OV tax-sharing deals come up short

Posted on November 01, 2007 | Type: In the News
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Oro Valley collected nearly 82 percent less sales-tax revenue than originally projected from two retail developments granted tax-sharing incentives by the town, figures show.

Two Oro Valley retail centers subject to those economic development agreements are open for business Oracle Crossings and Steam Pump Village and so far neither has met developers' original sales-tax forecasts.

Oracle Crossings on North Oracle Road about one-half mile north of West Ina Road generated a total of about $441,000 in sales-tax revenue during its first two fiscal years. That's $1.68 million less than developers' original projection.

Steam Pump Village on North Oracle Road just north of North First Avenue generated nearly $46,000 in sales tax revenue during its first fiscal year. That's about $479,000 less than what developers predicted.

That demonstrates that government officials "should not be in the business of picking economic winners and losers," said Clint Bolick, director of the Goldwater Institute's Center for Constitutional Litigation.

"The market indicates that they may not have been the wise investments (the town) thought they were," he said.

But David Welsh, Oro Valley's former economic-development administrator, said he's not worried by the figures.

"It's premature to evaluate these details at this point," he said, pointing out that neither Steam Pump nor Oracle Crossings is a short-term project.

"I would prefer that mid-agreement or at the end we say how we did," he said.

Both centers are still under development. So far, Oracle Crossings is home to Kohl's Department Store, Sprouts Farmers Market and Sedona Patio Furnishings, among other retailers and restaurants.

Baggin's Gourmet Sandwiches, Studio C by California Design Center and Chili's Grill & Bar are some of the tenants open for business in Steam Pump Village.

Less sales-tax revenue also means less sales. Oracle Crossings made about one-eighth of its projected annual sales during the 2005-06 fiscal year and about half of the projected sales for the 2006-07 fiscal year. Steam Pump made about one-thirteenth of its projected sales during the 2006-07 fiscal year.

But developers said they are not worried about not meeting original projections.

"Although Steam Pump Village might have gotten to a slower start as compared with the original projections, we're very comfortable with where we are today and quite optimistic as to the future," said Gregg Alpert, chief operating officer of Evergreen Devco Inc.

Steam Pump Village is a joint venture of Evergreen Devco and Diamond Ventures Inc.

The difference between Oracle Crossings' projected and actual early sales tax generation is due to a combination of factors, said Ben Craney, development retail leasing manager for Bourn Partners.

Those factors include getting buildings permitted and constructed, leases signed and tenants open for business, he said.

"It's been a phased development not necessarily by design, but by reality," he said. "By mid 2008, the shopping center should be fully occupied with tenants paying rent. At that point, the town should be realizing the full sales-tax generation."

Both Oracle Crossings and Steam Pump Village are the subject of sales-tax-sharing agreements between Oro Valley and their developers.

However, the Town Council in August decided to stop issuing that type of retail development incentive, though existing incentive agreements were not affected.

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