The Excelsior Hotel was officially turned over to its new owner Wednesday, and the proprietor says he is excited it finally has happened.
"It's kind of been a long time working on the deal," said Victor Borcherds, an Alpine businessman. "I'm excited. It's finally happened."Before the hotel could be sold, a federal district judge in Pittsburgh had to determine whether the sale was fair to all parties, because numerous lawsuits have been filed by bondholders.
Tuesday the judge sent his final order approving the class-action settlement clearing all litigation. Borcherds purchased the hotel for $5.5 million.
Mayor Joe Jenkins said city officials figured there would be a delay or two in the settlement, but they are happy the sale is complete.
In August, lawyers representing bondholders, proposed buyers, federal and city governments and others with financial links to the hotel met to draw contracts freeing the property from litigation and clearing its purchase.
Provo and its Redevelopment Agency became involved in the settlement after bondholders filed lawsuits against the city saying Provo was liable in the financial collapse of the hotel.
Because the city owns the land under the hotel and the parking garage, those involved in the settlement asked the city to accept some of the loss and contribute $100,000 to the settlement pie.
That amount will go toward $771,691 owed in back taxes to the city since taxes have not been paid for five years. Jenkins said Provo's settlement is not a loss because hotel developers owe $71,000 plus $36,000 interest for a contractual tax obligation.
Payment of the back taxes also will free up financing used to build the city-owned garage next to the hotel. The tax-increment bonds now will be available for other downtown projects. The city hasn't been able to do anything with those funds for five years.
Tax-increment financing is based on changes in the tax base of a redevelopment area. Before redevelopment begins, taxes are frozen at the original property value as far as the county, school districts and other government entities are concerned. Property owners, however, continue to pay taxes as the property valuation goes up, and taxes on the difference between the two values is the amount used to pay off the tax-increment bonds.
The theory behind tax-increment financing is that the county, school districts and cities are not hurt by development. It also gives businesses an incentive to build in a blighted area.
Under the agreement with Borcherds, the city will be responsible to pay half of the insurance costs and half the electricity costs for the garage.
City Attorney Gary Gregerson said bondholders likely will get 70 percent of their principal money returned to them.
Jenkins said: "We paid an awful lot of legal costs and would have paid more if it had gone on. I think we came out really well."
Borcherds also owns the Heritage Mountain Resort and plans to use the Excelsior as lodging for people who will frequent the proposed ski resort and aquatic park. He had planned to build a hotel at the base of the mountain but decided instead to purchase the Excelsior.
He said he intends to keep the same hotel management because there have been a fair number of changes already.
"I think we are on the right track now," Borcherds said. "I think it's a very good investment."
City Council Chairman Ron Last said: "The Excelsior is really an asset to the town. It changed hands and still remained in operation. I'm glad we were able to keep it alive."