When the city of Montpelier and the Bashara family, owners of the Capitol Plaza, announced a partnership in late 2017 that would bring a new, 89-room hotel and a four-story, city-owned parking garage to the downtown, the plan looked like an economic boon.
The hotel would create local jobs and bring in tourism dollars, while the parking garage was seen as a potential antidote to the city’s parking scarcity. Downtown businesses were enamored.
Gov. Phil Scott called the project “an important economic investment for downtown Montpelier … which will generate valuable economic activity in Vermont.”
But after more than three years of delays and lengthy appeals, the Hilton Corp. has backed out of the deal by terminating its franchise agreement, the city announced Friday. According to city officials, Hilton grew concerned over “ongoing legal delays” and a “lack of clarity around the construction timeline.”
“Appeals are not meant to kill projects through delay, but that is what happened here,” Mayor Anne Watson said in the statement.
The project originated with an agreement between the Bashara family, which is heavily involved in the community and with local investment, and Hilton to transform the pre-existing Capitol Plaza into Hampton Inn and Suites — part of the Hilton line of brands. Construction had been planned for late 2018.
The Bashara family was to donate a piece of nearby property to the city as part of the deal. That property — currently a surface-level parking lot — was supposed to be turned into a parking garage that would net 160 new spaces and include 20 charging stations for electric vehicles.
The project was approved by the Design Review Board, the Development Review Board and the Act 250 panel, according to the city.
Nearly 57% of Montpelier residents (2,459 in favor, 1,877 against) voted in November 2018 to approve a $10 million bond for the garage construction, paid for by tax increment financing.
Still, the project has been consistently delayed. Appeals by a small but vocal group of Montpelier residents have challenged that the project is noncompliant with Act 250 guidelines and existing zoning laws, and would have a detrimental visual impact on the city.
“I think it’s disappointing that a small group of people decided to delay this project to death, when a clear majority of Montpelier voters voted in favor of it,” said Dan Groberg, director of Montpelier Alive, a nonprofit group that advocates for local businesses.
James Dumont, an attorney based in Bristol representing the group of Montpelier residents, denies that the appellants have been responsible for the delays in the project.
He points to the back-and-forth process about whether the garage would be included in the Act 250 case as an example. The city didn’t file a motion to throw out “the whole Act 250 case” until March 2021, several months after a judge invited the motion, Dumont said.
“For the mayor to say we delayed the case is totally untrue,” Dumont said. “We did nothing to delay the case. All the delays are caused by the city.”
City Manager Bill Fraser said that it takes time to prepare those motions, and the Covid-19 pandemic has slowed those processes and interrupted court schedules.
“The entire delay is a result of a voluntary appeal that [Dumont] and his clients brought,” Fraser said. “Any blame [Dumont] tries to place on the city is disingenuous. There was no requirement that they file an appeal.”
According to Fraser, many of the appeals raised had been dismissed or withdrawn. He said the city won on several appeals, like those regarding the number of road signs, potentially increased traffic congestion, adequate sidewalks and sufficient bike access facilities.
The remaining appeals — regarding the zoning and Act 250 — had been consolidated into a single court proceeding and was set for late summer. Still, after years of the same, Hilton decided to back out.
“In my view, this group wants to obstruct and kill this project,” Fraser said.
The city said it has already spent $1.1 million on the construction of the garage, and the Bashara family has lost close to $1 million in hotel and litigation costs.
For the city, that $1.1 million will now have to come from property tax revenue rather than be recouped by revenue generated from the garage or hotel had the project gone through. It’s a scenario that demonstrates the risks associated with tax increment financing.
The scarcity in hotel rooms and parking spaces will remain an issue in Montpelier. It’s a problem that hit close to home for local businesses already dealing with Covid-19 regulations and operating in a hard-hit economy.
Groberg said that a vibrant downtown in Montpelier, with an estimated population of just under 8,000, “really depends on people coming in from surrounding communities and people coming from out of state.”
