post Office Building, The Town Center and the recently
completed new Fayetteville Public Library. Some of the redevelopments are pictured below:
Noticeably absent from this regenerative trend has
been the Mountain Inn with its broken windows
and boarded -up doorways sitting on its prominent
position at the crest of Archibald Yell/College
Avenue. Unfortunately, now, the once bustling
hotel's only visitors consist of vandals, transients
and the local police force.
Now with its neighbors alive with activity, the former Mountain Inn and other participating spaces
will be transformed into a destination facility that will be unsurpassed in the Fayetteville market.
The planned development project will incorporate
a 144 room full -service hotel, 18 condominiums,
12,500 sq. ft. conference/meeting space, three
restaurants, a day spa, exercise center, boutique
shops, a 300 space multi -story parking garage and
a rooftop botanical garden with observation deck.
The project in its entirety is known as the East
Square Redevelopment Project.
The project's centerpiece is a planned full service
national flagship hotel. The hotel will serve the
mid -to -high end of the business traveler, short
duration vacationer and meeting/event attendees.
With a thoroughly defined design concept, the
stylish hotel will offer the highest level of comfort
and service along with the intrigue of its inviting
amenities. The twelve -story main structure of the
new hotel will be built on the existing site of the
1960's addition to the historic Mountain Inn.
Condominiums will be built on the upper floors of
the new structure.
The architecturally pleasing section of the historic
inn's arcade which faces Center Street will be
preserved to accommodate pedestrian accessible boutique shops along the north/south lower level
arcade and will house the day spa and function space on the upper floors. Banquet and conference
facilities will be arranged in the northeast section of the complex with a multi -purpose ballroom and
multiple flexible "break-out" meeting spaces. The planned botanical garden will be the crownjewel
of the facility positioned on the rooftop of the main hotel building.
The
project will
combine complementary architecture, functional
access, technological amenities
and
comfortable
furnishings of subtle ambience to satisfy visitors
with the facility.
The proposed subject property is anticipated to be complete and operational in or near the Spring of
2006. No rezoning is required for the project.
8
The project is located one block east of the heart of the downtown business district. It is
conveniently located less than five minutes from the University of Arkansas, a short walk to the
Fayetteville Town Center, within walking distance of the Dickson Street entertainment district, the
University of Arkansas, the Walton Arts Center and approximately ten minutes from the I-540
north/south corridor. The following map illustrates the development's location:
• a c��j( r . nir vID♦S�ONN SI, It w ■
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Mountain Inn Project Site cc
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The Tax Increment Bonds to be issued by the Highway 71 East Square Redevelopment District
will finance certain allowable public purposes as outlined by the enabling legislation Arkansas Code
Annotated 14-168-301 through 14-168-323, Redevelopment District, Chapter 168, Community
Redevelopment Generally, Subchapter 3, Community redevelopment — Creation and procedures.
Specifically as described in 14-168-301(13A-E):
"(13)(A) "Redevelopment project" means an undertaking for eliminating or preventing the
development or spread of slums or deteriorated, deteriorating, or blighted areas, for discouraging the
loss of commerce, industry, or employment, or for increasing employment, or any combination
thereof.
(B) A redevelopment project may include one (1) or more of the following:
(i) The acquisition of land and improvements, if any, within the redevelopment district and clearance
of the land so acquired; or
(ii) The development, redevelopment, revitalization, or conservation of the project area whenever
necessary to provide land for needed public facilities, public housing, or industrial or commercial
development or revitalization, to eliminate unhealthful, unsanitary, or unsafe conditions, to lessen
density, mitigate or eliminate traffic congestion, reduce traffic hazards, eliminate obsolete or other
1
PROJECT
uses detrimental
to the public
welfare, or otherwise remove or prevent the spread
of blight or
deterioration; or
(C) The financial or other assistance in the relocation of persons and organizations displaced as a
result of carrying out the redevelopment project and other improvements necessary for carrying out
the project plan, together with such site improvements as are necessary for the preparation of any
sites and making any land or improvements acquired in the project area available, by sale or by
lease, for public housing or for development, redevelopment, or rehabilitation by private enterprise
for commercial or industrial uses in accordance with the plan;
(D) The construction of capital improvements within a redevelopment district designed to alleviate
deteriorating conditions or a blighted area or designed to increase or enhance the development of
commerce, industry, or housing within the redevelopment district; or
(E) Any other projects the local governing body deems appropriate to carry out the purposes of this
subchapter;"
In particular the public purposes of Phase 1 improvements financed by Tax Increment Financing
include acquisition costs, asbestos remediation, demolition expenses, reclamation expenditures,
waste recycling and site work on the site of the former Mountain Inn area. The expenditures are as
follows:
Expenditures
1 *Real Property Assembly costs: $ 216139000.00
765-01940-000,765-01930-000 $ 1,200,000.00
765-01938-000 $ 500,000.00
765-01939-000 $ 500,000.00
765-01929-000 $ 413,000.00
2 "Demolition & Site Preparation:
8879000.00
3,600,000.00
* No Condemnation procedures will be utilized for the Mountain Inn Project
** Demolition and Site Preparation expenditures include the following:
A. Resolution of access issues
B. Resolution of utilities as needed
C. Water/sewer system upgrades as required
D. Layout & engineering
E. Asbestos and other environmental remediation
The following aerial photograph delineates the Mountain Inn Project site:
Historic
Fagade
Parking
Garage
10
Meeting
Facilities
New
Main
Bldg.
Upon the completion ofthe removal of blight the Developer will purchase the raw land of the project
site at the established appraised fair market value.
Other
The project plan provides for temporary replacement parking (up to 25 spaces) or funds for said
parking as allowed in 14-168-301. Definitions (C) "The financial or other assistance in the
relocation of persons and organizations displaced as a result of carrying out the redevelopment
project and other improvements necessary for carrying out the project plan."
Direct Economic Impacts
-Approximately 125 new jobs will be created in connection with the catalyst project
-Construction jobs estimated at 55
-Increase in demand in consumer goods during construction period
-Improved Property Values upon removal of blight
-Tourism attraction drawing tourist dollars to Fayetteville
-Adjunct to convention/meeting space for attracting additional conventions, etc.
-Creates a catalyst for additional redevelopment along College/Archibald Yell
-Promotes additional downtown living, thereby adding vitality to Fayetteville's downtown economy
-New tax revenues (estimated on catalyst project only):
1) Sales tax of approximately $153,750 annually
2) HMR tax collections of approximately $60,000 annually
11
City Of Fayetteville, Arkansas
PHASE II (First 10 Year Plan)
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
IMPROVEMENT RECOMMENDATIONS
Section Two — Streetscane Improvements
The purpose of this report is to provide recommendations for public work improvements that
would be a part of the Highway 71 East Square Redevelopment TIF District Project Plan. These
proposed recommendations were developed using the Downtown Master Plan and the
Downtown Dickson Street Enhancement Project as a guide.
PROPOSED TYPICAL SECTIONS:
2 ROIN: or
ERS
MILL Ez4TMG
S =M�Yw+I
3O. J—
> r
PLAN VIEW
The following is a summary of improvements for the typical section that will be applied to
identified streets within the improvement district:
➢ Replacement of existing sidewalk with a uniform six foot wide sidewalk that would meet
RIGHWAI 71 i
12
ADA requirements.
➢ Replacement of existing curb & gutter with historic type "stand-up" curb.
➢ Installation of a double band of concrete pavers adjacent to curb.
➢ Installation of trees at intervals of 30 feet including underground irrigation.
➢ Installation of decorative street lights at intervals of 120 feet with underground electrical
supply.
➢ Provide a minimum of two inch asphalt overlay.
➢ Replace existing drainage structures and storm pipes as necessary.
Below is a conceptual photograph of College Avenue that was contained in the Downtown
Master Plan that illustrates the type of enhancements that are recommended.
Downtown Master Plan Conceptual Photograph of College Avenue
Portions of the major corridors within the Improvement District have been selected to be
improved to the Typical Section in conjunction with the redevelopment project. These portions
are listed below and are shown on a map on the following page.
➢ College Avenue — Between Mountain Street and Maple Street.
➢ School Avenue — Between TIF Southern Boundary (South of 7'h Street) and Prairie
Street.
➢ Mountain Street — Between College Avenue and Downtown Square.
➢ Center Street — Between College Avenue and Downtown Square.
➢ Block Street — Between Downtown Square and Spring Street. This street portion will
also require the replacement of the water and sewer lines located under the street due to
the age of the infrastructure that was installed before 1915.
13
➢ Downtown Square — This includes the replacement of the existing deteriorating
sidewalks around the square.
N
2
O
in
DICKSON
3
t
w
� z
�
�
E
SPRING
_
MEADO
ROCK n1
Proposed Improvement Corridors
The following are the associated costs to improve the identified corridors to the improved typical
cross sections:
t
Street Segment
*Unit Cost
per L.F.
Length
L.F.
Cost
From
To
enue
Mountai
n
Maple
$930.00
2,980
$2,771,400.00
EDowntownSquare
et
Colle
a
East
$930.00
450
$418 500.00
treet
Colle a
East
$930.00
450
$418 500.00
S uare
N/A
N/A
$930.00
1 200
$1 116 000.00ue
Center
Srin
$930.00
680
$864 900.00nue
Prairie
TIF
Boundary
$930.00
1,190
$1.106,700.00
TOTAL ESTIMATED COST $6,696,000.00
* The unit cost per Linear Feet of Street Enhancement was derived from the actual costs
of the Downtown Dickson Street Enhancement Project.
As previously stated, it will be necessary to replace the water and sewer lines under Block
Avenue prior to the street improvements due to the age of the utility lines. These replacements
have been estimated to cost $420,000.00.
Total Estimated Cost for Street/Sidewalk Enhancements - $616969000.00
Estimated Costs for Block Avenue Water & Sewer Replacements - Sa20.000.00
TOTAL ESTIMATED COST- $71116,000.00
14
Total Anticipated Expenditures:
Phase I - Process of removing blight in the former Mountain Inn area -Catalyst Project:
S3,500,000 (based upon 2004 dollars)
Phase 11 — City Streetscape Improvements — *First 10 Year Project:
$7,116,000 (based upon 2004 dollars)
$10,616,000 Total (based upon 2004 dollars)
*Financing and related improvements will be phased in as revenues from the growth of incremental
property taxes warrant them.
IS
City of rayetteville, ArLansas
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
EXHIBIT No.1
Economic Feasibility Study
16
An Economic Forecast of Assessment Values in
the Highway 71 East Square Redevelopment District
Produced for the City of Fayetteville, Arkansas
SAM A
ALTON
UNIVERSITY COLLEGE gf BUSINESS
IARKANSAS
Centerfor Business and Economic Research
Center for Business and Economic Research
Reynolds Center Building 217
Sam M. Walton College of Business
I University of Arkansas
Fayetteville, Arkansas 72701-1201
(479)575-4151
Contact: Dr. Jeffery T. Collins, Director
September 2004
17
The purpose of this study is to estimate the cash flows that will accrue to the Highway 71 East
Square Redevelopment Tax District (ESRD) in Fayetteville, Arkansas as a result of the tax
increment financing project that has the redevelopment of the Mountain Inn as its centerpiece.
The ESRD encompasses 443 parcels in the central part of Fayetteville, running along US
Highway 71 B from Maple Street to south of the Mill District. The ESRD centers on the
Fayetteville Square, the Mountain Inn, and the Old Courthouse. The desired renovation of the
Mountain Inn spurred the formation of the ESRD, as private developers were unwilling under
the current economic environment to attempt the project. Further, the redevelopment is seen as
key to improving local property values and fostering economic activity in the central corridor of
the city. Tax increment financing (TIF) was chosen as the appropriate tool for this private/public
partnership.
Researchers at the Center for Business and Economic Research (CBER) in the Sam M. Walton
College of Business at the University of Arkansas were asked to project the revenues that tax
increment financing will provide for the ESRD. The methodology employed was as follows.
