Mobile’s incentives for retail developers bringing mixed results

Mobile County

MOBILE, Ala (WKRG) –The City of Mobile’s efforts to provide tax breaks to retail developers have seen mixed results, according to the city’s finance director. 

In an effort to try to fight off online-sales and competition in Baldwin County and Mississippi, the City of Mobile over the last several years has agreed to provide incentives for several retail developments, including Westwood Plaza at Airport Blvd. and Schillinger Road. It’s one of the first things people see when leaving the Mobile Regional Airport.

“That incentive was designed to rejuvenate an eyesore and a front door,” said Finance Director Paul Wesch.

Wesch says the City provided Westwood Plaza incentives, as well as The Shoppes at Bel Air, in part due to their visible locations and importance to the overall local economy. In both cases, developers invested 25 million dollars in improvements, in exchange for a portion of sales tax receipts above and beyond what the shopping centers were producing before the remodeling.

Bel Air’s owners can collect a maximum of 7.5 million dollars over 15 years. Westwood can earn 9.25 million-dollars over the same time span.

Wesch says Westwood has already collected 1.2 million-dollars. Bel Air’s owner has collected nothing, in part because it hasn’t found a new anchor tenant for the old Belk site. That was a part of the incentive deal.

“We, as a general matter, don’t favor retail incentives but in those two particular cases we’ve seemed to have achieved, or are on the way to achieving, what the city desires,” Wesch said.

But what Wesch says the city doesn’t desire is what’s happened at McGowin Park.  There, the City Council and then-Mayor Sam Jones promised developers 28-percent of its city sales tax income for 20-years. In exchange, the Tennessee-based developer built the roads and infrastructure for the project. Since the contract did not require the developer to disclose exactly how much it paid for those improvements, that figure is unknown. The developer, however, has collected from the city $6.2 million dollars in the shopping center’s first three years alone. 

Wesch says what the city will ultimately give up for the project is staggering.

“My rough projection has been 60 to 80 million dollars over the 20 year lifetime, and probably closer to 80,” Wesch said.

Wesch says city leaders believed the complex would increase overall sales tax collections for the city could by attracting shoppers from Mississippi and Baldwin County. Having the area’s only Costco store was the key to that strategy.

“One of those purposes that may have been argued with the McGowin shopping Center was to try to draw in customers from outside of Mobile,” Wesch said. “I’m not sure that that has been as successful as some had thought.”

A number of stores at McGowin have simply relocated from other parts of the city or opened new locations, but that, in the end, is a loss for the City, since it keeps fewer sales tax at McGowin than it does elsewhere.

“That is just retail sales moving around,” Wesch said.

The addition of McGowin Park, the improvements at Bel Air and Westwood,  and a surging economy, have not increased the City’s sales tax revenues. They’ve remained constant at 188-to-189 million dollars over the last three years. 

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