Whether the city of O’Fallon will issue bonds to a developer to finance public infrastructure improvements for The Shops at Richland Creek will be considered at its Aug. 5 meeting.
The developer will fund and construct all the improvements prior to the bonds being issued. The city would be the issuer to assist the developer’s ability to get a more advantageous tax structure on the bonds, but O’Fallon would not have any liability in paying the debt.
At its meeting Monday, the O’Fallon City Council established a Central Park-Green Mount Business District and related taxes, imposing them within its boundaries, and rezoned the development on 17 acres. The project is planned for the southwest corner of Green Mount Road and Central Park Drive, extending south to include frontage on Frank Scott Parkway. No tenants have been announced.
The creation of a business district allows the developer to collect up to an additional one-percent sales tax within the development. This is an additional tax on retail goods above and beyond what is currently collected in O’Fallon and is not a sales tax rebate.
The planned use, 8-lot preliminary plat and incentive package for Franklin Land Associates are all in place for the proposed $30 million comprehensive project. The council adopted three related ordinances Monday after the proposal went through city channels and council committees for the past two months. No objections were expressed at a public hearing July 1.
The initial phase includes three buildings, totaling 17,800 square feet of retail/restaurant development on Lot 8 (3.03-acre proposed parcel). The remaining lots would be for various other retail, hospitality and service type uses.
The city is working with GBT Realty Corporation, based in Brentwood, Tennessee, a suburb of Nashville. The company has specialized in retail developments since 1990 and is now the annual leader of net lease developments in the U.S. GBT has been involved with the development, construction, leasing and management of more than 37 million square feet of retail, valued at $7 billion.
The council must still act on the last piece of legislation, a redevelopment agreement with O’Fallon Investment Partners, which has new language seeking the city’s help and cleared the first reading Monday.
The developer is asking to use the city’s bonding authority to issue debt for needed public infrastructure, which includes a public connector road, traffic signals, additional through and turn lanes on Central Park Drive and Frank Scott Parkway, any additional right-of-way needed and utilities.
The plan includes providing a public street connecting Frank Scott Parkway to Central Park Drive, with a signalized intersection at both streets. The development will also construct private drives to provide access to the other seven lots, including a right-in, right-out on Central Park Drive and cross-access to the retail strip center and the Bank of Edwardsville/Busey Bank lots along Green Mount Road.
The Community Development Department staff has stated the developer has worked together with surrounding property owners to address the cross access and site circulation between the project site and the adjoining properties.
The city would not back the bonds, and revenue is derived from the TIF and the additional sales tax. The TIF portion (Tax Increment Financing) would allow for 50 percent of the property tax increment to be returned to the property owner. The project is located within the Central Park TIF.
The developer has estimated $5.360 million in TIF eligible costs and $8.875 million in Business District eligible costs associated with the proposed $29,840 project. The total amount of these costs to be recovered by O’Fallon Investment Partners is ultimately dependent upon final taxable value of the buildings when the project is completed and based on the extra business district tax revenue.
The ordinance had been pulled from the July 1 meeting to discuss further changes to the agreement that had not been part of the Community Development Committee meeting June 24. The CDC voted 5-0 on July 8 to forward it to the council.
While this is a first for O’Fallon, it’s not unprecedented. The developer recently used this same method for a development in St. Peters, Missouri, as well as Albertville, Alabama. Additionally, several other metro-east communities have used TIF and business district bonds.
The city has never issued TIF or special business district bonds but has issued Special Service Area bonds for such businesses as Friese Harley and Newbold where the city is the issue. The bond payment revenue is derived from their property tax. Each parcel is assessed a portion of the required annual bond payment and they are backed by the credit — and faith — of the city.