Waco TIF OKs another extension for $780K hotel deal

The TIF Zone 1 board voted to recommend the Waco City Council give Bhakta until Dec. 31 to complete his Holiday Inn Express at Taylor Street and Martin Luther King Jr. Boulevard and still qualify for the hotel’s $780,000 TIF grant. Bhakta told the board he is struggling to secure fiberglass insulation to complete the job. TIF has pledged to Bhakta’s KB Hotels a combined $3.3 million in TIF money for his Cambria, Even and Holiday Inn properties clustered near Elm Avenue and MLK Boulevard, with $780,386 of the total designated to Holiday Inn Express.

The hotels also are up for a combined $4.86 million from the city, without TIF involvement, in the form of 55% hotel occupancy tax rebates over seven years.

Addressing Bhakta during Friday’s meeting, TIF board Chair Kyle Deaver said, “I have said how much I appreciate what you are doing. This is a really nice project.

“But you first appeared before TIF in 2018, six years ago now. I had hoped we would not be having this conversation again. Do deadlines mean anything if we do not enforce them?”

Deaver suggested the board consider reducing the TIF pledge each month completion is delayed.

Bhakta stated his case for an extension, saying though he first approached the TIF board in 2018, crews did not break ground and proceed with work on the first hotel, the Cambria, until late 2019 and early 2020. He said the city’s permitting process lasted nearly a year, the COVID-19 pandemic caused supply chain disruptions, and an unforeseen problem with soil conditions forced him to haul in truckloads of dirt to level the construction surface.

“You may recall that one of the stumbling blocks early on was the impossibility of obtaining PVC. Now the issue is the unavailability of fiberglass insulation as it relates to the Holiday Inn Express,” said Bradley Steele, a Longview attorney who identified Bhakta as a friend and client in a note to the board. “I understand Meraj Bhakta with KB Hotels LLC has or is providing you a letter from their insulation company detailing this matter.

“Despite the unavailability of insulation work continues on this project with all due haste as evidence by the photographs provided by Mr. Bhakta. Clearly, a good faith effort to comply with the deadline has been made but, as you have been made aware, they will be unable to do so due to the shortage of insulation. A cursory internet search confirms that this issue is affecting many developers nationwide, including Mr. Bhakta.”

Board member Will Jones, a McLennan County commissioner, asked if a policy exists outlining when, how often and under what circumstances the board can consider an extension. He was told no such guidance exists.

The city’s economic development staff recommended the board grant Bhakta the extension. The board voted to recommend city council approval. The council has final say on TIF grants.

An information packet shows June 30, 2022, as the original completion date for the three hotels. But either Waco City Manager Bradley Ford or the Waco City Council, at the urging of the TIF board, have granted five extensions for one or more of the three properties since March 2022.

In October, the city council split the hotels’ TIF grants and tax breaks into separate deals with separate deadlines, shaking out to $1.34 million from the TIF Zone and up to $1.72 million in tax breaks for the Cambria, with a Nov. 10 deadline; $1.15 million in TIF money and $1.68 million in tax breaks for the Even, with a March 1 deadline; and $780,000 from the TIF and $1.46 million in tax breaks for the Holiday Inn Express, also with a March 1 deadline.

The council initially considered barring any further extensions but removed that provision before its vote.

“I think this creates a dangerous precedent,” Mayor Dillon Meek said before the October council vote. “I think that if other TIF applicants come and for some reason we wanted to deny them an extension, that’s going to be hard to come by. … I am very ready for these hotels to be open and disappointed that we’re giving more extensions. I do not expect there to be another request for extensions because when we put public dollars into private hands we expect there to be a return on investment.”

Cambria Hotel met its Nov. 10 completion deadline, has been accepting guests for months, and will host the Greater Waco Chamber of Commerce’s Business After Hours mixer later this month.

The Even received its certificate of occupancy Friday, said Jeremy Pesina, Waco’s interim economic development director. The hotel’s booking website on Friday showed rooms would be available starting April 8.

In other business Friday, The TIF Zone 1 board recommended the council approve a third extension for Dottie Oaks Condominiums, a $9 million mixed-use development at 1024 Austin Ave. It included demolishing the seven-decades-old Oak Lodge Motor Inn, and making the corner home to condos, lofts, and commercial, retail and restaurant space.

At stake is $1.3 million in TIF money. The Mitchell Group and President Brian Mitchell predicted completion Aug. 30, 2022, but two six-month extensions later, the project remains under construction. Mitchell said delivery delays “associated with longer than expected lead times for the electrical gear as well as the custom windows” are the primary culprits.

“Thankfully, the window frames and glazing was delivered last week, and they have begun the installation,” Mitchell said in a letter to the board.

The board agreed to recommend an extension to June 30.

Dottie Oaks also has received a pledge from the city to refund up to $700,000 in sales tax revenue generated at the property over 10 years.

Also Friday, the board of TIF Zone 4, whose members also serve on the TIF Zone 1 board, approved a $60.8 million request from the city of Waco to pay debt service on eight infrastructure projects, mostly water and wastewater infrastructure upgrades serving the Texas Central Business Park. Several of the upgrades are required to create the capacity needed to serve the $1 billion Graphic Packaging International paper mill under construction on Gateway Boulevard and for future development in the area.

Board members also approved increasing by about $300,000, to $1.5 million, the TIF allocation to McLennan Community College’s Cameron Hall project. The college in January tore down the 1914 Cameron House, which had been closed for several years because of structural issues. A building planned in its place, Cameron Hall, will house the MCC Foundation and feature architecture paying homage to the Cameron House.

The TIF Zone 4 board also agreed to recommend that Houston-based NewQuest Properties receive $4.1 million in TIF money, as it has met requirements related to its Cottonwood Creek Market development spanning between New Road and the I-35 frontage road, home to TopGolf, Cinemark and Main Event.

NewQuest also has been promised $1.2 million in sales tax refunds.