The Laurel Commons developers presented their plans for the revitalized mall tonight. I arrived late but here is what I heard:
- They have settled on the following anchors for the project, a Regal 14-screen cinema complex, a new Burlington Coat Factory store, the existing Macy's, and an 400 unit apartment complex located in the old Montgomery Ward's garage area. (My original number of 1100 was quite wrong. - grw)
- The developers are asking the city and the county to kick-in to help finance the project. This is called a TIF, or tax increment financing program. A TIF is a common tool for redevelopment projects. A TIF creates a public-private partnership for the purposes of obtaining public capital investment for infrastructure improvements.
The TIF story is pretty straightforward. For example, assume today that the mall owners pay $250 thousand dollars a year in city property taxes. This is based on the mall's value today. The developers are going to make investments in revitalizing the mall such that the mall's value increases along with the property taxes paid to the city.
Let's say that the mall reopens in 2010 and the owners now pay $1 million dollars in property taxes on the drastically improved property. Then the new increment in taxes would be $750 thousand ($1 million less the original $250 thousand we get today).
The developers want the city to use 60% of that increase (~$450 thousand) to pay off a bond that will be used for improvements. The city will still get the original $250 thousand plus the $300 thousand from the remaining increment ($750 - $450). The TIF is set at this 60% level for thirty years. After 30 years, all of the taxes then go into the city's coffers.
In reality, the developers are looking for the city and the county to pay for a $36 million bond ($18 million each). The bond money will be used to pay for infrastructure improvements such as road and utility enhancements and new parking garages on the property.
It will cost the city approximately $47 million over 30 years to buy the $18 million dollar bond at a predicted 7.75% annual interest rate. But keep in mind, the city is paying the off this debt with the property tax increase (increment). Another way to think of it is that for every dollar in new property tax, the city keeps 40 cents and 60 cents goes to pay off the infrastructure debt.
I'm a little disappointed in the anchor stores, but I'm realistic. The developers were stuck with the legacy of the smallest Macy's in the world and a long term lease with Burlington. Neither of those stores are currently useful to me or my family.
But in today's market, Laurel simply can't support the same stores as Columbia or Annapolis. Maybe over time, we could grow into more high-end stores. Redevelopment now could provide us with that opportunity later. I think the new Mall will be an attractive addition to the city. I'm looking forward to walking to the movie theaters and eating in the new restaurants.
I also support the TIF. If we do nothing, the mall continues to deteriorate and our tax base continues to erode. The deal they offered us tonight is significantly better than any other option we have and we might just find ourselves in a very strong position 5-10 years out.
I also don't think of the mall revitalization as a single isolated decision. In my opinion, it's the first move in a long-term strategy involving scores of properties along U.S. 1 from the Patuxent river south to Contee road. I see these properties as chess pieces on the city's game board. We have to plan our moves well today if we are going to thrive in the future.
Today, there are powerful development forces blowing through our region like BRAC, Green Line extended, Konterra, ICC and skyrocketing energy prices. These forces are rapidly changing our commercial and residential environment. We can't afford to wait. Have you seen Konterra? Those are billion dollar footsteps pounding just behind us. If we delay our revitalization decisions, we will lose. We must be smart and courageous.
We must look to the long term and plan multiple, mutually supporting, redevelopment moves today. We must be prudent. We must doggedly ensure the developer and the county comply with their parts of the deal. We must ruthlessly verify every detail. But we simply cannot afford to remain frozen in place. Laurel must have innovative redevelopment in our commercial core.
My Bottom Line
I want to see all of the fine print, but I believe that the Laurel Commons redevelopment proposal is a very reasonable and exciting first step. I also encourage the Mayor, City Council and the Prince George's County Council to support the TIF legislation.
Sorry for the long winded post. The story is complicated and I had to do some math. My 30 year bond payment calculation was based on the following fixed rate mortgage formula: c = (r / (1 − (1 + r) ^- N))P *N
The comments section is now open for you. What do you think about the Mall? Do you support the TIF? Please take the poll on the upper left side of this web page.
Full Disclosure: I served on the City's 2006-2007 Master Plan Advisory Committee.