Hotel developer gambling on casino approval

Ohio builder seeks City Council's OK for gaming in proposed complex at old armory site

Talks between Kalispell and an Ohio hotel developer will continue about a proposed sale of the old Montana National Guard armory on U.S. 93 South.

But those talks face a hurdle: The developer wants to put a casino in the proposed hotel, which is across the street from Lions Park. Kalispell zoning laws forbid new casinos within 300 feet of public parks.

After a City Council workshop session Monday, developer Bob Voelker of Twinsburg, Ohio, said the lack of a casino would be a deal-breaker, because the proposed Hilton Garden hotel complex could not afford a liquor license without one.

At Monday's meeting, council members and city officials talked about ways to legally allow a casino at the site.

Voelker is chief executive officer of Gateway Hospitality Group, which wants to buy the 3.44-acre armory site to build a complex that includes a four-story, 148-room Hilton Garden hotel, an upscale 175-seat Blue Canyon restaurant, an 8,000-square-foot conference center capable of hosting 800 people, and a 2,000-square-foot casino.

Gateway is the only venture to submit a proposal to buy the site. Previously, five ventures expressed interest, but four did not submit proposals by the Feb. 24 deadline.

The draft deal has Gateway buying the site for $1.216 million, while leasing for $10,000 a year an additional 62,500 square feet of city land for parking. The parking lot would be on land that Kalispell cannot sell because a city well is on it.

The four-year-old Gateway company has built two Hilton Garden hotel complexes in the Cleveland area, two in Pittsburgh and two in Dallas. It has three more under construction in Dallas. It built and opened a Hilton Garden hotel-restaurant-conference complex in January 2005 in Missoula.

Gateway develops these complexes in cities that do a significant amount of convention business, which is why it picked Kalispell, Voelker said.

The proposed Kalispell complex is predicted to employ from 112 to 121 workers. The estimated assessed value would be $18.25 million, and the complex is expected to generate between $350,000 and $380,000 in taxes.

Gateway wants to begin construction by June 1. Construction would take from 10 to 14 months, depending on whether the hotel roof is up by winter, Voelker said.

A major potential hurdle is Lions Park being within 300 feet of the armory site.

Montana has a quota of liquor licenses in the state; the quota is filled. Consequently, new establishments that want to sell liquor have to buy licenses from other businesses. These liquor-license purchases can cost several hundred thousand dollars each. So new Montana liquor establishments typically add casinos, which are significant moneymakers with low overhead, to defray the costs of the licenses.

The lack of a casino to defray such costs would put a big enough financial burden on the restaurant and bar to scuttle the complex, Voelker said.

Voelker also pitched a casino as a needed "entertainment center" for convention-goers at the hotel and conference center.

Council members suggested that a planned-unit district might be set up for the hotel complex.

Such districts essentially are contracts in which landowners are granted exceptions to the city zoning laws if the owners take steps to mitigate the effects of the legal violations.

On Monday, council members told Voelker and the city staff to continue negotiating a sales and development agreement for council consideration.

If a sale occurs, the city will have to address what to do with the $1.216 million. The Kalispell council is undecided about what to do with money.

A complicating factor is that the armory site is inside the Kalispell City Airport's tax-increment district, which will exist until 2015.

With a tax-increment district, collected tax income above a certain amount is set aside solely for building and improving infrastructure in that zone. The theory is that outside businesses would be more inclined to move into a tax-increment district if the city has money to improve that area.

This is as controversial economic development tool with vehement supporters and critics.

In this case, the question was raised about how much of a Hilton Garden's taxes through 2015 would go to the city's general fund and how much would go to the tax-increment district fund.

Reporter John Stang may be reached at 758-4429 or by e-mail at jstang@dailyinterlake.com.