First, a copy of the property ownership report for the East Square Redevelopment District was
obtained from City of Fayetteville staff. This report included the identification of and 2003
assessed valuation numbers for the 459 parcels included in the Highway 71 East Square
Redevelopment District. Supplementing this information, CBER researchers used the
Washington County Assessor's online property search database to obtain the 2004 assessment
values for the same 459 parcels. CBER researchers then gathered historical data on assessment
value growth rates in other parts of Fayetteville for comparison purposes. Research was
conducted on the growth in property values in TIF districts in Tulsa, Oklahoma to assist in the
determination of reasonable expectations for growth rates.
The collected data show that 148 of the parcels in the ESRD are classified as Commercial
Improved, 95 of the parcels are classified as Residential Improved, 116 of the parcels are exempt
from property taxes (either as local or federal government properties or churches), and the
remaining 100 parcels are a mix of commercial and residential vacant properties, public services,
and miscellaneous usages. A total of 342 of the identified parcels had non -zero assessment
values in 2004.
In 2003, the total assessed value of the parcels in the ESRD was $16,691,61. In 2004, the year -
on -year growth rate of the assessed value was 12.9%, while the median assessment growth rate
was 10 percent. Of the relevant 342 parcels, 49 parcels had assessment growth rates of less than
10 percent, 208 had assessed values that grew at 10 percent, and 85 parcels had assessment
growth rates of more than 10 percent. Only 6 parcels in the ESRD had lower assessments in
2004 than in 2003
In order to form a basis of comparison, the parcels that have addresses along Dickson Street in
Fayetteville were examined. A substantial amount of private and public investment has gone
into the redevelopment of Dickson Street in recent years and examining recent annual
assessment increases might provide a fair indication of what assessment values might do in the
ESRD after investments have been made. According to data from the Washington County
Assessors Office,
E
in 2004 the average growth rate in assessed value on Dickson Street was 12.8 percent. The
median growth rate was 10 percent. In 2003 the median growth rate of the assessed value of
parcels on Dickson Street was 8.3 percent, while in 2002 and 2001 the median growth rates were
9.1 and 10.0 percent respectively.
In Tulsa, Oklahoma, tax increment financing has been used in five districts. Oklahoma's TIF
legislation differs from that of Arkansas in that both property and sales tax increments are
available for revenues for the districts. The successes of the TIF districts in Tulsa have varied.
Those that have been most successful have attracted a large retail anchor to the district or have
been tied to a specific redevelopment project. Most Tulsa TIF districts have been unable to meet
their projected increases in property tax and sales tax. This experience demonstrates that
planners should use conservative estimates in their calculations for projected revenue.
Based on all of the previous information, CBER researchers have developed a plausible revenue
scenario for the ESRD. This scenario takes into consideration that owner -occupied residential
property assessment growth is capped at 5 percent, that properties owned and occupied by
residents over the age of 65 have frozen property assessments, and that all other property
assessment growth is capped at 10 percent. Only new construction is assessed at its full value.
In order to provide a conservative estimate of the revenue that will be generated in the TIF
district, the following assumptions are made. In 2005 and 2006, assessed property values will
grow at 8 percent, unless they are frozen or capped at 5 percent. From 2007-2029, property
values grow at 10 percent, unless they are frozen or capped at 5 percent. These revenue
estimates do not capture the growth in assessments that will result from new construction, and as
such, likely underestimate the true revenues that are likely to accrue to the TIF district. Table I
presents the revenue estimates by year that are derived from the listed assumptions. Figure I
illustrates the growth path of the increment and the full assessment that is estimated for 2030.
,a.
200524)52M22W32009201020I 12012201320142015 MIS 201720112019202020212022202320242025202S20222M0=9 M30
19
Weighted Estimates by Property Taxation Classification
Total Available Increment:
$1,212.113,026
Total
Available
Yield:
$35,466,427
Net
Present
Value
of
Total
Available Yield:
$20,508,103
Year
2005
2006
2007
2008
2009
Frozen Assessment
$ 16,732,831
$
16,732,831
$ 16,732,831
$
16,732,831
$ 16,732,831
Total Assessment
$ 17,964,708
$
19,294,581
$ 21,084,090
$ 23,051,530
$ 25,214,645
Assessment Growth Rate
7.4%
7.4%
9.3%
9.3%
9.4%
Increment
$
1,231.877
$
2,561.750
$ 4,351,259
$ 6,318,699
$ 8,481,814
Available
Yield
$ 36,045
$
74,957
$ 127,318
$ 184,885
$ 248,178
PV of Available Yield
$ 34,995
$
70,654
$ 116,514
$ 164,268
$ 514,080
Year
2010
2011
2012
2013
2014
Frozen Assessment
$ 16,732.831
$ 16,732,831
$ 16,732,831
$ 16,732,831
$ 16,732,831
Total Assessment
$ 27,592,949
$ 30,207,904
$ 33,083,116
$ 36,244,550
$ 39,720,762
Assessment Growth
Rate
9.4%
9.5%
9.5%
9.6%
9.6%
Increment
$ 10,860,118
$ 13,475,073
$ 16,350.285
$ 19,511,719
$ 22,987,931
Available Yield
$ 317,767
$ 394,281
$ 478,409
$ 570,913
$ 672,627
PV of Available Yield
$ 266.125
$ 320,586
$ 377,661
$ 437,557
$ 500,498
Year
2015
2016
2017
2018
2019
Frozen Assessment
$ 16,732.831
$ 16132,831
$ 16,732,831
$
16.732,831
$ 16,732,831
Total
Assessment
$ 43,543.162
$ 47.746.297
$ 52,368.166
$ 57,450.562
$ 63,039,456
Assessment Growth Rate
9.6%
9.7%
9.7%
9.7%
9.7%
Increment
$ 26,810,331
$
31,013,466
$ 35,635,335
$ 40.717,731
$ 46.306,625
Available
Yield
$ 784,470
$ 907.454
$
1.042.690
$ 1,191,401
$ 1,354.932
PV of Available Yield
$ 566,718
$ 636,470
$ 710,021
$ 787,656
$ 869,679
Year
2020
2021
2022
2023
2024
Frozen Assessment
$ 16,732,831
$ 16,732,831
$ 16,732,831
$ 16,732,931
$ 16,732,831
Total Assessment
$ 69,185,410
$ 75,944,039
$ 83,376,514
$ 91,550,119
$ 100,538,861
Assessment Growth Rate
9.7%
9.8%
9.8%
9.8%
9.8%
Increment
$ 52,452,579
$ 59,211,208
$ 66,643,683
$ 74,817,288
$ 83,806,030
Available Yield
$ 1,534,762
$ 1,732,520
$ 1,949,994
$ 2,189,154
$ 2,452,164
PV of
Available
Yield
$ 956,413
$
1,048.203
$
1.145.416
$ 1,248,444
$ 1,357.704
Year
2025
2026
2027
2028
2029
Frozen Assessment
2025
2026
2027
2028
2029
Total Assessment
$ 16.732,831
$ 16,732.831
$ 16,732,831
$
16,732,831
$ 16,732,831
Assessment Growth Rate
$ 110,424,142
$ 121,295,501
$ 133,251,421
$ 146,400,231
$ 160,8615095
Increment
9.8%
9.8%
9.9%
9.9%
9.9%
Available
Yield
$ 93,691,311
$
104,562,670
$
116,518,590
$ 129,667,400
$ 144,128.254
PV of Available
Yield
$ 2,741,408
$ 3,059.504
$ 3,409,334
$ 3,794,068
$ 4,217,193
zo
City of rayetteville, ArLansas
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
EXHIBIT No.2
Existing Uses and Conditions Map
City OF Fa!)Cttcvillc, Ark. nsas
IIRJI\VAN 71 Ve"I SQ1 :ARE REDENTLOVMENI UISIRR.I
1114 0.1 hC I PLA\
22
City of rayetteville, ArLansas
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
EXHIBIT No.3
City of Fayetteville, AR
Ordinance No. 4608
Formation of the 71 East Square Redevelopment District No. 1
23
ORDINANCE NO.4608
AN ORDINANCE 'FORMING THE HIGHWAY 71 EAST
SQUARE REDEVELOPMENT DISTRICT NUMBER ONE
PURSUANT TO AMENDMENT 78 OF THE ARKANSAS
CONSTITUTION AND AUTHORIZING THE PREPARATION
OF A PROJECT PLAN
WHEREAS, the City Council after 15 day published notice has held a public
hearing at which all interested parties were given the opportunity to .express their views
on the proposed creation of the Highway 71 East Square Redevelopment District Number
One of Fayetteville, Arkansas and its proposed boundaries; and
WHEREAS, prior to publication, a copy of said notice was sent by first-class
mail to the chief executive officer of all local governmental and taxing entities having the
power to levy taxes on property located within the proposed Highway 71 East Squure
Redevelopment District Number One of Fayetteville, Arkansas, and to the school board
of any school district which .includes property located within the proposed Highway 71
East Square Redevelopment District Number One of Fayetteville, Arkansas; and
WHEREAS, the City Council has designated the boundaries of the proposed
Highway 71 East Square Redevelopment District Number One, of Fayetteville, Arkansas.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF
THE CITY OF FAYETTEVILLE, ARKANSAS:
Section 1: That the City Council of the City of Fayetteville. Arkansas hereby
establishes the boundaries of the Highway 71 East Square Redevelopment District
Number One of Fayetteville, Arkansas as set forth on the map attached hereto as Exhibit
"A" and incorporated herein.
Section 2: That the City Council of the City of Fayetteville, Arkansas hereby
names the District the following name for identification purposes: Highway 71 Fast
Square Redevelopment District Number One of Fayetteville, Arkansas.
Section 3: That the City Council of the City of Fayetteville, Arkansas hereby
creates the Highway 71 Fast Square Redevelopment District Number One of Fayetteville,
Arkansas as of September 20, 2004.
Section 4: That the City Council hereby finds that the real property within the
Highway 71 East Square Redevelopment District Number One of Fayetteville, Arkansas,
will be benefited by the redevelopment protect by eliminating or preventing the
development or spread of blighted, deteriorated, or deteriorating areas, or discouraging
the loss of commerce, or employment, or increasing employment, or any combination
thereof.
Section 5: That the City Council of the City of Fayetteville, Arkansas hereby
creates a separate and special food into which shall be deposited all tax incrernent
revenues, and all other revenues designated by the City for the benefit of the Highway 71
East Square Redevelopment District Number One of Fayetteville, Arkansas. All project
costs shall be paid from this fimd. This fund shall be known as the Highway 71 Fast
Square Redevelopment District Number One of Fayetteville, Arkansas.
Section 6: That the City Council of the City of Fayetteville, Arkansas hereby
authorizes the preparation of a Redevelopment Project
PASSED and APPROVED this 17°i day of August, 2004.
APPROVED:
ATTEST:
zs
City of rayetteville, ArLansas
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
EXHIBIT No.4
Assessor's Certification
October I, 2004
Mr. Hugh Earnest
City of Fayeneville
113 W. Mountain
Fayetteville AR 72701
Dear Mr. Earnest,
Please accept this letter and its attachments as the assessor's certification required by
ACA 14-168-306(b)(5) for the approval of the Redevelopment District Project Plan.
The assessed value of all real property within the redevelopment district subject to ad
valorem taxation, also known as the Base Value as of January 1, 2004, is:
16,616,684.
The current toad millage rate of WashingtonCottnty, the Fayetteville School Dist icl.and
the City of Fayetteville, also known as the Total Ad Valorem Rate, is:
52.96.
Tlie portion of the total ad valorem rate that was, at January 1, 2001, pledged to the
payment of debt service by the Fayetteville School District, also known as the Debt
Service Ad Valorem Rate, is:
23.7.
The total ad valorem rate less the debt service ad valorem rate, also known as the
Applicable Ad Valorem Rate, is:
29.26.
Attached is the certification firm the Fayetteville School District of the debt service ad
valorem rate, a copy of the most recent millage ordinance detailing levied ad valorem
millage rates for all taxing entities in Washington County with the pertinent items marked
with an asterisk, and a report from the assessor's database deviling the appraised and
assessed value ofeach parcel in the redevelopment district along with totals for the entire
district.
