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Plans to redo N.O. mall detailed

Council members voice their support

Wednesday, August 12, 2009
By Bruce Eggler, Staff Writer
The Times-Picayune

Unveiling the most detailed plans yet for their proposed redevelopment of the mostly vacant site of the former Lake Forest Plaza mall in eastern New Orleans, developers Cesar Burgos and Ashton Ryan appeared to win several City Council members’ endorsement Tuesday for a tax break needed to let them move forward.

The developers’ plans for the 81-acre site — at this point still more dream than reality — include attracting a Wal-Mart store and several smaller and more upscale retail outlets, renovating and reopening a multiscreen movie theater, building a 1,200-vehicle garage, opening a fresh-produce market, creating a police substation and eventually adding hotels or other hospitality-industry attractions.

The developers and planners hope the collection of smaller stores and restaurants, to be built around a 1.5-acre green space at the site’s western edge and anchored by the theater and a major retailer such as a Target or Kohl’s, would serve as a “town center” or “lifestyle center” for eastern New Orleans.

At the moment, the only commercial activity at the former Plaza site, which was ravaged by Hurricane Katrina, is a Lowe’s home improvement store.

The developers plan to rename the site the New Orleans East Marketplace.

Burgos, a lawyer and prominent supporter of Mayor Ray Nagin, said the developers are “in a healthy place” in talks with Wal-Mart officials about opening a store at the site, but nothing is definite.

Ryan, a banker, said “there is no way” for the overall $220 million redevelopment to move forward without a commitment from Wal-Mart or another big-box retailer. Wal-Mart is the developers’ first choice, he said.

—- Council members on board —-

Burgos said the project also is “practically impossible” without a tax-increment financing plan, or TIF, under which the city and state each would give up 2 cents of their tax revenue from sales at stores on the site to help finance the stores’ construction.

Figures presented by the developers Tuesday show they are counting on bonds backed by the TIF to cover $42 million of the $58 million cost of the project’s next phase, which would include the Wal-Mart and the police substation. TIF-backed bonds would pay for $78 million of the $160 million cost of the remaining phases, including the “town center” complex.

Full details of the TIF, which is backed by Nagin, have not been made public, and an ordinance implementing the plan is not expected to be voted on until September. However, Council President Arnie Fielkow and Councilwomen Jackie Clarkson, Cynthia Hedge-Morrell and Cynthia Willard-Lewis all appeared ready to vote for it.

“I will support this,” Fielkow said. “The city needs this.”

Clarkson said she had questions about the developers’ financing but added, “I’d rather have this than nothing in the East.”

Councilwoman Stacy Head also attended Tuesday’s joint meeting of the council’s Economic Development and Budget committees, but she did not commit herself.

—- Concerns about tax break —-

Peter Reichard, projects manager for the Bureau of Government Research, a nonpartisan research organization, said his group has several concerns about the TIF proposal.

Noting “the sheer size of the TIF,” he pointed out that the city would lose some of the sales tax revenue it now is getting from the Lowe’s and from other stores that would lose business to ones built in the TIF district.

Reichard also questioned “the propriety of the proposed uses of TIF bonds, which include funding the construction of new retail stores and paying off an existing $11 million mortgage provided by Lowe’s,” and whether the proposal conforms to “the letter and spirit” of the overall TIF policy that Nagin announced last month.

Fielkow, who has often criticized the administration’s efforts to develop a TIF policy, said he thinks the Burgos-Ryan proposal conforms to Nagin’s guidelines.

Willard-Lewis and other TIF proponents said there are so few stores in eastern New Orleans since Hurricane Katrina that most of the sales lost to the new complex would be from stores in St. Tammany and Jefferson parishes, meaning the city would lose relatively little in tax revenue it gets now.

John Mayeaux of Sisung Securities, a financial adviser to Burgos and Ryan, said the developers are putting about $50 million of private equity into the project, not counting the value of the land, which he said is worth $20 million to $30 million.

Clarkson said she did not consider New Market Tax Credits, counted on for $7.5 million in the next phase and $27.6 million in the final phases, to be true equity, as Mayeaux contended. However, she seemed impressed when Mayeaux said the developers will sign a $75 million commercial mortgage.

Head said the developers should have to help the city recover $4 million to $5 million still owed to it on a loan guarantee it provided the developers of the Plaza’s movie complex, but Burgos said he had no connection to the movie theater and it should not be tied to the new project. He did not point out that Ryan was one of the theater’s major investors.

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