The Austin City Council learned more about a proposed GrandStay hotel construction project on Fourth Avenue Northeast and the tax abatement request from that proposal during its regular work session Monday evening.

Craig Hoium of Mower County Development Group presented a detailed outline of the project to the council and answered questions.

“There has been a lot of money invested in the downtown and I think this would be a great addition,” Hoium told the council.

GrandStay is hoping to build a 56-unit hotel on Fourth Avenue Northeast west of The Tendermaid. According to Hoium, several of the rooms would be extended stay and the lobby would include a continental breakfast space and a micro brew bar. Hoium also said there are plans to build a joint parking lot with The Tendermaid, which has been discussed and okayed by Tendermaid owners Sara and Gary White.

“We felt the location is ideal with some of the surrounding businesses,” Hoium said. “We have conducted a feasibility study, and the results show that this is a viable project.”

City Administrator Craig Clark said a development agreement has been drawn up with Hoium, which they anticipate forwarding to the Austin Port Authority. Under the agreement, the construction value of the hotel must not be less than $5.8 million.

Hoium estimates the value at $6.5 million, saying there will be a competitive bid on the construction work, which will be open to local contractors.

Hoium requested the council consider granting a tax abatement request for the project. In order for an abatement to pass, the city council, county board and school district must approve the request after a public hearing is held for all three taxing entities.

Hoium has already spoken to the county board and school district, though neither has taken formal action.

According to Clark, the estimated annual tax valuation from the Mower County Assessor is $2.75 million and would have an annual tax bill of $84,000 and $63,020 available for abatement. If all three taxing entities participate, the return on investment would be 2.9 years.

Councilman Jason Baskin asked why the council should approve an abatement for a hotel in downtown while not granting an abatement to a hotel off Interstate 90.

Hoium cited the onsite development costs, such as proper soil compaction and fixing the elevation difference on the land, that are not needed at Interstate 90 sites.

“I think the development meets (tax abatement) criteria,” Hoium said.

Councilwoman Laura Helle pointed out that downtown also sees less traffic than 18th Avenue. Hoium agreed, saying the hotel would be marketed as a “destination” with an emphasis on downtown restaurants, retail, and attractions such as the Spam Museum, Riverside and Packer Arenas and the new Community Rec Center.

The council did not take any formal action on the abatement request. Clark said further discussions are needed before a public hearing date can be set.