City and Allen Economic Development Corporation (AEDC) staff have negotiated the terms of agreements with Altera AHCC LP., and IBC Bank to eliminate the loan guarantee with the AEDC, adjust the Hotel Occupancy Tax (HOT) payments for the facility, address the restructuring of the current loans for the facility, and put in place additional performance requirements for the owner of the Watters Creek Convention Center.  As a condition for the elimination of the $5 million loan guarantee, the City of Allen would agree to provide a $2.8 million payment to IBC Bank to cover the equivalent of approximately 6-months of principal and interest for the project loans.  In addition, the City would increase the guaranteed minimum HOT payment to Altera over the six year period from 2020 - 2025 to $750,000, with a cap of $2.2 million on the additional cumulative HOT funding to be paid during that period.  The HOT payments that the City is currently committed to pay Altera (from HOT produced only by the project) for the 5-year period from 2026 - 2030 will be reduced by $200,000 per year such that the City recoups a total of $1 million over that period.  The City of Allen would also extend the HOT tax reimbursement period from 2031 - 2036 in the amount of 50% of the HOT produced only by the project on an annual basis.

As part of these agreements modifications, the City of Allen will place performance requirements on the owners of the convention center.  The following is a general description of the requirements:

• Company will replace the operating company for the hotel/convention center.
• Company will replace the Delta brand for the project with either a Marriott or Sheraton brand.

• Agreement language will be amended to make it clear that the company is required to operate the Convention Center at all times from current date through the end of the HOT reimbursement term (2036).
• The ownership of Altera must raise $1 million in additional equity immediately with a requirement for future cash call.
• Company will provide the City of Allen all financial and operational information on the hotel and convention center on an ongoing basis.
• A committee consisting of Altera, the City of Allen, the CVB and the hotel operator will be formed that will meet monthly unless the parties mutually agree to meet less frequently.  At a minimum, the committee will review all operational documents noted above, discuss the meeting and convention business as the facility, and ensure performance benchmarks are being met.
• The CVB and the hotel operator will work together on an ongoing basis to book group business at the convention center. 
• The hotel operator will undertake a regular analysis of the competitive set of all hotel/convention centers and ensure meeting space rental rates are in general conformance with the average rates specified in the SWOT Analysis.
• Altera will not charge any parking fees for the City of Allen, its related entities, or any company or nonprofit based in the City of Allen, unless such parking fees are approved by the City of Allen.
• When the hotel reaches a stable occupancy of 55% (averaged over 12 consecutive months), then Altera will purchase the Airwalls required to divide the main convention space into 4 separate sections.
• The new hotel operator will complete an inventory of the hotel/convention center and determine the equipment (tables, plates, cutlery, glasses, staging, sound equipment, etc.) that should be owned by Altera in order to adequately allow a large group or groups to fully utilize the 70,000-SF of convention space to its full capacity.  Following the hotel reaching a stable occupancy of 55% (averaged over 12 consecutive months), Altera will purchase the equipment identified by the operator.

Staff believes the modifications to the incentive agreements as stated above accomplish the goals of the Allen City Council while protecting the financial interests of the City of Allen and its related entities.  The attached agreement reflect the significant deal points listed above.  Contract language is still being negotiated and updated.  As such, non-material changes to the contract may be made subject to ongoing City Attorney and City Manager negotiations.

I make a motion to authorize the City Manager to Negotiate and Execute an Amended and Restated Economic Development Incentive Agreement and Civic Center Agreement with Altera, AHCC, LP.