Carmel Mayor Jim Brainard issued a statement Feb. 10 about Hotel Carmichael’s price tag rising to 46 percent more than its original $40 million budget. The City of Carmel announced the updated project cost of $58 million in a Jan. 31 press release after multiple inquiries from media outlets, including Current.
(Read more about the rising costs at https://youarecurrent.com/2020/02/06/crc-director-defends-actions-carmel-council-seeks-answers-on-hotel-carmichael-cost-increase/)
The statement follows:
Construction of the 122-room boutique hotel – a public private partnership between the City of Carmel and developer Pedcor – is estimated to cost $58.5 million, which is 46 percent higher than the $40 million price tag in late 2017, when the Carmel City Council approved the sale of $18 million in bonds 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.
I am very proud of this unique property we are developing as the Hotel Carmichael in the heart of City Center. For two decades, we have been creating a walkable, vibrant downtown for Carmel that includes entertainment and cultural opportunities along with restaurants, shops, businesses and residential options. This landmark hotel is a long-awaited component of this development, which has been promised from the beginning to area companies to help them host visitors, guests and business associates who are looking for a convenient, upscale downtown location.
When we began the public-private partnership hotel project in 2017, we used industry leaders to help us estimate a budget for a luxury hotel. There was no indication at the time that the construction market would see major increases. The Council members approved a portion of the funding with the understanding that no more funding would be provided by them.
As the project moved forward and it became apparent that construction and labor costs were increasing across the market, the executive director of the Carmel Redevelopment Commission (CRC) and his staff continued to value engineer the project looking for cost cutting solutions that would not sacrifice the luxury brand we had promised the community. In addition, I instructed them to look for alternative funding solutions that would not depend on new taxpayer dollars, including working with our non-profit community development corporation (CDC) partners. As the mayor, I have the full authority to direct the CRC to do so. In Indiana, the state legislature specifically set up redevelopment commissions as independent legal entities in order to help municipalities redevelop underused areas of their cities and towns.
Instead of being criticized, Henry Mestestky and the CRC should be applauded for finding innovative ways of funding these cost increases without any additional risk to taxpayers. Construction and labor costs are increasing across the industry. These increases are not due to any type of mismanagement or oversight, but market forces beyond our control.
While the private sector can get funding up front for a project, the public sector must first submit budget estimates and preliminary design ideas without the benefit of detailed architectural and engineering plans based on those conceptual designs. It is after the public bidding process that the true costs can be evaluated. When unanticipated market fluctuations occur, we must be ready to find ways to cover those costs and continue the project through to completion. As we completed the public bidding in 2019, we were able to get a clear picture of the actual costs for the hotel and, armed with solutions for funding, were able to update the project budget to reflect the new costs.
Carmel has been very successful in building many quality projects that have had a tremendously positive impact on our city’s economic development and this hotel will have the same positive impact. The Marriott Autograph brand is very excited to be adding the Hotel Carmichael to its collection and the hotel has already secured several weddings and corporate groups for 2020 and 2021.