Tax deal on table for OV mall - The Explorer: Import

Tax deal on table for OV mall

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Posted: Thursday, February 5, 2004 12:00 am | Updated: 7:48 am, Thu Mar 24, 2011.

Like a homely debutante, the sunken patch of desert at the southwest corner of Tangerine and Oracle roads has seen few suitors over the years. Those who have come have all slipped away, along with plans to build a major mall at the site.

This time, Oro Valley has come up with a sizable dowry to entice the Phoenix-based Vestar Development Co., the group behind the as yet unbuilt Ritz-Carlton Resory, to bring in Oro Valley Marketplace, a $100 million shopping center it says will rival the foothill's La Encantada.

The prize is a proposed economic incentive package that includes 70 percent of new sales taxes generated during the first five years of the project, 50 percent over years 6 to 10 and 30 percent over years 11 to 15, for more than $37 million.

A few years ago, De Rito Partners Inc. of Phoenix proposed plans for a shopping center at the site but the deal went belly up.

The current project is estimated to generate in excess of $5.2 billion in retail sales over 21 years with total estimated retail sales tax revenue of $103 million, according to town economic development administrator Jeff Weir

"This will be a 24-7 environment," Vestar's David Larcher told Town Council members during a Jan. 26 study session to review the project and hear details on the proposed incentive package. "There's growth here and we feel there's a real demand." He expects the site will house movie theaters, restaurants, a furniture and home accessory sector and other retail shops.

The proposed agreement, one year in the making, will help the developer offset such infrastructure items as traffic signals and walking trails, re-vegetating areas of Big Wash and re-routing a water main.

"There are significant offsite drainage issues, we'll need to build a two mile storm drain to redirect flows and an internal road system," he said.

The 100-acre site, diagonally sited across from Palisades and Catalina Shadows neighborhoods, will be mass graded to accommodate an 800,000 square-foot mall and parking for 5,000.

"We're not going to burden the town with debt," said Larcher. "All the costs will be fronted by us, banking on sales from stores."

Vice Mayor Werner Wolff asked whether the agreement could be limited to 10 years, as written in the town's economic incentive guidelines.

"That's just a guideline," said town attorney Mark Langlitz.

"We're expecting huge growth in Pinal County," said Councilmember Dick Johnson, which will generate sales tax revenue for Oro Valley.

Town Manager Chuck Sweet read a list of concerns submitted by Mayor Paul Loomis, who did not attend the study session. Among his concerns, Loomis stated that he'd like to see the terms of the agreement reduced from 15 years and language in the agreement prohibiting any further revenue sharing if sales tax were to increase over the existing two percent.

"It's important that we understand the marketplace and what's happening out there in terms of economic incentives," said Johnson. "Are they standard operating procedure? Is this a giveaway?"

Larcher responded, "There isn't a large-scale retail development in Arizona that has not been developed in partnership with the community. The typical situation is a sharing arrangement between 50 and 70 percent of sales tax generated over 10 to 25 years."

Mitch Stallard, vice president for development of the Phoenix-based Westcor, which developed Metrocenter in Phoenix and the new La Encantada on Skyline Drive north of Tucson, said in a phone interview that incentive agreements are common and have been for the past 15 or 20 years.

"It helps the developer up front, and the city recoups that money down the line," he said. He ticked off similar agreements Westcor has made with Yuma, Flagstaff, Chandler and Tempe.

La Encantada, however, was developed without an incentive package, because the new upscale shopping center is situated in unincorporated Pima County, which imposes no sales tax.

In that instance, the developer paid Pima County $1.4 million to cover a portion of needed road improvements, he said. The company went ahead with the project because "we felt it would be good, desirable, and financially feasible," he said.

Karen Rogers, who lives across the wash from the proposed mall, said her family and other neighbors are concerned about a "24-7" environment. "That could be a lot of lights and noise at two o'clock in the morning," she said.

Rogers sent a letter to Mayor Loomis and the town council members asking them to address inconsistencies between Oro Valley's own economic development incentive policy guidelines and the new agreement with Vestar. Among them: Why is the town giving the developer 70 percent of sales tax revenue up front and why is the revenue-sharing agreement for 15 instead of the usual 10 years?

"Whose interests are being 'protected' by this agreement?" she wrote.

The Oro Valley Marketplace comes before council Feb. 18.

© 2014 The Explorer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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