Sincerely,
Lee Ann Ki=
Fayettav8le TIF district
PARCEL ID
Tvoe
Total Auoraiisod
Total Assessed
765-01638-M
CI
136,600
26,488
765-01639-M
CI
125,800
20.020
765-01640-000
RI
1419850
22.719
765-01641-000
CV
43,700
6.435
765-016424M
CM
64,100
9,724
765-01643.000
CI
696.850
125.070
765-01644-000
CI
1,358,600
182.559
765-01645-M
ET
0
0
765-01646-000
CI
210,950
35.905
765-01647-000
CI
275.950
49,207
765-01648-000
EX
0
0
765-01649-000
EX
0
0
765-01650-000
CI
379,000
71258
765-01651-000
CI
576,450.
98.927
765-01652-000
CV
86,000
16.819
765-01780-M
EX
0
0
765-01781-M
CI
282.450
44,165
765-01782-M
CI
268.800
45,133
765-017834)00
CI
1889650
31,812
765-01784-000
CI
70,900
12,999
765-01785-000
CM
61.450
8.514
765-01786-000
CI
284,600
23.995
765-01787-M
RI
136,300
17,604
765-01788-M
CI
223,100
25, 109
765-01789-000
CI
263.050
34,738
765-01790-000
RI
98,200
9,295
765-01791-000
RI
90,2M
97020
765-01792-000
CI
92.950
15,656
765-017934000
RI
73.000
10,704
765-01794-000
ET
0
0
765-01795-000
ET
0
0
765-01796-000
CI
144.100
21,912
765-01797-M
CI
146,300
19.005
765-0.1798-000
CI
168.950
25,267
765-01799-000
CI
193,000
317257
765-01800-000
ET
0
0
765-01801-000
ET
0
0
765-01902-000
CI
226.500
37,190
765-01803-000
CI
184200
26,312
765-01804-M
CI
339,000
48,532
765-01806-000
CI
173,850
33,297
765-01907-M
PS
5,211,350
1,042,270
765-01808-M
Cl
168,350
28,882
765-01809-M
PS
144.750
28,950
765-01810-000
CI
1,077.000
152.757
765-01811.OW
CI
11296,200
206,492
765-01812-000
CI
290,300
58.060
765-018134000
CM
47,850
6,710
765-WS14-M
CI
380200
73.871
765-01815-000
CM
55,600
10,978
765-01820-M
CI
6,400,000
1280.000
765-01821-000
CI
6,190.100
1,086,591
765-01827-M
CI
171,100
32,990
765-01828-ON
CI
199.850
389338
765-01829-M
CI
141,800
26,712
765-01830-M
CI
580,000
67.696
765-01831-OW
CI
240,300
44,573
765-01832-M
CI
169.100
31.746
765-01832-001
CI
100.100
18,633
10/12004
PARCEL ID
Two
Total Aooreised
Total Assessed
765-018334000
CI
163.700
22,537
765-01834-000
CI
405.400
64.106
76MI835-M
CV
396,900
75.533
765-01835-001
CB
1,953.100
299207
765-01836-000
CI
4,000.000
770,000
765-01837-M
CV
64,850
11231
765-01815-000
Cl
40%400
80.993
765-01817-000
ET
0
0
765-01846-000
CI
722.150
127,470
765-01847-M
cl
702.950
140.590
765-01848-000
CI
2,500.000
461.627
765-01849-NO
ET
0
0
765-018504000
ET
0
0
765-01851-000
ET
0
0
765-01852-M
ET
0
0
765-01853.000
EX
0
0
765-01838-M
CI
455.400
84.885
765-01839-000
cl
982.300
122.694
765-01840-000
CM
89.000
17270
765-01841-M
CI
68.150
12.112
765-01842-M
EX
0
0
765-01843-000
CI
85250
14.143
765-01944-ON
CI
67.100
11.168
765-01844-001
CI
67,000
11.140
765-01845.000
cl
275.950
52.573
765-01918-000
CI
1,975.950
377.706
765-01919-M
cl
244.900
34,120
765-01920-WO
CI
238.800
45.485
765-01924-000
CI
236.850
47.370
765-01925-000
CI
481.400
79.671
765-01926-M
EX
0
0
765-01928-NO
EX
0
0
765-01929-000
ET
0
0
765-01955.000
RV
22,500
3.168
765-01930.000
CI
389.750
77.950
765-01932-000
CI
527.600
59.068 -
765-01933-M
CI
432,400
72.758
765-01935-M
CI
4,380.500
849.736
765-01938-000
CI
167.550
30,488
765-019394)00
CI
134,850
62.062
765-01854.000
ET
0
0
765-01855-M
ET
0
0
765-01948.000
CI
332,700
61,576
765-01949-000
CI
239.150
44.959
765-01950-000
CI
260.950
52.190
765-019524M
ET
0
0
765-01953-000
ET
0
0
765-01940.000
CI
668.400
119,577
765-01940-001
CI
230,800
45,495
765-01941-000
EX
0
0
765-01942-M
CI
341.350
68-M
765-01943-000
CI
470250
90,167
765-01944-M
CI
109.650
14,715
765-019454)00
cl
175.450
23.695
765-01946-000
EX
0
0
765-01947-000
EX
0
0
765-01954-000
CI
151.150
26.609
765-019274D00
CI
7177700
129.031
765-01958-M
EX
0
0
765-01956-000
RI
72,550
12.913
765-01959-000
EX
0
0
765-01960-000
EX
0
0
10112004 2
PARCEL ID
Twe
Total Aowaesed
Total Assessed
765-01961-M
EX
0
0
765-01962-000
EX
0
0
765-01963-000
EX
0
0
765-01964-000
EX
0
0
765-01965-NO
EX
0
0
765-01985-M
ET
0
0
765-01985-001
CI
11219.550
225,577
765-01986-M
EX
0
0
765-01987-M
EX
0
0
765-01988-000
EX
0
0
765-01989-M
EX
0
0
765-01990-M
EX
0
0
765-01993-000
ET
0
0
765-01991-000
CI
392,300
69.398
765-01992-000
ET
0
0
765-01966-M
CI
484,750
79,325
765-01967-000
CI
98.200
10,496
765-01988-M
CV
69,000
13.365
765-01969-000
CV
34.500
6.688
765-01970-000
CV
34,500
6.698
765-01971-000
CV
23.000
4,455
765-01972-NO
CI
1,294.050
130.545
765-01975-M
EX
0
0
765-01976-000
ET
0
0
765-01977-000
ET
0
0
765-01978-M
ET
0
0
765-01979-M
ET
0
0
765-01980-000
ET
0
0
765-01981.000
ET
0
0
765-01982-M
ET
0
0
765-02070-M
CR
35%500
52.773
765-02071-000
PS
1,750
350
765-02072-M
EX
0
0
765-02073-M
EX
0
0
765-01983-M
ET
0
0
765-01984-000
ET
0
0
765-02076-000
RI
66,250
10.427
765-02074.000
RI
50.900
5.808
765-02075-M
RV
22.500
2.860
765-02077-000
RI
132,800
10.962
765-02078.000
RI
61,650
7.765
765-02080-M
RI
35.650
6,303
765-02081-000
RI
47,950
7222
765-02082-000
CI
153.200
24.915
7654)2083-000
RI
51.800
7.444
765-02084-000
RI
35.850
5.477
765-02085-000
RI
57.050
87065
765-0208&000
CV
26,500
3.795
765-02087-M
CV
43,700
5,754
765-0208&000
CI
160250
21,607
765.02088-001
CI
34.950
4,791
765-02092-M
RV
100
20
7654Y2093-000
RV
500
100
765-02093-001
RI
61.100
6.901
765-02094-M
CI
79.250
137607
765402095-M
RV
17,500
2,464
765-02103.000
RV
17,500
2.402
765-02096-M
RI
51.200
9,812
765-02097-M
CV
23,500
4.312
765-02098-000
CV
80.050
14,674
765-02099-000
CV
52,150
9,559
765-02104-000
EX
0
0
PARCEL ID
Twe
Total Anornised
Total Assessed
765-02106-000
RI
49,650
7,072
765-02134-000
CI
131,300
18,733
765-02135-000
RI
112.800
16,574
765-021374M
RI
66.100
6.195
765-02138-000
CM
18.550
3,663
765-02139-M
RI
110,750
8.900
765-02140-M
RI
93,600
9,708
765-02108-M
CI
44.850
67787
765-02112-000
RI
58,100
7,579
765-02113-M
RV
20,000
2,231
765-02114-000
RV
6,250
1,250
765-02115-000
RM
19,350
3,069
765-02116-M
CI
231.950
41.599
765-02118-000
RV
10,000
1.408
765-02119-000
RI
68,250
77424
765-02120.000
RI
54,000
67499
765-02121-000
RI
67.950
10,013
765-02123-000
RV
26,250
5250
765-02124-000
CI
98,900
157473
765-02127-000
RV
31.250
2.603
765-02128-000
RI
66.850
8,309
765-02129-M
RV
33,750
4,752
765-02130-000
CI
324,750
64,146
765-02133-000
CV
34,250
5.445
765-02100-000
RI
48.000
7,951
765-02102-000
RV
15.000
21059
765-02980-000
RI
44,050
67119
765-MBI-M
CI
73.250
12,474
765-M82-000
RI
43.450
6,363
765-02983.000
RM
10.500
1.485
765-02984-000
RI
22,250
2,922
765-02985-000
RI
36.250
6.450
765-02986.000
RI
37.500
4.936
765-02987-000
RI
33,950
5.048
7654)2988-000
RI
72,950
10.221
765.02989.000
RI
26,250
4.147
7654)2990.000
RM
100300
1.496
765-02991-000
RI
23,600
4,276
765-04325-M
CM
58,300
7,309
765-04319-000
CI
113,200
22,418
765-04320-000
CI
4990050
60,117
765-04321-000
CI
342,150
65,670
765-04322-M
CM
97,850
16.632
765-043234)00
CM
40,350
6.765
765-04324-M
CM
52.2M
6,428
765-04310-000
CI
98,250
19.437
765-04312-000
RI
165,500
23,568
765-04313-M
RI
157,400
18,559
765-04314-000
RI
61,100
8,910
765-04315-000
CI
160700
32,140
765-04316-000
RI
167,650
24.518
765-04317-000
RI
14%050
210411
765-04318-000
CI
228,050
447318
765-044484)00
Ex
0
0
765-04449-M
CI
134,350
28,345
765-04450-M
CI
334,600
64,162
765-04451-000
EX
0
0
• 765.04452400
CI
261,200
44,602
765-04453-000
EX
0
0
765-04459-000
EX
0
0
765-04454-M
EX
0
0
765-044554000
EX
0
0
101112004 4
PARCEL ID
Type
Total Agwaised
Total Assessed
765-044564000
EX
0
0
765-04457-000
EX
0
0
765-04458-000
EX
0
0
765-04467-000
EX
0
0
765-04461-000
EX
0
0
765-04462-000
EX
0
0
765-04463-000
EX
0
0
765-04464-000
EX
0
0
765-04465-M
EX
0
0
765-04466-000
EX
0
0
765-05446-000
EX
0
0
765-05441.000
CI
1.300,650
159.654
765-05441-001
EX
0
0
765-05442-000
RI
69.500
13,288
765-05442-001
RV
28.400
4,543
765-05443-M
RV
14.400
2.475
765-05444-000
RI
56.700
10.780
765-05445-000
RI
55,750
10.582
765-05467-000
EX
0
0
765-05447-000
CV
2737950
23298
765-05448-000
CI
230t65O
46.130
765-05448-001
EX
0
0
765-05449-000
CI
77.200
12.864
765-054504000
EX
0
0
765-05451-000
CR
107,300
18.336
765-05452-000
RM
22,500
3,900
765-05453-ODO
RI
41,150
7,699
765-05454-000
CR
76250
8.965
765-05455-000
EX
0
0
765-05456-000
CV
5180D
825
765-05457-000
EX
0
0
765-05458-000
CI
73.600
12.758
765-05459-000
EX
0
0
765-05480.000
EX
0
0
765-05461-000
EX
0
0
765-05465-000
CI
107,850
17,827
765-05466-000
EX -
0
0
765-05468-000
CI
250,850
46.884
765-05498-M
EX
0
0
765-05499-000
EX
0
0
765-05500-000
EX
0 -
0
765-05531-000
CI
69,850
13.970
765-05501-000
CI
110,700
14.542
765-05501-001
EX
0
0
765-05502-000
CV
- 42,550
4,455
765-05504-000
ET
0
0
765-05505-000
EX
0
0
765-05506-001
EX
0
0
765-05506-002
EX
0
0
765-05507-000
IV
451750
8,852
765-05508-000
CI
28.700
4.994
765-05509-000
II
418,350
80,553
765-05528-000
CI
14.550
2.910
765-05478-000
RI
44,250
7.036
765-05479-OW
CI
205,000
31,163
765-054814000
CM
16,350
2,563
765-05482-000
RI
67.750
10.854
765-054874000
CI
93.500
159928
765-05492-001
EX
0
765-055104000
CI
103.350
16,541
765-05511-000
CI
83.300
16.613
765-05522-000
IV
360550
4,378
/ter FFqT4.9
PARCEL ID
TWO
Total Aowaised
Total Asaossed
765-05523-M
II
366,850
73,370
765-05523-001
EX
. 0
0
765-05525-001
CV
17.800
2,640
765-06380-M
RI
62,100
11,571
765406382-000
RI
49,850
9,515
765-06381-M
RV
12.600
1,683
765-07060-M
CI
69.850
11,826
765-07061-000
RI
20,650
2,898
765-07082-000
RI
86,900
