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An Evanston hotel owner was a lonely voice in opposition Wednesday night to a plan to give one of his competitors at tax rebate in return for a renovation project.

Dave Reynolds, owner of The Homestead, complained at the Economic Development Committee meeting that the city was about to give his competitor, Michael Pure of the Mararita Inn, an unfair advantage by giving Pure a tax rebate for doing $2 million in upgrades to his property similar to ones that Reynolds says he has financed over the years without city help.

But EDC member Dan Mennemeyer said, “How business owners choose to secure their funds is up to them. Because one business owner chooses not to ask for help, that doesn’t mean another shouldn’t get it.”

Dan Mennemeyer, right, and other committee members listen to Pure’s preentation.

Pure had first approached the city last year, seeking some form of assistance for planned upgrades that he hadn’t at that point figured out how to fully pay for.

Since then he’s lined up bank financing to pay for the upgrades and has secured a licensing agreement with the Ascend Collection of boutique hotels operated by Choice Hotels International that will give him access to an online reservation system network that’s expected to drive more business to the upgraded property.

Michael Pure explains his plan to add private baths and make other improvements at the former rooming house for single businesswomen.

The requested help from the city would come in the form of a 50 percent rebate of hotel tax revenue from the Margarita that exceeds current levels, up to a maximum of $230,000 over the next five years.

Other than Reynolds, no one spoke against the renovation project at the meeting, and no one argued that the project could not be done without the city contribution.

The rebate is conditioned on completion of the rehab project and on creation of a total of eight new full-time-equivalent jobs at the hotel over the term of the tax rebate program.

Reynolds argued that at least half of any increase in business at the Margarita would come at the expense of reduced bookings at other hotels in town and that, as a result, the city would see no net increase in hotel tax revenue after it made the rebate to the Margarita.

But neither Reynolds or anyone else at the meeting was able to present data to support or refute his claim.

The tax rebate plan now goes to the City Council with a favorable recommendation from the committee.

Related story

Panel to hear three requests for development aid (2/27/13)

Related document

Margarita Inn proposal to city

Bill Smith is the editor and publisher of Evanston Now.

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15 Comments

  1. A great example

    Another example of how the Council picks 'Winners and Loosers.'  They give money to those they pick as 'winners' and tell the other businesses [esp. competitiors] to go to ____ and I guess they way they dole out the money the later message applies to taxpayers also.

  2. City officials playing favorites again

    "…no one argued that the project could not be done without the city contribution."

    It sounds like Michael Pure can finance the upgrades on his own. Why should hard hit property taxpayers who have lost a lot of equity over the years subsidize an existing business than can afford to finance the upgrades?

    I support tax rebates to attract new businesses into town but am highly skeptical of providing tax rebates for established businesses.  A 50 percent tax rebate for five years!!!! What other established business in town gets that deal?  

    The EDC again is playing favorites and upsetting other business owners. That is not good governing.

  3. Another tax break

    Frome the comment made by one of the  EDC members. It sounds like the decison for the tax break was decided before the comments made by owner of The Homestead.

  4. Agree . . .

    The city shouldn't be making these bets — this isn't their game.  

    Development is best left in private hands and making individualized bets is not in the best interest of tax payers.

    This is an existing hotel that already has financing available and they realize there is a need for more hotel rooms in the city.  Why do give them a tax advantage to do something that they are going to do regardless.

    Economic Development should focus on ways to make our city "easier to do business with".  They should be thinking about streamline processes for development, creating foundational elements (broadband for instance) that entice development and not making individualized bets.

    1. Economic development $
      Or how about using economic development $ to finance putting power cables underground?

      Every storm, someone goes without power, which interrupts all of us, haults business, and causes financial loss across town. I once went to an Evanston Dominicks that lost power in a storm. They were hauling out meat to refrigerated trucks. The rest of the frozen and refrigerated foods were spoiling, and probably needed to be all tossed.

