The Mobile City Council on Tuesday agreed to holdover a vote on a tax incentive agreement with the owners of the Shoppes of Bel Air.
Councilman Joel Daves, who represents the area surrounding the mall, said some councilors still have some unanswered questions about the deal, a week after a committee recommended approval.
“There are still some loose ends to tie up,” he said following the regular meeting. “We need a couple of weeks … ”
The agreement in question would allow Rouse properties to continue renovations of the decades-old center and recoup up to $500,000 in sales tax revenue per year from the city for a total of 15 years. The deal kicks in only after the mall generates a sales tax revenue increase of at least 10 percent over the total revenue for the mall in 2015. Rouse would have to bring in a total of $8.1 million per year over the life of the agreement in order to receive a total of $7.5 million back.
In exchange, Rouse must spend at least $25 million on renovations at the mall and must guarantee at least 80 percent of the new tenants attracted to the space are either new to the Mobile market, or are a second location. The city will also have input on which anchor tenant takes over the 104,000-square-foot space left by Belk, which is moving to a larger location within the mall, Doug Anderson, an attorney for Rouse said.
Anderson, an assistant city attorney who also works as the Planning Commission attorney, said the arrangement doesn’t represent a conflict of interest because the council, not Mayor Sandy Stimpson’s administration, is making the final decision on the incentive package.
Britton Bonner, outside counsel from Adams and Reese, was handling the negotiations for the city. Bonner handles economic development deals for the city, Anderson said.
Governments often use tax incentives to lure industry and jobs to various areas to provide employment for residents. Incentives for retail developments is relatively new for this area, with McGowin Park and Westwood Plaza reaching deals previously with Mobile and Eastern Shore Center and Spanish Fort Town Center reaching agreements previously with Spanish Fort.
Don Epley, an economics professor at the University of South Alabama wrote in an email that incentives for retail developments should have a limited focus.
“If a government unit spends tax dollars on economic development, it should be for a public good enjoyed by all citizens, or to promote jobs and worker income,” he wrote. Worthwhile projects would be the creation of new jobs and/or the retention of current employment. Since mall retail development is not the former, the relevant discussion should concentrate on jobs and income.”
In the Westwood Plaza deal, the developers were required to increase sales tax revenues by 40 percent more than in 2013. The city also required the developers to adhere to a similar 80 percent new-to-market requirement. In exchange, the city would recoup $450,000 in tax rebates until the more than $4.7 million paid for initial renovations was paid back.
The deals for the other centers, like McGowin park, Eastern Shore Center and Spanish Fort Town Center were a bit different.
The deals between Spanish Fort and its two centers were cooperative improvement districts, Mayor Mike McMillan said. In those agreements, the city would provide infrastructure, like roads and parking lots, and would increase sales tax in those areas to pay for it.
“They’ve proven to be successful,” McMillan said.
The city increased sales tax at Eastern Shore Center from a total of 8.5 percent to 9.5 percent. The tax increased to 10 percent at Spanish Fort Town Center and was upped to 10.95 percent, after the center fell into receivership.
“On both of those, when the debts are paid I see the tax (increase) going away,” he said.
For the Spanish Fort Town Center, McMillan said new stores could be announced soon, as the growth there continues.
Opponents of the plan said the agreement would allow The Shoppes of Bel-Air to poach tenants from other locations because 20 percent of the new tenants would be allowed to move from a current location within the city to the newly renovated mall.
Steve McMahon, managing partner of Legacy Village, said losing current tenants to Bel-Air was a concern.
“The incentives give them the opportunity to pick tenants from other centers and bring them to the mall,” he said, following the meeting.
McMahon, who said he wasn’t against the incentives for Bel-Air, recommended allowing for a three-year non-compete clause within a 2-to-3-mile radius of the enclosed mall. That way other centers, like his and Springdale mall would be protected.
Stores like Best Buy and Old Navy have left Springdale Mall, for example, for the newer McGowin Park.
The Bel Air renovations, which are already underway, includes a large, consolidated Belk store, a P.F. Chang’s and an H&M, among others.
Councilman Fred Richardson asked Rouse management, if the new shoppes would attract stores, like Macy’s or Nordstrom. Rouse Properties Vice President Kevin Connell didn’t make any announcements about either retailer.
Rouse is in the first phase of an “inside-out” renovation of Bel Air Mall. Other phases will include the development of outparcels.
In other business, the council voted to authorize several contracts for drainage repairs for parts of Ann Street and the stabilization of Twelve Mile Creek and Three Mile Creek. The contracts with Volkert and McCrory & Williams, Inc. total more than $386,000.