12,396
765-07083-000
RI
33,150
5,577
765-07064-000
RV
15,000
1,760
765-07065-M
RI
45.150
5?218
765-07066-000
RI
33,700
5.302
765-07087-000
RV
109500
1,232
765-07068-000
RV
10,500
1,232
765-07069-000
RI
40,900
6,886
765-07070-000
RI
32,750
5,005
765-07100-000
RI
57.700
8.038
765-07099-M
RI
4%500
6.992
765-07087-000
CI
287,550
43,987
765-0708&000
CI
116,550
22.156
765-07089-000
RM
14,250
1,749
765-07090-000
RI
36,400
4,950
765-07091-M
RI
66,450
9.961
765-07092-000
RI
50.400
6.835
765-07093-M
RI
41,000
4.460
765-070944000
RI
57,450
9.639
765-07095-000
RI
29,500
3.861
765-07096-M
RV
100
20
765-07097-000
RI
41.800
6.842
765-07098-000
RI
37.450
5,657
765-07125-000
CV
10.500
1.650
765-07128-000
EX
0
0
765-07128-000
RI
13,250
2.650
765-07129-M
RI
59,000
7,770
765-07130.000
RV
18,750
27200
765-071314M
RI
56.500
7.030
765-07979-000
CI
246,350
477539
765-07980.000
CI
163250
31,635
765-08245400
EX
0
0
765-08247-000
EX
0
0
765-08248-M
CI
189,500
37.900
765-082494)00
RI
106,300
13,388
765-08249-001
CV
18,900
2,970
765-08250-000
RI
55.000
5.941
765-07969-000
RI
107.250
18,280
765-07972-000
RI
110.350
17241
765-07973.000
CI
187.850
37.445
765-07975-M
CI
308.200
55.873
765-07976-000
CI
100,350
20,070
765-07978-000
CR
205,000
38.885
765-07984.000
RI
I11,250
19.360
765-07987-000
CI
1t007J00
1967118
765-07988-0W
EX
0
0
765-08077-000
CI
2,059,200
411.840
765-08078-000
PS
30.400
6,080
765-08082-000
CV
92,450
10.824
765-08083-OW
CI
525,300
92.398
765-08084-000
CV
77.050
9,020
765-08088-000
CV
18,900
1.130
765-08089-000
EX
0
0
765-08239-000
RI
54,850
9474
1011=04
PARCEL ID
Twe
Total ALma'isad
Total Assessed
765-08240-000
RI
60,100
8,565
765-11664-ON
RI
139.450
14,041
765-11723-000
EX
0
0
765-11724-000
EX
0
0
765-11724-001
EX
0
0
765-11731-000
EX
0
0
765-11731-001
CM
60,2W
10,353
765-11731-010
EX
0
0
765-12671.OW
ET
0
0
765-12972-OW
CI
133,6W
26,068
765-12673-M
CI
266,600
50,850
765.12674-000
RI
71,350
12,455
765-12675-000
CM
27,500
5,500 '
765-12876-OW
RI
98,350
18.150
765-12681-000
ET
0
0
765-12682-000
ET
0
0
765-12684-000
EX
0
0
- 765-12686-000
CI
493,100
94,373
765-12687-000
RV
23,000
3,575
765-1268"00
RI
128.350
14.288
765-12689-M
EX
0
0
765-12689-001
RV
1,000
200
765.12691-000
EX
0
0
765-12710.004
CI
170,293
27.080
765.12710-005
CI
19%308
31,702
765-12710-006
CI
68,680
10,929
765-12710-007
CI
28,076
4,145
765-12710-009
CI
65,W8
10,340
765-12710-010
CI
22,648
3,603
765-12710-011
CI
11.388
1,815
765-12711-WO
ET
0
0
765-127124000
ET
0
0
765-12713-M
ET
0
0
765-127144000
ET
0
0
765-127154000
CI
1,724,950
247,592
765-12716-000
EX
0
0
765-12718-M
CV
12.800
1.188
765-12720-000
CV
19,200
1,782
765-12721.ON
CV
14.700
1.364
765.127224000
CM
26,000
2,552
765.12724-000
EX
0
0
765-12766-000
RV
14.400
2,288
765-12767-000
RV
16.000
2,574
765-12768-000
RV
16.000
2,574
765-12781-000
CR
4%900
8.723
- 765.12782-000
CI
74,150
11,288
765-12783-000
CM
17.150
2,013
765-12785-000
CI
467,70D
88,717
765-12789-000
CV
28.350
4,455
765-12791-000
CM
36.150
5,786
765-12792-000
RI
111,600
21.043
765-12793-000
RI
47,650
8,148
765-12794-000
RV
19,2W
3,300
765-20935-020
CI
3717646
707528
765-22032-000
RI
420.119
78,887
765-22033-W0
RI
359.032
84,170
765-22034-000
Rl
384,607
72,188
765-22035-000
RI
465.242
93.048
765-22036-000
CI
315.192
.49280
765-22037-WO
CI
145,374
24.640
765-22038-000
CI
859.361
141.680
765-22039-000
CI
293,367
49,260
10112004 7
PARCEL ID
Twe
Total Anoraised
Total Assessed
765-22040-000
CI
252,856
43.120
765-127954000
RV
13,600
2,145
765-12796-000
RV
8,000
1,375
765-12797-000
RI
58,000
8,050
765-22538-000
CI
457,600
91.520
765-22539-000
CI
476.000
95,200
765-225404M
RI
239.850
47,970
765-22541-M
RI
228,800
45,760
765-22542-M
RI
184,500
361900
765-22543-000
RI
114.400
22,880
765-22544-000
RI
114,400
22,880
765-22545-M
RI
147.650
29,530
765-22546-000
CI
5530550
110.710
765-22547-000
CI
439.150
67.830
765-22536-000
CI
339.500
67,900
765-22537-000
CI
394.850
78.970
765-22548-000
CI
0
0
765-12811-000
RI
24,800
47290
765-17377-000
EX
0
0
765-20935-010
CI
1,436.854
273.665
765.127644)00
EX
0
0
765-12764-001
CI
307.800
25.454
765-12764-002
CI
436.250
801680
765-12765-000
RV
14.400
2,298
765-12709-000
ET
0
0
765-12710-001
CI
320.142
50.912
765-12710-002
CI
194,534
307943
765-12710-003
CI
146.175
23243
95,167, 900
16,616,684
10I1(200d
g
35
City Of rayetteville, ArLansas
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
EXHIBIT No.5
TIF Financing Strategies
36
EXHIBIT No.5
TIF Financing Strategies
General Tax Increment Financing Information
Tax increment finance ("TIF") is a type of public finance that the Arkansas General Assembly added
to the powers of municipalities and counties by Amendment 78 to the Arkansas Constitution.
Amendment 78 empowers municipalities and counties to create "redevelopment districts" that can
issue bonds the repayment of which is secured by ad valorem tax payments made by owners of
taxable real property in the district.
The real property within the district receives an increased assessed value due to the public
improvements and private reinvestment. Public improvements are financed by the proceeds of the
bonds issued and sold by the district. The district pledges to the payment of its bonds that portion of
the ad valorem tax that is otherwise levied by the city or county that formed the district (the amount
of which is increased by the value of the public and private improvements within the district). That
is, the district pledges the tax on the increment in value of the real property within its boundaries
before and after the improvements. TIF bonds are secured by the existing municipal and county tax
levied against the increase in assessed value. There is no new tax levied.
TIF's are generally used as a tool for economic development available to municipalities to promote
industry and redevelopment of real property, and to eliminate blight. Projects are funded by using
taxes collected in the district itself, without raising the taxes of residents outside the district. This
concept is referred to as "redevelopment from within." A TIF financing raises funds for
redevelopment and acts to stimulate revitalization without using general revenues of municipality.
TIF uses tax-exempt financing to encourage growth and redevelopment within the district, which in
turn stimulates economic growth outside the district. TIF captures, during its life, the increased tax
revenue that results when private investment is stimulated. These tax receipts are called the "tax
increment." As private investment adds to the tax base within the district, the increment is directed
back to pay for the public investment projects. When the bonds are paid off, the tax receipts
generated by the tax increment goes back into the general tax revenues or can be dedicated to
additional projects within the district.
Financine of Estimated Project Costs
The proposed project costs for improvements within the Highway 71 East Square Redevelopment
District are as follows:
TIF Bond Proceeds
Private Investments
Financing Timetable
Phase I
$ 3,500,000.00
$ 19,000,000.00
2004-2005
Phase 11
$ 7,116,000.00
2004-2029
37
District Indebtedness
It is anticipated that tax-exempt bonds will be issued by the Highway 71 East Square Redevelopment
District due to the public nature and purposes of the proposed improvements. The amount of
indebtedness to be incurred pursuant to the Highway 71 East Square Redevelopment District Project
Plan is projected to provide bond proceeds as follows:
Phase 1 - Process of removing blight in the former Mountain Inn area -Catalyst Project:
$3,500,000 (based upon 2004 dollars)
Phase 11 — City Streetscape Improvements — First 10 Year Project:
$7,116,000
(based
upon
2004 dollars)
$10,616,000
Total
bond
Proceeds (based upon 2004 dollars)
Other Costs
Other costs relating to the issuance of bonds may include, among other things, reserve funds,
capitalized interest, feasibility studies, accounting, financial advisory, legal and underwriting fees.
Any initial bonds and subsequent financings will be subject to allowable financing parameters as
determined by bond underwriting requirements, debt service coverage ratios, projections of
incremental growth in assessed values, interest rates and other requirements of the capital markets.
Professional Services
In accordance with Arkansas Code Annotated 14-168-304 (see Exhibit No. 7). Powers Generally, a
district may "(3) Issue redevelopment bonds and notes and to pledge tax increments and other
redevelopment revenues for repayment of them; (15) Designate one (1) or more official or
employee of the local government to make decisions and handle the affairs of redevelopment
districts created pursuant to this subchapter; and (19) Do all things necessary or convenient to carry
out the powers granted in this subchapter". The district may engage as may be necessary
professional advisors, consultants, attorneys and other TIF specialists to carry out the project plan
and related financings. The Mayor of the City of Fayetteville or others as may be assigned by the
Mayor may engage professionals to specifically meet the desired results of the Project Plan.
