ROCKFORD — Mayor Larry Morrissey next week will ask the Rockford City Council to back a new agreement that could make the city the owner of a 40,000-square-foot downtown convention center.

Morrissey is working with Gorman & Company on a new development agreement aimed at transforming the 13-story former Amerock factory into a $77 million Rockford Hilton Embassy Suites & Conference Center. The redevelopment project has been in the works for years. This is the third version of the development agreement that the city has considered as Gorman has struggled to obtain the necessary financing and bring the project to fruition.

"Our future is going to be determined on our ability to get tough deals done in spite of the challenging climate to finance a deal in Rockford," Morrissey said.

The project promises to transform the city's riverfront, create jobs, spur new investment and turn an eyesore into a four-star hotel with 160 rooms. It would be one of the largest private economic development projects in the history of downtown. But Morrissey said that the project would require contributions from the city to become a reality.

Aldermen could consider an amended development agreement on Tuesday during a special Planning & Development Committee meeting before a regular Rockford City Council meeting. If the agreement is approved, and remaining financing issues are settled, the facility could open in spring 2019.

A written amendment to the redevelopment agreement is still being worked on, Morrissey said.

The project is expected to create 123 permanent hotel and conference center jobs and 553 construction jobs over a two-year period. An economic study estimated that the project could generate an estimated $738 million in new spending over three decades, developer Gary Gorman said.

Although the first development agreement signed in 2014 called for the hotel and conference center to be built by now, there have been delays as Gorman navigates a complex series of financing mechanisms that includes attracting Chinese investment and federal historic tax credits. Gorman said he already has $16 million from Chinese investors through the federal Employment Based Immigration program known as EB-5.

"If the goal is to generate new businesses downtown and add value downtown then this is the right thing to do," Gorman said. "If the only factor is not to threaten the status quo, they shouldn’t do it."

New deal

Under a second proposed amendment to the development agreement:

— Gorman would own and operate the $64 million Hilton Embassy Suites. The hotel would overlook the Rock River and include a rooftop lounge, first-floor restaurant, bar with outdoor patio, swimming pool, fitness center, business center and other amenities.

— The city would not build a parking deck as had been called for in two previous versions of the development agreement dating back to 2014.

— Rockford would sell bonds to pay for construction of the estimated $13.1 million conference center. The conference center would feature a 7,500-square-foot banquet hall, a full-service kitchen and meeting rooms. The city would own the conference center and lease it to Gorman. The developer would operate the conference center and assume the risk of any operational losses.

— The city would repay bonds for the conference center using Redevelopment Fund money generated by a 1 percent sales tax on hotels, packaged liquor sales and restaurant bills reserved for downtown redevelopment and subsidies for downtown venues.

— Gorman would keep 5 percent of hotel taxes generated by the Hilton Embassy Suites. The developer would be restricted to spending that money on marketing and operating expenses associated with the conference center.

— Rockford would also spend an estimated $800,000 from its parking fund to install surface lots at the former location of the Tapco building and at the former Warshawsky Muffler property obtained through eminent domain. The Tapco lot would be reserved for use by the hotel and conference center. Although Gorman would keep money generated from valet parking, the city would keep any money generated through parking fees on the surface lots.

— A tax increment financing district would be terminated and re-established so that the development would get a “full rebate of property taxes” for 23 years. As property values grow from new investment, TIF districts work by reinvesting the increased property taxes back into the development.

There would be 468 parking spaces available at the hotel and surrounding municipal lots, including 76 spots on the surface lot that would be built at the former Tapco location.

Aldermen have supported the project in the past. They twice backed versions of the development agreement in 2014 and 2015. The City Council also approved spending more than $860,000 to buy the Warshawsky property after a lengthy eminent domain process.

Competitor downtown

Giovanni's Restaurant & Convention Center owner Joseph Castrogiovanni is an outspoken critic of proposed city subsidies and assistance to redevelop the Amerock into a hotel and conference center.

Castrogiovanni sees the project as government-financed competition.

Castrogiovanni said hoteliers, restaurateurs and conference center owners like him have invested millions of dollars into their businesses. They have gotten little or no help from government and shouldered all the risk. He said a downtown hotel and conference center would consume a large share of what he said is a shrinking pie of available banquet and conference business.

