The Wilmington City Council unanimously approved a resolution Tuesday that finally cleared the way for a new hotel at the Wilmington Convention Center.

As part of the resolution, the city will sell Virginia Beach, Va.-based Harmony Hospitality a 0.76-ace the site for about $579,000 – about $741,000 less than what the prime riverfront parcel has been appraised for, according to city documents. The agreement also clears the way for the hotel to pick up 250 reserved spaces in the city’s 578-space parking deck at a cost of $100 per month per space, which is the current publicly established rate.

In return, Harmony will construct an 186-room, $33.6 million Embassy Suites hotel on the site that will include a 5,891-square-foot restaurant, 6,609 square feet of meeting space, a fitness center and pool. 

Sterling Cheatham, Wilmington city manager, said the city would also receive $6.4 million in property and sales tax revenues over the next 10 years. He added the hotel's construction will create 346 jobs, and upon its completion, will create 207 jobs with 155 of those jobs being direct hotel jobs at an average wage of $13.02 an hour.

Brooks Johnson, director of development for Harmony Hospitality, told council members that the firm has secured a $21.3 million loan from Wells Fargo and plans to pump $3.5 million of its own equity into the project. He added that California-based Birch Capital, an investment firm hired by Harmony, has secured $9 million in EB-5 funds for the project.

Johnson said offiicials plan to breakground on the eight-story hotel in June and complete the project for occupancy by August 2015.

No general contractor has been selected, but Johnson said officials have identified three firms -- two of which have offices in greater Wilmington.

A number of business advocates were present during the meeting to voice their support for the project. 

Clark Hipp, chairman of Wilmington Downtown Inc., said that as a downtown property owner and resident, he thought having the Embassy Suites ajoin the convention center would be a much needed boost to downtown's momentum.

"The ball is rolling," Hipp said of downtown's economic activity. "This is going to increase tourism and visitors enjoying our Riverwalk ... and help in the redevelopment of existing properties and vacant land."

Chris Boney, first vice chairman of the Wilmington Chamber of Commerce and managing principal of LS3P's Wilmington division that completed the architectural design for the convention center, likend the center to a "fine sports car running on two cylinders" and urged the council to approve the resolution.

Susan Eaton, general manager of the convention center, said the hotel would make Wilmington more marketable to large conventions, including the N.C. Police Executives and the North Carolina chapter of The American Institute of Architects --  groups that have already expressed interest in relocating their conventions and meetings to the city.

But while an overwhelming number of business officials were in support of the measure, not all were pleased with the resolution.

Hours before a public hearing began Tuesday, a lawyer representing Hilton Wilmington Riverside’s owner sent a memo to city officials questioning the transaction.
 
“In preparing for tonight’s meeting I have come to realize that the proposed purchase agreement, on its face, violates the consent judgment,” Matthew B. Davis, an attorney with Wilmington-based Marshall, Williams & Gorham LLP representing Sotherly Hotels, wrote in a letter to city attorney Bill Wolak.
 
Davis reiterated the city's 2006 consent decree that forbids the city from subsidizing a private hotel’s operations – an issue Davis said the city was violating with its proposed “below market purchase price” offered to Harmony Hospitality.
 
Cheatham said the city has meet key provisions of the consent decree by issuing public requests for proposals dating back to 2008, setting the land price to entice development under the state's economic development Land Development Act, and ensuring that hotel and convention center are managed seperately.
 
After Tuesday's meeting, Davis said his clients did not have any immediate plans to challenge the decision. 

Sotherly Hotels has objected throughout the process.
 
In a Sept. 27 letter to the city, Davis said the “city should not be in the business of picking winners and losers by subsidizing one private developer’s project to the disadvantage of others.”
 
In the letter Tuesday, Davis argued that while the city is using a state statue that allows subsidizing property for economic development purposes, that law requires the city to gain long-term economic benefits such as new jobs or an improved tax base. But in this case, Davis said, “when the city agreed to the consent judgment, it agreed not to subsidize the hotel project.”
 
This type of challenge from competing businesses is uncommon, said C. Tyler Mulligan, an associate professor of public law and government at the UNC School of Government.
 
Under various state economic development statues, cities can convey land to a company for less than fair market value as long as the company adheres to specific entitlements outlined by the city within the project, promise a substantial amount of job creation at or above the average wages and improve the site, Mulligan said.
 
He said improving the site typically means constructing a building and recouping tax revenue and fees that would make up for the balance of discounting the property.
 
“In the end, the government is not giving the land away below fair market value for nothing,” Mulligan said. “They’re still expecting to recover the amount of the discount through future tax revenue.” 

City officials have long called the convention center hotel an economic development catalyst, especially in a part of the city seeing increased hotel development, renewed residential interest and future entertainment mecca given the ongoing momentum at the Northern Riverfront and Marina development next door.

City councilwoman Laura Padgett expressed relief when the vote was completed.

"This has been an odessey of many years," she said. "It's a thrill to see this come to a vote."