Application of District Revenues
All tax increment collected for the established twenty-five year period will be used to cover district
indebtedness including initial bonded debt and additional bonds that may be issued as district
revenues permit. Excess revenues shall retire the district's indebtedness or fund additional projects
as may be approved by the City Council in accordance with bond covenants and obligations.
Interest Earnines
All interest earnings will be used towards debt service obligations on issued Tax Increment
Financing bonds/notes. Earnings may be applied to the payment of Capitalized Interest and any
prepayment of debt obligations as may be permitted.
FT.'3
City o� �ayetteville, ArLansas,
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
EXHIBIT No.6
Amendment 78
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EXHIBIT No.6
Arkansas Code Annotated 14-168-301 through 14-168-323
Redevelopment District
Chapter 168
Community Redevelopment Generally
Subchapter 3
Community redevelopment — Creation and procedures
14-168-301. Definitions.
As used in this act subchapter, unless the context otherwise requires:
(1) "Applicable ad valorem rate" means the total ad valorem rate less the debt service ad valorem rate;
(2) "Base value" means the assessed value of all property within a redevelopment district subject to ad valorem
taxation, as of the most recent assessment preceding the formation of the redevelopment district;
(3)(A) "Blighted area" means an area in which the structures, buildings, or improvements, by reason of dilapidation,
deterioration, age or obsolescence, inadequate provision for access, ventilation, light, air, sanitation, or open spaces,
high density of population and overcrowding or the existence of conditions which endanger life or property, are
detrimental to the public health, safety, morals, or welfare.
(B) "Blighted area" includes any area which, by reason of the presence of a substantial number of substandard, slum,
deteriorated or deteriorating structures, predominance of defective or inadequate street layout, faulty lot layout in
relation to size, adequacy, accessibility, or usefulness, unsanitary or unsafe conditions, deterioration of site or other
improvements, diversity of ownership, tax on special assessment delinquency exceeding the fair value of the land,
defective or unusual conditions of title, or the existence of conditions which endanger life or property by fire and
other causes, or any combination of such factors, substantially impairs or arrests the sound growth of a city, retards
the provision of housing accommodations, or constitutes an economic or social liability and is a menace to the public
health, safety, morals, or welfare in its present condition and use, or any area which is predominantly open and
which because of lack of accessibility, obsolete platting, diversity of ownership, deterioration of structures or of site
improvements, or otherwise, substantially impairs or arrests the sound growth of the community;
(4) "Current value" means the assessed value of all property within a redevelopment district subject to ad valorem
taxation, as of the most recent assessment after the formation of the redevelopment district;
(5) "Debt service ad valorem rate" means that portion of the total ad valorem rate that has been, at January 1, 2001,
pledged to the payment of debt service on bonds issued by any taxing unit in which all or any part of the
redevelopment district is located;
(6)(A) "Incremental value", for any redevelopment district, means the difference between the base value and the
current value.
(B) The incremental value will be positive if the current value exceeds the base value, and the incremental value will
be negative if the current value is less than the base value;
(7) "Local governing body" means the city council, city board of directors, county quorum court, or any other
ELI
legislative body governing a local government in the State of Arkansas;
(8) "Local government" means any city or county in the State of Arkansas;
(9)(A) "Project costs" means expenditures made in preparation of the project plan and made, or estimated to be
made, or monetary obligations incurred, or estimated to be incurred, by the local government, which are listed in the
project plan as costs of public works or improvements within a redevelopment project district, plus any costs
incidental thereto.
(B) Project costs include, but are not limited to:
(i) Capital costs, including, but not limited to, the actual costs of the construction of public works or improvements,
new buildings, structures, and fixtures, the demolition, alteration, remodeling, repair, or reconstruction of existing
buildings, structures, and fixtures, environmental remediation, parking and landscaping, the acquisition of
equipment, and site clearing, grading, and preparation;
(ii) Financing costs, including, but not limited to, all interest paid to holders of evidences of indebtedness issued to
pay for project costs, all costs of issuance, and any redemption premiums, credit enhancement, or other related costs;
(iii) Real property assembly costs, meaning any deficit incurred resulting from the sale or lease as lessor by the local
government of real or personal property within a redevelopment district for consideration which is less than its cost
to the local government
(iv) Professional service costs, including, but not limited to, those costs incurred for architectural, planning,
engineering, and legal advice and services;
(v) Imputed administrative costs, including, but not limited to, reasonable charges for the time spent by local
government employees in connection with the implementation of a project plan;
(vi) Relocation costs, including, but not limited to, those relocation payments made following condemnation and job
training and retraining;
(vii) Organizational costs, including, but not limited to, the costs of conducting environmental impact and other
studies, and the costs of informing the public with respect to the creation of redevelopment project areas and the
implementation of project plans;
(viii) The amount of any contributions made in connection with the implementation of the project plan;
(ix) Payments made, in the discretion of the local governing body, which are found to be necessary or convenient to
the creation of redevelopment areas or the implementation of project plans; and
(x) That portion of costs related to the construction of environmental protection devices, storm or sanitary sewer
lines, water lines, or amenities or streets or the rebuilding or expansion of streets, the construction, alteration,
rebuilding, or expansion of which is necessitated by the project plan for a district, whether or not the construction,
alteration, rebuilding, or expansion is within the area;
(10) "Project plan" means the plan which shall be adopted by a local governing body for a redevelopment project as
described in § 14-168-308;
(1 1) 'Real property" means all lands, including improvements and fixtures on them and property of any nature
appurtenant to them or used in connection with them and every estate, interest, and right, legal or equitable, in them,
including terms for years and liens by way ofjudgment, mortgage, or otherwise, and the indebtedness secured by the
liens;
(12) 'Redevelopment district" means a contiguous geographic area within a city or county in which a redevelopment
41
project will be undertaken, as defined and created by ordinance of the local governing body;
(13)(A) "Redevelopment project" means an undertaking for eliminating or preventing the development or spread of
slums or deteriorated, deteriorating, or blighted areas, for discouraging the loss of commerce, industry, or
employment, or for increasing employment, or any combination thereof.
(B) A redevelopment project may include one (1) or more of the following:
(i) The acquisition of land and improvements, if any, within the redevelopment district and clearance of the land so
acquired; or
(ii) The development, redevelopment, revitalization, or conservation of the project area whenever necessary to
provide land for needed public facilities, public housing, or industrial or commercial development or revitalization,
to eliminate unhealthful, unsanitary, or unsafe conditions, to lessen density, mitigate or eliminate traffic congestion,
reduce traffic hazards, eliminate obsolete or other uses detrimental to the public welfare, or otherwise remove or
prevent the spread of blight or deterioration; or
(C) The financial or other assistance in the relocation of persons and organizations displaced as a result of carrying
out the redevelopment project and other improvements necessary for carrying out the project plan, together with
such site improvements as are necessary for the preparation of any sites and making any land or improvements
acquired in the project area available, by sale or by lease, for public housing or for development, redevelopment, or
rehabilitation by private enterprise for commercial or industrial uses in accordance with the plan;
(D) The construction of capital improvements within a redevelopment district designed to alleviate deteriorating
conditions or a blighted area or designed to increase or enhance the development of commerce, industry, or housing
within the redevelopment district; or
(E) Any other projects the local governing body deems appropriate to carry out the purposes of this subchapter;
(14) "Special fund" means a separate fund for a redevelopment district established by the local government into
which all tax increment revenues and other pledged revenues are deposited and from which all project costs are paid;
(15) "Tax increment' means the incremental value of a redevelopment district multiplied by the applicable ad
valorem rate;
(16) "Taxing unit' means any city, county, school district, or community college district; and
(17) "Total ad valorem rate" means the total millage rate of all county, city, school, or other local general property
taxes levied on all taxable property within a redevelopment district in a year. History. Acts 2001, No. 1197, § 2.
14-168-302. Construction.
The General Assembly declares that this subchapter is necessary for the welfare of this state and its inhabitants, and
it is the intent of the General Assembly that it is to be broadly construed to effect its purpose. History. Acts 2001,
No. 1197, § 3.
14-168-303. Powers supplemental.
The powers conferred by this subchapter are in addition and supplemental to the powers conferred upon local
governments and improvement districts by the General Assembly relating to the issuance of bonds. History. Acts
2001, No. 1197, § 4.
14-168-304. Powers generally.
In addition to any other powers conferred by law, a local government may exercise any powers necessary and
42
convenient to carry out the purpose of this subchapter, including the power to:
(1) Create redevelopment districts and to define the boundaries of redevelopment districts;
(2) Cause project plans to be prepared, to approve the project plans, and to implement the provisions and effectuate
the purposes of the project plans;
(3) Issue redevelopment bonds and notes and to pledge tax increments and other redevelopment revenues for
repayment of them;
(4) Deposit moneys into the special fund for any redevelopment project district;
(5) Enter into any contracts or agreements, including agreements with bondholders, determined by the local
governing body to be necessary or convenient to implement the provisions and effectuate the purposes of project
plans;
(6) Receive from the federal government or the state loans and grants for, or in aid of, a redevelopment project and
to receive contributions from any other source to defray project costs;
(7)(A) Exercise the right of eminent domain to condemn property for the purposes of implementing the project plan.
(B) The rules and procedures set forth in §§ 18-15-301 - 18-15-307 shall govern all condemnation proceedings
authorized in this subchapter;
(8) Make relocation payments to such persons, businesses, or organizations as may be displaced as a result of
carrying out the redevelopment project;
(9) Clear and improve property acquired by it pursuant to the project plan and construct public facilities on it or
contract for the construction, development, redevelopment, rehabilitation, remodeling, alteration, or repair of the
property;
(10) Cause parks, playgrounds, or water, sewer, or drainage facilities, or any other public improvements, including,
but not limited to, fire stations, community centers, and other public buildings, which it is otherwise authorized to
undertake, to be laid out, constructed, or furnished in connection with the redevelopment project;
(1 l) Lay out and construct, alter, relocate, change the grade of, make specific repairs upon, or discontinue public
ways and construct sidewalks in, or adjacent to, the redevelopment project;
(12) Cause private ways, sidewalks, ways for vehicular travel, playgrounds, or water, sewer, or drainage facilities
and similar improvements to be constructed within the redevelopment project for the particular use of the
redevelopment district or those dwelling or working in it;
(13) Construct any capital improvements of a public nature, as such term is defined in § 14-164-303(a)(2), as now or
hereafter amended;
(14) Construct capital improvements to be leased or sold to private entities in connection with the goals of the
redevelopment project;
(15) Designate one (1) or more official or employee of the local government to make decisions and handle the affairs
of redevelopment districts created pursuant to this subchapter;
(16) Adopt ordinances or bylaws or repeal or modify such ordinances or bylaws or establish exceptions to existing
ordinances and bylaws regulating the design, construction, and use of buildings within the redevelopment district;
(17) Sell, mortgage, lease, transfer, or dispose of any property, or interest therein, acquired by it pursuant to the
project plan for development, redevelopment, or rehabilitation in accordance with the project plan;
(18) Invest project revenues as provided in this subchapter; and
EW
(19) Do all things necessary or convenient to carry out the powers granted in this subchapter. History. Acts 2001,
No. 1197, § 5.
14-168-305. Creation of district.
(a) The local governing body, upon its own initiative or upon request of affected property owners or upon request of
the city or county planning commission, may designate the boundaries of a proposed redevelopment district.
(b)(1) The local governing body shall hold a public hearing at which interested parties are afforded a reasonable
opportunity to express their views on the proposed creation of a redevelopment district and its proposed boundaries.
(2)(A) Notice of the hearing shall be published in a newspaper of general circulation in the city or county at least
fifteen (15) days prior to the hearing.
(B) Prior to this publication, a copy of the notice shall be sent by first-class mail to the chief executive officer of all
local governmental and taxing entities having the power to levy taxes on property located within the proposed
redevelopment district and to the school board of any school district which includes property located within the
proposed redevelopment district.
