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Proposed hotel at Searles complex would generate $450k in annual taxes, accountants confirm

The accountant's report will be submitted to the town at the Selectboard’s Wednesday night public hearing to determine whether to issue a special permit that will allow Vijay and Chrystal Mahida and 79 Bridge Street, LLC to demolish most of the Searles school for construction of an upscale hotel, The Berkshire.

Great Barrington — An analysis by the local accounting firm Smith Watson & Company concluded a $24 million, 95-room luxury hotel slated for the former Searles Middle and High School complex will indeed generate at least $450,000 in total tax revenue to the town, according to Dave Carpenter, Director of Operations for Mahida Hospitality Group.

Vijay and Chrystal Mahida, touring the former Searles Middle School this summer.
Vijay and Chrystal Mahida, touring the former Searles Middle School this summer.

Carpenter said the report will be submitted to the town at the Selectboard’s Wednesday night public hearing to determine whether to issue a special permit that will allow Vijay and Chrystal Mahida and 79 Bridge Street, LLC to demolish most of the Searles school buildings for construction of an upscale hotel, The Berkshire.

There are two parts to the estimate: real estate and lodging taxes. Town Assessor Christopher Lamarre said it is “plausible that the [hotel’s] assessed value could be in the vicinity of $15 million to $18 million.” This is based on a “cost approach,” Lamarre added, meaning what the developer says it costs to build the hotel.

Right now it is the only measure of value, since income data won’t be available until a year after the hotel is up and running. The Department of Revenue (DOR) requires three approaches, the first being cost. The second is a sales comparison approach, and the third is income, which is the most desirable approach, according to the DOR.

Using the more conservative $15 million possible assessment as a guide, real estate taxes generated at the current Fiscal 2016 tax rate of 14.29 per $1000 valuation, the town would see $214,350 in property taxes from the proposed hotel.

Vijay Mahida and David Carpenter at Historic Commission meeting earlier this year.
Vijay Mahida and David Carpenter at Historic Commission meeting earlier this year.

For competitive reasons, Carpenter says, the Mahida Group will not go public with exact lodging tax revenue projections made with analysis from hospitality consulting firm PKF hotelexperts. Carpenter says the hotel should generate at least $240,000 in lodging and meals tax (6 percent) to the town, based on a projection of “a conservative” $4 million annual hotel revenue. That revenue estimate uses the Mahidas’ 95-room Fairfield Inn and Suites Marriott on Stockbridge Road as a guide. The Fairfield, by the end of this year will have generated approximately $200,000 in lodging tax to the town, in addition to $136,000 in town property taxes, according to Carpenter.

A Marriott-generated revenue report obtained by The Edge showed that as of December 1 of this year the Fairfield had roughly $3,226,421 million in total room sales. At 6 percent that’s $193,585 in lodging taxes to the town.

Carpenter says The Berkshire should “generate a higher number” since it will be “upscale and have higher rates.”

Six percent of the 11.25 percent lodging and meals taxes go to the town; the rest to the state. The town charges an additional .75 percent on top of the meals tax. These taxes are collected, sent to the state and then distributed back to the town by the DOR.

DOR sheet showing the Fairfield Inn generated over $300,000 in taxes last year.
The town of Great Barrington tax assessments for the 2016 fiscal year for the Fairfield Inn on Stockbridge Road. In addition to figures above, the Inn paid $2,527 in personal property tax.

According to FY 2016 town assessor’s records the Mahidas’ Fairfield (Stockbridge Road Realty, LLC) generated the second highest real estate and personal property taxes ($136,446) in town for a single property. The first highest single property tax revenue source is Big Y ($175,238), the third is KIMCO (Price Chopper/Kmart Plaza, $135,950)

The proposed hotel will also generate — at the conservative $15 million assessment level –$6,400 in Community Preservation Act (CPA) revenue from that 3 percent surcharge on property taxes, from which commercial properties are not exempt.

