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Taxpayers foot half the cost of Nebraska outlet mall

By   /   August 29, 2013  /   News  /   22 Comments

Part 1 of 3 in the series Gretna outlet mall
Joe Jordan/Nebraska Watchdog

SHOPPING FOR SUBSIDIES: More than half the costs of building this outlet mall in Nebraska are coming from public subsidies.

 

By Deena Winter | Nebraska Watchdog

LINCOLN — When a new outlet mall opens in November between Nebraska’s two largest cities — Omaha and Lincoln — shoppers can look around and thank the government for putting up more than half the money to build it.

That’s because more than half the $112 million price tag for Nebraska Crossing Outlets is coming from various government subsidies funded by you, the taxpayer.

The outlet mall is being developed by OTB Destination LLC of Park City, Utah, and Frank Krejci of Omaha’s Century Development. The developers have not yet responded to a request for comment.

Taxpayer subsidies are expected to cover $58 million of the cost, according to the redevelopment plan. The development team is making a $54 million investment.

Residents of the nearby bedroom community of Gretna voted to subsidize the demolition of an old, decrepit outlet mall and construction of a new, bigger, better outlet mall a few miles down the road, even though $4 million will come out of their pockets in the form of property taxes.

The question is, should government be in the business of helping build shopping malls? A national group that promotes smart economic development says no.

Leigh McIlvaine, research analyst for Good Jobs First, said subsidizing retail is not going to create economic growth in a region unless it’s in an area underserved by retail, such as a food desert in an inner city. In fact, many cities ban subsidies for retail projects, she said.

“Subsidizing a shopping mall is not really economic development,” McIlvaine said. “It doesn’t generate any more disposable money for people to spend.”

Rather, it pirates sales tax dollars from other communities, or even local mom-and-pop shops in Gretna.

“This is really a situation of government sort of picking winners and losers,” she said. “It’s not going to create new money.”

Joe Jordan/Nebraska Watchdog

WORK ZONE: This heavily subsidized outlet mall in Gretna, Neb., is scheduled to open in November.

John Green was the city attorney for Gretna when the mall project was in the planning stages, and said every incentive program available in Nebraska was tapped.

“Any time you use the vehicles (incentives) they own …  it’s always going to look like a lot, but basically what you’re doing is you’re subsidizing growth now with future revenue you wouldn’t have had but for the growth,” he said.

Green hired Lincoln development lawyer Kent Seacrest to work on the financing plan and redevelopment agreement. Seacrest’s costs will be reimbursed to Gretna by the developers, he said.

There was virtually no opposition to the plan in Gretna. A special vote-by-mail election was held in 2011, and voters agreed to divert sales tax revenue to the project by a vote of 1,342-93. Gretna is the fastest growing city in the state with only 20 percent of its residents working in Gretna, so the city needs to create its own jobs, Green said.

“It’s a huge jump start for a community … to create its own job structure and not just be another suburb,” he said.

But McIlvaine said the 500 jobs expected to be created are not good jobs.

“It will be a low-paying job,” she said.

She cited a study by a St. Louis regional planning agency that found that $2 billion in public subsidies for malls and retail projects in the St. Louis area resulted in negligible job growth.

The Gretna mall is being subsidized with about $13 million in tax increment financing, which diverts property tax revenue from the new development back into the project for 15 years. TIFs are intended to remove blight from inner cities, but Gretna officials declared as “blighted” the unpopular outlet mall that’s several miles from the actual town of Gretna. The mall area, along Interstate 80, was annexed into the city a few years ago.

The mall also will receive:

  • $26 million in occupation taxes. A 1.95 percent sales tax on purchases in the mall will be levied for 20 years.
  • $4 million in general obligation bonds issued by Gretna to fund infrastructure, which will be repaid by property taxes.
  • $14 million in local sales tax revenue. Gretna voters agreed to divert to the mall proceeds of the 1.5 percent local sales tax levied in the mall area for a decade. This tool, approved by the state in 2010, was intended for tourist attractions and blighted areas.