(c) The local governing body shall adopt an ordinance which:
(1) Describes the boundaries of a redevelopment district sufficiently definite to identify with ordinary and reasonable
certainty the territory included in, which boundaries may create a contiguous or noncontiguous district;
(2) Creates the redevelopment district as of a date provided in it;
(3)(A) Assigns a name to the redevelopment district for identification purposes.
(B) The name may include a geographic or other designation, shall identify the city or county authorizing the district,
and shall be assigned a number, beginning with the number one (1).
(C) Each subsequently created district shall be assigned the next consecutive number; and
(4) Contains findings that the real property within the redevelopment district will be benefitted by eliminating or
preventing the development or spread of slums or blighted, deteriorated, or deteriorating areas, or discouraging the
loss of commerce, industry, or employment, or increasing employment, or any combination thereof.
(d)(1) No county shall establish a redevelopment district, any portion of which is within the boundaries of a city.
(2) Provided, however, that one (1) or more local governments through interlocal agreement may join in the creation
of a district, the boundaries of which lie in one (1) or more local governments.
(e)(1) The ordinance shall establish a special fund as a separate fund into which all tax increment revenues and other
revenues designated by the local government for the benefit of the redevelopment district shall be deposited, and
from which all project costs shall be paid.
(2) Such special fund may be assigned to and held by a trustee for the benefit of bondholders if tax increment
financing is used.
(f)(1) The boundaries of the redevelopment district may be modified from time to time by ordinance of the local
government.
(2) Provided, however, that in the event any bonds, notes or other obligations are outstanding with respect to the
redevelopment district, any change in the boundaries shall not reduce the amount of tax increment available to secure
►n
such tax increment financing. History. Acts 2001, No. 1197, § 6.
14-168-306. Project plan - Approval,
(a)(1) Upon the creation of the redevelopment district, the local governing body shall cause the preparation of a
project plan for each redevelopment district, and such project plan shall be adopted by ordinance of the local
governing body.
(2) This process shall conform to the procedures set forth in this section.
(b) Each project plan shall include:
(1) A statement listing the kind, number, and location of all proposed public works or improvements within the
district or, to the extent provided, outside the district;
(2) An economic feasibility study;
(3) A detailed list of estimated project costs;
(4) A description of the methods of financing all estimated project costs, including the issuance of tax increment
bonds, and the time when the costs or monetary obligations related thereto are to be incurred;
(5) A certification by the county tax assessor of the base value, total ad valorem rate, debt service ad valorem rate,
and applicable ad valorem rate for the redevelopment district;
(6) The type and amount of any other revenues that are expected to be deposited to the special fund of the
redevelopment district;
(7) A map showing existing uses and conditions of real property in the district;
(8) A map of proposed improvements and uses in the district;
(9) Proposed changes of zoning ordinances;
(10) Appropriate cross-references to any master plan, map, building codes, and city ordinances affected by the
project plan;
(1 1) A list of estimated nonproject costs; and
(12) A statement of the proposed method for the relocation of any persons to be displaced.
(c) If the project plan is to include tax increment financing, the tax increment financing portion of the plan shall set
forth:
(1) The amount of indebtedness to be incurred pursuant to this subchapter;
(2) An estimate of the tax increment to be generated as a result of the project;,
(3) The method for calculating the tax increment, which shall be in conformance with the provisions of this
subchapter, together with any provision for adjustment of the method of calculation;
(4) Any other revenues, such as payment -in -lieu -of -taxes revenues, to be used to secure the tax increment financing;
and
(5) Any other provisions as may be deemed necessary in order to carry out any tax increment financing to be used
for the redevelopment project.
45
(d) If less than all of the tax increment is to be used to fund a redevelopment project or to pay project costs or retire
tax increment financing, the project plan shall set forth the portion of the tax increment to be deposited in the special
fund of the redevelopment district, and provide for the distribution of the remaining portion of the tax increment to
the taxing units in which the district lies.
(e)(1) The local governing body shall hold a public hearing at which interested parties are afforded a reasonable
opportunity to express their views on the proposed project plan.
(2)(A) Notice of the hearing shall be published in a newspaper of general circulation in the city or county at least
fifteen (15) days prior to the hearing.
(B) Prior to this publication, a copy of the notice shall be sent by first-class mail to the chief executive officer of all
local governmental and taxing entities having the power to levy taxes on property located within the proposed
redevelopment district and to the school board of any school district which includes property located within the
proposed redevelopment district.
(3) The hearing may be held in conjunction with the hearing set forth in § 14-168-305(b)(1).
(4) Prior to publication, a copy of the notice shall be sent by first-class mail to the chief executive officer of all local
governments or entities having the power to levy taxes on property within the district and to the school board of any
school district which includes property located within the proposed redevelopment district.
(f)(1) Approval by the local governing body of a project plan must be within one (1) year after the date of the county
assessor's certification required by subdivision (b)(5) of this section.
(2) The approval shall be by ordinance which contains a finding that the plan is economically feasible. History. Acts
2001, No. 1197, § 7.
14-168-307. Project plan - Amendment.
(a) The local governing body may adopt by ordinance an amendment to a project plan.
(b)(1) Adoption of an amendment to a project plan shall be preceded by a public hearing held by the local governing
body as provided in § 14-168-306(e)(1), at which interested parties shall be afforded a reasonable opportunity to
express their views on the amendment.
(2)(A) Notice of the hearing shall be published in a newspaper of general circulation in the city or county once a
week for two (2) consecutive weeks. The first such publication shall be fifteen (15) days prior to the hearing.
(B) Prior to publication, a copy of the notice shall be sent by first-class mail to the chief executive officer of all local
governments or entities having the power to levy taxes on property within the district and to the school board of any
school district which includes property located within the proposed district.
(c)(1) One (1) or more existing redevelopment districts may be combined pursuant to lawfully adopted amendments
to the original plans for each district.
(2) Provided that the local governing body finds that the combination of the districts will not impair the security for
any bonds previously issued pursuant to this subchapter. History. Acts 2001, No. 1197, § 8.
14-168-308. Termination of districts.
(a) No redevelopment district may be in existence for a period longer than twenty-five (25) years, unless, pursuant to
amendment of the redevelopment plan, additional bonds have been issued and would not be fully paid until after the
date which is twenty-five (25) years from the date of creation of the district.
F
(b) The local governing body may set a shorter period for the existence of the district, and may also provide that no
bonds shall have a final maturity on a date later than the termination date of the district.
(c) Upon termination of the district, no further ad valorem tax revenues shall be distributed to the special fund of the
district.
(d)(1) The local governing body shall adopt, upon the expiration of the time periods set forth in this section, an
ordinance terminating the redevelopment district.
(2) Provided, however, that no district shall be terminated so long as bonds with respect to the district remain
outstanding. History. Acts 2001, No. 1197, § 9.
14-168-309. Costs of formation.
(a) The local government may pay, but shall have no obligation to pay, the costs of preparing the project plan or
forming the redevelopment district.
(b) If the local government elects not to incur those costs, they shall be made project costs of the district and
reimbursed from bond proceeds or other financing, or may be paid by developers, property owners, or other persons
interested in the success of the redevelopment project. History. Acts 2001, No. 1197, § 10.
14-168-310. Overlapping districts.
The boundaries of any redevelopment districts shall not overlap with any other redevelopment district. History. Acts
2001, No. 1197, § 11.
14-168-311. Valuation of real property.
(a)(1) Upon and after the effective date of the creation of a redevelopment project district, the county assessor of the
county in which the district is located shall transmit to the county clerk, upon the request of the local governing
body, the base value, total ad valorem rate, debt service ad valorem rate, and applicable ad valorem rate for the
redevelopment district and shall certify to it.
(2)(A) The assessor shall undertake, upon request of the local governing body, an investigation, examination, and
inspection of the taxable real property in the.district and shall reaffirm or revalue the base value for assessment of
the property in accordance with the findings of the investigation, examination, and inspection.
(B) The assessor shall determine, according to his or her best judgment from all sources available to him or her, the
full aggregate value of the taxable property in the district, which aggregate valuation, upon certification thereof by
the assessor to the clerk, constitutes the base value of the area.
(b)(1)(A)(i) The assessor shall give notice annually to the designated finance officer of each taxing unit having the
power to levy taxes on property within each district of the current value and the incremental value of the property in
the redevelopment district.
(ii) The assessor shall also determine the tax increment by applying the applicable ad valorem rate to the incremental
value.
(B) The notice shall also explain that the entire amount of the tax increment allocable to property within the
redevelopment district will be paid to the special fund of the redevelopment district.
(2) The assessor shall identify upon the assessment roll those parcels of property which are within each existing
district specifying on it the name of each district. History. Acts 2001, No. 1197, § 12.
47
14-168-312. Division of ad valorem real property tax revenue.
(a) For so long as the redevelopment district exists, the tax assessor shall divide the ad valorem tax revenue
collected, with respect to taxable property in the district, as follows:
(1) The assessor shall determine for each tax year:
(A) The amount of total ad valorem tax revenue which should be generated by multiplying the total ad valorem rate
times the current value;
(B) The amount of ad valorem tax revenue which should be generated by multiplying the applicable ad valorem rate
times the base value;
(C) The amount of ad valorem tax revenue which should be generated by multiplying the debt service ad valorem
rate times the current value; and
(D) The amount of ad valorem revenue which should be generated by multiplying the applicable ad valorem rate
times the incremental value;
(2) The assessor shall determine from the calculations set forth in subdivision (a)(1) of this section the percentage
share of total ad valorem revenue for each according to subdivisions (a)(1)(B) - (D) of this section, by dividing each
of such amounts by the total ad valorem revenue figure determined by the calculation in subdivision (a)(1)(A) of this
section; and
(3) On each date on which ad valorem tax revenue is to be distributed to taxing units, such revenue shall be
distributed by:
(A) Applying the percentage share determined according to subdivision (a)(1)(B) of this section to the revenues
received and distributing such share to the taxing entities entitled to such distribution pursuant to current law;
(B) Applying the percentage share determined according to subdivision (a)(1)(C) of this section to the revenues
received and distributing such share to the taxing entities entitled to such distribution by reason of having bonds
outstanding; and
(C) Applying the percentage share determined according to subdivision (a)(1)(D) of this section to the revenues
received and distributing such share to the special fund of the redevelopment district.
(b) In each year for which there is a positive tax increment, the county treasurer shall remit to the special fund of the
redevelopment district that portion of the ad valorem taxes that consists of the tax increment.
(c) Any additional moneys appropriated to the redevelopment district pursuant to an appropriation by the local
governing body and any additional moneys dedicated to the fund from other sources shall be deposited to the
redevelopment district fund by the treasurer of the local government.
(d) Any funds so deposited into the special fund of the redevelopment district may be used to pay project costs,
principal and interest on bonds, and to pay for any other improvements of the redevelopment district deemed proper
by the local governing body.
(e) Unless otherwise directed pursuant to any agreement with bondholders, moneys in the fund may be temporarily
invested in the same manner as other municipal funds.
(f) If less than all of the tax increment is to be used for project costs or pledged to secure tax increment financing as
provided in the plan for the redevelopment project, the assessor shall account for such fact in distributing the ad
valorem tax revenues. History. Acts 2001, No. 1197, § 13.
14-168-313. Payments in lieu of taxes and other revenues.
(a) The local governing body may elect to deposit in the special fund of the redevelopment district all or any portion
of the local government's share of payments in lieu of taxes on property within the redevelopment district.
(b) Other revenues to be derived from the redevelopment project may also be deposited in the special fund at the
direction of the local governing body. History. Acts 2001, No. 107, § 14.
14-168-314. Bonds generally.
(a)(1) Bonds may be issued for project costs which may include interest prior to and during the carrying out of a
project and for a reasonable time thereafter, with such reserves as may be required by any agreement securing the
bonds and all other expenses incidental to planning, carrying out, and financing the project.
(2) The proceeds of bonds may also be used to reimburse the costs of any interim financing entered on behalf of the
redevelopment district.
(b) Bonds issued under this subchapter shall be payable solely from the tax increment or other revenues deposited to
the credit of the special fund of the redevelopment district and shall not be deemed to be a pledge of the faith and
credit of the local government.
