Minnesota’s Economic News — W/E 7/1/22
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Marriott is the biggest hotel company in the world, a fixture on the Fortune 500 list. But whether the corporation follows through with a proposed $14 million SpringHill Suites hotel in Mankato may hinge on whether the city and county provide the project with a big tax break.
That’s the dilemma facing city and county elected officials, according to the Mankato Free Press.
The two local governments would surrender a combined $2.5 million in tax revenue generated by the new Marriott-brand hotel over two decades. In return, the 117-room hotel would bring benefits to Mankato Area Public Schools, to downtown Mankato and to the broader economy, developer Gordon Awsumb told the board.
“The school district would end up getting an extra $111,000 a year that they’re not getting now,” Awsumb said, adding that the hotel would also generate sales taxes, lodging taxes and more spending in restaurants, bars and retail stores. “The project, if it’s built, generates a lot more revenue for the community.”
Is it crony capitalism or the cost of doing business for a major development? Blue Earth County commissioners were clearly conflicted over whether to move forward with what would be an unprecedented tax break at a county board meeting earlier this month.
Board Chairman Vance Stuehrenberg focused on the “if it’s built” question, wondering if the project might still move forward even if the county rejects the requested tax abatement.
“I’m going to be really blunt with you,” Stuehrenberg said before suggesting that Awsumb “kind of danced around” the question when it was asked last month at a Mankato City Council meeting.
“I probably danced around because I don’t know the answer,” said Awsumb, the longtime owner of the downtown Mankato Place mall before selling it last year.
In fact, the amount of tax relief requested has already shot up from $1.3 million to $2.5 million since the project was first proposed, due to changes in the construction plans.
A final decision on whether the Mankato hotel project proceeds, rather than one of the alternative investments, will depend on the projected profit margin, Awsumb said. And the tax abatements, if approved by the city and county, will enhance the profit margin for the project.
“It all comes down to — am I going to get a 4% return on the hotel project we’re risking $6 million on? … Are we going to get 8% return? 10%?”
In other words, the abatements might be critical to the project moving forward.
Meantime, another hotel redevelopment project has surfaced for downtown Mankato. Not surprisingly, there’s already talk of the need for significant tax abatement in order to move forward.