Hotel project seen as boost to economy

Now, more than ever, the time is ripe for the Keystone Hotel renovation project, the McCook City Council was told Monday night.

In fact, it's during financial downturns when large-scale construction projects like the Keystone are needed to keep economies productive, said Rex Nelson, executive director of the McCook Economic Development Corp. which is sponsoring the Keystone Hotel renovation project.

Nelson answered questions and briefly reviewed the status of the $4 million project, that will completely restore the first four floors of the six-story Keystone Hotel, including upgrades in electrical, plumbing, heating and elevator work.

The project will use a federal grant for half the costs plus a $1.115 million bond, paid back with $138,000 per year of the city sales tax that is allotted to the MEDC, along with tax increment financing. The MEDC is estimated to receive a total of $325,000 per year from the half-cent city sales tax.

Because the bonding may not be tax exempt, Nelson said Monday night, he will continue to research the financial components and bring the bond proposal back to the City Council for approval at a later meeting.

The MEDC will purchase the building from owners Dale and Joan Stewart for around $150,000, before construction begins, Nelson said Tuesday.

The project will refurbish 24,000 square feet of the brick building, now in disrepair but considered the height of elegance when it was originally built in the 1920s. Nelson said he has already fielded inquiries about renting the dining space and lobby for weddings, areas included in the restoration.

Plans call for the second floor to be leased as office space for businesses and the third floor will house the MEDC office, along with the business incubator, where start-up businesses can be mentored for one or two years. 21st Century Systems, a military software company, will be the anchor tenant of the building and use all the space on the fourth floor.

The Keystone has always been part of the discussions concerning city sales tax dollars, Nelson added and is a solution to the concerns he's heard about improving the downtown area.

"We are doing what people asked us to do," he said.

The project is estimated to result in numerous advantages for the economy, Nelson said, such as the 20 new jobs and $3.7 million in annual economic activity 21st Century Systems will pump into the area. In addition, the business incubation center will help new companies generate more jobs.

The project elicited several favorable comments from the council, with council member Colleen Grant noting that it provides an chance to do something positive with the building. Councilman Jack Rogers cited a similar yet smaller-scaled project that was successful in Holbrook ,using a former school and Councilman Lonnie Anderson clarified that the bond would use just a portion and not all of city sales tax dollars.

Others who spoke in favor of the project were John Hubert, who co-owns the historic Fox Theatre next to the Keystone on Norris Avenue, and Tor Olson, owner of a photography business in McCook.

The council also heard from McCook citizen Todd Cappel,who questioned Nelson on governmental entities competing with private businesses, leasing arrangements and the funding stability of the anchor tenant.

Cappel expressed reservations about tax-sponsored organizations such as the MEDC and the Keystone competing with privately-owned businesses for leased office space and if that would affect the downtown renting market.

Nelson said it would not be be detrimental and expects little impact on the local market, as most of the ground-level downtown office spaces are already fully leased and the Keystone would only challenge areas to upgrade.

In response to why a private investor was not sought for the project, Nelson said it would be too costly for a single investor. Cappel asked if the citizens of McCook should assume the risk and Nelson replied that he saw it as an investment and not as a risk.

Another concern Cappel cited is that although the anchor tenant, 21 Century Systems, is branching out into the private sector, it's still heavily funded by defense spending. He asked how much of that funding would be retained with the new Washington administration and how it would affect the Keystone.

21 Century Systems is a ten-year old company, Nelson answered, flexible in its funding and adept in commercial products. If defense appropriations are cut to the company, the Keystone budget may be adjusted accordingly.

Nelson added later in the meeting that the renovation work would not affect the Keystone's listing on the National Register of Historic Places and the Nebraska State Historical Society has approved the proposed plans.

Most of the concerns about the project are due to lack of information, Nelson said and the public is encouraged to call him at 345-1200 with any questions they may have.