Mushrooming construction costs delay Eola project

Published 4:26 pm Saturday, April 13, 2024

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NATCHEZ—Natchez Mayor Dan Gibson said that while he still thinks a renovated Eola Hotel will reopen in Natchez, he shares the community’s frustration that the project has taken so long.

“It should come as no surprise to anyone that getting the Eola done has not only been a top priority but also one of my top frustrations during the entire time I’ve been mayor thus far,” Gibson said.

The development team, which consists of Randy Roth of Milwaukee, Wisconsin-based, Endeavour Corp. and Eola Hotel owner Robert Lubin, remains committed to the project, Gibson said.

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“Over the last two weeks, two major investors have finally come forward with major financial commitments. I can’t give details or amounts yet, due to requests made by the development team,” Gibson said. “While this is good news, I can’t hide the fact that I’m still frustrated. We are about to begin our second term and I truly hoped we would be in construction this year.”

Estimated construction costs for the Eola project have mushroomed to more than $30 million since the project was announced in August 2021.

Parking garage back in the works

The city accepted the donation of the Fry Building at the corner of South Pearl and Franklin Street next door to the Eola, which was originally planned to be demolished, and a parking garage in its place as part of the Eola project. However, because of soaring estimates of Eola construction costs, Gibson said, the parking garage project was scrapped and the Tax Increment Financing funds that were aimed at helping finance the parking garage were redirected into the hotel project.

“So many great things have been happening downtown and we are now faced with a real parking dilemma,” the mayor said. “Over the last month, we have had several meetings with the Eola development team. And over the past 10 days, we have also met with their architect and engineers and our bond attorneys and we have told them all the same thing. They have to get the cost of the project down because we have to build a parking garage and we have to go back to our original strategy that we had in 2021 when the Fry Building was donated to the city. We need parking now more than ever and it is very important that they now develop a strategy that can renovate the Eola while allowing us to construct a parking garage with the TIF bond funds. We may be able to have a strategy that allows some of the TIF funding to go to the project, but definitely not the $4 million they requested.”

The city is working now with consultants on what will soon be phase one of an environmental abatement of the Fry Building, which will lead to a phase two demolition of the building, Gibson said.

“Over the past year, while we have been working with the Eola team and having so many meetings, we have had something else happening. Loss Prevention, located on Franklin Street across from the Fry Building, is growing at such a pace that they have embarked upon phase two of their growth plan. They have maxed out at over 220 jobs and they now are working on a plan that will add another 100 jobs over the next year and a half,” Gibson said. “In addition to that, we have had other projects taking place downtown. Some have been completed, some are about to begin and we are also about to renovate our convention center, civic center and our city auditorium. If ever we have had parking problems, we have them now. While that’s a sign of growth and some say good problems to have, it’s still a problem.”

Taxpayer funding

In February 2023, the Board of Aldermen took the beginning steps in the process to create TIF funding of about $4 million for use with the hotel project. Those funds will come from a Mississippi Development Authority tourism rebate program, which Gibson called a souped-up TIF program.

“For projects that have a tourism component, it allows more of the sales tax dollars to go to the retirement of the debt than a traditional TIF allows,” he said.

Some have criticized the use of taxpayer funding for the Eola project.

“TIF funds were used to build the Holiday Inn and the Grand Hotel. We are so grateful to have the wisest counsel available to us about how to properly leverage these bonds to avoid risk on the city’s part and I can assure anyone who is concerned that this city and this administration will not consider any deal that would put our taxpayers at risk or put our bond rating at risk,” Gibson said.

Construction on the Eola in 2025?

Gibson said 100 percent of the pre-development budget for the Eola project has been funded by the development team, including owner Robert Lubin and Randy Roth of Endeavour.

“That does not include the two large commitments to the project made recently. Having the pre-development budget fully funded has allowed the team to embark on the architectural design with architect Dale Partners Architects of Jackson and has allowed them to geo-map the entire property, which is now complete. The architects are now fully engaged in drawing the plans with support from the interior design firm, Feltus Hawkins Design, and the construction firm Anderson Corp., located on the coast, who will be the contractor on the project,” he said.

However, the project is not as yet fully funded.

“We are still a ways away. The capital stack that is being considered now includes traditional financing. Still, the larger portion involves selling historic tax credits, new market tax credits, and attracting new investors and other financing scenarios.

“Based on the progress that has been made over the past two months, they are feeling very good about a construction date in 2025. I know the first thing people will say is, ‘Well, we had a banner that said 2023, and it’s down and we are in 2024 and you are saying 2025 now?’ My answer is this. We have worked as hard as we can. If anyone has a better idea or way to fund this project that we haven’t considered, we are all ears,” Gibson said.

For now, making repairs and cleaning up

This week, contractors removed sheets of stucco that were at risk of falling off the Eola building.

“We actually gave the development team an ultimatum. We told them it was a liability to them and to our city and that it had to be remediated and remediated soon,” Gibson said. “We are so grateful they are taking care of it.

“I also want to give them a really good shoutout because on one of the tours of the hotel last week I saw they have really cleaned up the inside and outside. As someone who had seen the hotel three years ago, I could not believe the difference. Over the past few months, as part of the pre-development budget, they have spent thousands getting the Eola in satisfactory condition,” he said.

Gibson said his inspiration for making the Eola project a reality comes from Gary Rhoads, mayor of Flowood.

“He single handedly took charge of the development of a new hotel in Flowood called the Sheraton. He told me if I sit back and wait for everybody else to do it, it’s not going to get done. As mayor, you’ve got to wear them out,” he said. “I am very likely saying more than a typical development team would want, but it is my opinion and that of our aldermen that the people of Natchez have a right to know. We have people downtown who have invested thousands and thousands of dollars only to have a seven-story vacant building towering over them and all have a right to know when it is going to get done.”