In fact, the redevelopment plan calls for government subsidies to pay for $11.5 million in property purchase assistance, a half-million dollars for demolition, $16 million for “communication and marketing” and $12 million in “tenant improvements.”

Jeff Kooistra, Gretna’s city administrator since January, defends the city’s decision to help redevelop a mall.

“None of this money would even exist if that mall didn’t,” he said of the TIF and mall sales tax dollars going toward the project. “It’s not like it’s money that we’re pulling from somewhere else.”

But even he acknowledged to another reporter that he wasn’t aware of any other project that made use of virtually every incentive available.

He also said the redevelopment agreement calls for the city to be reimbursed for costs as tax revenue comes in.

The public subsidies, according to the redevelopment plan, will double the developers’ return on investment. The mall would bring a 6 percent return on investment if it weren’t underwritten by the public. With the incentives, the ROI is expected to be 12.7 percent, which a “fair” rate of return for such a project, according to the city document.

McIlvaine said if the mall would make a 6 percent return without public subsidies, “then it is not something that should be subsidized.”

“A lot of these businesses have really made a model out of relying on public subsidies,” she said.

So if the outlet mall won’t produce good jobs, and the new tax revenue will be diverted back into the project, who does it benefit, besides the developers and shoppers looking to buy brand-name purses on the cheap?

A cost-benefit analysis done for the city by a University of Nebraska-Omaha professor concluded the project was “eminently justified” because the mall would generate $7.45 in benefits for every $1 in lost revenue and costs bourne by Gretna during the next 30 years.

The redevelopment plan envisions attracting out-of-state shoppers, increasing tourism and housing demand. But McIlvaine is doubtful. The Mall of America in Minnesota also is looking for subsidies to expand, but that’s different, she said. That mall actually does bring in tourists from all over the world.

“Do I think an outlet mall outside of Grenta, Nebraska, is going to be pulling tourists from Iceland?,” she said. “I don’t.”

Contact Deena Winter at [email protected].

Editor’s note: to subscribe to News Updates from Nebraska Watchdog at no cost, click here.

Part of 3 in the series Gretna outlet mall

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Deena formerly served as staff reporter for Watchdog.org.

  • Oswaldo Le’mon

    I would like to say the fire union is wrong on so many levels.

  • pollencruncher

    This is not long term positive for workers, or local economy. Poor planning Follow the money Bet the governor has a finger in the pie. People will not be able to live on the wages paid at this low skill jobs

  • Ricky Fulton

    And to top it off I bet the mall will be a total bust. Nobody drives out there now and nobody lives nearby so nothing will change with the outlet mall.
    Very dumb move by Gretna, and the same guy, Frank Krejci of Omaha’s Century Development, is working on the Crossroads mall project.
    Be afraid be very afraid.
    ricky

  • BossManj

    I’d like to add that Nebraska Republicans are Socialists for handing money out to people. Let the mall build it’s own. I won’t go out there-why does my money have to subsidize a bunch of chumps who can’t get their own investors? Why do Republicans even give tax incentives/tax breaks/corporate welfare to anyway (corporations are people too- like really high maintenance divas) if no one is supposed to benefit from the government?
    This will be as successful as the Kearney Bridge.

  • ProgressiveOasis

    Let’s be clear, Good Jobs First, is hardly an unbiased reputable source for financial analysis of business development projects…unless it’s an “inner city food desert” that fully funds healthy fresh foods for SNAP participants at establishments which pay their workers a mythical “living wage”. Good Jobs First is just another in a long line of progressive tax exempt front groups for the American Communist Party…and its fellow travelers like the SEIU, etc. I also am 100% opposed to government subsidies to business like the Gretna Outlet Mall, Crossroads, Midtown Crossing, etc., etc., etc. If it wasn’t for these handouts, the economics of these projects are so questionable that no bank or group of banks would agree to the financing. Remember the “wonderful, amazing, world class” Wall Street Tower project??? You have to know pols of all stripes are taking huge campaign contributions from developers, construction companies, engineering & design companies and legions of lawyers….just to tap into all these goodies. It’s got to stop sometime.