(c) Every bond issued under this subchapter shall recite on its face that it is a special obligation bond payable solely
from the tax increment and other revenues pledged for its repayment. History. Acts 2001, No. 1197, § 15.
14-168-315. Redevelopment bonds or notes - Authority to issue.
For the purpose of paying project costs or of refunding notes issued under this subchapter for the purpose of paying
project costs, the local governing body may issue redevelopment bonds or notes payable out of positive tax
increments and other revenues deposited to the special fund of the redevelopment district. History. Acts 2001, No.
1197, § 16.
14-168-316. Redevelopment bonds or notes - Authorizing resolution.
(a) Redevelopment bonds and notes shall be authorized by ordinance of the local governing body.
(b)(1) The ordinance shall state the name of the redevelopment project district, the amount of bonds or notes
authorized, and the interest rate to be borne by the bonds or notes.
(2) The ordinance may prescribe the terms, form, and content of the bonds or notes and such other matters as the
local governing body deems useful, or it may include by reference the terms and conditions set forth in a trust
indenture or other document securing the redevelopment bonds. History. Acts 2001, No. 1197, § 17.
14-168-317. Redevelopment bonds or notes - Terms, conditions, etc.
(a)(1) Redevelopment bonds or notes may not be issued in an amount exceeding the estimated aggregate project
costs, including all costs of issuance of the bonds or notes.
(2) The redevelopment bonds and notes shall not be included in the computation of the constitutional debt limitation
of a local govemment.
(b)(1) The bonds or notes shall mature over a period not exceeding twenty-five (25) years from their date of issuance
or a period terminating with the date of termination of the redevelopment district, whichever period terminates
earlier.
(2) The bonds or notes may contain a provision authorizing their redemption, in whole or in part, at stipulated prices,
at the option of the local government on any interest payment date and, if so, shall provide the method of selecting
the bonds or notes to be redeemed.
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(3) The principal and interest on the bonds and notes may be payable at any place set forth in the resolution, trust
indenture, or other document governing the bonds.
(4) The bonds or notes shall be issued in registered form.
(5) The bonds or notes may be in any denominations.
(6) Each such bond or note is declared to be a negotiable instrument.
(c) The bonds or notes may be sold at public or private sale.
(d) Insofar as they are consistent with subdivision (a)(1) and subsections (b) and (c) of this section, the provisions of
§§ 14-169-220 and 14-169-221 relating to procedures for issuance, form, contents, execution, negotiation, and
registration of municipal bonds and notes are incorporated by reference therein.
(e)(1) The bonds may be refunded or refinanced and refunding bonds may be issued in any principal amount.
(2) Provided, that the last maturity of the refunding bonds shall not be later than the last maturity of the bonds being
refunded. History. Acts 2001, No. 1197, § 18.
14-168-318. Redevelopment bonds or notes - Security - Marketability.
To increase the security and marketability of redevelopment bonds or notes, the local government may:
(I ) Create a lien for the benefit of the bondholders upon any public improvements or public works financed by the
bonds;or
(2) Make such covenants and do any and all such actions, not inconsistent with the Arkansas Constitution, which
may be necessary or convenient or desirable in order to additionally secure the bonds or notes, or which tend to
make
the bonds or notes more marketable according to the bestjudgment of the local governing body. History. Acts 2001,
No. 1197, § 19.
14-168-319. Redevelopment bonds or notes - Special fund for repayment.
(a) Redevelopment bonds and notes are payable out of the special fund created for each redevelopment district under
this subchapter.
(b)(1) The local governing body shall irrevocably pledge all or part of the special fund to the payment of the bonds
or notes.
(2) The special fund, or the designated part thereof, may thereafter be used only for the payment of the bonds or
notes and their interest until they have been fully paid.
(c) A holder of the bonds or notes shall have a lien against the special fund for payment of the bonds or notes and
interest on them and may bring suit, either at law or in equity, to enforce the lien. History. Acts 2001, No. 1197, §
20.
14-168-320. Redevelopment bonds or notes - Tax exemption.
Bonds and notes issued under this subchapter, together with the interest and income therefrom, shall be exempt from
all state, county, and municipal income taxes. History. Acts 2001, No. 1197, § 21.
14-168-321. Excess funds.
50
(a) Moneys received in the special fund of the district in excess of amounts needed to pay project costs may be used
by the local governing body for other purposes of the district or for any other lawful purpose of the local governing
body.
(b) Upon termination of the district, all amounts in the special fund of the district may be used by the local governing
body for any lawful purpose. History. Acts 2001, No. 1197, § 22.
14-168-322. Impact reports.
The Assessment Coordination Department, in cooperation with other state agencies and local governments, shall
make a comprehensive impact report to the Governor and to the General Assembly at the beginning of each
biennium as to the economic, social, and financial effect and impact of community redevelopment financing
projects. History. Acts 2001, No. 1197, § 23.
14-168-323. Value of assessed property in a redevelopment district.
(a) If state funding to a school district is calculated with regard to the value of assessed property located in the
school district, the incremental value of real property within a redevelopment district shall not be included in the
assessed value of the real property within the school district for purposes of computing school district funding if the
real property is located within the redevelopment district and within the school district and the assessed value of the
real property increases above the base value.
(b) Subsection (a) of this section shall apply for each school year during which the tax increment for real property
within the redevelopment district is distributed pursuant to § 14-168-312. History. Acts 2003 (2nd Ex. Sess.), No.
43, § I.
51
City of ragetteville, ArLansas
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
EXHIBIT No.7
Local Demographics
52
EXHIBIT No.7
Local Demographics Summary
Economic strength continues to be the mainstay of the Northwest Arkansas MSA. Recently named
as the top ranking MSA in the country by the Milken Institute, NWA is now gathering much
attention for its regional economy. Fayetteville continues to experience robust growth along with
the rest of Northwest Arkansas. Fayetteville is still considered the city of choice for living mainly
because of its reputation for offering a superb quality of life. One highlight Fayetteville offers are
the attractions associated with the University of Arkansas including sporting events and cultural
activities. Fayetteville also is known in the region for its entertainment district located primarily
along Dickson Street which connects the historic areas of town and the university campus. There
has been a tremendous surge in demand for downtown/urban style living in Fayetteville near the
heartbeat of culture for northwest Arkansas.
Economic impact from the University of Arkansas in Fayetteville continues to be a major factor.
Beginning in 1871 when the University of Arkansas was created with a major land-grant under the
Morrill Land -Grant College Act the campus population has been ever increasing. On April 11, 2002
the University of Arkansas announced that it had been the recipient of the largest gift in the history
of American public higher education. The Walton Family Charitable Support Foundation of
Bentonville, AR committed $300 million to establish and endow an undergraduate honors college
and endow the graduate school. $177 million will be targeted towards students, $82 million towards
faculty, and $41 million towards library, technology, and other support areas. At the time, the
University was in the midst of six -year campaign targeting to raise $500 million. As a result of the
Walton's gift, the University decided to revise its parameters, upping the goal to raising $900 million
by June 2005. As of Fall, 2003 the campaign had raised $770 million. Chancellor John White said
in his annual State of the University address in September 2002 that over the next decade the
University would spend $642 million on building construction and improvement. Many of these
facilities and projects are necessary to the University's vision, as they have stated a goal of having
22,500 students by the year 2010. Current enrollment is just over 16,000.
The Fayetteville -Springdale -Rogers corridor gained notoriety when the 2000 Census indicated that
the area was the sixth fastest growing MSA in the country over the last 10 years. The population
jumped from approximately 211,000 to 31 1,000. Most notably during that time Wal-Mart Stores,
whose headquarters are in Bentonville, a sister city and north of Fayetteville, increased their sales
from $26 billion to $191 billion. Besides Wal-Mart, two other corporate giants call Northwest
Arkansas home. Tyson Foods, which had been a $7 billion sales giant, increased to $23 billion in
sales in 2002 with the takeover of IBP. JB Hunt Trucking, also headquartered in the MSA, has
annual sales in the $2-2.5 billion range. All three of these companies had phenomenal success during
the 1990s and are significant factor in the growth ofthe area. This bustling corner ofthe state's saga
has not escaped the media's attention as it has received write-ups in several national publications
thus aiding growth in yet another way.
53
Economic Overview of the Fayetteville -Springdale -Rogers MSA
Overview
The two -county area of Northwest Arkansas has experienced unprecedented economic and
population growth since the 1990's. A dominant driver behind the growth has been the success of
Wal-Mart, as it grew to become the world's largest retailer. Along the way, Wal-Mart has
encouraged its vendors to be accessible to the company which directly translated into the opening of
offices within Benton or Washington County for Fortune 500 and other companies. The resulting
high quality job creation has spawned a boom in the commercial real estate market, as the demand
for office space has increased and as the population growth has created the need for more retail
shops, restaurants, entertainment facilities and service providers. A corresponding escalation has
occurred in the construction of residential housing.
Wal-Mart has not been the only driver of growth in Northwest Arkansas. Tyson Foods has also
grown rapidly during the same period, becoming the world's largest "protein" company. The
Northwest Arkansas area has long been the home base of several large trucking companies. JB Hunt
has become one of the largest providers of logistics services in North America and Willis Shaw
Express is a major provider of transportation of refrigerated and frozen food products.
Fayetteville is also home to the University of Arkansas, a major research university, which is
steadily improving its national rankings. Some academic areas have reached the top tier nationally.
In 2002, the University of Arkansas was the recipient of a $300 million challenge grant from the
Wal-Mart Foundation, the largest grant ever given to a public university in the U.S. The university
has accelerated its quest for excellence and at the same time is pursuing a goal of increasing its
enrollment, to a total of 22,500 students by 2010.
The following pages provide some economic highlights of the Fayetteville -Springdale -Rogers MSA
54
National Perspective
In June of 2003, the Milken Institute released an update of its "Best Performing Cities" rankings,
which is intended to rank U.S. cities on two counts: leading the nation in economic performance
overall and in job creation. The components of the index include job, wage and salary and
technology growth. Using these criteria, the Fayetteville -Springdale -Rogers MSA ranked as the
number one regional economy in the United States.
Top 20 Best Performing Cities
Composite Index
'_003
Rank
Rank
fear ago
Metro
Index
1
23
Fayetteiille-Springdale-Rogers, AR
100.00
?
3
Las Vegas, NV 4Z
120.00
3
37
Fat Myers -Cape Coral, FL
123.08
4
12
West Palm Beach -Boca Raton. FL
138.77
5
1
San Diego, CA
149.23
6
7
San Luis Obispo-Atascadero, CA
15 L08
7
16
Laredo, TX
180.31
8
9
Brownsville -Harlingen -San Benito, TX
183.38
9
5
Mc-411en-Edinburg-Mission, TX
186.46
10
50
?Monmouth -Ocean. NJ
186.46
11
48
Anchorage, AK
194.15
12
20
Raleigh -Durham -Chapel Hitt, NC
197.23
13
41
Chico -Paradise, CA
206.46
14
4
Ventura. CA
207.38
15
18
Sacramento, CA
210.46
16
33
Houma, LA
215.08
17
15
Vallejo -Fairfield -Napa, CA
219.08
18
36
San Antonio, TX
223.08
19
28
Washington, DC -MID -VA -WV
226.15
20
11
Riverside -San Bernardino. CA
228.92
So e: %lam rus=:e
Unemployment Rate
The unemployment rates for the U.S. and for the state of Arkansas have followed the same general
trend and the levels have been fairly close.The unemployment rate for the Fayetteville -Springdale -
Rogers MSA has consistently been significantly lower than both. It has been at the three percent or
under level since the second half of 1998.
Unemployment Rates, Seasonally Adjusted
6.5
5.5
0 4.5
Y
fo
d
3.5
2.5
%N
1.5
oK a e 16 oK 0Z`99 e" 0 O eO�^ 0 Old: eO�ryPA p(DP o'�� i pdQ� m oo
U.S. 4Arkansas—FaySpr-Rog MSA
Sou=: Bureau of LaEor Stabsibs, Seasonal AEjuat=nt By
UA Center for Business am Econome RessanA
56
Non -Farm Emnlovment
The monthly establishment -based employment survey conducted by the Bureau of Labor Statistics
shows that, on a seasonally adjusted basis, total non -farm employment in both the U.S. and Arkansas
are at levels about 105 percent of the level in June of 1998. The Fayetteville -Springdale -Rogers
MSA has experienced a noticeably larger increase in employment. Currently, the level is just about
125 percent of the level of June 1998.
