CHAMPAIGN — City administrators at the end of August hoped a negotiation would not take longer than two months, but they will come back to the city council this week to ask for more guidance on how to proceed with the redevelopment of a campus parking lot.
After receiving proposals from a few developers in August, officials gave JSM Development the exclusive right to purchase and build on the city-owned Lot J on Green Street just west of Sixth Street. At the time, JSM asked to build an eight-story retail, residential and hotel building on the parking lot and connect it to a building it already owns at the corner of Green and Sixth streets.
As negotiations for the sale of the property continued, the proposal has evolved into a 12-story building that would still struggle to return its estimated $64 million cost after five years.
A $7 million "value gap" — the difference between the project cost and its value in five years — is attributable largely to the city's requirement that JSM include a public parking garage in the develop to replace, at a minimum, the 131 spaces that already exist at Lot J, according to city documents. City council members will look at how they might be able to close that gap when they meet in study session on Tuesday at 7 p.m. at the Champaign City Building, 102 N. Neil St.
JSM's original plans included a structure with 218 private parking spaces and 221 public spaces. Structured parking costs approximately $20,000 a space to build, according to city documents, and in the beginning, cannot collect an hourly rate high enough to break even.
To cover that gap, JSM has asked that the city help offset the expense of owning and operating the public parking when the revenues collected do not meet those expenses.
Here is the memo to the city council on the development.
Based on a JSM analysis, a deficit would exist for the first 12 years that the parking garage is in operation. The shortfall is most pronounced the first few years — up to $60,000 annually — then drops to below $3,000 by the twelfth year.
JSM has asked that the city rebate up to 50 percent of the hotel/motel tax revenue generated by the new building to cover the difference between the cost of owning and operating the public parking and the revenue it generates. City officials estimate that the hotel/motel tax generated by the JSM building would come in around $143,000 in the first year and $179,000 by the fifth year, according to city documents.
Once parking revenues grow to cover the expenses, JSM would pay the profit to the city until the rebates are paid back in full. At that point or after 25 years — whichever occurs first — the financial arrangement between the city and JSM would end.
City council members could take a straw poll on Tuesday night to determine if they support the arrangement. After that, officials will still need to finalize a contract with JSM for the sale and development of Lot J.