In The News › BGR critical of Lake Forest plan

BGR critical of Lake Forest plan

Wednesday, September 16, 2009
By Rebecca Mowbray, Business writer
The Times-Picayune

If the defunct Lake Forest Plaza shopping mall is transformed into a modern lifestyle center, it will have a positive effect on sales and property tax collections in the city as it recaptures retail spending from other parishes, according to an economic impact study commissioned by the developers.

Baton Rouge economist Loren Scott estimates that the project would result in a net gain of $144.4 million in sales taxes to the Orleans Parish treasury between 2010 and 2030, and $83.6 million in new property taxes at the mall.

Property owners Cesar Burgos, who also is the unpaid chairman of the Regional Transit Authority, and Ashton Ryan, chief executive of First NBC Bank , released Scott’s study in advance of Thursday’s City Council meeting, when council members are expected to vote on their request for tax-increment financing for their project.

Burgos and Ryan, through their company, Lake Forest Plaza LLC , are asking the city to give up two cents of its sales tax collections at the site for the next 20 years to help pay for the construction of the mall. If granted, they will ask the state for the same arrangement.

The duo also plan to present Scott’s study at a public meeting organized by Sen. Ann Duplessis, who represents the area in the Legislature and is the chairwoman of the Lake Forest Plaza District Board of Commissioners. The meeting will be tonight at 6 p.m. at St. Maria Goretti Church, 7300 Crowder Blvd.

Scott estimates that only 20 percent of the spending at the rebuilt mall, to be renamed the New Orleans East Marketplace, would be cannibalized from existing stores in New Orleans. The rest, Scott said, would come from places like Jefferson and St. Tammany Parishes.

Scott also estimates that the new services provided by the Marketplace would spur people to return to the region and believes the mall could increase the population of eastern New Orleans by 10 percent.

Burgos hopes to build a Wal-Mart, 100,000 square feet of other retail and 10,000 square feet of restaurants, plus a gas station and police substation by July 2011. By mid-2013, he hopes to add 500,000 square feet of new shops, 50,000 square feet of restaurants, a movie theater and parking garage. By the beginning of 2015, he hopes to add an office tower, hotel and conference center.

Burgos estimates that the full development would cost about $200 million; the city and state would each contribute $60 million through their tax revenue, and the developers would contribute the rest through a mix of cash, the value of the land, and commercial loans.

The nonpartisan Bureau of Governmental Research has strongly criticized the deal, saying that there are no guarantees that the developers’ vision will actually get built, and no provisions in the proposed ordinance for the public to reclaim its taxing authority if the project fails. About the only thing that is concrete, the bureau says, is that the deal would wipe out the remaining $11 million mortgage that the developers have on the property.

Burgos takes offense at those characterizations. He said cities usually buy the land or lease it from the developers at market rate in TIF projects, as they are known, but since the city doesn’t have the money to buy a $30 million piece of land, as this property is worth, paying off the mortgage is a bargain. Burgos further said that he’s been involved in mediating other disputes related to the property to help the city collect its money.

“It’s not a bailout,” Burgos said. “We’ve got a big piece of land out there. If I have to, I can sell it piecemeal.”

He said there are protections for the public, because the developers would have to go back to the City Council with any proposed changes in the plan if they were unable to sell their vision. Moreover, he said, the city has little to lose because there’s no economic activity going on now at the site. “There’s no financial risk to the city of New Orleans,” he said.

But Janet Howard, chief executive of the Bureau of Governmental Research, said money from future tax revenue isn’t free because it represents an investment by the city to the exclusion of other potential investments in the area. She called upon the City Council to demand the transparency and assurances that a private investor would.

“When the city is doing deals like this, and it’s giving up future tax revenue, it’s making an investment. It needs to act like an investor,” Howard said. “They’re our stewards in these deals, and they have to insist that they be done in a responsible, businesslike manner.”

Fair Use Notice

This site occasionally reprints copyrighted material, the use of which has not always been specifically authorized by the copyright owner. We make such material available in our efforts to advance understanding of issues and to highlight the accomplishments of our affiliates. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is available without profit. For more information go to: US CODE: Title 17,107. Limitations on exclusive rights: Fair use. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.