With two proposed downtown Wilkes-Barre hotel projects now seeking Luzerne County funding, a decision should be made soon, council Chairman John Lombardo said Wednesday.
H&N Investment is requesting $5 million toward a $37 million, 112-room Gateway Hyatt Place Hotel and Conference Center on a 2.1-acre lot at River and Market streets where the landmark Hotel Sterling once stood.
Bloxton Investment Group asked for $2 million to acquire and convert the former First National Bank building on Public Square into an upscale restaurant linked to a 105-room “Tribute by Marriott brand” boutique hotel it is creating inside the adjacent Luzerne Bank Building already owned by Bloxton. That project is estimated at $23.8 million.
Representatives of both projects made presentations at Tuesday’s council work session. It was the first appearance before council for Bloxton principal Michael Bloxton, but H&N representatives have discussed their project at two previous council meetings.
“I will advocate at least the Sterling project should come to a vote at the next meeting,” Lombardo said, referring to the one scheduled on Jan. 23.
Processing back-to-back briefings from developers seeking money from the same pot is challenging, he said.
“Even though they both are of a hospitality nature, they’re two very different projects. I really hope council will be able to look at them objectively,” Lombardo said.
Both are seeking earmarks from community development funds that had been set aside in case the U.S. Department of Housing and Urban Development, or HUD, follows through with a $6 million penalty threatened a decade ago over a lack of development at the Sterling site when it was owned by the nonprofit CityVest.
The county has $6.675 million available in this reserve account.
Some argue the county should keep $6 million intact unless HUD drops the threatened penalty, but the federal agency has not communicated any willingness to do so to date, officials have said.
Others maintain using the set-aside funds on a project at the Sterling site would be the best way to clear up the disagreement with HUD because that project would address HUD’s original complaint that no development has occurred there.
H&N representative Stephen Barrouk reiterated Tuesday that county funding is necessary to cover escalating costs stemming from the COVID-19 pandemic, inflation and rising interest rates. Approximately $2 million must be spent clearing out underground foundations and debris left from the 2013 Hotel Sterling demolition.
According to the latest funding plan, known as a “capital stack,” H&N already put $2 million into the project and is now prepared to borrow $17 million. Barrouk said figures on what could be borrowed have ranged from $13 million to a maximum $21 million, and H&N has determined $17 million is a realistic amount.
H&N received $7 million from the state and has applied for $6.4 million in additional state funding to close the gap that would remain if the county provides the $5 million.
Separate from construction work, the project would create the equivalent of 80 full-time hotel, food/beverage and retail positions, the presentation said.
H&N has agreed the county funding would not be released until construction commences and would be structured as county reimbursement for work already completed, Barrouk said. A sunset clause also would cancel a county earmark if work does not commence at the site within a specified time period, he added.
If all funding is secured, Barrouk estimated the project should start construction by the fall and take 18 months to complete.
Barrouk asked council members to visualize the hotel and the “impression” that it would present entering the city from the Market Street Bridge.
“Use your imagination please. This site has been sitting here vacant for how long. It’s problematic. The only way we’re going to straighten it out is public support,” Barrouk said.
Bloxton said he is investing millions of dollars in his hotel project and expects to start “swinging hammers” on July 1 with a goal of opening the hotel in June 2025.
The project will supply the equivalent of 60 full-time hotel/restaurant jobs and more than $1.8 million in local, state and federal tax revenue annually.
He incorporated the former First National Bank building in the plans after learning the city’s previous prospective buyer fell out of contract.
“I don’t want to see it sit,” Bloxton said.
Councilwoman Joanna Bryn Smith said Bloxton’s company appears to be very successful and asked why it needs financial assistance from the county.
Bloxton said the First National Bank building was not part of the original plan and that county funding would demonstrate public support for a high-end restaurant operator the developer is trying to attract to the site.
“We need to show them —all of us, the city, the state the county — show these restaurateurs who are in New York and Philadelphia that we want to support them, that we want them here,” he said.
Bloxton said it will cost more than the $2 million he is seeking from the county to purchase and add a kitchen and dining space to the structure.
Bloxton said he also is seeking state funding and will pursue historical tax credits for the project.
He noted he is willing to indemnify the county and repay the $2 million if HUD eventually takes action forcing the county to repay that funding.
“I’ll be right there with you,” Bloxton said.
Lombardo said Wednesday this type of indemnification agreement would make some council members more amenable to the earmarks. He’d also wants assurances the developers won’t be seeking real estate tax breaks.
Barrouk said Wednesday a $5 million indemnity likely would jeopardize H&N’s ability to secure a loan because the lender would not consider the receipt of county funding as a guaranteed commitment.
Reach Jennifer Learn-Andes at 570-991-6388 or on Twitter @TLJenLearnAndes.