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El Paso City Council delays decision on $3 million in tax incentives for Downtown hotel

By Maria Garcia, MariaG@kvia.com.
Published On: Dec 24 2013 09:29:14 AM CST
Updated On: Jan 16 2014 04:54:31 PM CST

City delays $3 million hotel rebate decision.

EL PASO, Texas -

El Paso City Council on Tuesday said it was not ready to decide whether to award $3 million in tax incentives for a new hotel Downtown.

Local developer and attorney Jim Scherr, who's company turned the dilapidated International Hotel into the DoubleTree wants to build a new 15-story urban hotel next to the DoubleTree.

City Rep. Cortney Niland said the City's economic development team "hasn't formed an opinion" on Scherr's proposal.

Matt McElroy, the City's Economic development Director said the City has contacted third parties to evaluate the rebate plan and the City should have a recommendation in 30 to 45 days.

The City will from now on be hiring a firm to evaluate the proposal "so no one can accuse us of being biased toward one particular project," said City Manager Joyce Wilson.

The City will evaluate if it will award property and/or sales tax rebates to Scherr but City Rep. Emma Acosta on Tuesday told Scherr the Hotel Occupancy Tax is "not negotiable and not up for rebate."

That's because voters last November decided to increase the tax to 17.5 percent to fund the Downtown baseball stadium construction. The Hotel Occupancy Tax is a fee generated by hotel guests when they stay in El Paso hotels.

Scherr asked if there's a new City policy that prohibits the use of HOT on hotel economic development projects. City Attorney Silvia Firth said there is no policy yet but Rep. Acosta is working on one.

"Give us time to look at the proposal," said Mayor Oscar Leeser. Scherr is asking for $3 million in tax rebates over the next 10 years. The 140-room Marriott hotel would generate $69 million in economic impact to El Paso and the state, according to a study performed by Richfield Hospitality.

In June, the Council voted in favor of a similar proposal with Summit 11, a group slated to purchase and redevelop the Downtown Artisan Hotel. At that time, Council voted to give $3 million in tax rebates and abatements to Summit 11 over the next 10 years.

When Council took that vote, McElroy said Downtown hotel developers would operate at a loss for 10 years and the project would be impossible without the City's rebates. The Artisan developers did not ask for HOT rebates.

Scherr said the rebates are a contingency plan developers use to ensure success

"Not one homeowners property taxes will go into this project. If your successful you use the tax rebates to pay for the debt you incurred to build the hotel or to operate it. That's the way it works," he said.

Wilson said the City received the proposal last Wednesday. "We need to evaluate weather or not that amount of incentive is really essential to the project. Is there a way to get to a number he needs and that's why we need more time," she said in an interview.

Scherr said the denial of tax rebates could "shut the project down."

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