      This would be government economic spending and job creation to cheer about. I haven’t seen many free market fairies in Evanston, so keep an eye out for some communist “pigs” to snort at the horses to do the heavy lifting.

  5. Beware of free market purists

    Sure, the City shouldn't be favoring businesses and picking winners, whether it is hotels or Tilted Kilts, etc.

    But….

    What is Pure allowed to do with this building under current zoning rules and city ordinances?

    A hotel with shared bathrooms?   Doesn't sound like a 3-diamond winner….maybe he could turn it into a SRO , or one of those low-budget old hotels that you see in Chicago.

    Does anybody want that?

     

     

  6. It’s not about Pure, it’s about Evanston

    There is nothing deplorable in asking for assistance; especially when the assistance includes a clause guaranteeing more jobs for the community. It is easy to narrow the focus to appear as though only Pure has something to gain by the rebate, however, I, for one feel Evanston can benefit as well. What do we stand to lose by aiding tourism/hospitality? Probably very little.

  7. Tax Rebate for Margarita

    The suggestion that Pure can finance the upgrades on his own may or may not be true.  But that's beside the point.

    In real estate, the goal is to develop property to its "highest and best use".  This term takes into account financial benefit to the owne, to be sure.  However, it also takes into account impact on the neighborhood, social utility, tax revenues to be generated, beautification, "green" qualities, and the like.  Achieving highest and best use can be both an expensive and a complicated proposition.

    An SRO is a significantly "lower and worse use" of the Margarita Inn.  Occupants of SROs typically utilize significantly higher levels of public services (welfare, Medicaid, emergency rooms, etc.) than the demographic of Margarita's neighborhood.  Those occupants typically patronize local businesses less frequently and with less expenditure.  In all, an SRO would be a bad idea for downtown Evanston. ( I don't know if there are SROs already present in the neighborhood.)

    As to "What other established business in town gets that deal." you've just made the point. Go ask the businesses in the neighborhood how much of a tax rebate they got when they first invested in Evanston.  I bet you'll find that most of the real estate projects in the township got rebates that are similar or bigger.   Tax rebates are to assist businesses that are starting up.  Tax rebates are meant to reduce the risk to the entrepreneur by sharing that risk across the tax base — sharing the risk with the people who, if the business is successful, will see a substantial addition to the tax base in a mere 5 years. Tax rebates constitute an investment on the part of the town in improving itself, its business climate, its appearance, its tax base and its attractiveness to business and residents alike.

    Most of the negative comments here ignore the facts:  Pure has invested and will continue to invest a substantial amount of money (don't forget that he is not getting paid much right now for his 18 hour days) and time; there is substantial risk in the hotel business, especially for an unproven property;  there is even more risk in the restaurant business; and, even with this downside, Pure is willing to bet that he can make the Margarita Inn a productive and attractive and welcome addition to the neighborhood.  The size of the rebate is, in the scheme of things, modest.  No reason Reynolds couldn't have applied.  He is just trying to keep the market to himself.

    1. No tax rebate for Margarita

      The Margarita Inn has been in business since 1989. It appears the highest and best use is a hotel since the business seems to be successful. Maybe a new midrise apartment building might be better suited there. Who knows. Hey, how about a "tower!!!"

      The property has already been developed so not sure what you're talking about.

      You speak of SROs. Well, it appears the Margarita Inn has been doing OK and the primary clientele are Northwestern parents so not sure where you come up with the notion Margarita Inn's occupants "utilize….welfare, Medicaid, emergency rooms, etc."

      Typically, developers of NEW projects or businesses relocating ask for and get tax rebates or some kind of incentive. Could you imagine every existing business in town asking for a tax rebate every time they want to rehab their building or business?

      I did an addition on my house. It added value to my neighbor's home and mine and provided additional tax revenue to the city. I didn't get a tax rebate – I got a tax increase. The thing is, my property values have declined since 2008 but not my taxes. This year is a reassessment year and just wait when property owners get their taxes next year. Remember, the City of Evanston has increased taxes 20 percent over the past five years.

