Decorah could have a new hotel at the southern entrance to the city by 2017.
After hearing several comments, both for and against the proposed Marriott Fairfield Inn, the Decorah City Council approved a development agreement for the project on a 6-1 vote. Council member Chuck Lore cast the only dissenting vote.
The agreement with the developer, Rebound Hospitality, calls for the city to provide up to $1.5 million in property tax rebates over a 10-year period. However, the rebates are tied to the developer meeting certain requirements, such as a minimum property tax assessment of $4.5 million, the creation of jobs and adhering to a construction schedule. Rebound will now apply for a franchise with Marriott.
The original development agreement called for Rebound to apply for the tax rebates annually, but during a discussion, Rebound Chief Executive Officer and Managing Officer Brett Reese said it would be necessary to get the city’s pledge for the rebates for the entire 10-year period up front to secure financing and investors. The Council ultimately amended the agreement to include that provision.
Rebound Hospitality of Northfield, Minn., which also manages the Hotel Winneshiek in Decorah, plans to build an 80-plus-room Fairfield Inn and Suites after demolishing the Bluff’s Inn, located off Highway 9.
The State Department of Inspections and Appeals suspended the Bluff’s Inn’s license for hotel operation and food and beverage service after an inspection in March.
Rebound also is proposing to develop two commercial lots suitable for restaurant or office use in conjunction with the project. The total cost is estimated to be at least $11 million, including land purchase, demolition and extensive site work and hotel construction.
Decorah Jobs, a volunteer organization that focuses on encouraging and supporting new business within the greater Decorah area, has pledged $500,000 from its hotel motel tax proceeds for site preparation for the new hotel.
The Bluff’s Inn site is within an urban renewal district, which allows for tax incentive programs.
“This is exactly what this district was created for. A project like the one on the table would be fantastic for the area and could drive further renewal in the area,” said Benji Nichols, chair of the Decorah Planning and Zoning Commission.
He said the property valuation of the area has decreased in recent years.

Funding competition
Jeff Ruhr of Minneapolis, managing partner of the Country Inn in Decorah, which is located across Highway 9 from the proposed Fairfield site, agreed it would be a “great relief” to see something done with the Bluff’s Inn “eye sore” and that tax rebates are the “perfect method’ for investing in the project. However, he said he objects to the use of hotel/motel tax proceeds.
Ruhr said Country Inn is the largest contributor to the lodging tax and that the tax should be used for what it was intended for – generating business for the community.
“In the end, we, the established hotels, are forced to pay a tax to directly fund our competition,” he said.
Ruhr also questioned Rebound’s pledge to create 15 full-time equivalent (FTE) jobs. Country Inn has seven FTE’s for its 70-room hotel. He said most of the jobs at Fairfield would be part-time front desk or housekeeping jobs that local hotels currently can’t fill themselves. Rebound said its payroll would be no less than $325,000 a year and a representative said Rebound staffs its hotels “heavier” than the typical hotel because of the style of properties it operates.
Ruhr commented that half of all new hotels fail and that Marriotts are difficult to run. He questioned whether Rebound has the experience to run such a hotel.
Brett Spitzak, who owns land on the northeast side of the intersection of Highway 52 and Highway 9, asked if there would be funds available from hotel/motel tax proceeds for future developments or if “it’s first come, first served.”
Tom Hansen of rural Decorah said the city is going “above and beyond” with the development agreement for Rebound to increase the profits of a private business. He suggested Rebound go “above and beyond” for the community by giving at least 10 percent of what it will save in rebated property taxes back to the community to “any private or non-profit organization in the county.”
“There are many businesses here in the community that pay all their property taxes and still give lots to this community without the community ever knowing it,” Hansen said.
Mike Huinker of Decorah, who worked on the development of the Trout Run Trail, an 11-mile recreational loop around the city, said the trail bridge across Highway 9 added a “dynamic element” to the south side of the city where there are several vacant buildings.
“If public funds are used to remove (The Bluff’s Inn) to redevelop the site, it could become a catalyst that will spread throughout the area ... I pledge support for this development,” he said.
The Council also received letters of support for the project from Mike Harman and Harlan Satrom of Decorah.

Agreement amended
Reese asked the city to amend the development agreement regarding tax rebates by dropping the requirement the Council consider the tax rebates annually and instead approve the rebates for the entire 10-year period in the development agreement.
Not having assurances for that money “up front” is hindering financing for the project, he said.
Council member Jody Niess asked if requiring an annual allocation of tax rebates would be a “deal breaker.”
“It’s a really important issue. We’re spending $11 million plus – to not be sure the rebates are going to happen is difficult for investors and lenders,” said Reese, adding future Council members could have a different opinion of the agreement.
City Manager Chad Bird said if the rebates aren’t approved annually, the $1.5 million in rebates would be included in the city’s debt. The city currently has $6 million in debt and the city’s statutory debt capacity is about $20 million (5 percent of the city’s total property valuations).
Bird said the city’s valuations increase 1 to 1.5 percent a year and the hotel will be adding at least $4.5 million in property value to the city.
He noted even without the requirement the developer request tax rebates annually, Rebound must still certify annually that certain performance benchmarks have been reached; the city has remedies available if they are not.
While he said the new hotel would be good for the community, Lore said he doesn’t like to “give away the chickens before the eggs are hatched.” He said he was having “difficulty” taking the yearly abatement request out of the agreement.

Spur development
Council member Gary Rustad said there have been heated discussions in the past on major projects that have benefited the city, such as the Water Street and Short Street reconstruction projects. He said when making decisions, the Council needs to consider what will benefit the city years from now.
The new hotel will provide a major renovation in a blighted area and will spur other development, he said.
“I’m excited about this project. If this does not happen and that building sits there and deteriorates even worse, the city will be on the hook for tearing it down, potentially,” Rustad said.

Niess made the motion to approve the amended development agreement eliminating the annual request for a tax rebate, which was seconded by Council member Kirk Johnson. After the Council approved the motion, Mayor Don Arendt wished the Rebound representatives good luck with their project.
“I’m looking forward to eliminating an eyesore,” he said.

“I appreciate the opportunity to go forward,” Reece said.
He said the franchise application to Marriott will be submitted by the end of the month, and the outcome should be known by mid-January. If the application is successful, the land will be purchased, demolition will begin and construction could start in May or June.