Roanoke is ironing out a $1 million funding deal with the developer of a Cambria Suites hotel planned for Reserve Avenue.

In early July, the city council and several Roanoke city officials agreed to grant up to $1 million in tax incentives to Telemark Hotel Group LLC, according to Warner Dalhouse, an investor in the project.

Telemark is the Wisconsin-based developer of the Cambria Suites project, which is estimated at $15 million.

The city still is drafting a performance agreement that the city council must approve before the deal is official, said Brian Townsend, assistant city manager for community development.

Like some other city tax incentives packages, this one would require the 127-room hotel to generate a minimum amount of revenue per year from certain tax sources, Townsend said.

In recent years, the city has granted lucrative tax incentives to some large retail developments. That includes $9 million for the developer of Ivy Market, where Ukrop's Super Market opened in June, and $1 million for the owners of the District at Valley View, a shopping area adjacent to Valley View Mall.

This is not the first time Telemark has sought financial help from the city. Several months ago, it asked the city for about $2 million, a request the city rejected initially.

It has been more than a year since Telemark announced plans to build a Cambria Suites hotel at a site called the Riverside Centre, at the corner of Reserve Avenue and Franklin Road. The city has spent $3.2 million to prepare this area for development. Carilion Clinic owns the Riverside Centre site, and it sold 6 acres to a Telemark-related group for hotel and other commercial and retail development.

But the hotel site has a major hurdle. It is near the Roanoke River.

Telemark said there would be extra costs to build the hotel in a flood plain. The structure would have to go up on a raised site. That would make room for a parking garage under the building, developers said.

A few months ago, the city rejected Telemark's initial $2 million request, saying it exceeded the developers' actual costs related to the flood plain, Townsend said.

At that time, Telemark already had received a building permit and construction had begun on the hotel. Work halted there in May for several reasons, including a change in architects.

This situation created friction among some people associated with the project.

During a meeting in August 2006, City Manager Darlene Burcham and Townsend had assured the developers that tax rebates "would be no problem," according to a letter sent in May to the city council from Dalhouse.

Burcham and Townsend recalled the meeting differently. In e-mails obtained by The Roanoke Times under the Freedom of Information Act, Burcham and Townsend expressed outrage that Telemark expected the city to offer them tax rebates. In fact, they said, the city said it never promised funding in the first place.

"You know how much it burns me when folks put words in my mouth like 'no problem,' etc.," wrote Townsend in a May e-mail to Burcham. "I've been around the block long enough and done enough deals in the past to know NEVER to give assurances about anything, especially when we, until recently, didn't have any numbers upon which to make an evaluation and recommendation."

In his letter, also obtained by The Roanoke Times, Dalhouse encourages the city to help pay for the hotel project.

"I believe Darlene thinks the hotel will be built without the rebates but that is not true," the letter states. "This project is dead right now."

Telemark now appears to have come up with a cost estimate of $1 million that the city can accept. Townsend said Tuesday that hotel development "is a critical part of overall development of Reserve Avenue."

Ryan Eller, a partner with Telemark, said Tuesday in a phone interview from his Texas office that obtaining funding from the city will determine whether the hotel moves forward. He would not discuss the monetary amount of his new request.

"There's certainly a need for a hotel there," Eller said. "As soon as we get the deal going with the city, we expect to resume construction very quickly after that."

Townsend said it could be late September or October before the city council will vote on the performance agreement.