CARMEL, Ind. – A luxury hotel project partially funded by the City of Carmel is now more than $18 million over its original budget.
In 2017, construction of the Hotel Carmichael was projected to cost $40 million. Now, the Carmel Redevelopment Commission says the estimated price tag will be $58.5 million. That is more than $18 million over the original budget.
City council members explained they just learned about this new number in January, even though the hotel is set to open this May.
The 122-room boutique hotel at Carmel City Center is a public-private partnership between the City of Carmel and developer, Pedcor.
The city council approved the sale of $18 million in bonds a few years ago to help finance it.
The city closed on a $25.5 million loan to cover the rest of the project in April 2019, bringing its total funding to $43.5 million at that time.
The Carmel Redevelopment Commission, or CRC, is working with Pedcor to build this hotel.
“The redevelopment commission took a lot of time to see if we could cut as many costs out of the hotel as possible,” said Henry Mestetsky, Executive Director of CRC.
He attributed the change in the budget to rising construction costs, which is a trend nationwide. Mestetsky said CRC will cover the overrun through bonds, loans, and funds from its own budget which is separate from the city’s budget.
“It comes from a source of funds unrelated to the city at all,” he explained.
He said this will not place new risks on the taxpayers and the funds have no relation to hotel operations or profits.
The CRC expects to receive millions of dollars back from hotel revenues.
That is not stopping some city council members from wanting to review the hotel’s funding and procedure.
Councilwoman Sue Finkam said she was surprised when she heard about the new budget.
This month, she and four other council members submitted a resolution together which asks for a review of Hotel Carmichael’s funding and procedures.
It was placed on the agenda for the city council meeting on Monday, March 2nd.
The resolution claims it is in the best interest of the city and its residents to seek review to ensure it has been and continues to be in compliance with applicable laws and fiscal procedures.
This resolution would direct the finance committee to investigate the budgeting, cost management and funding of the hotel. It would also authorize the hotel to utilize outside counsel to aid in its investigation.
“I believe it is worth looking into just to ensure all the steps were proper,” Finkam said. “What steps were taken by the CRC? What statutory authority did they have to do that?”
It is a step Mestetsky said he welcomes.
“It will show all the redevelop commission is dealing with,” he said.
Another council member, Tim Hannon, tried to introduce a different resolution. Hannon wanted a special committee to review the spending rather than place that responsibility on the finance committee.
He also wanted this review to be done by experts and external consultants. Hannon claimed the special committee would have comprised of every council member.
Hannon did not submit a resolution because he said he did not have the votes.