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Paul Feely's City Hall: Hilton hotel developer wants city backing, new Millyard deal

By PAUL FEELY
June 09. 2018 5:55PM




The developer behind a new hotel slated to open in the Millyard late next year is looking for help from the city - including asking aldermen to bond $5 million associated with "significant" costs "directly attributable to the site" - to keep the project moving forward.

Alderman Tim Baines of Ward 3 received a letter last week from Peter Flotz, managing member of Bedford Lot Venture LLC, developer for the Tru by Hilton hotel.

The $23 million project includes a 116-room hotel and a parking garage for 253 vehicles at the Bedford lot, near North Commercial and Spring streets. Flotz had hoped to break ground on the site last month, with 16 to 18 months of construction.

"The current situation is that the project is burdened with significant unusual costs that are directly attributable to the site," writes Flotz in the letter to Baines. "We have a project that is currently pricing at approximately $23.5 million but is appraising at $18 million. As a business owner, you surely understand that the possibility of obtaining project financing is essentially zero at that value proposition."

Flotz said the costs are "directly attributable to the contamination in the soil, the difficult geotechnical conditions, and the structured parking required due to the constraint of the site geometry."

Flotz seeks a meeting with the Aldermanic Committee on Lands and Buildings to ask the city to consider bonding the cost to bring the project "into feasibility."

In exchange, Flotz says his firm would relinquish ownership of the parking deck and air rights, allowing the city to earn all revenue. "The hotel will pay for a control system for the upper level of the garage to allow for a validation system for hotel guest parking, and all revenue earned from guests for parking will be paid to the city," writes Flotz. "In addition, the project will fund installation of short-term parking revenue collection systems for the angled spaces on Commercial Street immediately along the hotel site frontage to generate additional revenue to the city."

Under a 20-year-bond financing scenario, and assuming a principal amount of $5,000,000 in a general revenue bond, the debt service for such a venture would be approximately $400,000 annually.

Flotz proposes all hotel parking revenue, and any short-term parking revenue on Commercial Street along the front of the site be dedicated to repaying that debt service. If the parking revenue is insufficient to cover the debt service, Flotz promises his firm will cover the deficit.

Flotz also asks that the project be granted a five-year property tax hiatus under state statute 79E, beginning when construction gets underway, and that the "reverter clause" currently included as part of the development agreement be removed by amendment. The clause includes a Sept. 30, 2018 deadline for closing on a construction loan to avoid having the property revert back to the city, which previously owned it.

"This creates doubt in the minds of lenders and casts an unnecessary negative on the project," writes Flotz.

Reaction to the proposal by aldermen has been mixed.

"I am supportive of economic development, specifically at this critical time here in the Millyard," said Baines. "The thought of a Tru by Hilton hotel, with increased parking that will help ease the burden on parking in the Millyard, is certainly something that I would like to see move forward.

"With that said, there is an increased price tag and a re-structuring of the deal that has been brought forward and a discussion on the risk and impact of bonding, is certainly warranted."

Alderman At-Large and board chair Dan O'Neil wrote in an email that "I personally remain very supportive of the hotel and parking garage project,.

"The delay on the project moving is both the developer and the city now know that the site has contamination issues that need to be remediated at a significant cost. Once the contamination is addressed, construction will start and we will have Hilton Tru hotel in the Millyard and some much needed additional Millyard parking."

Baines has asked that the proposal be discussed at the next meeting of the Lands and Buildings committee. That meeting has yet to be posted.

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Who says you can't fight City Hall?

Not Elizabeth Voyiatzakis and David Giovognoli, two homeowners in the city's South End, who took the city to court to challenge a rezoning vote allowing the construction of 165 luxury townhouses in one of the last residential, rural areas of Manchester. Current zoning would allow only 26 homes in the area.

Last October, city aldermen voted 9-5 to approve the rezoning request from developer William Socha, despite pleas from neighbors urging them to reject it. Socha petitioned the board to rezone three privately held parcels from single-family to suburban multi-family.

Voting in favor of the request were Aldermen Chris Herbert, O'Neil, Joseph Kelly Levasseur, Bill Shea, Barbara Shaw, Bill Barry, Normand Gamache and Keith Hirschmann, along with former Ward 2 alderman Ron Ludwig. Opposed were Kevin Cavanaugh, Tony Sapienza, and Elizabeth Moreau, along with former aldermen Pat Long and Tom Katsiantonis.

Residents of Lucas Road and South Mammoth Road submitted a petition opposing the development that included signatures from more than 20 percent of property owners located "within 100 feet immediately adjacent to the area affected by the change or across a street from such area" - thereby invoking state statute 675:5, which requires a favorable vote from two-thirds of the full board to pass. But one homeowner changed her mind and asked that her name be taken off the petition - dropping the total to below the 20 percent threshold.

According to city planner Jodie Levandowski, that decision meant aldermen needed only a simple majority - rather than a two-thirds vote - to change the zoning.

Following the vote, Voyiatzakis and Giovagnoli challenged that decision in Superior Court, claiming the city failed to comply with state law when calculating the appropriate buffer area used to determine the number of property owners needed to trigger a two-thirds vote.

Superior Court Judge Diane Nicolosi agreed and denied the city's motion for summary judgment, concluding that applying state law as the city did would render parts of it "meaningless."

According to court documents, the city used ArcMap software to determine the property boundary lines, including a 100-foot buffer, which came in at 1,666,023 square feet. To determine the square footage of the buffer area, the city subtracted 1,090,370 - the square footage of the rezoned lots - to get a buffer area of 575,633 square feet.

The city then multiplied that number by .20, giving them 115,130 square feet - or 20 percent of the buffer area.

The protest petition submitted by residents initially included properties totaling 126,032 square feet - above the 20-percent threshold. But when property owner Christine Miller changed her mind and took her name off the petition, that number dropped to 106,542 - below the 20 percent mark, allowing the city to side-step the two-thirds vote.

The complaint filed by Voyiatzakis, Giovagnoli and others argued a portion of the 100-foot buffer calculated by the city included a portion of Mammoth Road - 44.515 square feet to be exact.

State statute 675:5 reads, in part, "The area of streets, commons, or land owned by a governmental entity shall not be included in any calculation under this section."

As Judge Nicolisi writes in her decision, "Had the portion of Mammoth Road been excluded, and the city only considered privately owned abutting properties, plaintiffs' petition would have met the 20-percent threshold to trigger a two-thirds vote."

Judge Nicolisi determined the statute was "clear" and "unambiguous," concluding that interpreting state law as the city did "is inconsistent with the recognized and stated purpose of the protest statute, which is to afford landowners protection from hastily conceived and ill-advised amendments to zoning ordinances." The city's approach "would frustrate this purpose," writes Nicolisi in her decision.

"Thankfully, our courts are there to protect all of the residents of the City and not just the developers who promise tax revenue, application fees and impact fees," said Atty. John Bisson with Cronin, Bisson & Zalinsky, who represented South End residents in the case. "Ms. Voyiatzakis and Mr. Giovagnoli felt strongly enough about this issue to pay attorneys to challenge what they saw was wrong. The Board of Mayor and Aldermen should understand and follow state law and carefully consider zoning ordinance changes. Those ordinances exist for legitimate reasons. This hastily conceived and ill-advised amendment to the ordinance has been set aside."

It remains to be seen whether the city solicitor will appeal.

"We hope that the entire board will review what the court has said as they consider that decision," said Bisson.

Paul Feely is the City Hall reporter for the Union Leader and Sunday News. Reach him at pfeely@unionleader.com.


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