WPI explains, and defends, plan to purchase 2 Worcester hotels

WORCESTER — In the wake of mounting criticism from city government and economic officials about Worcester Polytechnic Institute's plan to buy two hotels in the city so they can be turned into student housing, WPI officials state in a letter to the university community that the purchases are in response to a looming student housing shortage.

In addition, the WPI officials say, the properties will remain on the city property tax rolls for a period of time after the purchase.

A spokesperson for WPI shared the letter with the Telegram & Gazette on Monday. WPI had not previously commented on its plans.

Worcester Regional Chamber of Commerce President and CEO Timothy P. Murray said WPI's behavior around this plan should give the city and residents plenty of reason to be "dubious" of the WPI administration's claims.

WPI intends to buy the two hotels — the Hampton Inn & Suites at 65 Prescott St. and the Courtyard by Marriott at 72 Grove St.

The purchase was widely publicized after a letter from Worcester’s Economic Development Coordinating Council to WPI President Grace Wang excoriated WPI's plans.

Members of the Economic Development Coordinating Council, an informal partnership between city officials and some of the city's largest business leadership organizations, say Worcester could lose $780,000 annually in local property taxes and more than $850,000 in annual hotel/motel tax revenue, along with more than 100 jobs and 25% of local hotel room capacity.

The hotels are part of the 55-acre Gateway Park project, which used roughly $170 million in public and private funds to clean up contaminated lands and refurbish old industrial buildings to create a mixed-use development. The project features WPI’s 125,000-square-foot Life Sciences and Bioengineering Center.

Criticisms continued with a signed letter and public statements from the majority of the Worcester City Council. There are a handful of items on the City Council agenda for Tuesday that touch on the planned purchase as well as payments in lieu of taxes (PILOT) agreements the city has with WPI and other colleges and universities.

A Historical Commission meeting previously scheduled last week where the hotel plan would have been discussed has been postponed to Thursday. The city manager's office had been in communication with WPI about a meeting as of Thursday.

The letter to the WPI community is signed by WPI Executive Vice President and CFO Michael Horan and Senior Vice President for Student Affairs & Enrollment Management Philip Clay.

It confirms the planned purchase, stating WPI could not provide an update before now because it had been engaged in "confidential discussions."

The letter says WPI has been exploring strategies to address a projected shortage in student housing in ways that would provide students with "affordable, accessible, and desirable housing options." The letter says WPI does not have enough space for upper-level students, and first-year and transfer students are guaranteed on-campus housing.

"Many of you live in the city and therefore know that the Worcester housing market is extremely tight, with ever-increasing apartment rents and a vacancy rate of 1.7%, one of the lowest in the country," WPI's letter reads. "This situation puts considerable strain on our students’ ability to find affordable housing and adds pressure to the city’s housing crunch. Our plans to increase our on-campus housing will not only help our students, it will also create space in the market for families and other renters impacted by the housing shortage."

Initially, the letter says, the hotels will continue to operate at their current capacity and the management company will be retained, the letter reads.

The plan is to transition the The Hampton Inn to student housing in 2026 while the Courtyard by Marriott will continue to operate as a hotel through at least 2030.

Until those dates, the buildings would remain on the city's property tax rolls and to generate hotel tax revenue.

"This approach will help serve our students by providing housing close to campus, which will foster their engagement with our vibrant campus life," the letter reads.

If WPI buys the Hampton Inn, it could be on the hook to pay the full amount of property taxes until at least June 30, 2029, due to a tax increment financing agreement the city signed in 2014 with the original owner of the Hampton Inn, SXC Prescott Street Hotel LLC. The deal exempted SXC from paying a portion of the property taxes over a seven-year period from July 1, 2015, to June 30, 2022.

Baked into the deal was the stipulation that no matter who owned the property, it would remain taxable, or the owner would make a tax-equivalent payment, for 14 years from the first day of the increment agreement. The 14-year period ends June 30, 2029.

Courtyard by Marriott is not part of the tax increment agreement, with total property taxes paid on that hotel of $4.5 million from fiscal years 2015 to 2024.

Murray said the letter does not mention the TIF agreement obligations for the Hampton Inn, adding that WPI administrators are not keeping it open out of "the kindness of their hearts."

The WPI letter cites the payments the university makes to the city in its PILOT agreement, exceeding $815,000 each year.

"Our university has stood upon this hill for 159 years, and we have continually proven ourselves to be a solid community member and a good neighbor."

The letter states that almost 450 WPI employees reside in Worcester, and that as of 2023, WPI technologies and resulting local and regional companies have employed more than 400 people and raised approximately $1 billion in investment.

Murray, who signed the initial Economic Development Coordinating Council letter and has been a leading critic of WPI's conduct surrounding the purchase, said he was most struck by what the letter from WPI did not say: how the university would make up for any loss in hotel and property property tax revenue or any investments to ensure the Gateway Park vision continues.

"City leaders, the business community, the employees should be dubious of any claims and assertions given how the WPI president and her leadership team chose to handle this," Murray said, "There was no transparency. It was not collaboration, it was not partnership."

On WPI's projected housing crunch, Murray reiterated a point made in the Economic Development Coordinating Council letter – that WPI made a "strategic mistake" in not acquiring 200 beds from properties that previously belonged to the now-closed Becker College and another 200 beds Becker had from long-term leases.

"They made a strategic mistake in not acquiring those properties, and now they are cannibalizing 25% of the city of Worcester's hotel capacity, taking property out of the tax rolls, reducing hotel and motel revenue and compromising the integrity of what Gateway Park was supposed to be focused on."

Murray said WPI chose not to engage in dialogue with the city and business leaders about student housing or spending from the university's endowment to build on existing WPI property.

This article originally appeared on Telegram & Gazette: WPI confirms its plan to purchase 2 hotels in Worcester