Imagine that you reach a point in your life where you decide you want to build your own house. Not a modest single-story reach-style, split-level or neo-Craftsman, mind you. But the largest, fanciest and most noticeable house in town. Your new house is going to be so famous that townsfolk are talking about it even before you build it!
Now imagine going to your longtime bank and trying to get a construction loan from then, only to be told that you already owe too much on your other accounts, so you are too high a risk for them to lend money to. Besides, they point out, no one else in town has ever built a house like that and the parcel you want it build it on is too far away from everything you frequent in town.
But you are stubborn. You are determined. You will not take ‘no’ for an answer. So while you continue to look all over for a construction loan, you decide you can start paying for this house from your checking account. If you just make a minimum payment here and defer a payment there, you can free up enough money to pay for at least getting the site graded, foundation and walls put in and maybe a few utilities as well. In the meantime, surely someone will loan you money once they see what a magnificent house you are building!
Time goes on. Your bills become past due and the balance in your checking account dwindles. The house is not nearly finished and will need a lot more money to complete. It is taking shape and passers-by are beginning to notice. They notice the size. They notice the location. They shake their heads in disbelief and move along.
Does this sound far-fetched? Perhaps, when one reflects upon the realities of financing a home purchase or construction. Yet, our mayor and his incumbent council majority are pushing the Carmel Redevelopment Commission to move forward full apace to erect the future “Hotel Carmichael” — a “4-star” boutique hotel to anchor the City Center and Center for the Performing Arts. Hospitality consultants were unable to find sufficient demand for the hotel, especially in light of its planned location far from the U.S. 31 hospitality corridor and especially the convention and event centers of greater Indianapolis. No hospitality developer stepped forward to offer to develop the hotel, citing this information.
Undeterred, the mayor pressed the CRC to proceed with construction of the hotel, even before financing had been secured. As of today, financing has still not been secured, though is said to be nearing approval.
During a progress report to the Carmel City Council on 3/4/2019, CRC Director, Henry Mestetesky mentioned that construction of the hotel was proceeding and was being paid for with “cash”. His explanation was that whatever can be paid with cash does not incur interest expense. It does beg the question — where is this “cash” coming from? You guessed it — a city revenue deposit fund, where revenues from other CRC projects not already designated for bond repayment are posted. This is where CRC operational expenses are typically paid out of and is not subject to review or approval by the city council.
It begs questions — that every Carmel voting citizen should be asking of all incumbent candidates for office:
• What happens when expenses for hotel construction already in progress exceed the amount of money in the fund account?
• How will the CRC meet its other obligations and pay its bills?
• Is another bailout of the CRC (the mayor and his supporters prefer to characterize it as a “refinancing” of CRC debt) on the near horizon as soon as the November general election is over, just 8 years after the last bailout?
• Does this trigger the uncapped Special Benefits Tax, forcing Carmel property owners to pay for this hotel whether they want it or not?
• Is the mayor putting personal ego and the hotel as a priority over the fiscal well-being of the city and its citizens?
Ask the hard questions of each candidate. Then on May 7th cast an informed vote.
brought to you by our friends at Essayists of Carmel, Indiana
UPDATE:
NEWS RELEASE
HOTEL CARMICHAEL UPDATE
City of Carmel | One Civic Square January 31, 2020
Contact:Nancy Heck (317) 571-2474
Release: Immediate
Carmel’s new boutique hotel at City Center provides update on finances, details of new French restaurant; May opening
Carmel, IN – The City of Carmel and Pedcor Companies is releasing an update on hotel construction costs and finances, as well as announcing details of a new French restaurant concept planned for the boutique hotel that is under construction at City Center. The Hotel Carmichael is still on schedule to open in May of this year, in time to welcome the International Making Cities Livable Conference, which will make its first appearance ever in Indiana. Due to a variety of economic factors including the national increase in construction costs and local spikes in labor costs and tariffs on materials and goods imported from abroad, the overall cost of the hotel has increased from the time of the original estimate provided in 2017. The new estimate on construction is $58.5 million, which includes a new “hard construction” budget of $41.9 million, $3 million for the land and $13.5 million for soft costs.
“The same factors that have led to a building boom across the nation, state and the City of Carmel itself have unfortunately also led to increases in costs of materials and labor that have impacted the hotel,” said Henry Mestetsky, Executive Director of the Carmel Redevelopment Commission. “As we tracked these construction cost increases reported by various construction-related sources, we anticipated the challenge. Fortunately, the Redevelopment Commission has filled those gaps with additional funding that will have no risk or impact on local taxpayers and be largely reimbursed to the Commission out of the revenues of the Hotel.”
A variety of additional financing through existing bond revenue and new mortgages on the James Building and Monon Square secured by the CRC, will allow Pedcor and the City to cover the additional costs with no risk or impact to local residents. This includes a CRC commitment to have more than $12 million reimbursed out of anticipated hotel revenues.
“This magnificent new hotel will play a key role in our economic development strategy as we meet the needs of our corporate community with a boutique hotel for their clients and visitors; as well as tourists who will come to stay near the Palladium and the heart of our new downtown, providing a substantial economic benefit to our local businesses,” said Mayor Jim Brainard. “Henry and the CRC have done a good job of managing this project in the face of many challenges outside our control. It is important to know that none of the additional costs will be borne by local residents, who will instead benefit additional private corporate investment and a greater quality of life in Carmel.”
Across the nation, similar projects have been feeling a similar pinch, according to experts in the industry.
“National construction cost data has recorded significant increases in nearly every construction market. The average cost of a luxury hotel alone has increased by 37 percent since 2017,” said Kevin Hunt, President and Chief Operating Officer for Shiel Sexton. “Locally, the greater Indianapolis construction market has experienced cost increases in materials and labor. On average, 9 percent of a building utilizes steel products. Since 2017, raw steel prices have fluctuated significantly but have increased over 25 percent.
“In the last 24 months, drywall products have seen an increase of 12-to-13 percent per board foot. A variety of factors has caused these increases including recent trade tariffs, raw material shortages and material price escalation. The labor market in central Indiana is very tight, labor costs including compensation and benefits have increase 16.1 percent since September 2018. The result of these and other factors have forced subcontractors to be very selective in the projects they bid, leading to additional increases in overall construction costs.”
The strength of the national and local economies, the increasing costs of hotel developments similar to The Carmichael and anticipated increasing demand for luxury hotel rooms should all result in a significant increase in revenues for the Hotel Carmichael compared to the original projections, which should provide a significant return on the additional investment that has been made. Hotel Carmichael, such as the Palladium and the Center for the Performing Arts, Carmel City Center, Midtown Plaza and our Arts & Design District, remains a good investment in our community that will no doubt attract a return on investment that will continue to keep Carmel one of the best cities in America to live, work and raise a family.
VIVANTE – A FRENCH EATERY
The Carmichael has also announced details on the new French restaurant to be open to the public and hotel guests, serving breakfast, lunch and dinner with a full-service bar. Vivante (which translates to Alive in French) will be a French countryside-inspired culinary experience that is welcoming, warm and approachable with a French-inspired cuisine in an elegant, but not pretentious dining environment and a menu that is relevant, fresh, vibrant, creative and hearty and will create a lasting culinary experience.
Coury Hospitality is currently working on the final process of hiring a Food & Beverage Manager and Executive Chef, with plans to post additional management and hourly positions by March 1.
“I am excited to offer the local Carmel community, as well as travelers from all over the world, a unique culinary experience, combining cuisine, culture and outstanding service” said General Manager Jamie Hopwood.
