MASON CITY — The City Council in Mason City Tuesday night unanimously approved a development agreement with Gatehouse Mason City LLC for a $24 million hotel and convention center that would fulfill the private investment portion of the River City Renaissance project as part of the Iowa Reinvestment Act.

The agreement commits Gatehouse to construct a select-service hotel to be located on the city-owned parking lot on the south side of Southbridge Mall. Gatehouse proposes to construct a 106-room hotel that will also include a ballroom-style convention center that will accommodate up to 700 people. Gatehouse will receive a “hotel grant” from the city totaling $8.7 million, with the city paying $1 million for pre-construction costs, $600,000 to be used by Gatehouse to fund convention center improvements to Music Man Square, with the remainder being paid out as Gatehouse submits construction costs.

David Rachie of Gatehouse Capital says having the main convention center as part of the hotel was one of the keys in moving the project forward. “What is changed is we are now doing the convention center, that’s going to be on the south parking lot of Southbridge Mall. The convention center will be on the first floor. There will be a skywalk over to Music Man Square where we will have additional ballroom space over there. We will have a tower above that with the hotel rooms.”

Rachie says having the main convention center space in the hotel is a better concept that what was originally proposed.  “Part of this obviously is the city normally would pay for a city convention center and then continue to pay for the operations for it. I think what was masterfully done by city staff is to really kind of relinquish that, what is a yearly cost to the city, by offering basically the grant which pays for just the convention center, and at that point the rebate is to cover some of the cost in terms of keeping up an $8.7 million-dollar facility to the standards of a Hyatt or a Courtyard.”

Councilman John Lee says while the mall was potentially a good concept 30 years ago, the economy is ever changing, and now is the time to be proactive in reinvesting in the mall area.  “All malls live about 20-25 years, and to remind everybody, the economy isn’t evolving monster daily, weekly, monthly, yearly, by decades, and we just try to work things out. You’re right, this is a 20-year project. We don’t know what’s going to be like in 20-30 years here, but hopefully for the next 20 years this is what helps Mason City say strong, competitive, and that’s what we’re doing here. No one builds out a hundred years anymore. It’s 20 year increments, and I think this is something that can anchor this town for 20 years, and then we’ll worry about it next time.”

Councilman Paul Adams says there have already been benefits seen from the entire project.  “The whole project has been referred to as a renaissance and you’re already seeing it in the mall. We’ve seen news about River City Mini Golf being kicked off by a young entrepreneur here in town,17-18 years old, that’s taking a chance out there to build something. There’s been word that there are other contracts being negotiated or already in place for future businesses to come in the mall. Really the intent of this project all along was revitalize and reshape and re-purpose our mall, and we’re already seeing that, and we only have one out of the five portions of the project even started. As we go further and further into this, I think you’re going to see more of that. I think you’re going to see a revitalized mall, really a downtown that’s going to live up to its full potential.”

The agreement does not include a property tax rebate. All incremental property taxes will go into the Tax Increment Finance fund and used to retire bonds for the project. In addition, four percent of the sales taxes generated by the hotel and convention center, as well as five percent of the state hotel excise tax, will be returned to the city through the Downtown Reinvestment District approved by the state. Those rebates will be made to the city for the 20-year life of Mason City’s reinvestment district.


See the agreement starting on page 350 of the council packet


Watch the council meeting in full below