Prince Street Hotel Project Tourism Zone, Gap Funding OK'd

ALEXANDRIA, VA — City Council voted 4-3 Saturday on a proposal to create a tourism zone and provide gap funding for a Prince Street hotel project. The opposed councilmembers were Alyia Gaskins, Sarah Bagley and Kirk McPike.

The proposal relates to a hotel redevelopment project at 699 Prince Street, which is near the Washington and King Street intersection. While the building was last used as office space in the last few decades, it was the site of the George Mason Hotel from 1926 to 1972. The developer, J. River 699 Prince Street, LLC, proposed a 134-room boutique hotel. The project has been in the works for years, as required land use approvals from the city were secured before interior demolition started in 2019.

The project had been ready to secure a construction loan when the COVID-19 pandemic hit in 2020, stopping lending particularly for new hospitality industry projects. As Alexandria's economic development officials looked for federal and state resources to help businesses, they found the Tourism Development Financing Program and tourism zone.

The 699 Prince Street project involves a Tourism Development Financing Program, which would allow the project to receive gap funding from state and local revenues. To be eligible, the developer must prove they have secured at least 70 percent of funding for the project.

According to a city staff report, the estimated hotel project cost is $69.6 million, which includes $6.1 million in Tourism Development Financing Program gap financing. Repayment of the gap funding would include $2.3 million each from the state and city from reallocating the 1 percent sales and use tax collected from customers. The developer would repay $12.2 million from a 5 percent access fee charged to hotel and restaurant customers.

The hotel project would generate revenue for the city after the former use had a tax exemption. The National Center for Missing and Exploited Children occupied the building in 1998, but it had a federal tax exemption and did not generate city tax revenue. The National Center for Missing and Exploited Children decided to sell the building in 2017 and leased space until it relocated to the Carlyle neighborhood.

For the new hotel project, the net gain to the city would be an estimated $37.6 million over 20 years after deductions of the 1 percent sales and use tax and costs for city services, according to the city staff report.

While the gap funding proposal drew some scrutiny in the community, public testimony at Saturday's meeting also centered around labor. A presentation to City Council stated the project would create 19 jobs and over 90 part-time jobs. Members of hospitality workers union United Here Local 25 testified against the proposal, expressing concerns about low-paying jobs as working-class people struggle to afford housing.

Since City Council discussed the proposal on Jan. 11, updates were made to the performance agreement between the developer and economic development authority. This includes the general contractor including language for subcontractors affirming they have not engaged in wage theft, construction monitoring, preferred hiring for City of Alexandria residents, including the city's Equal Employment Opportunity policy as an addendum in subcontracts. Another new term states that the facility "will not unlawfully interfere with the right of its employees to organize a union to negotiate terms and conditions of employment should they choose to do so." The term also states it will not violate labor practices in the National Labor Relations Act, will meet "in good faith" with a bargaining representative, and will respect an employee's decision to join a union and not retaliate based on their interest.

City approval allows the Alexandria economic development team to submit a Tourism Development Financing Program application to the state.