MUSKEGON, MI - A $15 million convention center will be built next to the Holiday Inn and LC Walker Arena in downtown Muskegon under a public/private agreement among the City of Muskegon, Muskegon County and the owner of the hotel.

A letter of intent was approved by city and county commissioners Tuesday calls for the construction of a convention center connected to the arena and the hotel. The city would own and arrange financing for the center, but the money used to pay off the debt and for operating expenses would come from hotel owner Parkland Properties and Muskegon County.

A convention center has been discussed for more than two decades and has been the focus of at least two studies. A 2014 study determined that the convention center would be well used, most likely by state and regional groups looking for lower-cost venues in smaller communities. Muskegon's tourist features would help draw groups looking for varied activities for its participants.

Under a "best case scenario," the convention center would open in 2020, said Muskegon City Manager Frank Peterson.

The city would sell bonds and undertake construction of the convention center. A new 4 percent assessment -- as well as most of an existing tax -- on hotel rooms in the city (the only hotels are the Holiday Inn and Shoreline Inn owned by Parkland Properties) would provide the funds to pay off the bonds. Muskegon County would funnel some of the hotel assessment proceeds normally use for its marketing budget to pay the bonds and would provide the guarantee on the bond payments, city officials said.

The county in 2014 paid for a feasibility study that found that more than half of event planners within a four-hour drive of Muskegon would consider the city as a location for conference-type events.

Since then, the downtown has had significant investment, including multiple housing developments and the establishment of a Downtown Center by Muskegon Community College.

The feasibility study determined there would be $10.6 million in annual economic benefits from a convention center, with $7.4 million coming from those who live outside the Muskegon community.

How it will be financed

Parkland Properties, owned by downtown investor and supporter Jon Rooks, would manage and operate the convention center and would receive all profits and incur all losses from the center. Rooks' Holiday Inn and Shoreline Inn, both located downtown, would generate the money for convention center construction as well as a fund to pay for its upkeep.

"It's the next big step for our town," Rooks said of the convention center.

Development of a convention center has been bogged down by a lack of financing. Muskegon County hotel owners voted down a proposal to pay for it with a 2 percent assessment on room rates county-wide, Peterson said. The current county-wide room rate assessment is 5 percent.

The funding issue was resolved with the decision to levy the assessment only in the city of Muskegon. With Rooks being the only hotelier in the city, only his "vote" is needed to approve the 4 percent assessment on room rates in the city. The other funds would come from an existing room tax on city hotels, most of which had been going to the county.

The assessments will raise an estimated $627,000 in 2020, but is expected to increase to $865,000 by 2022 and $945,725 by 2025, Rooks said. As use of the convention center increases demand for rooms, rates can be increased and occupancy rates will rise, resulting in the higher assessment proceeds, he said.

The potential for the increase in hotel demand provides Rooks with the incentive to book the convention center as much as possible.

"I'm going to be extremely motivated to make sure that convention center is fully booked," Rooks said.

The additional room assessment means local taxes on Rooks' 341 hotel rooms will total 9 percent.

The appeal of the payment arrangement is that no one other than Rooks is putting up any risk, but business owners from throughout the county will benefit from the convention center, Peterson said. Muskegon County would be taking on some risk by guaranteeing the bonds, but it would take a "pretty dramatic change" in the city's direction to not generate the needed bond payments through the room assessment, Peterson told city commissioners.

Muskegon County Commissioner Susie Hughes was the lone politician who voted against the plan. She said she was opposed to the county taxpayers guaranteeing bonds for a project that would attach to a privately-owned hotel and provide business opportunities for the owner.

Convention center design

The convention center likely will be 40,000 to 50,000 square feet and be built on property owned by Parkland behind the Holiday Inn near Shoreline Drive and Fourth Street. Rooks said he would donate the property.

Tentative plans call for Fourth Street to be blocked off, and for the convention center to be connected to both the Walker Arena and the Holiday Inn.

Peterson said the city likely will take the lead in the design of the convention center since it will be overseeing its construction - and because it will be located inside city boundaries.

The convention center could host tradeshows, meetings and conferences and banquets and receptions. Rooks said the center would serve smaller organizations and associations looking for a cheaper alternative to Grand Rapids.

Conventions tend not to be booked during summers, which is good for Muskegon when room occupancy is fairly high, Rooks said. Increasing the occupancy in the off-season is what the downtown hotels need, he said.

Rooks said during a recent interview about downtown development that a convention center would accelerate downtown investment, especially by attracting off-season use.

"If we get the convention center, it would be a huge, huge economic boost," Rooks said.

Rooks, who lives in Norton Shores, has already invested significantly in downtown Muskegon. His $7 million Highpoint Flats development in the former Comerica Bank will include 47 new market rate apartments and three floors of commercial space. Rooks also continues development of the Terrace Point Landing subdivision of single-family homes downtown on Muskegon Lake.

He also donated the former Masonic Temple building to the college for its Downtown Center. And his offices are located in the historic former downtown fire station which he obtained from the city and renovated.

"We have a mission here," Rooks said of Parkland Properties' commitment to what he called "impact developments" in Muskegon.

"We want to make this town a better town, and the convention center is the right decision," he said.