Proposed funding debated for project at former Hotel Sterling site

Stephen Barrouk told Luzerne County Council there is a solution if it does not choose to earmark $3 million in county community development funding toward a hotel/conference center project at the former Hotel Sterling site in downtown Wilkes-Barre.

“We just get rid of the conference center. We can go ahead and build just a straight hotel. We can do that now,” he said during a council work session presentation about the project last week.

But Barrouk said the conference center attached to the hotel is “where we get the impact.” Its 10,000-square-foot ballroom could bring up to 400 people to the downtown for conferences and sizeable activities, making it more likely they will linger in the downtown and help businesses, he said.

Councilman Stephen J. Urban, who requested council approval for the new Sterling site award, said a rooftop restaurant already had to be cut from the design to bring down project costs that accelerated due to COVID-19 delays, inflation and rising interest rates.

H&N Investments wants to build the $36.36 million Gateway Hyatt Place Hotel and Conference Center at the corner of North River and West Market streets and is asking the county for $3 million to help close the remaining projected $7 million gap.

H&N paid $700,000 to purchase the land from the city, secured the Hyatt franchise and was informed $21 million is the maximum it can privately borrow to fund the project, Barrouk said. The state has committed $7 million in grants toward the project to date, and there also is a $225,000 contribution from Hyatt.

To address some council and public concerns, Barrouk proposed council conditionally authorize the $3 million to make it clear the funding would not be awarded unless H&N comes forward within a designated time period providing documentation that it has closed the remaining gap. If the county provided such a funding pledge, H&N would approach the state seeking additional funding, he said.

Urban implored his colleagues to save the project.

“Let’s not be naysayers. Let’s work collaboratively. Take that negative mindset and toss it aside once in awhile, and let’s make something more positive,” Urban told them.

Roadblocks

Aside from the still-fresh memory of the last failed attempt to do something at the site, a major source of council hesitation is the source of the $3 million county allocation.

The money would come 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 demolition of 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 torn down 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.

Some argue the county should not use the $6 million set aside unless HUD decides it is OK, but that may never happen. The county also could pursue some type of court action to resolve the matter, but a resolution could take years and will require the expense of legal fees.

If the county is going to take a risk and spend the $6 million, some have believe the pot of money should be spent addressing county-owned road and bridge repairs or other county government needs.

Urban said he believes using the funds on the Sterling site would be the best way to clear up the disagreement with HUD because the proposed project would address HUD’s original complaint that no development has occurred there.

More feedback

Councilman Tim McGinley said he wants to see a feasibility study and detailed financial plan for the hotel/convention center project.

“It’s a dream. You’ll be lucky if you’re able to put it all together,” McGinley said of the project.

McGinley also pointed out Wilkes-Barre has not provided any funds toward the project.

City Mayor George Brown verified there are no plans at this time to commit funding.

Councilman Kevin Lescavage said he supports the project because it would bring a beautiful structure to an eyesore corner.

“I applaud your effort with this. I would encourage it, and I think it’s a great idea,” Lescavage said in the work session.

Lescavage reiterated his suggestion to use the historic Jim Thorpe in Carbon County as a model to emulate in downtown Wilkes-Barre, saying a more diverse mix of businesses is needed to draw visitors.

“We have a lot to be proud of. We just need to expand on it,” Lescavage said.

Barrouk said he believes more businesses will invest in the downtown if there are “some risk takers on the front end.”

“We’re not a backwater community, and I think we ought to start acting like it in terms of doing some things that sometimes require a little risk,” he said.

Councilman Brian Thornton said more must be done to promote Wilkes-Barre, which is the county seat, and amenities such as the county-owned River Common recreational area along the Susquehanna River.

Council also had earmarked $500,000 in federal American Rescue Plan funding toward a project to restore and repurpose the historic Irem Temple on North Franklin Street to house an open-floor music venue that can also host trade shows, weddings and other events.

The hotel/convention center project at the Sterling site would help downtown businesses and encourage others to open stores and restaurants, Thornton said.

“The alternative is to do nothing. Let that site go. Ten years from now, what will that site look like? What will the (Public) Square look like? You’ve got to start somewhere,” Thornton said.

County Controller Walter Griffith had a different take and adamantly opposed spending the $6 million, saying it is “not up for grabs” because he verified the HUD determination is still binding. He also praised Mayor Brown’s efforts to improve the downtown.

“Reality check: Nothing’s coming to downtown via a hotel/conference center. It’s not happening. You want to bring people downtown? Make it a safe place and put things on there,” Griffith said.

Six of 11 council members voted last week to advance an ordinance that would allocate $3 million for the hotel/convention center project. A public hearing and approval by a council majority would be necessary at a future meeting to authorize the earmark.