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  • Question on bond issue for mid-tier hotel construction in Nephi will not be on November ballot

By Myrna Trauntvein
Times-News Correspondent

Nephi City Council decided not to place the question of whether there should be a bond issue to allow construction of a mid-tier hotel on the ballot in November.

A vote isn’t needed if the need for it is dead.

“I am definitely pleased that the developer is finding a way to build the mid-tier hotel and am glad that the developer is finding a way to make it happen,” said Justin Seely, mayor pro tempore. “It will facilitate growth.”

In 2017, the City Council created a Community Reinvestment Area (CRA) to encourage the development of a mid-tier hotel with a conference space.

The reasoning behind this was to allow other hospitality options in Nephi for events and to capitalize on the geographical location of Nephi in the State of Utah as a central meeting place.

“After considerable time invested in examining the feasibility of this project, finding an interested developer, and working out agreements with other taxing entities and the developer, the project was ready to move forward in 2018,” said Seth Atkinson, city administrator.

The details of the project involved the Community Reinvestment Agency issuing a bond for $1.3 million which would be added to the equity and financing from the developer to construct a roughly $7 million hotel.

Taxes collected from the hotel project in the future would be used to pay back the debt service on the bond.

In 2018, as the CRA was preparing to issue the bond, a petition was signed by residents of the community requiring that the issuing of the bond, and the guarantee offered by the city on the bond, be placed on the ballot for a vote by the community.

The guarantee meant that Nephi City would provide any funding for the debt service if the taxes received by the CRA from the hotel were insufficient to meet the debt payments.

“The council is reaching the point where a decision to place these questions on the ballot must be addressed,” said Atkinson.

All of the concern has been removed, said Skip Worwood, council member. The council doesn’t need to ask voters for permission to do something that will not happen.

“If there is no need for the city to bond,” said Nathan Memmott, council member, “then there is no reason to place the question on the ballot.”

Kent Jones, council member, said that he also agreed that there was no need to put the question up to the voters since it was now a moot point.

Larry Ostler, council member, said that he agreed. There was no reason for a ballot question to be posed if there was no need for it to be asked.

“Due to some changes in the developer’s financials, the developer believes that he is now in a position to proceed with the project without the CRA making an initial investment bond for a portion of the hotel construction expenses,” said Atkinson.

If this is the case, then there is no reason for the issuance of a bond, which means there is no need to have a vote on the bond issue.

“While it is unlikely the developer will need an initial capital contribution up front from the bond,” said Atkinson, “the developer still qualifies for a financial partnership with the CRA.”

Specifically, over the duration of the project which is 20 years, through the increased taxes from the project (tax increment), the CRA would reimburse the developer for a portion of its development costs.

Atkinson said that the staff’s recommendation was that the $1.3 million bond issue or the city’s guarantee of that bond not be placed on the ballot.

“We did want you to provide direction to the staff on whether or not you still wanted the question on the ballot,” he said.

He did say that the staff recommended that the city continue to take the steps necessary for the developer to be reimbursed by the CRA tax increment for a portion of the project development costs.

The council directed the staff not to place the question of a Community Reinvestment Area bond on the ballot as well as the guarantee offered by the city for the bond.

“It is nice to know that the developer is planning to continue with his plans to build a mid-tier motel in Nephi,” said Seely.