The Mobile City Council on Tuesday approved $7.5 million in sales tax rebates to help Rouse Properties LLC renovate the nearly 50-year-old Shoppes at Bel Air.
By a 5-2 vote, the council agreed to rebate up to $500,000 in sales taxes per year for 15 years if the mall reaches a minimum tax revenue baseline. Councilwoman Bess Rich and Councilman C.J. Small dissented.
Rich said she had an issue with giving a multibillion-dollar company a subsidy. Rouse was acquired in February by the Canadian firm Brookfield Asset Management for $2.8 billion, according to a statement from Rouse.
Rich also said she wonders if the agreement, which doesn’t require Rouse to add any square footage, would give the mall an unfair advantage over other shopping centers. Instead of attracting new retail opportunities, she said, Mobile is seeing a “shifting of stores.” Rich also had concerns about supporting an older concept for malls when there is a shift toward mixed-use lifestyle centers.
“I find it interesting that we’d support an enclosed mall concept when it [the concept] is struggling nationwide,” she said.
Rich also had concerns about what she calls “ethics and conflicts” issues involving the city’s “paid legal consultants” representing Rouse. In a previous interview, Doug Anderson, an assistant city attorney who represented Rouse in the agreement, 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 LLP, is handling negotiations for the city. Bonner advises on economic development deals for the city, Anderson said.
The baseline for the agreement requires Rouse to increase tax revenue at the mall by at least 10 percent of the $7.5 million it made in 2015. Small said he had an issue with using last year for the baseline. In 2015, Small said, the mall had big stores like Sears close and had other smaller stores close due to the renovations.
“It’s the lowest of many years Bel Air has experienced,” Small said. “Therefore sales taxes will be lower in 2015.”
In addition, Small said, the consolidation of two Belk stores — one in Bel Air and one in neighboring Springdale Mall — into one larger store at Bel Air means Rouse “can’t help but increase tax revenue.”
As part of the incentive, Rouse must spend $25 million on the renovations and guarantee at least 80 percent of the new tenants attracted to the space are either new to the Mobile market or are a second Mobile location. While the developers of Legacy Village initially had an issue with the Bel Air incentive package due to a fear they would lose tenants to the renovated space, Rich said she understands they were able to reach a noncompete agreement with Rouse.
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, Anderson said.
For the five councilors who approved the agreement, the fear of losing the mall altogether was a consideration. Councilman Joel Daves said the council could not let the mall become “completely blank and dead.”
“The only way Rouse gets money back from the city is if sales revenues increase at the mall,” he said. “In order to not only protect current tax revenue but also to increase it, this is the appropriate action to take.”
Councilman Levon Manzie reminded councilors Rouse has already invested $135 million in the city with the purchase of the mall. He added the renovations could attract shoppers and tourism to the area.
“If we want to attract the caliber of shopping, like in New Orleans … we need these types of facilities,” Manzie said. “This is an opportunity to better our largest shopping center.”
This is not the first retail incentive deal the city has approved. In 2014, the city entered into a similar agreement with Burton Properties for the Westwood Plaza shopping center at Airport Boulevard and Schillinger Road. As part of the agreement, Burton Properties would be allowed to recoup any sales tax revenue exceeding a 40 percent increase from the $795,000 the city received in sales tax revenue from the center in 2013.
In the case of Westwood Plaza, the benchmark was set at $1.1 million in sales tax revenue and the incentive could not exceed $450,000 a year in rebates, once Burton made back the $4.7 million it initially paid in capital expenses.
The Westwood Plaza agreement also stipulated 80 percent of the new tenants at the center had to be either new to the market or second locations.
Westwood Plaza saw a significant bump in sales tax revenues in 2015, according to information from Paul Wesch, its executive director of finance. The center brought in about $1.1 million in 2013 and 2014, but revenue increased to $1.5 million in 2015, Wesch wrote in an email message. Sales tax revenues through March of this year were $413,005, Wesch wrote.
This also doesn’t appear to be the last time the city will assist retail development. Councilman Fred Richardson pushed for the city to widen the intersection of Florida Street and Old Shell Road at a cost of about $1 million to make way for a new Publix shopping center.
“Publix doesn’t want one cent from the city to help build its store,” he said. “They are asking the city to fix our own street. If we can help Bel Air fix their stores, surely we can fix our street for this venue that would create $1.4 million in tax revenue.”