  • Retired retail manager

    Additional Retail never creates net jobs or net sales tax increases for the greater area. If the outlet mall or Wal-Mart food stores hire people for a new outlet, some other supplier of the same type of merchandise (Baker’s HyVee, Oakview Mall, small stores) will lose a similar amount of sales and ultimately lay off workers, as the pool of money to spend by the public will not increase because of that new mall being there. It should not be subsidized.

  • DustinHanson

    “None of this money would even exist if that mall didn’t,” he said of the TIF and mall sales tax dollars going toward the project. “It’s not like it’s money that we’re pulling from somewhere else.”

    Where does this bozo think this money is going to come from? Is it going to fall out of the sky onto the Omaha metro? This is EXACTLY what I would expect someone whose income is supplied by sucking off the taxpayer to say. Bureaucrats know jack squat about economics, all they know is that taxes are guaranteed to come in so, PARTY TIME!

  • jimino

    Are these businesses part of the “47%” that the so-called conservatives consider moochers?

  • BossMan

    AND…

    All the politicians are dirty and get big payoffs. Because you said so.

    The Wall Street Tower project fell apart because the economy took a dump and the investors bailed. No Subsidy.
    You haven’t made an argument for anything, there is no proof in you flimsy statements.

  • Wow!
    This Nebraska corporate welfare item makes the Metro KC pollys look like amateurs….

  • 44Grim

    How’s it any different than the taxpayers being responsible for just about every new sports building in Lincoln?

  • 44Grim

    Every now and then they listen to the idiots who say that if you spend $1, you get $3 back in taxes, which isn’t even possible.

  • Bam

    Kearney Bridge? There’s a bridge in Kearney that’s unsuccessful? I’d heard about the arch, but tell me about this bridge that has you worked up!

  • Hunyock

    I’m sure he meant the Arch that just went bankrupt.

  • Hunyock

    The same Frank Krejci developed Oakview mall. I would say he has his ducks in a row and most of his projects succeed. Nebraska Crossing will be a tough one though. It will depend a lot on who they have lined up for outlets there.

  • Hunyock

    that depends on what retail is already in the area. Walmarts and larger retail outlets also tend to bring other developments to the area as well. Gretna is a growing community.

  • Ricky Fulton

    Actually Oakview mall is not a success I don’t think. I rarely if ever go there (except for glasses) and I hear they are losing money.

  • JA

    Generally those types of developments are publicly-owned. That is to say, profits from them are returned to the city.

  • Hunyock

    After lasting as long as it has, pretty much full all the time, and looking at all the business that has moved to the area in the last 20 years, I would say it has been very successful to the community it serves. How successful it has been for the owner, I couldn’t say.

  • 44Grim

    as is the maintenance. and if they are ‘publicly owned’ we (rate payers) pay for water use and electricity as well.
    my main point was that we subsidize the crap out of the state universities and wonder why costs never go down, nor do taxes. nope, no tax on room and board at unl, for some reason we just can’t do that to the kids. but we’ll build them sweet recreational facilities and give them more tax dollars.
    if the bcs and college football were so profitable, tax payers shouldnt pay for any stadiums. where is the money really going?

  • ProgressiveOasis

    The Wall Street Tower was granted TIF financing by the city council you idiot…check the Weird Harold archives for the articles. You need look no further than NE Accountability reports of campaign donations to see who is greasing the pols to get access to TIF and other public dollars for private development projects moron BossMan.

  • Nate

    Actually Oakview is doing fine. Its pulling in new stores and stores like the one I work at there are making money so get your facts straight before you sell a place short.