Marshall City Council OKs up-to-$480,000 tax-abatement cap, authorizes business-subsidy agreement for proposed Hampton Inn

The Marshall City Council voted to approve a tax-abatement resolution with a not-to-exceed cap of $480,000 and authorized staff to draft a business-subsidy agreement for a proposed Hampton Inn development adjacent to the Red Baron Arena.

The council’s action came after presentations from city staff, the developer and the city’s financial consultant, and a public hearing during which sports organizers and tourism officials said more hotel rooms would help keep tournament visitors in Marshall. Several residents and a council member urged caution over a proposed $500,000 forgivable loan from the city’s pooled tax-increment financing (TIF) funds and pressed for safeguards and timelines.

The question before the council was whether to support municipal incentives to bridge the developer’s financing gap for an 84-room Hampton Inn planned next to the Red Baron Arena. The developer group, Rebound Partners (Rebound Real Estate Group), requested a sliding-scale abatement and additional assistance to make the project feasible; staff proposed a reduced abatement plus a forgivable loan drawn from unallocated pooled TIF funding.

Lauren Dice, the city’s economic development director, told the council the site has been marketed for years and that studies show Marshall needs additional midscale hotel rooms. Dice said the developer originally requested “85% for 15 years” and later adjusted that to a shorter sliding scale; staff’s counterproposal was “80 to 60 over 10 years with a $480,000 cap in addition to a $500,000 forgivable loan” drawn from the city’s pooled TIF increment, with the caveat that those TIF dollars must be spent by the end of 2025.

Scott Kester of Rebound Partners described the Hampton Inn plan as an 84-room branded Hilton franchise with amenities the developer says will attract tournament and weekend guests and corporate travelers. Kester said estimated project costs are about $16 million, with an equity raise of approximately $3.35 million and about $1 million in subordinated debt; the group projects stabilization and possible refinancing in a multi-year hold.

Mikayla Huot of Baker Tilly, the city’s financial consultant, summarized how the proposed assistance would be structured: the developer would obtain all financing and incur costs; the TIF money would be reimbursed on a documented, eligible-cost basis, and the tax abatement would function as a performance-based rebate after the developer pays the taxes. “The way that it is structured, eliminates any risk from the city in financially providing the assistance because the developer…is responsible for obtaining all of the costs, incurring all of the costs, performing, completing the project, and then paying the annual taxes,” Huot said.

Public commenters representing local sports organizations and the convention-and-visitor bureau said a branded hotel next to the arena would keep tournament teams and visiting families in Marshall for meals and shopping rather than sending them to neighboring towns. Mitch Koenig, activities director for Marshall Public Schools, said lack of hotel inventory has forced teams to stay as far away as Redwood Falls and Montevideo. “If there was another one giving us some more options, we would like to continue to grow our tournaments,” Koenig said. Ryan Stelter, tournament director for the Marshall Amateur Hockey Association, said teams often split across hotels and that the organization has lost repeat associations because of room shortages.

Cassie Weiss, director of the Convention and Visitor Bureau, said she has seen potential events decline or avoid Marshall because of limited nearby lodging and that additional lodging tax revenue would support CVB efforts to recruit events. “Midweek is a really big concern for a lot of our hotels right now,” Weiss said, adding that a new branded property could help fill weekday occupancy.

Several speakers, including resident Laverne Eich and Council Member Jim, expressed concern about the $500,000 forgivable loan from the unallocated TIF pool and the risk that the money could be committed before the project reaches secured financing or construction. “We’re a hundred million dollars in debt with the school bonds and the city debt…and we’re gonna give another guy half a million dollars just to get him to build their hotel here,” Eich said. Council Member Jim pressed staff on the TIF spending deadline and whether the forgivable loan would be disbursed prior to December 2025; staff and the mayor said the TIF reimbursement would be paid only on approved, reimbursable invoices and that benchmarks would be included in any business-subsidy agreement to protect taxpayers.

Council discussion noted the multi-step nature of the process: the council approved the abatement resolution (with the $480,000 cap) and separately authorized staff to draft a business-subsidy agreement that would return to council for final approval. The council passed the tax-abatement resolution on a motion that included the $480,000 not-to-exceed number; the council also voted to authorize staff to prepare the business-subsidy agreement under Minnesota law governing local business subsidies.

The council voted to close the public hearing and then approved the tax-abatement resolution and the motion authorizing staff to draft a business-subsidy agreement. The developer also indicated it will seek a parallel sliding-scale abatement from Lyon County.

Council members and staff said they would include protective provisions in the business-subsidy agreement—benchmarks, reimbursement-only payments from TIF dollars, and other safeguards—to limit exposure if the project fails to proceed. Staff also said the TIF pool at issue originated from prior TIF projects that produced surplus increment and that the funds are not general-levy revenue.

Next steps: staff will draft the business-subsidy agreement and return it to the council for final approval; the developer will continue securing private financing and county approvals. The project remains contingent on private financing, the business-subsidy agreement, and any county-level abatement decisions.

Sources: Presentations and public testimony at the Marshall City Council public hearing (economic development director Lauren Dice; Scott Kester, Rebound Partners; Mikayla Huot, Baker Tilly; public commenters Mitch Koenig, Cassie Weiss, Ryan Stelter, Laverne Eich) and council motions and votes recorded during the hearing.