Details of the tax breaks offered to developer George Schott aren’t firm, since they’re still at the proposal stage. But the Auburn City Council endorsed them in concept at its Monday night meeting as a means to help lure $10 million to $15 million in new retail investment.
The incentives fall into two categories: one for traffic improvements and another to recoup costs associated with preparing two sites for retail development.
The traffic package will earmark a portion of the increased property taxes paid by new retailers for what will likely be $1 million of work, primarily on Turner Street. Roland Miller said it’s likely the city would earmark that money for three years.
“It’s an equitable way of distributing costs (to retailers who will benefit from the traffic improvements), with the city serving as banker,” said Miller. “We’re going to be able to retire that debt and not have the taxpayer shoulder a portion of it.”
The city established a tax increment finance district in the Auburn Mall area many years ago, but has not activated it until now. Previously, road work required for a retailer to locate in that area was paid outright by the developer.
The other incentive under consideration would designate a portion of new taxes generated by the incoming retailers to go to Schott to offset his upfront development costs. For instance, the old Wal-Mart building has been nearly empty for two years and has to be demolished before work can begin on Kohl’s.
Miller said developer S.R. Weiner crunched its numbers and told Schott what it was willing to pay for the site. It wasn’t what Schott had hoped.
“But George took a long-term view of this,” said Miller, and was willing to take less money to make the project happen. “We talked about partnering with the city and allowing his (cost) recovery over time” through the proposed tax mechanism.
Across the street at Schott’s other retail parcel, dubbed Mount Auburn Plaza, extensive site prep work has to be done before construction can begin. The 14-acre parcel is dotted with wetlands that must be moved, and at least $200,000 worth of fill trucked in to even the grade. The parcel is bisected by a drainage system from the Auburn Mall that complicates any change to its topography. Development of the parcel was so complicated that Home Depot decided to move up the street after assessing the corner lot’s development costs.
Miller said the council endorsed the idea of offering the financial assistance to Schott for the two properties over a 10-year period. Under the plan, Schott would get a percentage of the new property taxes paid on both parcels. Typically that percentage does not exceed 40 percent of the new taxes paid, capped at a certain level.
The agreement, called a credit enhancement, works like this: An undeveloped parcel of land is assessed at $100,000 and the owner pays $3,000 in property taxes (at a $30 mil rate). Once developed, the property’s assessment increases to $500,000 and its tax bill rises to $15,000. Under the agreement, the city takes the first $3,000 for its general fund (the original property tax). The developer would then get a rebate of $4,800 (40 percent of $12,000) and the remainder would go back to the city’s coffers.
The details of both tax incentives must still be worked out and approved by the city council.
Comments are no longer available on this story