After the city of Urbana saved the Urbana Landmark Hotel via an agreement  made in November 2012, hotel owner Xiao Jin Yuan  ran out of money in one year.

In June 2012, he received an additional $400,000, which was originally scheduled to be sent by November 2012.  

In the original agreement between Yuan and the city, $1.45 million was promised to Yuan over the course of five years. This tax increment financing, or TIF, money comes from two of Urbana’s TIF districts. The city of Urbana allocated $650,000 to Yuan for the first year of renovations for the hotel and $200,000 for the following four years. 

Cities sometimes use TIF money to invest in redevelopment and other building projects. This money comes from expected future revenues from taxes on the development.

Urbana Mayor Laurel Prussing said criminal activities, injuries and fire were all possible problems that could have occurred in the vacant hotel.

Yuan said the hotel was not in working order and was in fact a public safety hazard when he purchased it. And although he had a chance to look at the hotel before purchasing it, he was unable to test certain aspects of the hotel, such as the plumbing system.

“Everybody was saying when the bank took over it was a working hotel,” Yuan said. “But the definition of a working hotel is very subjective.” 

The $650,000 reimbursement in the form of TIF money from this work “is not permanent, it will become permanent (money in Yuan’s account) if and only if the hotel stays open for two years of continuous operation,” Prussing said.

The two-year clock on the loan started when Yuan opened the first 45 rooms in December 2012. Renovations have not progressed as quickly as Yuan and the city had hoped, due to unanticipated factors.

For example, Yuan said the roof work was delayed due to weather and safety concerns for workers. He signed the agreement with the city in November 2010 but had to wait until March or April of 2011 to begin work on the roof.

An addendum was added to the agreement in June 2012 to extend more of the TIF money to Yuan earlier than the city had planned. However, Yuan has not been given any additional money by the addendum; it simply sped up the ability of the city to reimburse him for necessary renovations.

The $650,000 set aside for the first year of remodeling was already spent on renovations such as the roof, gas pipes and updating the emergency lights. 

Yuan said the addendum for the agreement was necessary to allow Yuan to continue the renovations.

All of the permanent and semi permanent changes so far are covered by TIF money. Yuan has no intention to sell the building, but even if he did, the city would still benefit, according to Mike Monson, Urbana chief of staff. 

“These improvements can survive a change in ownership. We saved that building,” he said. “If that building had remained vacant for another winter, it wouldn’t have been salvageable. We would have had to demolish it.”

Yuan and Prussing both made clear the amount of money spent by Yuan and the city separately. Prussing said Yuan is spending almost $2 million, and the city of Urbana is committing almost $1.5 million.

“Most of the money is his. Ours is an investment into downtown. We’ll get property taxes, stimulation for other businesses and the hotel/motel tax,” Prussing said. “That’s the purpose of a TIF is to invest so that you can build up the value of the TIF.”

Janelle can be reached at [email protected].