In The News › BGR report criticizes Lake Forest Plaza financing district

BGR report criticizes Lake Forest Plaza financing district

Thursday, September 17, 2009
By Rebecca Mowbray
The Times-Picayune

A formal report by the Bureau of Governmental Research says that the proposed Lake Forest Plaza tax increment financing district that will be considered by the City Council Thursday is “fraught with problems.”

While the non-partisan watchdog group says that “some type of well-conceived, properly targeted public assistance” is probably needed to redevelop the site, BGR says that the current proposal by the owners of Lake Forest Plaza LLC — Cesar Burgos, chairman of the Regional Transit Authority, and Ashton Ryan, chief executive of First NBC Bank — doesn’t pass muster.

Burgos and Ryan are asking the city council to allow them to use a share of any tax revenues generated at the Lake Forest Plaza site for developing new retail on the site. They initially propose a retail development anchored by a Wal—Mart, and later, a 500,000-square foot town-center project.

BGR says that the developers will benefit from the proposal more than the city. The developers would be under no obligation to deliver on the architectural drawings of the upscale lifestyle mall they propose, but the tax revenues that the rest of the city would forgo would be used to pay $11 million of private mortgage debt that the developers have on the property.

In fact, BGR notes that if upscale town center developments in more affluent areas are any guide, it may be tough to pull off such a development in New Orleans. The Nord du Lac retail project in St. Tammany Parish is on hold, while the Perkins Rowe mixed-use lifestyle development in Baton Rouge, which opened in 2007, has been sued by its lenders on claims that it is delinquent on debt payments.

As far as the more immediate proposal to try to build a 100,000 square foot retail development anchored by a Wal-Mart is concerned, the developers would charge Wal—Mart below market rent of $4 per square foot while charging other retailers market rates of $15 to $18 per square foot in rent.

The only business that’s currently in operation at the site is a Lowe’s home improvement store, and the TIF would give the developers the right to use $1.4 million a year in sales taxes that are currently generated by the Lowe’s to help pay for their project.

The proposal also allows Burgos and Ryan the right to use $1 million in TIF money to reduce a $2 million debt that a defunct theater on the property, Grand of the East LLC, owes them in unpaid rent and construction loans. While the proposal would help Lake Forest Plaza LLC resolve its debts from the movie theater, the city would still be stuck with a $4 million debt that the theater owes it.

Meanwhile, BGR notes that there are potential conflicts of interest with key people involved in the governance of the taxing district.

The board is chaired by state Sen. Ann Duplessis, who represents eastern New Orleans in the Legislature and works as a banker at Liberty Bank and Trust Co.. Alden McDonald, the president and chief executive of Liberty Bank, is a member of Grand of the East, the moldering theater with debts that would be partially reduced by the deal, increasing its chances of redevelopment.

Ryan is not only an owner of the Lake Forest property, but he is a member of Grand of the East and was elected in June 2009 to be secretary/treasurer of the shopping center district that would be the beneficiary of the proposed tax-financing. An advisory opinion from the ethics board in 2008 says that Ryan can serve on the board as long as he recuses himself in matters before the board where his shopping center would have substantial economic interests. “It is hard to imagine what matters would not require recusal,” BGR’s report says.

In an email, Ryan said that he has recently resigned from his post, and has nominated the Rev. Charles Southall III of First Emmanuel Baptist Church as the owner’s representative on the board. Ryan said the board will vote on Southall’s nomination at its next meeting.

In an interview this week, Burgos took issue with many of BGR’s criticisms. The parcel cannot be redeveloped with out public subsidy, he said, and it’s customary in TIF districts for the city to buy the land or lease it at market rates. Since the city doesn’t have the cash to get involved with a piece of land that Burgos says is worth $30 million, the $11 million mortgage payoff is a bargain.

Meanwhile, Burgos says that he has helped to mediate some of the financial disputes between Grand of the East and Lake Forest Plaza, and the movie theater and the city. Rather than the proposed TIF deal being something that helps take care of debts owed to Lake Forest Plaza, Burgos says his project is a tool for the city to be able to recuperate some of the money that is owed.

Burgos further says that retailers have expressed interest in 50 percent of the site, so he is optimistic he can pull off the deal. If his plans didn’t coming together, he’d have to come back and ask the city for new permits to do anything different with the site. He also commissioned an economic impact study that shows that if the lifestyle mall is developed, the City of New Orleans will see a net gain in the taxes it collects.

But BGR says that none of Burgos’ arguments provide assurances that the lifestyle development he is pitching will be built. The watchdog group recommends that the Council reject the proposal at hand and says there are other avenues the city could take to redevelop the property.

One is to enforce an existing $1.6 million court judgment against Lake Forest and possibly seize control of the property. Another is to require that if the city pays off the mortgage on the property, then the city gains ownership of the property and can issue a competitive request for proposals by qualified developers to re-invent the site.

While new developers may still require public subsidies, BGR says that proposals could be better tailored to bringing new development to the east rather than using public funds to repay private debt.

Rebecca Mowbray can be reached at or 504.826.3417.

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