SIBLEY—The AmericInn hotel in Sibley is running in the red, but the Osceola County Board of Supervisors agreed to continue a 100 percent tax rebate program to help keep the business open until its fortune turns around.
The board heard from representatives of two of the three banks that own the hotel April 9 about a request to maintain the tax rebate despite a change in ownership.
The 36-room hotel was built near Jackrabbit Junction in 2015 as the result of collaboration between the county and 35 area investors to generate new tax revenue for the county while lifting tax burdens for the hotel.
In 2016, the board of supervisors approved a 20-year property tax rebate agreement with the project developer, JRJ Hospitality Group LLC, which represented the 35 area investors behind the project. As part of the deal, JRJ Hospitality Group agreed to make a $10,000 yearly contribution to the Osceola County Economic Development Commission.
The project was designed to come at no cost to the county, which would recoup roughly the equivalent of the property taxes through a 5 percent hotel and motel occupancy tax which county voters approved in 2016.
The agreement gave the hotel a significant tax break to establish itself and provided for up to $200,000 in contributions to the Osceola County Economic Development Commission over the 20-year agreement.
That status of that agreement came into question last year when JRJ Hospitality filed for foreclosure after the hotel was unable to generate enough revenue to meet interest payments and make the promised $10,000 contributions.
Through the foreclosure process, JRJ Hospitality was dissolved. In May the hotel came under the ownership of Melvin Savings Bank, Ashton State Bank and Farmers Savings Bank in Fostoria, equal owners of a nearly $2 million loan JRJ Hospitality had taken out.
“If it had all gone as planned, we wouldn’t be standing here today because that 35-plus investors of JRJ Hospitality Group would be happily paying their taxes,” said Brian Mino, president of Ashton State Bank. “The long and the short of the deal is the project did not work as planned.”
The hotel is now operated by JRJ Hotel Group LLC, which is jointly owned by the three banks.
The original tax rebate agreement with JRJ Hospitality transferred to the three banks upon foreclosure, but the board questioned whether the transfer of ownership to JRJ Hotel Group represented a breach of the agreement.
“To get that transferred from the bank and for you to assign it to them you would have had to come to the board to request that to get assigned to that third entity,” said board chairman Ed Jones. “That’s where we were told that after you did that there’s a void in the agreement.”
Jim Benz, vice president of Melvin Savings Bank, pointed out that the LLC is owned solely by the three banks, so they have retained complete ownership of the hotel.
“We own it, we own it 100 percent,” Benz said. “The fact that there is a straw owner, which is JRJ Hotel Group LLC, doesn’t change anything. The banks own the hotel, the banks are the secured party, and the banks need to find a way to keep this hotel running.”
Benz said the banks have agreed they do not want to close the hotel, which they view as an important investment in the county. Instead, they are asking the county to continue to honor the agreement to help the hotel stay open and attract a new permanent owner.
“We are the default owners of this through foreclosure,” Mino said. “We aren’t making any money on it. The long and short of the deal is that we accepted ownership through foreclosure and we need to work ourselves out the best way we can.
“Are we in the position where we want to maintain it on a long-term basis? No, we don’t. We want to sell the property.”
The hotel, which has nine employees, is being subsidized month to month by the banks to keep it operating. Mino said the coronavirus pandemic has been a particularly hard blow for the hotel, which has suffered loss of revenue like the rest of the hospitality industry.
Since 2016, the hotel has provided up to $25,000 of income to the county in hotel and motel occupancy taxes per year, which is equal to or greater than the property taxes being paid yearly.
Benz and Mino added that maintaining the agreement is ultimately advantageous to the county, because if it were dissolved the Osceola County Economic Development Commission would no longer receive its annual stipend of $10,000.
After 25 minutes of discussion, the board agreed to continue the agreement and update the contract to reflect JRJ Hotel Group LLC as the new owner, with the possibility of making an addition to acknowledge intent to transfer the agreement a third time should the hotel be sold.