Luzerne County Council hears second presentation on proposed project at former Hotel Sterling site

The developers of a proposed hotel/convention center at the former Hotel Sterling site in downtown Wilkes-Barre made a second funding request presentation to county council — this time bringing in the entire project team.

Council did not vote last month on H&N Investment’s request for $3 million toward the project because the developer requested more time to compile responses to council questions.

H&N owns the parcel at the corner of Market and River streets and wants to build a $36.36 million Gateway Hyatt Place Hotel and Conference Center.

In the latest presentation during last week’s council work session, Stephen Barrouk, who is affiliated with the project, further explained the plans with assistance from architect Brian Doran, of HC (hemmler+camayd) Architects in Scranton, which designed the structure; Eric Rubino, of Extreme Hospitality in Scranton, a hotel management and consulting business that will serve as third-party operator of the property; and several others.

Now that council has discussed and debated the subject at two public work sessions, council Chairwoman Kendra Vough said the typical path would be for council to vote on the request at its next meeting Nov. 28 unless there is another request to hold off.

County Councilman Tim McGinley said after the work session he is confident council should not be voting on the allocation this year because the 11-member legislative body is now in “lame duck” status, which refers to the window between the Nov. 7 general election and swearing-in of newly elected members on Jan. 2.

McGinley said he requested confirmation from the county law division because the matter has come up before following county council elections. Five new council members will take office Jan. 2. McGinley is among the five leaving.

He said the resulting legal opinion mirrored one provided to council after a prior general election that advised decisions should be deferred during a lame duck period if they involved matters that are not statutorily required, essential government functions.

The discretionary allocation of funding for a hotel/convention center project is not an essential government function, McGinley said.

At the end of the 2019 general election, for example, council did not vote on a proposed real estate tax break because four new members were set to be seated in January. Several other decisions on a tax-claim operator, voting system and 911 emergency radio upgrade were deemed allowable during the post-election window because the county is statutorily required to collect back taxes, conduct elections and provide 911 service, officials said at the time.

Latest presentation

Doran, the architect for the Hyatt project, described the aesthetics and layout of the property with a PowerPoint presentation that is posted with council’s Nov. 14 work session agenda at luzernecounty.org.

The hotel portion would be five stories and contain 116 rooms, he said. More than 3,000 square feet of retail space is carved out. The section fronting River Street is slated to house a 5,000-square-foot event space that can accommodate 300 to 350 people for conferences, weddings, lectures and other events.

A corner glass tower would be the “highlight” of the project, said Doran, noting the structure was designed to blend with neighboring buildings.

Addressing hotel occupancy, Rubino told council analysis shows the Wilkes-Barre market has an annual occupancy above 70%.

While the movement since the 1990s has been largely for hotel construction along interstates, such as those in Wilkes-Barre Township, Rubino said millennials now traveling for work and leisure typically want to stay in downtowns.

He further stated he is confident some staying in the hotels along Interstate 81, including parents of students at Wilkes University and Kings College, would choose a new downtown hotel if that is an option.

Councilman Gregory S. Wolovich Jr. asked about the impact of competition if a new five-story, 102-room hotel is constructed a few blocks away on a lot at the corner of South Main Street and West Northampton streets. Council members said that project, unveiled years ago, has been held up due to pending litigation.

Rubino acknowledged it would be competition, but his company’s research of occupancy levels concluded the downtown can support two or possibly three new hotels.

A downtown becomes more of a destination for lodging and bookings if a cluster of options is available, he added.

The same would apply to event space, he said. The project at the Sterling site is “poised to benefit” from plans to house an open-floor music/event venue and museum at the nearby historic Irem Temple on North Franklin Street because multiple projects help “create a market” that will attract larger event planners currently taking their business to areas such as Scranton, Reading and Harrisburg, he said.

Finances

H&N paid $700,000 for the land and is working to secure a $21 million loan toward the hotel/conference center, Barrouk has said. The state committed $7 million in grants toward the project to date, and there also is a $225,000 contribution from Hyatt. That leaves a gap of about $7 million.

Wolovich questioned how much private money will be invested.

Barrouk said the private equity will be just under $2 million in addition to the already stated $21 million loan, describing that as a “considerable obligation.”

“This project is probably the largest private investment that has been made in Wilkes-Barre probably in the last 40 years,” Barrouk told council.

Rubino said this type of private borrowing isn’t a decision made lightly because H&N will have to sign personal guarantees and be responsible for the debt for many years.

County funding

Councilman Chris Perry said during the work session the proposed project is beautiful and would be good for the area, but his major concern is the source of the funding. He said he does not want the county to be stuck if another potential liability comes due.

The $3 million earmark would come from $6 million in community development funds the county set aside as a precaution in case the U.S. Department of Housing and Urban Development, or HUD, follows through with a $6 million penalty threatened a decade ago.

This sanction stems from a past county community development allocation of $6 million to redevelop the landmark Hotel Sterling that once stood at the site when it was owned by the nonprofit CityVest. HUD issued a determination that project should not have received $6 million because it did not create jobs or result in a revitalization project. The structure was condemned and torn down in 2013.

Some argue the county should not touch the $6 million kept in reserve unless HUD drops the threatened penalty, but the federal agency has not communicated any willingness to do so to date, officials said.

County officials have maintained the HUD finding is unfair, saying planned development at the site eventually should create jobs and that HUD regulations don’t specify a time limit for the job creation.

Councilman Stephen J. Urban argues using the set-aside 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.

“It’s a roll of the dice. It’s a coin flip. But I can’t see the federal government suing Luzerne County for helping to develop a project in the near future that will create jobs. That will be counterintuitive,” said Urban, who is wrapping up his term because he was not re-elected Nov. 7.

Urban and council colleagues Kevin Lescavage and Brian Thornton, also strong project advocates, again urged their colleagues to support the allocation.

The three council members said last week they support taking the allocation to another level and allocating more than $5 million of the money set aside to ensure the hotel/convention center project has all pledged funding needed for H&N to secure the loan and start construction.

Describing the current vacant site as a “dirty dustbowl, Thornton said he doesn’t want to see the project fall apart and end up with the developer walking away and selling for a gas station/convenience store to be put there.

“We have an opportunity to partner up with people here and get something grandioso for Wilkes-Barre. I think we really need to think seriously about that,” Thornton said. “We can truly be enormously helpful, or we cannot, and the cannot option really paints a very bleak picture for years to come.”

Lescavage said he believes the project will help make Wilkes-Barre the “next up and coming” area as long as officials work in unison to attract other appealing businesses. He cited Lancaster as an example, saying it has nice wineries, coffee shops and microbreweries.

He reiterated the county already has an attractive park along the Susquehanna River and believes the free summer concert series there should be expanded.

By providing funding for the hotel/convention center project, council would be finishing the county’s past investment to redevelop the Sterling site, Lescavage said.

Thornton said the county should “be done with it” and allocate the entire more than $5 million for the project, saying it will end complaints that nothing has been done there.

More information

Councilwoman LeeAnn McDermott requested a copy of the developer’s feasibility study and more clarity on the financial figures.

Rubino said he will forward some market analysis, and Barrouk said he will provide council with internal information that cannot be released publicly due to proprietary confidentiality.

Lombardo suggested H&N compile some feasibility information for public release, saying it could help citizens to “put their minds a little more at ease.”

Barrouk said the team will remain accessible to council members, indicating “these types of projects don’t come along every day.” Work on the site could begin in 2024 if funding is secured, he told council.

“Without the support of the community, it doesn’t happen,” Barrouk said.