Honorable Mayor Frank and County Commissioners:
Like you and all of our citizens, I recognize the need for the successful redevelopment of the Oak Ridge mall property. My research, to include discussions with various city officials and partners from their past projects, has me convinced that if anyone can help us finally turn the mall around, it is Crosland.
The generation of added sales tax revenue from new retail is our highest priority in this venture. Not only do we desire more shopping options, but the financial health of our community is highly dependent upon new sources of revenue. No one can guarantee that the anticipated sales tax will materialize nor is it realistic to expect such an assurance. However, there is one guarantee contained within this plan. Once demolition has begun, the terms of the TIF will be permanently secured, regardless of whether or not anything is built. The end result will lock in a 20 year freeze on the property tax collected by the city and the county.
As you know, at its peak, the property was valued at over $60 million. It now appraises at less than one-tenth of that value. We hope to see that value and those of the surrounding properties surge upward as a result of the TIF. Should we achieve those desired results, the 60 acre tract located in the heart of the TIF district (and our city) will not produce property tax revenues beyond the rock-bottom amount we currently collect.
My vote as a member of city council hinged on this one critical, but still resolvable, impediment.
To fully appreciate the risk involved in this proposal, we must acknowledge how much we already ask of our home owners and businesses. Through our combined property tax rates, they make up for the revenues not collected on roughly 400 tax exempt parcels located in the Anderson County portion of Oak Ridge. These abated, non-profit and government-owned lands represent well over $100 million in value. Many of those parcels will produce no property tax for decades due to abatement or lease deals made for similar terms of 10, 20 and 30 years.
There are a number of safeguards inherent to the TIF. The only safeguard protecting the city and county from the 20 year term, however, is a requirement that demolition begin within 30 months.
The developer has indicated an expectation for completion of the build out by December 2016. I encourage the commission to discuss the inclusion of a risk mitigation clause. Such a clause should offer protection for the city and county but also allow for some leniency with Crosland for the unforeseen and uncontrollable. I suggest requiring that at least 65% of the planned new retail square footage be completed by December 2018 to avoid nullification of the agreement. Such an allowance would limit the number of years to a more reasonable time frame should a worst-case scenario unfold while ensuring that some revenue is eventually produced for the benefit of the taxpayers.
While there are other variables (short term tenants, economic crashes, etc.) for Crosland to surmount, it is unrealistic to set highly restrictive safeguards given the property’s current state and the lack of willing and able suitors for such a project. I applaud Crosland for taking on this task and for their willingness to invest in our community. They want to be successful and we need them to be successful!
As elected officials, we need to set the stage so that this key project has the best chance of success. That success will be measured by its overall benefit to the Anderson County and Oak Ridge economies in the coming years. We should make the most of this important opportunity. I thank the Commission for your consideration and wish you all the best.
—– Forwarded Message —–
From: “Beehan, Tom” <TBeehan@oakridgetn.gov>
To: Ray Evans ; Parker Hardy ; Steve Whitson
Sent: Thursday, November 14, 2013 11:13 AM
Subject: Fwd: A Successful Oak Ridge Mall Project
Sent from my iPad
Begin forwarded message:
Sent: Thursday, November 14, 2013 11:06 AM
To: Tim Sittema; Trent, Jr., Tom; Murphy, James L
Cc: Darrell Akins
Subject: Fw: Fwd: A Successful Oak Ridge Mall Project
Mark Watson will address this in his opening comments Monday night. Tim and Jim/Tom….you can reinforce the points as well.
From: Murphy, James L
Sent: Thursday, November 14, 2013 1:46 PM
Cc: ‘Sittema, Tim (Croslandsoutheast)’; Trent, Jr., Tom; ‘Ray Evans’
Subject: FW: Fwd: A Successful Oak Ridge Mall Project
I represent Crosland in connection with the proposed Economic Impact Plan for the Redevelopment of the Oak Ridge Mall Economic Development Area (the “Economic Impact Plan”). The Economic Impact Plan has been approved by The Industrial Development Board of the City of Oak Ridge, Tennessee (the “IDB”) and the City Council for the City of Oak Ridge, and is on the agenda for November 18 meeting of the Board of Board of Commissioners of Anderson County. I would like to respond to Ms. Baughn’s suggestion that the tax increment financing (“TIF”) funding for the redevelopment of the Oak Ridge Mall be nullified if at least 65% of the planned new retail square footage is not completed by December 2018.
As has been explained by Ray Evans in the meetings of the Operations Committee and the Budget Committee, the proposed redevelopment of the Oak Ridge Mall requires a public-private partnership. After carefully reviewing the project’s pro forma, the City officials who have been involved in negotiating the incentives with Crosland were convinced that there was a funding gap of $13 million that could be bridged by the use of the TIF funding. Without that $13 million in TIF funding, the project would not go forward.
To obtain the $13 million in TIF funds, Crosland will have to find a lender willing to loan the $13 million to the IDB so that the funds will be available at the time that Crosland closes on the acquisition of the Mall. That lender will have to be comfortable that the incremental increase in property tax revenues resulting from the redevelopment of the Mall will be sufficient to pay the principal and interest on the $13 million TIF loan, since the lender will have no recourse against the County, the City or the IDB other than the amount of incremental property tax revenues received by the IDB. Therefore Crosland will not be able to obtain a commitment from a lender to loan the $13 million to the IDB unless Crosland can convince the lender that there will be sufficient new development within the project to generate enough incremental property taxes to pay the principal and interest on the TIF loan. So there is no real risk that the lender will make the TIF loan to the IDB and then no significant retail development will be constructed.
Adding the proposed nullification language also makes the TIF loan impossible to finance as no lender will loan money that is to be paid back out of incremental tax revenues if the avaibility of those incremental tax revenues can be terminated before the loan is paid off. In addition the potential tenants that Crosland seeks to attract to the redeveloped project want to be assured that the TIF funding needed to make the project possible will be available when Crosland is ready to close on the land. Having the possibility that the TIF funding will not be available due to the fact that no lender will make a loan where the payment stream could be eliminated before the loan is paid off will prevent Crosland from securing the commitments from the tenants who are needed to make the project a success.
BOULT CUMMINGS LLP