Plans for a Marriott-branded hotel were met favorably by DeKalb city leaders this week, as project leaders sought a proposed tax-sharing agreement after the hotel developer blamed tariffs and inflation for rising construction costs.

No final action was taken by the City Council, although a vote is expected in the future.

Almost a year ago, the City Council approved the final development plan for TownePlace Suites and Fairfield Inn by Marriott Hotel at 902 Peace Road, between the Bumper to Bumper auto parts store and the Fast Stop Express gas station.

Since then, the applicant, Pramit Patel of EO5 Hotels, approached the city to propose a hotel tax-sharing agreement to help with an additional $4 million in construction costs for the $23.2 million build. Patel pointed to tariffs and inflation as a reason for the unexpected costs, according to city documents.

City Manager Bill Nicklas said project leaders are facing a bit of a “funding gap.”

“A gap is owing to conditions we face now, which were probably not, which we know were not existing a year and certainly not two years ago,” Nicklas said. “That has led to a rise in a variety of materials and also in labor costs.”

Project leaders said they intend to invest about $23 million into the hotel’s construction.

At the same time, officials have determined that while the hotel is situated in the DeKalb County Enterprise Zone, it may not benefit from local property tax abatements, as it is considered a non-industrial use, according to city documents. Project leaders may retain state-level exemption on sales tax for building materials, however.

Once it opens, the hotel will consist of 61 rooms branded as Fairfield Inn and Suites by Marriott and 59 rooms branded as TownePlace Suites by Marriott, according to city documents. There will be a shared lobby, front desk, meeting room and swimming pool.

Construction is expected to begin on the vacant 2.5-acre property in early September, according to city documents. A groundbreaking was held on Tuesday.

City staff put together a proposal based on a previous, unrelated 50/50 revenue-sharing agreement adopted in 2021, directing the council to provide some guidance on the matter.

Patel is proposing a 10-year agreement on sharing or distributing hotel-motel tax, with payment of revenue to the company payable at 90% the first year, 80% the second year, 70% the third year, 60% the fourth year, and 50% every year thereafter until the deal expires. The maximum payment over 10 years would not be allowed to exceed $2 million over the life of the deal, according to city documents.

Second Ward Alderwoman Barb Larson, who is a city representative to the DeKalb County Convention and Visitors Bureau, spoke in favor of Patel’s request.

“I would support this because I do know that there are some events that we’re not even in the running for because we don’t have enough hotel rooms,” Larson said. “Even if you count Elgin and Rochelle, we don’t have enough. So, to have more hotel rooms available and the quality that you’re putting up, I think it would be a great benefit to DeKalb.”

Mayor Cohen Barnes echoed that sentiment.

“Not only do we miss out on events, but we have multiple events that every hotel room is taken,” Barnes said. “People are going to Sycamore. They’re going to Rochelle, Batavia or Geneva. This is a great opportunity to expand the amount of rooms that we have to be able to ... keep those people here locally, which definitely would attract more people here while generating some hotel-motel tax revenue.”

The City Council reached a consensus, directing staff to prepare an ordinance to help solidify the deal.

If approved, a hotel-motel tax sharing agreement would take effect when the hotel’s occupancy permit is issued.

An ordinance on the matter is expected to be put to a final vote in September.