Foursquare Properties’ closing on the purchase of Bellevue Center and adjacent properties over the past few weeks wasn’t a huge surprise.
In fact, it was the plan all along.
By closing before the end of the year, the California developer had hoped to lock in 2007 as the base tax year for the $12 million in incentives it seeks.
Apparently, the thinking was that this year would be the lowest one possible for property taxes. With the planned improvements, the developer could get the largest spread possible between current and new taxes to pay bank a loan that would be used for public improvements on the $180-million project.
The ‘spread’ is known as the increment in tax-increment financing.
A wrinkle, however, is that the developer also had hoped to have a tax-increment financing deal by now. Instead, the city is working to establish a policy on whether a project like the proposed one should even qualify for the incentive. A policy would mark the first time TIF was done outside the urban area.
There seems to be an attitude in other Tennessee cities, mostly a losing one at this point, that applying the incentive to retail development probably isn’t the best idea. A deal in Knoxville with a larger retail center went through the wringer with a key business figure questioning whether it should be allowed.
A big question is why does a developer need more than $12 million in tax-increment financing when it appears the project could be done without the incentive. The questions with the incentive are like one of those Russian matryoshka nesting dolls; one issue begets another.
And what about fairness?
Why should one developer get the money for public improvements such as green space or moving sewer lines when other developers have paid for it themselves. The Nashville West developers certainly sure would have liked TIF for that large shopping center when creating green space and dealing with a park.
“The fairness issue is a major one,” said Rich Riebeling, new Metro Finance Director, who is writing the policy, adding that this is a policy decision that can’t be made willy-nilly.
Needless to say, developers are watching. If it goes through, several have said they will be making their own pitch.
Several Metro Council members already have stuck their hand out as well.
In Knoxville, Mike Edwards, chief executive of the Development Corp. of Knox County and who staffs the industrial development board there, warned that the county commission would set a precedent if it that granted TIF for infrastructure improvements developers usually cover anyway.
“You’ll be making a decision that’s basically saying that in this instance you’re going to deviate,” Edwards was quoted in the Knoxville News Sentinel saying.
This month, the Knox County Commission approved the project there but lowered the incentive from $6 million to $5 million.
Typically, tax-increment deals are done in a city’s urban core.
In Nashville, the Metropolitan Development and Housing Agency has managed the TIF deals, not the industrial development board.
In 2004, state legislators tweaked the law to allow TIF deals through the development boards and supposedly done so for a retail development.
Blight is the measuring stick for an urban area but may not be for the use through the industrial development board. That is where the policy definition arises.
Bellevue Center, a mall many agree should never have been built, has struggled for years but certainly doesn’t quite conjure needle-ridden or dilapidated properties of some poor urban area.
But property taxes from the property have fallen over the years and sits somewhere around $250,000, considered paltry compared to other commercial properties. The Mall at Green Hills, which the city has appraised for $90 million, has a tax bill close to seven times that of Bellevue Center, which is appraised at $12.6 million.
The argument for the incentive is that there is a laundry list of requirements by the neighborhood and the city that drives up the cost — a community center and park space, for example.
In addition, the city doesn’t lose the property taxes it is getting now, as small as it is, but would gain considerably in sales tax revenue. The thought there is keeping shoppers in Davidson County instead of flocking to Cool Springs in Williamson County.
A slight counter to that position is that some of the money that would be spent there is already spent elsewhere in Nashville and is simply redirection, not new.
The chief reason for the incentive may be the cost of building a store on-site for hunting and fishing retailer Cabela’s. That store remains among the local chatter and supposedly the developer of the retail center named Providence in Mt. Juliet had offered $20 million to lure the destination retailer that way.
Developers think that figure is a stretch but say that Cabela’s certainly is a desired tenant. They’ve also said that locating in Nashville would be unusual, since it favors smaller towns offering big incentives.
Cabela’s may doing well pulling in hunters and anglers, who apparently dole out $1.3 billion annually, according to the Congressional Sportsmen’s Foundation.
Regardless of the tenant or tenants, Metro may have to consider more retail deals for incentives. Last year, voters made it more difficult to raise property taxes in the county by requiring a referendum.
That means, Metro will have to focus more on how to generate more sales tax whenever it can. Still, now that the developer has bought the property, it may be easier to say no to the incentive.