Friday, August 11, 2006
Victory at Any Cost
There is a situation playing out in Washington County that looks like a classic case of “bait and switch”. Two developers—Tanger and BassPro—plan on building a multi-million dollar retail development called Victory Center. Realizing that the public sector in Pennsylvania is quite generous with dollars to stimulate retail and entertainment venues, they applied for and were granted a tax increment finance package ($14 million) last year. Along with the developers putting in some of their own money ($8.1 million), the state ($15 million) and the creation of a Neighborhood Improvement District, or NID ($12.7 million) would cover the rest of the infrastructure costs, about $50 million in all.
Now that it is time to approve the NID, the sources of money have suddenly and suspiciously changed. The state money—viewed as a certainty when the TIF was approved—is missing. So is the developer equity. As a result, the borrowing amount tied to the NID will go, if approved, from $12 million to $43 million, a three-fold increase.
Why would such a thing happen? Is it possible that the state money will be spent, but on something else related to the development? Why, if the project is a touchdown, would the developer not put any equity into it?
With any economic development project that promises fantastic results, the buyer must beware. Favorable tax treatment for a selected developer pushes costs onto other established developments and often incurs the ire of those developments. Such has been the case with Victory Center and the change in the funding package will only add to the questions and bad feelings already surrounding it.
Now that it is time to approve the NID, the sources of money have suddenly and suspiciously changed. The state money—viewed as a certainty when the TIF was approved—is missing. So is the developer equity. As a result, the borrowing amount tied to the NID will go, if approved, from $12 million to $43 million, a three-fold increase.
Why would such a thing happen? Is it possible that the state money will be spent, but on something else related to the development? Why, if the project is a touchdown, would the developer not put any equity into it?
With any economic development project that promises fantastic results, the buyer must beware. Favorable tax treatment for a selected developer pushes costs onto other established developments and often incurs the ire of those developments. Such has been the case with Victory Center and the change in the funding package will only add to the questions and bad feelings already surrounding it.
