The Enid News and Eagle, Enid, OK

October 4, 2012

Preliminary 'de-malling' gets an OK

By Robert Barron, Staff Writer
Enid News and Eagle

ENID, Okla. — After a spirited discussion, a resolution calling for a tax increment finance district to help fund the Oakwood Mall “de-malling” project was approved Thursday by the city’s Tax Increment District Review Committee.

Discussion on the TIF agreement covered many aspects. Dr. David Van Hooser questioned what will happen if — after the project is completed — the mall does not meet anticipated revenue figures.

“We are giving them a $5 million gift,” he said.

City Manager Eric Benson said the city will forgive sales tax and Garfield County will forgive ad valorem tax for the period of time the TIF district is in effect.

“We’re getting a 12-screen movie theater, new restaurants and additional businesses that will draw the trade,” Benson said. He called it an incentive plan.

A TIF district establishes an area in which increased ad valorem taxes will be delayed for a specific period of time. The funds would be used to help defray construction costs of the improvements. In the meantime, tax-receiving agencies will continue to receive taxes at the current ad valorem rate. At the end of the TIF district time, the higher ad valorem taxes would be collected.

“It’s fiscally irresponsible to do it,” Van Hooser said. “We’re giving them the money upfront and we’re taking all the risk.”

The project, which is expected to cost about $35 million, would turn the mall into an outdoor regional shopping center.

Repurposing the mall will increase its overall taxable valuation and eventually increase the taxable income entities receiving ad valorem taxes will receive, supporters of the project have said. Garfield County Assessor Wade Patterson previously said he has been assessing Oakwood Mall for 15 years and said it had a valuation of $22 million in the past, but that has dropped to about $12 million.

John Cromwell, representing Garfield County Health Department, said at some point the current mall no longer will be feasible. He said the project would transfer the mall operation to a good operator who has a good track record.

“We’re not building excess capacity like the original mall did,” Cromwell said.

City Commissioner Mike Stuber, who is chairman of the Tax Increment District Review Committee, said the developer, Vector Securities, has a track record coming into the project and has shown success.

Patterson said Vector will purchase the mall from Herzog and Son, the current owners. He said the mall must be renovated or it will continue to decline.

“We don’t want a blighted corner at that corner in the future,” Patterson said.

Van Hooser said he did not oppose the project, but thought there should be a better way to finance it.

Benson said the city is paying a portion of the risk to gain additional income in sales tax. If the project is not done, the city will not get the new businesses, he said.

“There must be a different way to finance it. What other way can we do it other than “borrowing money?” Van Hooser asked.

Enid Public Schools Superintendent Shawn Hime said the city must reinvest in itself to continue to grow.

“That’s the way the game is played in Oklahoma. That’s the way the laws allow you to do it,” Hime said.

Enid insurance agent David Burrows said Enid must have “some skin in the game.”

Van Hooser said he did not like the idea of giving a private company $5 million. If it fails, the taxpayers will be paying the project off. Patterson said he was opposed at first, but current ad valorem laws will not allow other types of arrangements. Stuber said the city is not assuming a large risk. He said the developer has significantly more risk than the city.

Finance attorney Nate Ellis said if the process is not done as a TIF, it may take longer to do and the city would lose money over time. Burrows said if the mall fails, the city eventually will have to demolish it and that will cost a lot of money.

Cromwell’s motion to approve was seconded by Burrows and unanimously approved. Van Hooser said after the meeting he voted for the TIF, but has “serious reservations” about how it is being done.

The TIF now is ready for city commission approval, but must have two public hearings first. The resolution will be published, followed by a 14-day waiting period. After the waiting period, the first public hearing will be held when the public will be invited to review the resolution. A second public meeting will follow that, then any recommendations that would change the resolution will be submitted to city commission for action.

Jim Dill, of Vector Securities, previously outlined a revenue analysis of the project.

Vector revealed the plan in June to purchase and renovate, or “de-mall,” Oakwood Mall. The plan calls for construction of new buildings on the front side of the mall property and moving current tenants into them. The mall itself will be destroyed, except for anchor stores Dillard’s, JCPenney and Sears, which will be maintained and new facades built. Dill said those stores also may remodel the inside portion of their businesses.

Dill said existing anchor stores JCPenney, Sears and Dillard’s total 229,183 square feet, which will generate an estimated $3,437,745 in new sales. The city will receive yearly tax sharing of $38,675 from those stores.

For junior anchor stores — those with about 121,682 square feet of space — figuring $200 of new sales per square foot and estimating 95 percent occupancy, Dill said the analysis showed  $17,339,685 in new sales. The city would receive about $260,095 as its tax sharing portion.

Showplex Cinema, which will move to a separate location on the southwest corner of the mall property, will have an estimated 1,254 additional seats and enlarge to a 12-screen theater. It will generate about $1,600,000 in new net gross sales, Dill said. About 20,000 square feet of new footage will be added to mall shops, which will generate an estimated $8.7 million in new sales.

About 13,000 square feet of new space will be occupied by restaurants, and will generate an estimated $5,200,000 in new sales per year, Dill said. Chen Garden, currently in the front of the mall, will move to a separate building on the mall property, and Dill indicated there are other restaurants, including a Charleston’s and possibly Cabo Mexican Restaurant, that also will open on the property.

Chick-fil-A, currently in the mall food court, also will move to its own store on the northwest corner of the property.

Several businesses have signed non-binding letters of intent, Dill said. The figures in his analysis assume a 95 percent occupancy rate. Oakwood Mall currently is about 30-35 percent vacant, he said.