By Jim Hagerty
CITY HALL – Whether Rockford will get a 160-room sky-rise hotel downtown is in the hands of the developer – again.
To thundering applause Monday, aldermen voted 7-6 to give Wisconsin-based Gorman & Company the green light to redevelop the Ziock/Amerock building at 416 S. Main St. The agreement with Gorman is the third in as many years to turn the former factory into an Embassy Suites and conference center.
Unlike the first iteration of the deal, which passed almost three years ago to the day, the project now comes with a $77 million price tag. That includes the $64 million Gorman will spend to build the hotel. The City of Rockford will use $12.5 million to construct the conference center, in addition to the more than $5 million already spent on nearby infrastructure improvements.
The city’s investment will come from the redevelopment fund, the 1-percent tax adopted in 1978 on hotel, restaurant, and liquor sales. The toll has been renewed through 2028.
A combination of tax credits, construction loans and funds raised through the federal EB-5 visa program will comprise Gorman’s capital outlay, a stack that has undergone slight changes since 2014.
Certain tax credits were not captured under the first deal because of delays, while the $46 million in EB-5 he pushed for was capped at $30 million.
And he’s nearly there. Gorman said he’s raised nearly $20 million in EB-5 cash, some of which came in a late push as the April 28 sunset date looms.
“We have that right now in a bank account,” Gorman said. “The fact that the program ends has created momentum for investors in China, Taiwan and Vietnam. They understand the deadline, so we’ve gotten a rush of money coming in. (The sunset date) has actually worked out pretty well for us.”
Under the first plan, the then $67 million proposal included a parking deck and multi-modal transportation hub for city buses and a station for an Amtrak line promised by former Gov. Pat Quinn. The new plan includes no train station, but two parking lots. One lot will be at the site of the former Tapco building, the other in place of Warshawsky Muffler.
Fifth Ward Alderman Venita Hervey said there is still a need to eye a train station and parking deck, something city leaders previously vowed to build even after Gov. Bruce Rauner halted Amtrak’s path to Rockford.
To scrap those plans to take on the conference center, she said, could come with future consequences.
“What bothers me is that everyone is saying, ‘We’ve reduced our risk,’” Hervey said. “We took away the parking deck because first we said the train is not coming. My understanding is that the train is not off the horizon. It’s certainly delayed, like everything else in Illinois. But no one has said the train project is totally dead. It’s not dead.”
Rauner has repeatedly avoided comment on the fate of the Amtrak project and other IDOT-funded projects he put on hold in February 2015.
“So,” Hervey continued, “not only are we not reducing our risk, we actually have a bigger risk sitting out there, because if we wanted the train, and it gets back on track, we are going to have to build a station and come up with parking for the train. I would not have an objection to that. I do have an objection to it when we are giving up every other development dollar that we have. I am concerned about what we are doing to our city’s fiscal position. I am for a hotel, but I have concerns about how we got here with this deal. I think it gives too much.”
Hervey was echoing 4th Ward Alderman Kevin Frost, who called the agreement the worst he’s ever seen in terms how it was negotiated.
“In this deal, we had no involvement as aldermen,” Frost said. “We’ve never seen a hard bid for what this thing is going to cost to build. But, if the cost to build goes from $68 million to $48 million, guess what? We don’t save a dime. Our costs for these amendments are fixed. Who benefits from that? Gorman and Company benefits from that.”
Frost said between the cost of the conference center and infrastructure improvements, the city is giving Gorman more than it has ever given local downtown developers.
“Take the 5.2 (million), plus the 12.5 (million). That’s $17.7 million that we are not going to give like we’ve given to Justin Fern – Urban Equity Properties – in the form of TIFs or other enticements,” Frost said.
“This is cash. We are giving $17.7 million plus the TIF, plus the rebates, plus River Edge (tax credits), plus New Market credits. Who gets this? It’s never happened in Rockford that I know of. And why don’t we get a break if construction costs come in lower?”
Gorman said he attempted to sit down with Frost about the amendments but those attempts were largely unsuccessful. Sources told the Times that despite Frost’s claims of little contact from the Milwaukee-based developer, the alderman and Gorman had talked multiple times over the past few weeks as the package came together.
A fair deal
Gorman said the deal is fair to both parties, noting his investment of $64 million will bring a flagship attraction to the center of the city and systemic flow of economic development.
“This project will get done, and it will be a catalytic impact on downtown,” Gorman said. “What I know is going to occur, is that people are going to become more confident in investing in Rockford.
“We are involved in projects in five states and 27 communities, and we’ve seen this catalytic effect when we go into a community where there’s not a lot of investment and do a major investment along with the city, it creates momentum. You will see a very different downtown Rockford.”
The project will employ some 370 people during the two-year construction phase slated to begin this summer. Approximately 120 staff positions are expected to be filled when the hotel opens.
“We (will be) putting people to work right now,” Second Ward Alderman Jamie Getchius said. “We have a workforce we need to fill.”
The project has drawn other skeptics in the last three years. Some have voiced concerns that a public investment would place the city in direct competition with the established hotel stock on the east side.
Regardless, officials say data proves that a downtown hotel and convention center will reach beyond the banks of the Rock River.
“Our growth is faster than all other major counties and regions in Illinois except for Cook County,” Rockford Area Convention & Visitor’s Bureau CEO John Groh said at Monday night’s meeting. “Our growth has been exceeding others at a 38 percent clip since 2009. We are also capturing market share – up 5 1/2 percent in the last six years.
“However, hotels are also doing well in our community. The total number of rooms has increased by 28 percent since 2009. The average daily rate is up 25 percent, and the overall occupancy rate for our region’s full- and select-service hotels is up from 57 percent to 68 percent over the last six years.”
Gorman initially requested he keep all funds from the 5 percent hotel tax generated by the new site. He later agreed to take 80 percent of those funds and divert the remaining 20 percent to the city for the RACVB, BMO Harris Bank Center and Coronado Performing Arts Center.
No council member who voted yes did so without trepidation. However, they said the risk was outweighed by future rewards.
“I am not going to say that the agreement is perfect,” Third Ward Alderman and mayor-elect Tom McNamara said. “But if you look at any agreement I have voted for as a member of council, I couldn’t find one that’s perfect.
“But this is ahead of us, and I look at this as not just a way to improve downtown, but to improve Rockford. This is one more piece to continue moving forward.”
McNamara, who takes office as mayor May 1, said projects like those at the airport, downtown pedestrian bridge and UW Health Sports Factory, will only be leveraged by a redeveloped Amerock building.
Voting “yes” were McNamara, Getchius, Ann Thompson-Kelly (Ward 7), Jeanne Oddo (8), Karen Elyea (11), Linda McNeely (13), and 12th Ward Alderman John Beck. “No” votes were cast by Frost, Pam Connell (6), Venita Hervey (5), Frank Beach (10), Teena Newburg (9) and Joe Chiarelli (14).
Tim Durkee (1) was absent. In the event of a tie, Mayor Larry Morrissey was expected to cast the deciding “yes” vote.
The 13-story Amerock building was Rockford’s first skyscraper, constructed in three phases between 1912 and 1950 by the family of William H. Ziock and the Amerock Corporation. During the height of the city’s manufacturing boom, it housed both Ziock’s textile company and the Amerock hardware operation. Amerock was the building’s last tenant.