Niagara Falls City Council members are considering making a “strategic investment” in a state-supported $10.5 million expansion project for a downtown hotel — a proposal that is expected to create 40 new jobs and increase the number of retail options for tourists.

USA Niagara President Christopher Schoepflin presented plans at Monday’s council meeting to use public and private money to renovate the existing Four Points Sheraton hotel on Rainbow Boulevard with 80 more rooms and a large retail area on the first floor. The project would require a $500,000 contribution from the city, an investment that would be paid back in full within the first two years after the expansion is completed, Schoepflin said.

Empire State Development will contribute approximately $1.5 million to the project, with the remainder of the $10.5 million to be covered by private funding, he added.

“The developer is ready to move on this,” Schoepflin said. “Once the city takes action, the design work can begin this spring. ... We believe this expansion can be completed before tourism season 2009.”

Owned by a group of investors headed by Ashak Merani, the Four Points Sheraton currently offers 189 deluxe guest rooms, a restaurant, lounge and other amenities. It underwent a renovation in 2005.

Schoepflin said the hotel is an ideal site for expansion, pointing out its proximity to the Seneca Niagara casino and other downtown destinations. USA Niagara officials estimate the city will not only recoup its $500,000 investment within two years, but see a total of $1.8 million in revenue over the next five years from additional taxes and building permits as a result of the expansion.

“And the benefit doesn’t stop after five years,” he said.

After the estimates were questioned by City Controller Maria Brown, Schoepflin said the figures were calculated using conservative projections in bed tax and sales and property taxes. He said officials estimated the 80 new rooms will bring in more than $160,000 in direct bed and sales taxes for the city each year, assuming there’s at least a 57 percent occupancy rate.

According to the owners, the hotel currently has a 75 percent occupancy rate.

The city also would receive an estimated $75,276 annually in additional property taxes and a total of $50,000 in building permits from the project.

Schoepflin said the expansion, and USA Niagara’s involvement, will be similar to the recent $34 million renovation of the Crowne Plaza on Third Street.

Niagara Falls Mayor Paul Dyster endorsed the Sheraton’s expansion plans, saying it will fit in well with other downtown development goals. The addition of retail space on the first floor, he said, is one of the most attractive components.

“Right now, we have visitors walking down the street with no way to spend their money,” Dyster said. “We need to give them as many options as possible.”

The city’s $500,000 portion to fund the project will be taken from its share of casino revenue, which is earmarked for economic development. Dyster said he expects a formal resolution will be added to the council’s agenda on March 10.

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