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BUSINESS

Southern Hotel project delay forces return of $500K state grant

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Elizabeth City officials plan to return a $500,000 state grant slated for the renovation of the Southern Hotel, shown here at the corner of Road and Main streets, because the project has been delayed too long and likely won't be complete by the time the grant funds are supposed to be spent, City Manager Rich Olson announced Friday.

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By Jon Hawley
Staff Writer

Saturday, February 3, 2018

In another setback for redevelopment of the Southern Hotel, the city of Elizabeth City is planning to give a $500,000 grant back to the state of North Carolina because the project has been delayed too long.

City Manager Rich Olson reported late Friday that the city is relinquishing the Small Cities Community Development Block Grant that the N.C. Department of Commerce awarded the city in mid-2016.

The grant was awarded to help SAGA Construction and Development, of Kill Devil Hills, renovate and reopen the Southern Hotel as boutique hotel. It's an ambitious project because the hotel is four stories, roughly 150 years old, and needs extensive repair in addition to asbestos removal. SAGA has estimated the project’s cost at about $13 million.

Olson reported in a press release Friday that SAGA "made clear the project would not begin in the near future and would not be substantially complete by the April 2019 deadline" for spending the grant. If the city holds on to money it knows won't be spent on time, it could hurt the city's ability to get future grants, he said.

Olson also said that before officially relinquishing the grant, city officials will try to convince Commerce officials to let the city keep the money to support other projects.

In a followup interview, Olson said the developer still hasn't found enough funding sources for the project. SAGA has Historic Tax Credits to use toward the project, but project developer Bob Howsare said last August his company was not able to secure almost $4 million in New Market Tax Credits it had counted on. He also said then that the "best-case scenario" for the project was that it would start construction early this year.

Olson said Friday that the Southern Hotel restoration isn’t a "dead" project, noting that SAGA has committed to revamping the hotel and still has the city's support. He also noted SAGA still owns the hotel plus an adjacent property. It acquired a former medical building across the street so the hotel could offer 50 rooms. The project would transform an "anchor" property for the downtown and generate a lot of business downtown, Olson’s press release notes.

Asked if the Southern Hotel might be able to win another Community Development Block Grant, Olson said he wasn't sure. He noted the $500,000 was a special appropriation, not part of a normal, competitive grant cycle.

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