"We barely squeak by to keep our places open," Castrogiovanni said. "Then you go ahead, take public money and pump it into a private development ... you take our tax money, our 1 percent we produce to bring in tourism, and you are going to compete with us."

Rockford developer Sunil Puri, owner of the Radisson Hotel & Conference Center, declined to comment about the Gorman proposal.

In October, the City Council agreed to send $768,846 in TIF funds toward redeveloping the former Millennium Center into a boutique hotel. The hotel, 220 S. Madison St., is being developed by Madison Street Properties LLC, which is led by SupplyCore CEO Peter Provenzano.

"We have been supportive of the Amerock project and continue to be," Provenzano said. "I haven't looked into (financial) details of the project, but on the surface it looks like a good project for the city."

Rockford Area Convention & Visitors Bureau President and CEO John Groh said that although the downtown conference center could compete for some business, it would also grow the industry in Rockford. Groh said that with 20,000 square feet of meeting space, it would be capable of tapping a market for larger conferences that Rockford now cannot accommodate.

The proposed facility could host banquets, seminars or luncheons for 650 people in a 7,500-square-foot hall, and still provide space for meetings in adjacent rooms afterward. It would also offer conference organizers a combined full-service hotel and conference center that many trade shows, fraternal groups and seminars demand, Groh said.

"Having a larger, very versatile conference facility opens things up for new meetings and conferences that don’t come here," Groh said. "And it is important to have an attached hotel."

Unanswered questions

A financial pro forma on the city's subsidies for the development was not immediately available.

How much money the hotel is expected to generate in hotel taxes that it would retain, the financial picture of the proposed TIF District changes, how much money the Redevelopment Fund is expected to collect annually and what the impact of the project would be on the fund were questions that Alderman Joseph Chiarelli, R-14, said remain unanswered.

Aldermen are asking for more financial information on the deal and for a written development agreement. And although the development could benefit the city, aldermen also must decide whether owning a conference center that could compete with other private businesses is the proper role for the city, Chiarelli said.

"Is that our function of government? We provide fire and police services. I don't know if our job is to bond for a conference center," Chiarelli said.

Supporters of the project including Groh, Morrissey and Gorman point out that other cities have completed similar deals — and that aldermen have previously voted to support the deal. Whether the city pays for a parking deck or a conference center, the end result is the same.

Alderman Tom McNamara, D-3, who is running for mayor, said he had been frustrated by how the latest proposed amendment was rolled out. Although Gorman met with most of the aldermen individually to discuss the proposal, McNamara said community groups, labor representatives and the Rockford Register Star Editorial Board were given more information about it before a formal presentation to elected leaders.

McNamara said he needs more information in writing before he can say whether he supports the amendment.

"It's disappointing how a project so many people who have worked so hard on for years, when aldermen have stood and supported the project twice before, we are the last to get a formal (proposal)," McNamara said.

A 'catalyst'

Gorman said the proposed development would do little to "cannibalize" existing business. The project would instead work to attract events that now do not come to Rockford because it doesn't yet have the right kind of amenities to attract them.

He said investment in the development would pay off for Rockford by raising the value of surrounding properties and giving rise to new businesses to serve the people and events it helps attracts in conjunction with the UW Health Sports Factory across the river.

"What we have designed with meeting rooms, the latest technology, a dramatic view of the river and the park and with the Embassy Suites brand attached, will attract new events to Rockford," Gorman said. "We are not cutting a slice of the same pie."

It is because construction costs are so high, Gorman said, that securing conventional financing for the project has proven challenging and led to delays.

"The construction costs are equivalent to Chicago, but the room rates are half of what they charge in Chicago," Gorman said. "That's why we needed a hybrid financing structure, all those trips to China, tax credits and the need for a public private partnership. Very few (banks) want to be pioneers. They are extremely cautious."

Local architect and former River District Association President Gary Anderson said he has high hopes for what the long-awaited development could mean for Rockford.

"It's a tremendous opportunity," Anderson said. "This will be a catalyst for next-level development downtown."

Staff writer Chris Green contributed to this report.

Jeff Kolkey: 815-987-1374; jkolkey@rrstar.com; @jeffkolkey