A developer wants a haul of incentives to build a hotel in Rosedale

Does Kansas City, Kansas, need a hotel within chip-shot distance of an existing hotel on Rainbow Boulevard? Does it need four different types of incentive to make it work?

Not everyone on the Unified Government of Wyandotte County/Kansas City, Kansas, Board of Commissioners is sure.

This past December, the UG approved the creation of a tax-increment-financing district for a 100-room, extended-stay hotel near 34th Street and Rainbow. The hotel would sit halfway down the hill between the University of Kansas Hospital and Southwest Boulevard on four acres occupied now by Applebee’s and a gas station.

The December vote doesn’t commit UG to helping pay for the $14 million project. As things stand, some commissioners have given a frosty reception to a developer that has typically had good luck getting UG approval for projects.
Lane4 Property Group is the developer of the hotel, which doesn’t yet have an operator in place. It would rise north of the existing Oak Tree Inn at the corner of Rainbow and Southwest Boulevard and, in theory, serve visiting family members of patients at the University of Kansas Hospital.

“I think, given the fact that the hospital is exploding and developing a $240 million hospital tower to accommodate more patients, I definitely think it meets a need,” says Ann Murguia, a UG commissioner whose district includes Rosedale, the neighborhood where the hotel is being proposed.

Lane4 is no stranger to Murguia’s district. The development firm recently refashioned a small, run-down shopping center near Mission and County Line roads with a hefty set of incentives. It also developed much of the new retail and office space and the Holiday Inn Express hotel across the street from KU Med on Rainbow. Lane4’s attorney, Korb Maxwell, is also the attorney for Murguia’s nonprofit development agency, the Argentine Neighborhood Development Association.

For this latest hotel idea, Lane4 has asked for tax-increment financing, a community-improvement district, and the redirection of sales taxes and transient guest taxes generated by the hotel.

That’s a substantial load of incentives. How much in dollars, no one really seems to know yet. Hunter Harris, a Lane4 principal who is shepherding the deal, says nothing is final, so he can’t say what percentage of the $14 million price tag would come from public incentives.

Hal Walker, a UG commissioner, figures that the incentive request is too much for the county to get much good out of it. Walker tells The Pitch that he likes the idea of the hotel but worries that the incentives, which are being requested over a 20-year span, wouldn’t produce much, if any, spin-off revenue for the UG.

“Lane4 — they basically want us to be an investor in a hotel, and we aren’t going to get the tourism tax, we aren’t going to get squat on this for 20 years, other than the people staying there who might go to a restaurant in the vicinity on the Kansas side,” Walker says. “We would get the sales tax from that, which, in the scheme of things, is de minimis. … I’m not giving that kind of deal to anybody that doesn’t have a bang for us in other ways.”

UG Mayor Mark Holland has expressed similar reservations.

“I had a similar thought that the other commissioners did, which is, if what you’re presenting is accurate, it doesn’t sound very appetizing,” Holland tells The Pitch. “When I think of incentives, I like to think of return on investment.”
UG has a difficult history when it invests in hotel projects. It is half-owner of the downtown Hilton Garden Inn, which, as this newspaper chronicled in 2014 (“Zoned Out,” September 11), has been a money loser since it opened. UG is still looking for a private investor to buy out its share of that hotel.

The Rosedale hotel is different in that UG wouldn’t own any of it. But it could end up being a heavy investor in the end. And what about incentivizing a hotel for 20 years, at the end of which a hotel operator could say, “This hotel is old, no longer suits consumer demand and needs incentives for an upgrade”?

“The Hilton Garden Inn — in 10 years we had to invest a couple million dollars in it just to get it ready for sale,” Holland says.

Lane4 is expected to come back to the UG within the next few months to hone its project. From the sound of it, the firm may have to take a step or two back from what it’s asking from taxpayers.

“Lane4 has done some pretty good work in building in areas where it’s hard to do development,” Walker says. “But, you know, it just seems at some point, how much do we have to do to have people want to come here? They’re going to have to educate me on why this is a good deal.”