Delano OKs subsidy for city’s first hotel

The Delano City Council Wednesday, Aug. 8, approved a development agreement and $385,457.25 subsidy for construction of the Grand Stay Hotel — Delano’s first hotel — on Highway 12 west of Delano Crossings retail center.

The project proposed by Crow River Hospitality Group is a scaled down version of a proposal that the City Council approved in 2006.

Tom Schaffer, of Crow River Hospitality, announced the name of the newly approved building — Grand Stay Hotel.

The City Council condensed its approval process for the proposed 56-unit hotel to a two-week span. First, on July 24 councilors held a special meeting to approve preliminary and final plats, as well as site and building plans. Then on Aug. 8 the council approved the final document — the development agreement containing provisions for city subsidy of public infrastructure improvements.

Delano made it clear that approvals are for the first phase only of a proposed two-phase project. The 56-room first phase will include a swimming pool. Second phase expansion, if approved, would contain a 14,500 square foot event center, 13 more hotel rooms and expanded pool area.

Grand Stay Hotel will sit on 3.3 acres between Highway 12 and St. Peter with Ridgeview Clinic and True Value Hardware Avenue, as next-door neighbors. The hotel project has been in the works for some time. In 2006, Delano approved for the same site a hotel, clinic, water park and banquet center. After that the economy slumped and no ground was broken. The newly proposed project has been scaled back to only a hotel and banquet center for the first phase.

City Administrator Phil Kern explained the development agreement and city financial help for infrastructure improvements ending in 2014. Delano would use $385,457.25 in proceeds from the Delano Crossings Tax Abatement District, which was set up in 2001 to finance public improvements for Delano Crossings retail center. Delano will “use new tax dollars (from Delano Crossings businesses) to offset the financial impact on the hotel,” he said.

Subsidy money would cover utility charges and park dedication fees the developer otherwise would have to pay under the development agreement. They include sewer availability, $156,290.46; sewer trunk charges, $86,722.37; park dedication fee, $10,748.22; water availability, $62,208; water trunk fee, $62,397; additional water connection fee, $3,257; water meter fees, $3,629 and small fees for water inspection, plan review and sales tax on electric fees.

Kern described the public purpose for the subsidy. Developers said they would not happen without city financial help. They simply do not have money for the initial utility fees. Meanwhile, the hotel would result in immediate generation of taxes benefiting the community and an immediate increase in city tax base. The hotel would create 25 to 30 new jobs and access to lodging that currently does not exist in Delano. Industrial park users have said a hotel would be a major asset to attract new businesses.

Kern said if the hotel defaults on agreements with Delano, the city could recoup the subsidy through special assessments.

During the public hearing, Delano resident Jon Sutherland said he was “glad for the hotel” coming to Delano, but “development should pay its own way.” He noted that two City Council members (Dale Graunke and Derek Schansberg) were absent from the meeting. He wanted the full council to vote on the issue “because we’re waiving almost $400,000 in revenue.”

City Councilor Dan Vick answered, “We won’t get the revenue if they don’t build.”