URBANA — A potential candidate for mayor says the city has fumbled a $1.45 million renovation of the Urbana Landmark Hotel, while incumbent Mayor Laurel Prussing said her challenger "has not done his homework."
Democrat Les Stratton said the initial 2010 agreement to reimburse hotel owner Xiao Jin Yuan for renovation costs up to $1.45 million over a number of years was "not awful."
But as the renovation progressed, the opening was delayed and then scaled back, and now Stratton worries the hotel, formerly the Lincoln Hotel, will cost the city more than originally anticipated.
"I don't think it's ever a good idea to bet $1 million with the expectation to make $200,000 or $300,000 off of it," said Stratton, a retired Urbana Public Works operations supervisor.
The original agreement between the city and Yuan had the city reimbursing Yuan for renovation costs up to $650,000 before the hotel's opening. The city would make $200,000 available for reimbursement annually for four years after the opening.
All of this money would come out of a special property tax fund that is set up specifically for improvements to the downtown Urbana area. The reimbursements would be considered a loan until Yuan had the hotel open for at least two years, and at that point, the city would forgive his debt.
The upside for the city was that renovating and reopening the hotel would increase city revenues in the long run. City officials expected that hotel-motel tax revenues, extra property tax revenues and the residual benefits of more traffic in downtown Urbana would have the city's costs paid back over nine years, and by the 10th year, officials would start to see a $240,000 annual increase in revenues.
The city council approved that agreement in 2010 with the understanding that Yuan would start booking rooms in November 2011. That deadline passed without an opening.
Yuan and city administrators came back to the city council this year to ask for more time. They made $400,000 more available for pre-opening renovations, bringing the total to just more than $1 million. Under the original agreement, that amount would not have been reimbursed to Yuan until after the hotel opened. The additional $400,000 from the original agreement remains available for reimbursements after the hotel opens.
The second agreement also gave Yuan until the end of December to open the hotel, and he said that he could be ready for a "soft opening" within the next few weeks.
Stratton said he isn't sold — when the hotel opens this fall, only 45 guest rooms will be ready for guests. There will be no bar, restaurant or conference center until Yuan has more time for renovations.
By Stratton's estimate, that puts the city $600,000 in the hole by the 10th year — not $240,000 in the black like city officials anticipated.
"They need to make sure that Mr. Yuan knows that his clock can't start until all the things he has promised are in place," Stratton said.
He said the city should not agree to start the two-year window for forgiving Yuan's loan until all the rooms and amenities in the hotel are available to guests. If that happens within the next two years, Stratton estimates, the city might get its money back in the long run like originally planned.
"Until he gets the restaurant open and the bar open and the other portion of the 128 rooms open, he's working on his own dime," Stratton said.
But Prussing said Stratton has it wrong. The two likely will face off in a Democratic primary election in February.
"I think X.J. (Yuan) has done a great job," Prussing said. "He's opening the hotel."
Yuan said on Monday that he has completed city inspections and is just awaiting certification that it's fit for occupancy. He plans to open the bar soon, he said, and thinks the full 128 rooms, restaurant and conference center will be open within 12 months.
In the meantime, the ballroom can be used for weddings or meetings, and he's opening a space for a karaoke dance club.
"If we can bring people in here to fully utilize the 128 rooms, you can imagine how much more foot traffic that will bring to downtown," Yuan said.
Over the past few years, city officials have held up the Lincoln Hotel renovation and reopening as a boon to downtown Urbana and a historic preservation project. Yuan ran into more problems than he anticipated when he bought the property two years ago, Prussing said, and the agreements to accommodate him and the city have been reasonable.
"Redoing a hotel that's almost 100 years old is a big undertaking," Prussing said.
Renovations have included roof replacement, installation of marble floors and the addition of the canopy entrance from Race Street and the adjacent breakfast area. Yuan has also installed drains and sump pumps to stop flooding on the lower level.
Yuan gave city officials a tour of the hotel several months ago, and they said they were pleased with what they saw.
"This hotel's going to open," Prussing said. "And my impression is that Les Stratton hasn't done his homework."
The filing period for the Feb. 26, 2013 primary is next month , according to the Champaign County clerk's website.