Without fully tipping their hand, two Starkville leaders say the proposed Academy Sports development could be saved with a minor adjustment to the city’s sales tax pledge toward the project’s tax increment financing package.
The pending $11 million development is in limbo until the city and developers can find common ground on the financing package that would construct public infrastructure improvements.
Developers sought a 15-year, $1.8 million TIF Tuesday, but aldermen lowered their sales tax pledge from 50 percent to 25 percent of new sales, creating about a $300,000 vacuum between the two offers.
On Thursday, Ward 5 Alderman Scott Maynard said a slight increase to the sales tax pledge could get the two entities to an agreeable deal. A day later, Mayor Parker Wiseman confirmed the city has a bit of wiggle room in its pledge for continued negotiations.
It is believed as much as 32 percent of pledged sales taxes, coupled with the city’s full property tax pledge and 50 percent of the county’s ad valorem receipts, could fund as much as $1.5 million — the amount the attorneys said developers needed to move forward — in any interest rate scenario attached to the bonds.
“It’s an exciting project. I’m confident we can reach an agreement that is beneficial to both sides, and I look forward to this deal coming to fruition,” Wiseman said.
Maynard confirmed he would support a slight adjustment but did not set a cap on the amount due to the nature of ongoing negotiations.
Tense negotiations
After aldermen approved public hearings on the TIF — not the financing package itself — Golden Triangle Development LINK Chief Executive Officer Joe Max Higgins said the offer was “deemed unacceptable” and the project “probably is in jeopardy unless something happens.”
City officials stood by their offer, as recommended by Wiseman, after the mayor said Starkville is at a point where pledging high percentages of sales taxes from a business that would tap into existing stores’ sales could hurt overall finances in the future.
“The issue is the exposure you have committing a high percentage of sales tax to the project because you don’t know how many purchases will be transfer purchases (from other stores). Transfer purchases do not create new sales tax revenue city wide,” Wiseman said Tuesday.
Other TIFs
In the last 10 years, Starkville has approved TIFs for various projects – Middleton Court, the Cotton Mill Marketplace, the Mill at MSU and the Parker/McGill car dealership.
Combined, those developments represent $13 million in pledges. Only $510,000 of the total amount has been issued, and that was for a portion of the Middleton Court project.
If all of the TIF debt is issued – a move Wiseman said is unlikely since TIFs rarely max out – the city would be obligated to pay $102,000 in property taxes and about $954,000 in sales taxes annually.
“(The property tax pledge) does not scare me because it is less than what we average in one year of property tax growth. Even if all TIF pledges come … we’d still have more property tax growth than we’d have obligated in new debt against our property taxes,” Wiseman said. “(The sales tax pledge) is a figure that does concern me. That is just over 15 percent of our current citywide sales tax collection. In addition, it’s four years of sales tax growth city-wide on the rate we’re on now. If we have, over the next two years, three or four of these TIF projects that issue bonds – which is quite possible – that number could be high enough to create a hole in our budget.”
Project plans
If a deal is reached and the Academy Sports project moves forward, developers would build a 62,000-square-foot facility behind Sweet Peppers on Highway 12. The project also includes a yet-to-be-named 4,600-square-foot restaurant.
Ad valorem collections on the site would increase dramatically, attorney Chris Gouras said. It currently generates about $5,400 annually for the city, and Starkville alone would see that yearly total increase to about $25,000. The county could see almost $56,000 in property tax returns.
The Starkville-Oktibbeha Consolidated School District would receive almost $74,000 annually in this scenario. State law prevents governing bodies from waiving school taxes.
In total, Gouras estimated Academy Sports could generate about $26 million in annual retail sales, which would provide a $336,000 rebate for the city. The restaurant, he said, would generate about $60,000 in 2 percent food and beverage tax returns.
About 140 jobs would come with the development, which doesn’t include the 120 construction jobs expected to handle the build.
Carl Smith covers Starkville and Oktibbeha County for The Dispatch. Follow him on Twitter @StarkDispatch
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