Developers reaping millions in retail tax incentives

Through an agreement with developers of the McGowin Park shopping center, the city has refunded more than $3.9 million in sales tax revenue since 2015.

The agreement, which created an improvement district, guaranteed that a percentage of the sales tax paid by retailers to the city would come back to the developers over a 20-year period.

An example in the agreement says that if a customer at a sporting goods store bought a football for $100, the city would receive $3.60 from the city’s 5 percent sales tax and the developer would receive $1.40.

During the same period, from 2015 to 2017, the city took in more than $13.7 million in tax revenue in an area that produced more than $358 million in sales because of the shopping center.

“I think people like it,” Councilman John Williams said of the development. “It offers a different venue with stores that have never been in Mobile before. Those are easily a step up in our retail community.”

Part of the McGowin Park development is in the district Williams represents. He said the McGowin developers paid upfront costs for the infrastructure, which he appreciated.

“That’s something we need to do more of,” WIlliams said. “We took the less risky route.”

The center has introduced retailers like Costco, Field & Stream and Dick’s Sporting Goods to Mobile. However, it has also poached stores like Old Navy and Best Buy from other malls in the city.

The agreement does somewhat protect the city’s interests in terms of attracting stores from other retail centers and, thus, just moving revenue around instead of adding new revenue.

The agreement makes clear that the McGowin developers only receive the incentive if the stores poached from other areas perform better in terms of sales than they did during their last month at a previous location.

While the McGowin deal was pursued under the previous administration, Mayor Sandy Stimpson’s administration has also given incentives to retail establishments, most notably the Shoppes at Bel Air and Westwood Plaza.

Executive Director of Finance Paul Wesch said the three incentive agreements differ from one another in some specific ways. For instance, he said, the deals at Westwood Plaza and Bel Air both have caps and thresholds for the incentive, while the McGowin deal does not.

The Bel Air agreement allows the mall owners to recoup up to $500,000 per year for 15 years to help pay for renovations to the mall. The renovations have attracted retailers such as H&M and new restaurants such as P.F. Chang’s to the area, but the mall has also poached from other areas. The current Belk store moved to Bel Air from Springdale Mall after the renovation, for example.

Wesch said the city entered into the deal with Rouse to keep the city’s only enclosed mall from shutting down. He said they were trying to avoid a nationwide trend.

In the Westwood Plaza deal, the city gave developers an incentive to help defray the costs of an initial $25 million investment. The developers of Westwood Plaza will receive a total of $9.5 million in incentives over 15 years if sales exceed 40 percent of what they were before the renovations took place.

Wesch said that deal was attractive to the city because the intersection of Airport Boulevard and Schillinger Road served as a “gateway for the city.”

“In each of these incentive deals, there was something at play that is a positive for doing the incentive,” Wesch said.