In The News › Editorial: Lake Forest Plaza deal is too risky

Editorial: Lake Forest Plaza deal is too risky

The rebuilding of eastern New Orleans is vital to the city’s ongoing recovery, and city officials are right to look for ways to spark economic development there.

But the deal being proposed by developers who want to use a portion of sales tax revenues to remake Lake Forest Plaza isn’t a smart way to achieve that goal.

The developers clearly would benefit from the proposed tax increment financing proposal. They would use the stream of sales tax revenues to pay off their $11 million mortgage on the property and get themselves out of that debt. City revenues also would pay off $1 million in back rent they are owed by the Grand of the East theater. And the city’s tax increment financing subsidy would back a total of $120.6 million in bonds.

But the Bureau of Governmental Research points out that there are essentially no protections for the public.

Even so, the City Council seems to be leaning toward approving the deal today. Council members no doubt are looking for ways to provide more shopping options and amenities for eastern New Orleans residents. That is crucial to recovery and to the area’s quality of life, and the city ought to encourage smart development.

But this deal has major problems, and the council shouldn’t ignore those.

As BGR points out, developers are offering no guarantees that the project will actually be completed. Signs are already discouraging. Part of the construction budget depends on the sale of some land to Wal-Mart for $5 million, but a representative for the mega-retailer said no negotiations have begun.

In addition, developers are not only asking to be given a portion of future sales tax revenues — as is common in a tax increment financing district. They also want a percentage of the taxes currently being paid by Lowe’s, the only business on the site.

That is highly questionable. The argument for tax increment financing districts typically is that government isn’t losing any money because developers are only getting a share of revenues they create.

In this case, the developers would drain the city’s budget of the estimated $1.4 million per year in taxes Lowe’s is paying, BGR said. That doesn’t make sense, especially since city officials already are bracing to make deep cuts to balance next year’s budget.

In exchange for these sacrifices, residents might get new places to shop. Or they might not.

“Unfortunately, we can’t guarantee anything. It’s all market-driven,” said Cesar Burgos, one of the developers.

If the project were driven by the market, city taxpayers wouldn’t be asked for so much assistance. This looks instead like a gift for the developers. The City Council needs to protect the public and reject the deal.

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