A much-anticipated Campustown high-rise project will be cut in half after bids came in about $19 million over the target price, and the city will have to take another look at its involvement when council members meet next week.
CHAMPAIGN — A much-anticipated Campustown high-rise project will be cut in half after bids came in about $19 million over the target price, and the city will have to take another look at its involvement when council members meet next week.
The JSM Development project on parking lot J near Sixth and Green streets originally included plans for two 12-story towers connected by a glass bridge, a 6-story parking garage, 276 residential units, 108 hotel rooms, and 22,000 square feet of retail space. JSM budgeted the project around $56 million, but construction bids came in at $75 million.
Because of the hefty price difference, JSM is redrawing its plans. The buildings likely will be lowered to six stories with 90 residential units, 95 hotel rooms, less than 12,000 feet of retail space, and no glass bridge. The parking garage will be lowered to four stories, but it will still contain 131 public parking spaces — the same number that the existing parking lot has now.
If the city council signs off on the design changes, construction could begin in spring 2014 and be completed by August 2015, according to city documents.
Lorrie Pearson, the city's land development manager, said a number of factors inflated the bid prices: The soil is less stable than officials expected, which requires a deeper foundation. And Marriott TownePlace Suites, which JSM has already signed on to run the hotel portion, has stricter building codes than the city.
A plan to cantilever the building over the existing JSM-owned business space containing Flat Top Grill and Penn Station also inflated the price and will be removed from the plans.
"That was really expensive," Pearson said.
According to city documents, JSM officials think they could redevelop the building containing Flat Top Grill and Penn Station when those leases expire. The redevelopment could include an expansion of the hotel.
The city owns the land on which JSM plans to build and has been involved in the project since the beginning. Some of the financial details will need to be revised with the new designs, and city council members are scheduled to meet in study session at 7 p.m. Tuesday in the Champaign City Building, 102 N. Neil St., to go over the specifics.
Administrators will recommend that city council members agree to lower the upfront costs for JSM. The developer was going to buy the property from the city for just under $4 million. The sale price will not change, but now the city would ask for $2 million up front and the rest spread out with interest over 10 years.
JSM had also agreed to share up to $160,000 in the $1.7 million reconstruction of Healey Street to accommodate the large development. That will not change either, but it too will be spread out in annual payments with interest over 10 years instead of an upfront lump sum.
To preserve the number of public parking spaces where Lot J will be eliminated, city officials had agreed to cover the deficit JSM would incur from running the parking garage until the garage started turning a profit.
Because public parking will now become a higher proportion of the overall garage — JSM will also build private parking for hotel guests — the deficit in the early years is expected to be larger. The city is raising the cap of what it will cover from $60,000 to $100,000.
Eventually, JSM will pay that back, but not until the garage turns a profit. Originally, the garage was expected to become profitable in the 13th year of its operation. New projections push that date back to the 14th year.
According to city documents, estimates show that removing 13 hotel rooms from the design is actually a $20,000 boon to the city. Market conditions allow the hotel to charge more for the rooms and still achieve a higher occupancy rate, resulting in more hotel-motel tax revenue for the city.
City officials expect the hotel will net $163,000 in new hotel-motel tax revenue in its first year and nearly $200,000 by the fifth year — both numbers about $20,000 higher than estimates under the original plans.