City approves tax abatements for hotel, water park

Artist's rendering of water park

Beaumont City Council approved incentives for economic development activities and agreements for a convention hotel and water park Tuesday, April 14, by a vote of 6-1.

The City of Beaumont approved tax abatement incentives with Pate Development, L.P. for the hotel (no relation to council member W.L. Pate) and Innovative Leisure Partners for the water park that would include a 10-year tax abatement on construction improvements for both the 200-room Embassy Suites Hotel and adjacent water park, as well as a 12-year abatement of the city Hotel Occupancy Tax (HOT) for the hotel with the condition that the incentives for the hotel would only be available after construction of the water park was completed and the water park was operational. The proposed convention hotel and water park would be located at Ford Park.

Chapter 380 of the Local Government Code authorizes municipalities to offer incentives designed to promote economic development such as commercial and retail projects, according to TexasAhead.org, a website of the Texas Comptroller’s office. Specifically, it provides for offering loans and grants of city funds or services at little or no cost to promote state and local economic development and to stimulate business and commercial activity.

Councilwoman Gethrel Williams-Wright was adamant during council discussion prior to approval of the resolution that the water park be built and open before any abatements would go into effect.

 “I think it will be a definite asset for our city,” Wright said, “but I want to make sure I’m on the same page when I say no breaks tax or otherwise for the hotel if the water park does not come. … If the conventions are not coming, we will not have employment. That’s why I am so stuck on the water park. No water park, no incentive tax breaks.”

“Actually (the agreement) says even if the hotel is built first and begins to operate, they do not get the abatement until the water park opens,” Beaumont Mayor Becky Ames said.

“Until the water park is open and operational,” Cooper clarified.

Beaumont City Council member W.L. Pate was the only council member to vote against the measure. Pate said in an interview that he sympathized with the Golden Triangle Lodging Association, which opposed the tax breaks for the hotel because members believed it to be an unfair advantage for the hotel to receive these breaks during a time with high vacancy rates.

“I am 110 percent behind the water park and I think it will do a lot to advance all the other events that we have.” Pate said in the council meeting. “The only problem that I ever had with it was on the hotel tax because of the other hotels that are really running 50-60 percent occupancy … because the prices have been driven down so low, we’re actually collecting less taxes with more hotel rooms than we did years ago when the prices were higher.

“Holiday Inn comes in and says they want to spend $5-6 million to enhance what they’ve got,” Pate told The Examiner. “We’re not giving them any breaks.”

Beaumont City Council member for Ward 2 Mike Getz said while he appreciated Pate’s concerns, he felt that competition would be good for area hotels.

“We only really have, at the present time, two what you would call convention-type hotel facilities — the Eleganté, formerly the Hilton, and the Holiday Inn,” said Getz.

“When the Hilton was first built out there, they also received some tax advantages and economic incentives from the city. So it’s not unheard of. What I hope happens is that should we get an Embassy Suites out there, that type of competition will cause everybody to pick up their game a little bit. You know, competition isn’t a bad thing. The industrial expansion that we are seeing here is going to bring in a lot of construction workers that aren’t going to need full-time, permanent housing but will be staying at hotels. I think we have an opportunity to have hotel occupancy pick up and bring something to our citizens I’m very excited about.”

Pate further explained to The Examiner that he didn’t feel like the plan for the hotel was solid. Pate said former Holiday Inn owner John Q. Hammons Hotels, (the hotel is now owned by Prism Hotels) considered converting the Holiday Inn to an Embassy Suites (John Q. Hammons owned 30 of the 200 Embassy Suites at one time, Pate said) but reconsidered because it wasn’t feasible financially.

“They said, ‘We looked at it but we couldn’t make the numbers work because of the services we would be providing, we couldn’t charge enough to cover the $139 rate during the week and $119 on the weekend.’ This is what they have to generate to make a profit. When you’ve got another conference hotel charging $79 or $89 for a softball group; believe me they aren’t going to go to the Embassy Suite first even if it’s across the street. That’s just economics. If John Q. Hammons, one of the premiere hotel management companies, has 30 Embassy Suites and can’t take a hotel that they already built and enhance it to provide the additional services as an Embassy Suite and make it work, I find it challenging that someone else is going to build one from the ground floor and make it pay for itself. I didn’t think it was a good business plan.

“You’re helping out someone who has taken a year to finesse all this stuff, hoping it works just to get a water park, hoping the water park will be a plus and not really thinking about what will happen if this hotel doesn’t make it.”

Chapter 380 incentives were approved 6-1 regardless, with Pate opposing.

The site for the water park is a 13-acre land parcel adjacent to Ford Park with six acres for the actual water park and seven acres for storm water detention. It is expected to open in May of 2016. The hotel is expected to open in 2017.

“The plan as I understand it calls for the water park to be bigger than the one in Baytown,” said Getz. “It’s going to be right on the interstate, so I have no doubt whatsoever that it will be hugely popular and tremendously successful.”

Jefferson County Commissioners Court initially approved its part of the incentives (Chapter 381) in 2014, Pate said. It will continue to own the Ford Park land, with the developer entering into a long-term lease with property taxes assessed on the improvements to the land after the 10-year abatement period.

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