The Tuscaloosa City Council has yet to reach a decision approving $18 million in tax rebates for a potential new shopping center.
Alumni Construction, the Clanton-based development group leading the $62 million project called the Shoppes at Legacy Park, plans to fill the center with six anchor stores. As of last week, Bed Bath & Beyond and Cost Plus World Market are the only confirmed tenants, but the company said they have signed letters of intent from retailers in the sporting goods business, a specialty grocer and a pet supplies store. The development is planned for just west of Krispy Kreme on McFarland Boulevard, the previous location of the Cedar Crest neighborhood, which was destroyed by the April 27, 2011 tornado.
Mayor Walt Maddox said this incentive plan was a revenue sharing agreement in which the city developer would divide the new tax revenue generated from the project over a period of 25 years.
“According to their economic study, that development will create roughly around $1.6 million in year tax revenue for the city per year,” Maddox said. “Theoretically, that number should be ever-increasing, so the baseline would be $1.6 million. The city would rebate half of that back to the developer.”
Maddox said this incentive plan would be no risk to the city.
“The city is collecting new taxes,” he said. “So it’s not like we’re losing in the proposition or that we’re writing a check from current funds.”
Maddox said this type of incentive package has become an established norm in commercial retail recruitment, but the city will continue to review the developer’s economic study to determine if they believe $1.6 million is an accurate amount of new revenue that would be generated.
“It’s exciting to have names like Bed Bath & Beyond being mentioned in our market because they’ve been missing, and the data shows that we’re losing potentially hundreds of millions of dollars a year to Jefferson County because of people leaving our community and going there to shop,” Maddox said. “What we need to do though is make sure that any incentive package that is approved by the city is one that is reasonable and one that will achieve the goals of stopping leakage and one that we can live with going forward.”
This decision will help the city prepare for other similar retail projects that are sure to follow, Maddox said.
“We don’t want to reach a situation where we’re providing incentives for the sake of providing incentives,” he said. “It needs to be we’re missing links that are not in our market.”
While the developer claims this project could create 500 new jobs, Maddox said the city’s focus is on the amount of new sales revenue that could be generated and what new to the retail market it brings.
Over the course of the 25-year incentive plan, the developer’s economic study reveals that this project would bring $33.7 million in tax revenue to the city.
Maddox said, if approved, he believed the project would be completed sometime in 2015.
“I think it’s important to know that this is not for certain,” he said. “There is a lot of due diligence that is ahead of us, so I think a lot will depend upon whether we are able to reach an agreement with the developer. I think everyone wants a good conclusion to this, but there are still a lot of milestones.”
The Council tabled the approval of this development indefinitely to allow for the four new Council members and newly appointed financial chairwoman Cynthia Almond to come in and evaluate before moving forward, Maddox said.
Almond, who has served in the District 3 seat for eight years, said it would be important for Alumni Construction to reveal the remaining retailers planning to come to the center.
“That’s part of the equation we don’t know yet, and often that’s hard information to get because these retailers are really tight lipped about where they’re going,” Almond said. “There undoubtedly will be some shops there that will actually compete with current retailers that we have in the market and undoubtedly we will have some retailers close shop where they are and move to that location.”
Almond said, while the city approves industrial recruitment tax rebates fairly often, retail incentives are less frequent in the Tuscaloosa community.
“I’m thinking within the last eight years, we’ve done it fewer than five times,” Almond said. “Midtown was one of the first big projects that came along where incentives were requested, and that was probably six years ago or so.”
Almond said she is not thrilled with the rising popularity of tax rebate incentives for retail development.
“It’s a game I wish we didn’t have to play,” she said. “They always say retail will go where the money is, but you have some people who will say that, today, that’s not so true anymore. At the moment, because they are expanding so little, they’re only going where the incentives are.”
Almond said Robert Jolly, president of the Birmingham-based company, Retail Specialists, was hired by the Chamber of Commerce to analyze the developer’s economic study where he determined the $18 million figure was a reasonable amount to pay through a tax incentive program.
“He means that this is the amount of money that it is going to take for us to incentivize the developers to make their numbers work,” Almond said.
To move the Council’s decision forward, the city staff is currently analyzing the economic report.
“They will further review the numbers and see what they think, and they will give us their recommendation,” Almond said. “Then we will have their [the city staff’s] recommendation as well as the Chamber’s recommendation and Mr. Jolly’s, and then we just have to make a decision.”
Almond said the city staff would have their recommendation to the Financial Committee by Nov. 19.
“I think everybody wants to see it happen, and the question is how much do you pay to have it here,” she said. “I know the developers are probably ready to have a decision and move forward, and I would expect that by the end of the year, we will have made a decision.”