1.30
1.20
1.10
1.00
Non -Farm Employment Relative to June 1998
Seasonalty Adjusted
r�rrwrrMrr1�
rr�
rltirrl-�
O.on _s p c�0 �M19 00 �9 c�9 � � cp0 00 po `ph cps �1 p� pM1 pM1 nM1 ,pM1 p"� cp9 �9 ,p9 Y a�'
U.S. 4Arkansas—FaySpr-Rog MSA
Somta: Bureau of L&W StNsurs, Saasonal Adjusunant by
UA Carder kr Businasund Emnonl Rasaar
57
Sector Employment
Sector employment in the region has shown varying trends. Manufacturing employment has
declined since 1998, but by a lesser amount than nationally or in the state. Construction, trade -
transportation -utilities and services have shown significant gains in the past six years.
1.5
1.4
1.3
1.2
1.1
1
0.9
Fayetteville -Springdale -Rogers MSA Sector Employment Relative to June 1998,
Seasonally Adjusted
90 99 Ay_ Kd',' �•',Na'' � t� Fp P1 cep, QP1 P1�e5P`t' cP�' GPI' P�'�,SP"' �" c�"' P"' �Ff'3`
Construction Manufacturing Trade, Transportation, 8 utilities �—Services
Soum Bureau of Lauor Slausucs, Seasonal Adpsunent by UA Center fa Business nd Economc Rssaar
Bui/dine Permits
While there is some monthly volatility in the monthly data compiled by the United States Census
Bureau, the strong upward trend in the value of building permits in Northwest Arkansas since the
Fall of 1998 is evident. Over the last two years, this growth trend has accelerated. In fact, the value
of residential building permits in the area has equaled or exceeded the value of those in the Little
Rock metropolitan area, an area that currently has a population almost double that of the
Fayetteville -Springdale -Rogers MSA.
e0,000
50,000
40,000
30,000
20,000
10,000
Fayetteville -Springdale -Rogers MSA Residential Building Permits, Seasonally
Adjusted Value in $ Millions,
Source: Bureau of Me Census, Seasonal Adjuelmenl by UA Conk, Or Business and Economic Research
59
Population Proiections
In June of 2003, the Center for Business and Economic Research released updated population
projections for Arkansas, its counties and its metropolitan areas. The Fayetteville -Springdale -
Rogers MSA is projected to experience a doubling of its population by the year 2025.
Population Projections for Fayetteville -Springdale -Rogers MSA
nsaoo
�zs000
6J5000
625000
579M
525000
a
a156ro
a a25o00
L
37MK)
325000
215000
235000
in"
125000
Year
Sounn: V.S. Cen... Bmeu.,
OA Center far Bus nest M E[onomi. Mun.b
�Hawline
aaaa*l.uwer Bound
,,,,UpP rBou lld
City of ragetteville, ArLansas
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
EXHIBIT No.8
District Map and Legal Description
Highway 71 East Square ' a
Redevelopment District
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61
low
Highway 71 East Square Redevelopment District
A part of the Northwest Quarter (NW'/.) and a part of the Southwest Quarter (SW%) of Section 15, a part
of the Northeast Quarter (NEY.) and a part of the Southeast Quarter (SE%) of Section 16, and a part of
the Northwest Quarter (NW'/.) of the Northeast Quarter (NEA) of Section 21, all within Township 16 North,
Range 30 West, and being more speeftally described as follows! Beginning at the Northwest corner of
said Section 15; thence South 87' 17' 27" East 249.668 feet, within the right-of-way of Maple Street;
thence South 01' 47' 40' West 20.003 feet; thence South 02` 42' 16" West 174.001 feet; thenco North
87' 17" 32' West 26.0 feet; thence South 02' 43' 09' West 133.515 feet; thence North 85' 27' 59' West
6.224 feet; thence South 02' 42' 49' West 75.089 feet; thence South 87' 10' 49" East 21.222 feet thence
North 02' 42' 08" East 86.052 feet; thence South 87' 17' 23' East.42.0 feet thence South 02' 42' 09'
West 181.078 feet; thence South C9" 38' 06" East 53.252 feet thence South 02" 42' 31' West 88.117
feet thence South 87' 17' 25" East 6.578 feet; thence South 02' 42' 34" West 118.249 feet; thence North
87' 17' 1g" West 6.405 feet thence South 02" 42' 33' West 178.179 feet thence North 87' 17' 29" West
48.248 feet; thence South 02" 36' 09' West 140.177 feet; thence South 87' 17' 25' East 18.0 feet thence
South 02' 42' 21" West 8.749 feet thence South 87' 17' 21" East 66.367 feet; thence South 02' 42' 47'
West 250.57 feet; theme South 87' 10' 22" East 588.485 feet within the right-of-way of Dickson Street
thence South 02' 47' 49" West 193.929feet thence North 87' 17' 30" West 60 feet; thence South 02" 47'
53" West 60 feet; thence North 87' 12' 10" West 178.5 feet; thence North 02' 47' 24" East 6.8 feet;
thence North 87' 12' 11" West 72.75 feet; thence South 02" 47' 49" West 108.121 feet thence North 87"
12' 11" West 135.25 feet; thence North 02" 4T 50' East 63.132 feet thence North 87' 17' 31" West 12.0
feet; thence South 02' 47' 50" West 76.7 feet; thence North 87' 17' 28" West 57.931 feet; thence South
02' 47' 60" West 217.289 feet; thence South 27' 30' 47' West 23.922 feet; thence South 02' 42' 33" West
170.585 feet; thence North 87' 17' 24' West 50.0 feet; thence South 02" 52' 40' West 163.672 feet
thence South 87' 17' 27' East 64.825 feet; thence South 02' 42' 33' West 150.0 feet; thence North 87'
11' 17' West 11.476 feet thence South 02' 42' 48' West 448.801 feet thence South 40' 00' 30' East
36.293 feet; thence South 02' 43' 58" West 419.838 feet, within the right-of-way of Washington Avenue;
thence North 87' 10' 22' West 209.244 feet; within the right-of-way of Rock Street; thence South 02' 43'
58" West 546.724 feet within an alley; thence North 87' 10' 2T West 210.365 feet, within the right-of-way
of South Street; thence South 02' 43' 57" West 66.685 feet within the right-of-way of College Avenue;
thence North 87' 10' 22" West 518.504 feet, within the right-of-way of South Street; thence South 02' 43'
58" West 353.905 feet, within the right-of-way of East Avenue; thence North 87" 10' 22" West 266.896
feet, within the right-of-way of Fourth Street; thence South 02' 43' 58" West 336.999 feet, within the right-
of-way of Block Avenue; thence North 87' 10' 16- West 762.561 feet; thence South 02' 43' 58" West
983.02 feet, within the rightof-way of Locust Avenue; thence North 87' 00' 49' West 312.479 feet thence
North 46' 44' 23' West 92.814 feet; thence North 87' 00' 48' Wesl 306.778 feet thence South 02' 54' 17'
West 40.0 feet; thence South 73' 33' 26' East 16.52 feet; thence South 02' 02' 57" West 27.743 feet;
thence North 71' 09' 03' West 403.805 feet; thence North 02' 49' 30" East 106.181 feet; thence South
82" 59' 29' West 25.111 feet; thence North 02" 49' 31" Fast 118.176 feat; thence North 80' 4S 3r East
39.444 feet thence North 74" 49 51" East 31.257 feet thence North 02" 09 42" East 195.911 feet;
thence North 85" 34' 21" West 57.073 feet; thence North 00' 24' 18" East 106.401 feet; thence South 87'
10' 22" East 370.524 feet, within the right-of-way of Sbdh Street; thence North 02' 44' 00' East 52.635
feet; thence North 01' 46' 36' East 62.183 feet; thence North 06' 19' 32" West 48.42 fact; thonco North
10' 47' 29" West 37.114 feet; thence North 14' 03' 53" West 218.89 feet; thence North 02" 26' 34' Fast
76.273 feet; thence North 09' 56' 28" West 61.522 feet; thence North 14' 03' 08" West 181.254 feel;
thence South 86' 57' 21" East 122.451 feel; thence South 66" 13' 30" East 64.306 feet thence South Sr
10' 16' East 323.255 feet; thence North 02" 43' 59" East 149.989 feel, within the right-of-way of School
Avenue; thence South 87' 10' 15' East 350.602 feet thence North 02" 43' 52' East 5.751 feet thence
South 86' 50' 33" East 227.568 feet thence South 02' 41' 24" West 54.443 feet; thence South 87' 10'
16" East 160.561 feet thence North 02' 41' 25' East 2228.846 feet within the right-of-way of Church
Avenue; thence South 87' 10' 23" East 642.95 feet, within the right-of-way of Spring Street; thence North
02' 43' 68" East 608.315 feet, within the right-of-way of East Avenue; thence South 87" 10' 21' East
170.883 feet within the right-of-way of Dickson Street thence North 02' 44' 13" East 1333.608 feet,
within the right-of-way of Highland Avenue; thence South 87' 02' 57" East 347.732 feet, within the right-
of-way of Maple Street to the Point of Beginning and containing 144.467 acres, more or less.
63
City of rayetteville, ArLansas
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
EXHIBIT No.9
Existing Conditions of Blight
loa
City Of Faycltcvillc, Arkansas
HIGHBI'A171 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
City of Fayetteville, ArLansaa
HIGHII'AI71 EAST SQEARE REDEVELOPMENT DISTRICT
PROJECT PLAN
4QI., 14?P*. � , 1.
6-• 200igo-ram °Tr..f�•
.f
City of Faycttc illc, Arkan as
HICHWAV 71 EAST SQI ARE REDEVELOPMENT DISTRI(U
PROJECT PLAN
7"Nal 11w
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City of Fayetteville, Ar6nsas
IIIGHWAN 71 EAST SQI-ARE REDEVELOPMENT DISTRICT
P RO.I E. CT PLA\
meg
City of rayetteville, ArLansas
HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT
PROJECT PLAN
EXHIBIT No.10
Downtown Master Plan
FAYETTEVILLE CITY COUNCIL MEETING
4 dAIA6#A�4A
9�c0. sl(.(o3
STATUS REPORT
HIGHWAY 71 EAST SQUARE RE -DEVELOPMENT PROJECT
9-28-2004
After considerable discussion, city administrative and legal staff and the
developers of record are in agreement that public involvement in the first
phase of this important project will be limited to the removal of the
Mountain Inn and adjoining structures. This limited use of public funds
generated through the Tax Increment Financing Mechanism TIF follows
the clear intent of the blight removal focus of the state enabling legislation.
As of this date, the city has completed the following tasks as identified in
14-168-306 Project Plan -Approval
1. A list of public improvements proposed for the TIF District
2. An economic feasibility study has been completed and is under review
3. A map showing existing uses and conditions of real property in the
district
4. Certification by the county Tax Assessor of the base value, total ad
valorem rate, debt service ad valorem rate and applicable ad valorem
rate for the redevelopment district
In order to continue to progress on this project, the following items are
necessary:
1. A detailed list of estimated project costs
2. A description of the methods of financing all estimated project costs,
including the issuance of tax increment bonds and the time when the
costs or monetary obligations related thereto are to be incurred.
3. Receipt of a letter detailing the financing conditions for the
hotel/condo project.
City staff has tentatively scheduled the public hearing as required by statute.
However, prior to affirming the schedule, we must have in hand the items as
listed. The public hearing is currently scheduled for October 19, 2004.
However, both the developers and the staff are in agreement that the project
plan must clearly address all of the conditions mandated in the enabling
legislation. In sum, it will not be released until the concerns of all
parties are satisfied.