‘Pink Palace’ investment a tricky one for Bradenton

Downtown Development Authority set to consider developer’s financial pitch

twhitt@bradenton.comApril 10, 2011 

BRADENTON -- The historic Manatee River Hotel’s future is at the center of a complex three-tiered balancing act.

The city’s political leaders see a need for investment downtown, but must decide at what cost to taxpayers.

They must weigh whether that investment should go to one big project sure to bring visitors, or to dozens of smaller projects designed to improve the center city incrementally.

And finally, they are faced with spending money to encourage private development of an iconic historic structure or taking a risk that no investment will mean the property will be razed.

The Downtown Development Authority will take up all of those issues in a workshop Tuesday as it considers whether the city can give the Widewaters Group Inc. as much as $3 million to $4 million in grants to renovate the historic hotel, commonly referred to as the “Pink Palace,” and to turn it into a Hampton Inn hotel.

So far, the developers have asked for more than the city is willing to spend for the renovation, but the DDA board has hired a consultant to negotiate a more palatable deal: one that would require as little public investment as possible, without killing the project.

In addition to the cash, the company wants tax abatements in the first decade of hotel operations and for the city to waive $50,000 in permit fees.

If the deal involves a significant cash investment, the city council would have to approve taking a loan to fund that grant. Several council members said they are not inclined to approve such a large investment.

Preliminary negotiations have been challenging because Regions Bank assigned the mortgage to Widewaters in a foreclosure sale. As part of the deal, the bank had developers sign a nondisclosure contract, keeping the price a closely guarded secret. The 2005 mortgage on the property was $2.6 million, and at foreclosure the bank showed $3.1 million owing on the property, including back taxes. The city also holds a $12,700 lien on the property for boarding up and securing the abandoned building in 2009.

But neither the consultant nor the authority’s board members know what Widewaters paid for the property and so don’t have a clear idea of the private investment in the project.

The project comes at the tail end of a downward spiral in the economy. Property values have dropped for the past few years and revenues in the Community Redevelopment Area have been hit hard. The downtown was included in a CRA beginning in 1980 to encourage, support and provide economic development in the area. The district’s goals are to promote new development, new business and new jobs.

The district was funded with tax increment financing, the idea behind such a program is that if the mission is successful, property values will go up, generating new revenue for the CRA to fund more development projects.

That mission is what drives the balancing act. The DDA wants to be aggressive enough to stimulate more business and higher revenues, but cautious enough that it doesn’t lose money for future investments in the downtown area.

Greg Green, vice chairman for the DDA and an accountant by trade, embraces that balance.

“I guarantee you I am considering numbers and as chairman of the long range planning committee, I have made sure that the rest of the members have those numbers,” he said.

Art and science

Green said the public-private partnership with Widewaters is worth considering if the numbers are right. Figuring that out is one part science and one part art.

“It’s all about balancing the public investment,” he said.

Financially, there is a direct return in projected increased tax revenues by turning a decaying building into a successful business property. The Pink Palace project would create construction jobs, as well as 35 full-time hotel jobs once it opens. It would also have a positive impact on other businesses.

“More people staying downtown is more business for local restaurants,” he offered as one example.

There’s also an intangible benefit in revitalization.

“You come over the bridge, and that’s one of the first things you see coming into downtown,” he said. “I don’t think there’s any disagreement that something needs to be done with the property.”

Ultimately, though, it could come down to science.

“The science is the financial analysis and looking at long-term budgets, cash forecasts and how much we have to spend on projects,” Green said. “We have to anticipate those that are not even on the radar.”

Councilman Gene Gallo said he has a “fondness” for the building’s history, but ultimately for him it comes down to money.

“As a teenager living in Bradenton, I used to go to moonlight dances on the roof,” said Gallo, 72. “I know the building well and how beautiful it was.”

He emphasizes “was,” because the historic building has suffered damage from termites and water in recent years. While the historic lobby, dining room and first floor are still intact, the previous developers gutted the upper floors.

While he is not opposed to preservation and understands the historical value of some buildings, Gallo said that is not the foremost issue on this project.

“The biggest thing is the financial aspect,” he said. “I am not willing to put the taxpayers in that position.”

For Gallo, the decision to invest $4 million in a single project or to use that money on 40 different projects over time is a “no-brainer.”

“If we were to float a bond of $4 million or $5 million in combination with the bond we want to float for the riverfront improvements we will commit the DDA’s tax increment revenues for a number of years,” he said.

Gallo said he would consider tax abatements, but that there are more deserving projects than the Hampton Inn when it comes to a cash investment.

The proposed hotel, he said, is not a destination “with spas and swimming pools. This is a hotel where people come spend a night or two nights and then they will be gone. If studies show that this is a viable project, developers should come in with their own money and build that.”

Fellow council member Harold Byrd agrees that it is better to spread such a large investment throughout downtown, rather than to put the money into a single project.

But Councilman Bemis Smith said the project is worth investigating, even though the developer seems to be asking for too much in early negotiations.

“At this point, based on the initial presentation, I don’t believe the return on investment is enough to justify the costs,” Smith said. “But we are just in the initial phases of trying to hammer out something. If we can come to terms where I believe the balance of our (financial) support provides the likelihood of a good return to the city, I would support that.”

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