      The point is if one established business gets a 50 percent tax rebate for upgrades shouldn't every other existing business that wants an upgrade get a tax rebate? And who picks up the tab?

  8. The Margarita Inn

    Those States and municipalities that assist business in starting or growing find that their economies benefit in the long term. In this case the long term is a mere five years; an excellent ROI. Assisting through tax relief will raise the value of the properties that nearby, an expanded and upgraded margarita Inn will benefit taxpayers, small businesses that are nearby and will keep an architectural gem in Evanston.
    The comments by anonymous, which all sound more like whining than reasoning, are just that, anonymous whining.

  9. Bad logic, bad business

    If one listens to the business owner who didn't take advantage of an available tax break they must like sour grapes.  His mistake that he didn't apply.  He's afraid of competition whan improving Evanston helps improve all the business in Evanston and Evanston itself/

    Tax breaks are readily available to business new and old all over the country, not just Evanston. If every business owner complained that another business was getting an unfair advantage from this, then no business would ever get a tax break.  It shouldn't matter if it's an existing business as the business supported Evanston for many years.  To suggest that an old business shouldn't get money is akin to saying senmiors shouldn't get Medicare.

    If the business meets all the criteria required to get the tax break then it should; it's not unfair, it's good busines for all of Evanston!

  10. If one listens to the

    If one listens to the business owner who didn't take advantage of an available tax break they must like sour grapes.  His mistake that he didn't apply.  He's afraid of competition whan improving Evanston helps improve all the business in Evanston and Evanston itself/

    Tax breaks are readily available to business new and old all over the country, not just Evanston. If every business owner complained that another business was getting an unfair advantage from this, then no business would ever get a tax break.  It shouldn't matter if it's an existing business as the business supported Evanston for many years.  To suggest that an old business shouldn't get money is akin to saying senmiors shouldn't get Medicare.

    If the business meets all the criteria required to get the tax break then it should; it's not unfair, it's good busines for all of Evanston!

  11. Misinformation prevails

    The dollars for this proposed rebate are hotel tax dollars paid for by out of town visitors…so unless you residents are staying at hotels on a regular basis you are not paying for a cent of any of these expenditures.

    You, dear property tax payer, can calm down.  Be happy that business people are trying to keep your hotel inventory up-to-date and competitive so that the city can utilize increased amounts of hotel tax to develop business in our fine city.

  12. Job creator

    Michael Pure brings abundance to Evanston.

    We have all heard lots of discussion about "job creators" stemming from this past election.  Well, Michael Pure is a job creator and right in Evanston to boot.  Give him his tax break.  Celebrate his success and the expansion of the hotel.  Help him to bring more revenue into the economy.  I suspect the synergy will be of benefit to Mr. Reynolds as well. 

    It is not only the lodging that is at issue, the food there is great as well.  The Margarita has been a hidden jewel in Evanston for years.  Those in the know have enjoyed it for many years even before Mr. Pure became its proprietor.  He took a stressed business and turned it around when it could well have become a landing pad for another highrise.  When the restaurant ran into trouble, he took it over as well and kept it going.  This is the kind of man who should be getting an award from the city to thank him for all he as done, not bemoaning him a tax break.

    Mr. Pure has my admiration for his willingness to take a risk and put his pocketbook and reputation on the line.  It would be a shame for city government not to become a partner with him in this endeavor.

    1. Mr Reynolds is constantly

      Mr Reynolds is constantly fighting any new ideas or anyone that might be competition to his 90 room hotel that has absolutely no parking available.

      He also has always had the first ward alderman in his pocket to try to stop all projects in our city as well as anything to do with the lakefront.

      Fortunately most citizens have figured out that it is all about him and his personal interest and he has failed to halt projects such as the beautiful Mather Home.  We are lucky to have citizens such as Mr. Pure who are innovative and forward-looking for all citizens of Evanston not just himself.

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