News Photo by Steve Schulwitz Construction equipment and building materials sit on the property where a new Marshalls will be built in Alpena Township. Construction of the new store could take about six months and the store could be open by early summer.

ALPENA — The proposed plan for a Fairfield Inn and Suites by Marriott in downtown Alpena has been scrapped due to increased costs for the project and a rapid increase in interest rates, which increases the cost of borrowing money.

Alpena Area Chamber of Commerce Economic Development Director Mike Mahler said the plan to purchase the property on the Thunder Bay River and build the hotel was not the decision of Marriott, but the developer.

Mahler said as interest rates and inflation increased, prices of everything from building materials to fuel increased too, and he suspected the proposed project could be in jeopardy.

The government has raised interest rates five times since the middle of March with hopes it will cool the economy and help slow inflation. It is possible there could be more increases before the end of the year.

“It has been in the back of my mind for the last couple months and I was prepared for it because it was just going to be too expensive to do,” Mahler said. “The cost of construction and the current interest environment just doesn’t make the project feasible. We tried to rearrange the parking and change the plans, but we just couldn’t find anything to make it work financially.”

Mahler said the developer spent at least $100,000 in prep work to move the project forward. Alpena applied and received a $615,000 grant from the Michigan Department of Environment, Great Lakes and Energy that would have addressed some of the environmental issues at the site of the former Alpena Power Company office on the river.

Mahler said there will be a meeting with EGLE to see if the grant will remain with the property and if it can be used for another project when another one comes about.

The riverfront property will return to the market, Mahler said, and he will continue to find a developer and use for it.

Although the hotel project was scrapped, construction of the new Marshalls has begun. Contractors have begun excavating the property on Bagley Street near the entrance of Meijer.

Mahler said the bulk of the material to build the store is in place and there is an estimated six-month construction period. He said once the building is complete, the developer will turn it over to the company, which will stock the store and hire employees to run it.

“As far as I know everything is going well with that project,” Mahler said.

As costs continue to climb and investors monitor other interest rate increases from the Federal Reserve, Mahler said development in Northeast Michigan could slow down until the economy stabilizes.

Still, he said, there is still significant interest in Alpena to conduct business and open new businesses.

“I do think there are headwinds that will make my job more challenging for sure, but I’m still confident we’ll see development activity in Alpena,” he said. “It is not like things have come to a screeching halt and I don’t want people to think the sky is falling.”