Opposition to the Bridge Street project is multi-layered. Skirting the town’s 45-room limit bylaw is, for some, the first bone of contention. Razing Searles is another. Others have complained of the design, the size, the footprint and traffic concerns. The town’s attorneys, however, said Searles can be razed if a portion of the historic-designated structure remains intact. Carpenter said new renderings based on both town counsel’s opinion and “community feedback” will be unveiled at Wednesday’s public hearing.

Developer Bobby Houston has proposed converting Searles into a residential complex.
Developer Bobby Houston has proposed converting Searles into a residential complex.

But it is the uncertainty of the projected lodging tax that gives some opponents of the project enough gray area to make a case against the hotel as an economic engine that will widen the tax base.

In a letter to the editor last month Great Barrington resident and hotelier Marc Fasteau said the town will not support a luxury hotel market, and said room rates and occupancy did not line up with what the Mahidas’ are projecting. He wrote that a Smith Travel Research report he had commissioned supported this position, and said he supports the reuse of Searles for “high end residential use” that will keep “our older citizens in the area.”

Redeveloper Bobby Houston entered the picture in October, with an unofficial offer to preserve Searles and develop it into roughly 12 units of market rate and affordable housing. Houston is redeveloping the former Dolby Florist site directly across the Housatonic River from Searles. His advocacy group, Save Searles, has made a push back against the Mahidas’ hotel project.

Former finance committee chair Sharon Gregory supported Fasteau’s position in her own letter, citing last year’s tax figures (at the 13.72 tax rate) showing total hotel real estate tax revenue in town at roughly $352,000. A vocal proponent over the years of economic development, Gregory, however, is not in favor of The Berkshire. She wrote: “A new hotel will cause a certain loss of tax revenues and price declines from existing hotels/motels.”

Former Finance Committee member Sharon Gregory.
Former Finance Committee member Sharon Gregory.

Carpenter and Gregory have hit the vitriolic tennis ball back and forth. Carpenter wrote that Gregory neglected to add the lodging tax to her calculations. Carpenter said he offered to sit down with her and explain his figures, but she “refused,” he told The Edge.

Gregory, a former employee of Iredale Mineral Cosmetics, LLC, could not be reached for comment.

Founder and President Jane Iredale owns Searles. She paid a $640,000 note to the town last year for it after another developer backed out of an ambitious plan to reuse and redevelop the property. Searles is adjacent to Iredale’s new corporate headquarters in the restored former Bryant Elementary School.

In the hotel business, Carpenter says, decisions are not made without hospitality consultants. For 10 years the Mahida Group has used PKF hotelexperts, “widely recognized as one of preeminent hospitality consulting firms,” Carpenter said. “They like to work with the Mahida Group because we have a track record of producing what they project.” He added that when hotel developers don’t follow PKF’s advice, “it makes them look bad.” PKF was used to analyze recent Mahida projects such as the Hilton Garden Inn in Lenox, the Fairfield, and later its expansion and renovation. PKF is also doing a study on the Mahida Family’s plan for a 100-room extended stay hotel and event center in Lenox at the site of the former Magnusson hotel.

Carpenter, Vijay Mahida and hotel supporters say the project will bring a deteriorating area back to life and flood the downtown with visitors and their fat wallets. The school district 10 years ago left the Bryant/Searles school compound to build new near the Monument High campus off Route 7. The problem was the expense in renovating the old buildings to code and state standards.

Finance Committee Chair Michael Wise says he’s been thinking about the revenue question and himself used the $15 million assessment estimate as a guide. “It depends on a lot of assumptions,” Wise said. “This is revenue based — not based on the number of rooms but turnover.” He noted the Mahidas may also be “assuming large turnover in their restaurant.” A 65-seat “farm to table” restaurant is part of the plan.

“While $450,000 seems optimistic,” Wise said, “I won’t make fun of it.” He said he sees something more in the $375,000-$400,000 range. “That’s with no actual expertise in the hotel business.”

The Selectboard will hold a public hearing for 79 Bridge Street, LLC’s request for a special permit, Wednesday, December 16, 7p.m., Monument Mountain Regional High School auditorium.

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