In The News › Agency moves to use sales tax collections to help redevelop Lake Forest Plaza

Agency moves to use sales tax collections to help redevelop Lake Forest Plaza

By Kate Moran, The Times-Picayune
Friday, June 12, 2009

Lake Forest Plaza moved a stop closer to revival on Friday, when a public agency agreed to use sales tax collections to help redevelop the eastern New Orleans shopping center, located in an area largely bereft of retail since Hurricane Katrina.

Lake Forest Plaza sustained catastrophic damage during the storm, but it had suffered even before that from declining patronage and a growing vacancy rate. Its owners, led by majority stakeholder Gowri Kailas, owed the city more than $1.5 million plus interest and legal fees from a delinquent economic development loan.

Minority owner Ashton Ryan Jr. recently forced Kailas out of the partnership and agreed to pay back the arrears in short order, provided that the city cooperate in the formation of a tax-increment financing district, or TIF, that would dedicate a portion of the sales tax collected at the property toward the redevelopment costs.

A board called the Lake Forest Plaza District voted on Friday to dedicate 2 cents from the city sales tax levy and 2 cents from the state levy toward paying off the construction loans that Ryan and his development team will incur to rebuild the shopping center. Ryan himself sits on the TIF board.

Cesar Burgos, a local attorney and prominent supporter of Mayor Ray Nagin whom Ryan chose as the developer of the property, told the board Friday that the shopping center would remain idle if not for the dedicated sales tax, which will be used to support the issuance of bonds.

“We need a TIF in order to make the numbers work,” said Burgos, who is also the chairman of the Regional Transit Authority. “Without a TIF, it is pie-in-the-sky.”

Lowe’s is currently the only store to have opened at Lake Forest since the storm. Burgos is trying to lure Wal-Mart as a second anchor, in addition to higher-end outlet stores that he hoped would attract shoppers from across the region. The mall would be renamed the Marketplace at Pointe Maree.

The developers estimate that they need $63 million for the first phase of the project, which would bring Wal-Mart and other new retail, restaurants, a gas station and a police substation to the former Lake Forest property. TIF bonds would support $62 million of that cost, with the remaining funds to come from the anticipated sale of land to Wal-Mart.

Later phases, which would include more retail, the renovation of a movie theater and the construction of a parking garage, would require $128 million. The developers would finance those phases with additional TIF bonds, Gulf Opportunity Zone bonds and equity, possibly from new market tax credits.

At the meeting Friday, two eastern New Orleans neighborhood leaders said they supported the sales tax dedication because the Read Boulevard area has sorely lacked for basic retail since Hurricane Katrina. City Council members Arnie Fielkow and Cynthia Willard-Lewis, who both sit on the TIF board, also expressed enthusiasm.

“We are so long overdue for this,” said Tangee Wall of the East New Orleans Neighborhood Advisory Commission. “This is truly the anchor that needs to be the catalyst for eastern New Orleans.”

Yet the vote was not without controversy. The Bureau of Governmental Research, a nonpartisan watchdog group, criticized several pieces of an agreement that Ryan and Nagin signed last month in which the mayor agreed to support the TIF. The group was especially concerned that the agreement allows Ryan to use a portion of the sales tax to satisfy a debt he was owed by the owners of the Grand of the East, the vacant movie theater next to Lake Forest Plaza.

“If part of the TIF proceeds are being used to pay off one private party’s debt to another private party, that is a gross abuse,” BGR President Janet Howard said this week.

Ryan vigorously contested BGR’s criticism both during and after the meeting. In an interview, he said the TIF proceeds would be used to pay for the renovation of the theater, not to satisfy the debt. If the language in his agreement with the city was misleading, he said, it would be amended.

Ryan faces something of an ethical conundrum, as he sits on the board that voted Friday to dedicate sales tax revenue to Lake Forest Plaza, the property he owns. The Legislature named him to the board in 2003, when it established the tax-increment financing district for Lake Forest Plaza.

Ryan said he planned to ask the state Board of Ethics to clarify whether he could retain the seat given to him by state statute. He said his vote Friday was not the final word on the dedication of sales tax for Lake Forest Plaza, as the matter would still be brought before the City Council.

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