Luzerne County Council may consider awarding $3 million in community development funds to a hotel project at the former Hotel Sterling site in downtown Wilkes-Barre, according to Tuesday’s agenda.
Councilman Stephen J. Urban said Friday he is proposing the allocation to cover the “last mile” of funding needed for a Gateway Hyatt Place Hotel and Conference Center on the empty lot at the corner of North River and West Market streets.
“It’s an eyesore right now, and if we don’t help the developer do something, it may be a long time before we have anybody to invest in that corner,” Urban said.
“This is a positive project. It will spawn other development, freshen up the downtown and help restaurants and other businesses. It will be a positive for everybody, really, at the end of the day,” he added.
The $3 million that may be allocated to the project is from $6 million in community development funds the county had set aside in case the U.S. Department of Housing and Urban Development, or HUD, follows through with a penalty threatened in 2014 to withhold $6 million in funding.
This threatened action stems from failed attempts to restore the landmark Hotel Sterling that once stood there. The public had learned in 2011 that CityVest, the property’s nonprofit owner at the time, was out of funds and couldn’t fulfill its mission of attracting a developer to renovate the former hotel into a premier residential and retail complex. The structure was condemned and demolished in 2013.
CityVest was unable to repay a $6 million county community development loan largely used to make the parcel larger, pay a consultant, tear down an attached hotel structure and remove hazardous material. Critics had questioned that approach, saying the funds should have been invested on roof repairs and mothballing to stop leaks and prevent further deterioration.
HUD issued a determination the former Sterling project should not have received $6 million because it did not create jobs or result in a revitalization project.
County officials have contested this determination, arguing planned development at the site eventually should create jobs and that HUD regulations don’t specify a time limit for the job creation.
Urban said he believes it is safe to tap the money that had been set aside, particularly because the $3 million will help address HUD’s concern that no development has occurred at the site.
Stephen Barrouk and possibly others involved in the development are slated to attend Tuesday’s work session to provide an update on the project and answer council questions, Urban said.
The work session follows a 6 p.m. voting meeting at the county courthouse on River Street in Wilkes-Barre, with instructions for remote attendance posted under council’s online meeting link at luzernecounty.org.
At the voting meeting, council is set to vote on introduction of an ordinance amending the budget to factor in the $3 million in community development funds. A public hearing and majority vote at a subsequent meeting would be necessary for the ordinance passage.
In the work session, a discussion is scheduled on a resolution approving the actual earmark for the hotel project.
Other funding
County Council had awarded $2 million in federal American Rescue Plan funds to help build a public parking garage at the proposed hotel site earlier this year, which was $1 million less than requested.
The Wilkes-Barre Industrial Development Authority and hotel developer are trying to secure that $1 million through casino gambling funding.
The county redevelopment authority has not yet voted on whether it will submit that request on behalf of the city authority and developer. Requests for gambling Local Share Account, or LSA, funds must be submitted through certain entities, including redevelopment authorities and municipalities. The Commonwealth Finance Authority decides which applications are approved.
Barrouk has said the $3.8 million garage is a public-private partnership involving the city industrial development authority and H&N Investments LLC. H&N separately plans to construct the 110-room hotel/conference center.
In addition to supporting hotel needs, the two-story, 150-vehicle parking garage will accommodate other nearby residential structures and events at the county-owned River Common recreational complex located across the street along the Susquehanna River, Barrouk has said. He has cited several nearby former commercial buildings that have been converted for residential use with no parking, and the occupants’ ability to park for free at the Sterling lot will end when a hotel is constructed there.
A study concluded a 400-vehicle parkade is needed, and the scaled-back, proposed garage can be expanded upward in the future if funds become available, he has said.
Barrouk has blamed hotel project delays on the COVID-19 pandemic, supply chain issues, inflation and interest rates that rose from around 3% to 8%. Some architectural adjustments are under consideration to cut costs without compromising the hotel design, he said, noting it will be a structure that “people will be proud of.”
He had estimated the total project cost, including the parking garage, at $40 million earlier this year. To date, the state has committed $7 million in grants toward the project, with that funding targeted for the hotel and not the parking garage, he said.
This site is more challenging because much of the debris from the Hotel Sterling demolition was dumped in the hotel basement when the structure was demolished, and that material must be extracted and hauled away for the new hotel construction, Barrouk has said.
It’s also an odd-shaped lot requiring construction of the parking garage, as opposed to hotel projects on large tracts with ample space for parking lots, he added.
Urban said other counties have provided financial support for hotel projects.