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KEVIN GUTTING

A view of the site of the proposed Hilton Garden Inn in the Round House parking lot at the back of Pulaski Park. This view is from The McDonald House on Old South Street. Pulaski Park is behind the trees at top of frame. The Valley CDC apartments on New South Street are at far left. The Roundhouse is at right.

NORTHAMPTON - The Pioneer Valley Hotel Group is pleading with the city for more time to build a hotel and parking garage downtown, citing bonding requirements as the sole obstacle.

The company's purchase-and-sale agreement with the city to buy the Round House parking lot for $1 expires Dec. 31. But it has not been able to secure a $12 million bond the city is demanding to financially safeguard completion of the project.

The city has already granted several extensions to the company, which had planned to break ground on an estimated $14 million Hilton Garden Inn and parking garage earlier this year. The firm has built three other hotels in the area, including the Comfort and Hampton inns in Hadley.

In a three-page letter hand-delivered to City Hall on Monday, Shardool S. Parmar, president of the hotel group, informed city officials that financing, including $4 million in equity from the hoteliers, is in place. But securing a $12 million bond remains problematic.

--Read the text of the PVHG letter

The letter notes the company has successfully concluded negotiations with Bay State Gas, the company responsible for the $6.4 million hazardous waste cleanup of the site where the hotel would be built. Protracted negotiations with the company and a longer-than-anticipated cleanup contributed to the project's delay. In addition, the tanking of the global economy has made it difficult for the developers to secure financing and bonding requirements.

"The only issue remaining open is the question of a bond for the project," Parmar wrote to Northampton city councilors. "Because a number of insurance companies have been hurt by claims on completion bonds, the process of getting one is much tougher than anyone could have anticipated in 2007."

Parmar noted that the Pioneer Valley Hotel Group has been told by the city's legal counsel that a full $12 million bond is "imperative." His letter references city concerns about the failed $700 million redevelopment of the former Filene's block in downtown Boston.

"I'm concerned about having a project that gets half finished," Mayor Clare Higgins said. "We would like them to be successful, but we need to be assured that they can finish the project, or that the project will get finished."

Higgins said she is keeping city councilors abreast of the negotiations with the hotel group, but declined to say Monday whether she is leaning toward granting another extension of the purchase-and-sale agreement.

Though Higgins holds the authority to grant the extension request, she will make the decision in consultation with the City Council.

"They have until (Dec.) 31st, and we're still in discussions with them," the mayor said. "We're going to continue the conversation. The attorneys are conversing."

Laxman S. Parmar, chief executive officer of the Pioneer Valley Hotel Group, said Monday that the family-owned company is essentially asking for more time from the city as it works with bonding companies.

"We want to continue negotiating with the city," he said. "This is a big project for the city. We have a lot invested in the project."

Laxman Parmar said his family has already invested about $1.3 million in the planned hotel development and, according to its financing plans, would invest $4 million more in equity even before bank financing kicks in.

The company says it also has secured a fixed-price construction contract as well as a construction bond that would cover the project if the contractor were not able to complete the job.

In his letter to the city, Shardool Parmar reiterated his family's commitment to the hotel development and noted that its loss would be a loss for his family as well as for the city in terms of jobs and tax revenues.

"We are not a large institution from another state with Northampton as a balance sheet," Parmar wrote. "We are of and in this community. This project is our only project. This project is our family's future, as much as it is Northampton's future."

Dan Crowley can be reached at dcrowley@gazettenet.com.