It is recommended that the City Council:

1.  Authorize the City Manager to execute an Economic Development Program Agreement with Development Services Group, Inc., or an affiliate related to the development of a full service hotel to be located at 714 Main Street;  

2.  Find that the terms and conditions of the Agreement, as outlined below, constitute a custom-designed Economic Development Program, as recommended by the 2018 Comprehensive Plan and authorized by Chapter 380 of the Texas Local Government Code;

3. Accept dedication of the property at 714 Main Street to the City and authorize execution of any necessary related documents;

4. Authorize execution of a Ground Lease of the property at 714 Main Street by the City to Development Services Group, Inc., or an affiliate, with an option and put-option for the sale of the property after a period of 10 years; and

5. Authorize execution of a Room Block Agreement with Development Services Group, Inc., or an affiliate to provide event room blocks in the hotel to potential Convention Center customers for a period of at least 10 years after the opening of the hotel.

Development Services Group, Inc., or an affiliate (Developer) intends to convert the existing 190,000 square foot office tower located at 714 Main St. into a 232 room four star hotel. The hotel will contain approximately 10,000 square feet of meeting space, including a main ballroom, conference, boardroom space. The hotel will also include an approximate 3,100 square foot full service restaurant and a 3,100 square foot penthouse bar that can also be available for private events.  Total investment will be at least $56 million, not including land acquisition, of which at least $36 million will be hard construction costs.

In order to facilitate this development, the City of Fort Worth (City) proposes to provide 10 annual Economic Development Program grants to the Developer, as authorized by Chapter 380, Texas Local Government Code.  The grants will be tied to the amount of investment made by the Developer and satisfaction of other project and spending requirements, as follows:

Investment:
Failure to meet the following criteria is an event of default, which subject to commercially reasonable notice and cure rights, will result in immediate termination of the Agreement.

- Minimum investment of $56 million in total development costs (exclusive of land acquisition costs).  
  Of this, a minimum $36 million shall be hard construction costs;

- Minimum 220 key hotel;

- Must contain 10,000 square feet of meeting space, including a main ballroom and conference rooms;

- Must be completed by June 30, 2021;

- Must operate at Kimpton brand standards at all times or operate and be marketed in a manner that is consistent with the standards for a Four Star Hotel as defined by Forbes Travel Guide;

Utilization of Fort Worth Companies and Fort Worth Certified M/WBE Companies (Real Property Improvements):
The Developer will be required to spend 15 percent of hard construction costs with contractors that are Fort Worth companies.  The Developer will also be required to spend 15 percent of hard construction costs with contractors that are Fort Worth certified Minority/Women-Owned Business Enterprise (M/WBE) companies (with the understanding that dollars spent with Fort Worth certified M/WBE companies will also count as dollars spent with Fort Worth companies).

Employment Commitments:
The Developer will employ a minimum of 30 full-time employees on the property by December 31, 2021.  The Developer will fill the greater of 18 full time positions or 60 percent of all full time positions with Fort Worth residents and will fill the greater of 8 full time positions or 25 percent of all full time positions with Fort Worth Central City residents (with the understanding that employment of Fort Worth Central City residents will also count as employment of Fort Worth residents).

Utilization of Fort Worth Companies and Fort Worth Certified M/WBE Companies (Supply & Services):
The Developer will spend a minimum of $50,000.00 of annual discretionary service and supply expenditures with Fort Worth companies.  The Developer will spend a minimum of $50,000.00 of annual discretionary service and supply expenditures with Fort Worth certified M/WBE companies (with the understanding that dollars spent with Fort Worth certified M/WBE companies will also count as dollars spent with Fort Worth companies).

Supply and Service Expenditures means all expenditures by the company expended directly for the operation and maintenance of the development, excluding amounts paid for electric, gas, water and any other utility services (but not excluding cable, internet or television services).

City Commitments:
The funding source for the grants will be revenues generated by the City's 7 percent hotel occupancy taxes from the hotel.  The City will make up to 10 annual Economic Development Program grants to the Developer subject to the following conditions.  The maximum annual program grant will equal 58 percent of City's 7 percent hotel occupancy tax revenue received from the hotel in the previous year, with the overall incentive capped at $6,000,000.00 gross. Except for cases of default, failure to meet a commitment will result in a reduction of the corresponding component of the grant for that year proportional to the amount the commitment was not met, or for the duration of the Agreement in the case of construction commitments.

TABLE IV-I Maximum Potential Grant with Corresponding Components:

Conveyance of Hotel Property to City and City Ground Lease to Developer:
Under the Texas Tax Code, the City is authorized to use local hotel occupancy tax revenue to, among other things, pay for the construction, improvement, equipping, operation and maintenance of convention center facilities.  For cities the size of Fort Worth, a convention center facility includes a hotel that is located on land owned by the City and that is located within 1,000 feet of a convention center facility or a convention center complex.  The hotel property is located within 1,000 feet of the Fort Worth Convention Center, which qualifies as a convention center facility under the Tax Code.  Therefore, in order for hotel occupancy tax revenue from the hotel to serve as the funding source for the grants, the City must own the real property on which the hotel is constructed.  The Developer has agreed to deed the land to City at no cost to the City.  The City will then enter into a ground lease with the Developer for a term of 25 years.  The Developer must pay fair market annual rent to the City.  However, in turn, the City will pay the Developer a second Economic Development Program grant equal to the rent payment, less $100.00.  The lease will give the Developer an option to purchase the land at the end of the 10-year incentive program for the then fair-market value of the land without consideration of the improvements, with the understanding that the City will pay the Developer a final Economic Development Program grant equal to the purchase price, less $10,000.00.  The City will also have an option to obligate the Developer to purchase the land under those terms.  If neither exercises these options, annual rent will increase to the then-market rate for the remainder of the 10-year term.

Room Block Agreement:
The Developer and the City will enter into a separate Room Block Agreement at market rate terms for a 10 year period, with provisions mutually agreed upon.

This project is located in COUNCIL DISTRICT 9.