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Hilton TIF pitch likely to strike out

December 19, 2018

Weeks before the Rochester City Council updated its tax increment financing policy, a Rochester developer gave Council President Randy Staver a letter suggesting that city help provided for a $138 million hotel project wasn’t enough.

“By far, Hilton Hotel is your best building and the TIF dollars are less than 50 percent of what other projects have received,” wrote Gus Chafoulias, chairman of Titan Development and Investments. “Does that make sense to you? Please ask yourself if that is fair. We are only asking to be treated like every other project. Is that so bad?”

The Hilton Hotel, being constructed by Titan and its partner, Harbor Bay Real Estate Advisors, at the intersection of Broadway Avenue and East Center Street, received approximately $6.5 million in city assistance, through a mix of TIF and land acquisition.

Titan and Harbor Bay have not made a formal request for additional TIF support.

Sheila Thoma, Titan’s director of marketing and communications, said discussions have been held regarding a potential TIF request related to the project’s second phase, which would reach across Broadway to the property currently occupied by the former Michaels Restaurant.

In his letter, Chafoulias said the added funding would be warranted due to increased costs associated with shifting plans after city staff offered the $6.5 million in city assistance.

He points out that early plans called for an Embassy Suites to be opened at the site, but that changed to the Hilton brand, which required scrapping previous designs and adding $58 million in development costs.

Included with the letter is a list of expenses Chafoulias considers eligible for TIF, which total nearly $12.8 million.

Staver said that after receiving the letter, he gave it to City Administrator Steve Rymer for consideration.

Rymer, who distributed the letter to other council members, said city staff is not suggesting an increase in assistance to the Hilton project, noting a new request would need to show added public benefit to gain support.

“We can’t achieve that,” he said.

Staver said it appears the only way for an increase to be considered is for at least two council members to put it on a meeting agenda.

On Dec. 10, council member Michael Wojcik raised the issue during a council meeting, asking if there was support.

“I keep looking to staff, and staff has been pretty clear that this is not appropriate,” he said. “If there are different opinions out there, we should bring that to the council and not have side discussions.”

None of the council members responded with support for adding to the assistance listed in the city’s 2015 development agreement with Titan.

“I expect that agreement to be respected by everyone involved,” council member Nick Campion said Monday.

Other council members said they’d be willing to listen to a request but would not be likely to make one.

Any request would face a new council, since council members Ed Hruska and Mark Hickey will be replaced during the next council meeting.

Incoming council members Patrick Keene and Shaun Palmer said they’d need more information before making a final decision, but both indicated approval of Titan’s request would face a high bar.

Only two development projects in Rochester have received additional TIF support after a development agreement was approved by the council.

Titan’s H3 office building on South Broadway at Third Street, which opened in late 2014, initially received $300,000 in tax increment financing for the $17 million renovation, but increased costs related to asbestos removal led the council to approving another $200,000 in support.

More recently, the council approved an additional $648,475 in TIF for Miracle Market, LLC, last year after the discovery of a sinkhole added to the cost of the project. The original TIF agreement was for $2.9 million.

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