Many have had hopes of another grocery store in Alexander City.
But city leaders say the city-provided incentives proposed by a developer of a project at the corner of U.S. Highway 280 and Highway 63 is not a good deal for Alexander City.
Alexander City Mayor Woody Baird said much of the information about the proposed incentives for the development in the Wednesday Outlook is misleading.
“The article announcing the potential of a new grocery store did not properly state the facts, nor did it cover all the relevant information,” Baird said. “The information, which I assume was provided by the developer, was vague and appears designed to lure citizens into believing an agreement has been reached and the project is on its way.
“There is presently much concern over the proposal submitted by the developer, and to date, the city council has not voted to approve it. The developer has pushed the city council to call a special meeting on Tuesday to vote on its proposal.”
A legal notice advertised the meeting for Tuesday for the Alexander City City Council to take up the deal in a public forum and presumably vote for or against the proposal. The meeting was called for by city council president Buffy Colvin.
The information in the article referenced by Baird was in a release from Alex City Development’s Evan Conder whose parent company is JWA Ventures and provided to the Outlook by Alexander City Chamber of Commerce president and CEO Ed Collari. (The Outlook is a member of the chamber and publisher Steve Baker is on the chamber board).
Alex City Development has proposed a retail development and has been in negotiations with city leaders for several months.
“The retail center will consist of a grocery store of approximately 47,000 square feet, two ancillary shops buildings consisting of 11,500 square feet and a freestanding building of 5,000 square feet,” Conder said in a release this week. “The retail center will also have six free standing stores along Hwy 280 and Hwy 63.”
Baird said accounting professionals engaged by the city to assist with the matter have recommended against the developer’s proposal.
“They advise, and applicable staff within city hall agree, that the structure (of the current proposal from the developer) enriches the project development team on the backs of Alexander City taxpayers and offers minimal benefit to the city,” Baird said. “They believe a deal that is more equitable and that actually benefits Alexander City citizens, not a decade from now, but at the same time the developer is benefitted can easily be worked out.”
Baird said the current proposal from Alex City Development to build the retail/grocer development has Alexander City sharing up to $7.5 million plus 5% interest to cover a 10-year loan to close when the doors to the grocer open in 2023, with the monies coming from the city’s portion of the sales tax. Baird said the city would be responsible to pay up to $9.7 million if the grocer closes or relocates before the loan is paid back.
Baird agrees the developer’s proposal does not share sales tax collected for public schools, the city’s road fund or for the Charles E. Bailey Sportplex. The tax to be rebated in the proposal is the entire 2.75% of sales tax aimed at the city’s general fund. Baird said the proposal would likely worsen the city’s financial position through cannibalization.
“The new grocery store will take sales away from other grocery stores in the area for which the city now receives sales and use tax revenues,” Baird said. “There is no offset or recoupment of taxes by the city not if but when this occurs. This further reduces sales taxes generated for the city and creates a big hole in the city's general fund and budget.”
If $1,000 of the 2.75% sales tax is collected among four current grocers, Baird said a fifth store would not increase the city’s collection of sales tax proportionately even when some shoppers who left town came to the new store. If the new store collects $275 in rebateable sales tax and overall the city only garners $1,100 in sales tax with the fifth store, the current developer proposal would leave the city with $825 for the general fund, a net loss of 17.5%.
“The city’s auditor has advised us that this cannibalization effect is real and presents a serious threat to the city’s already beleaguered general fund,” Baird said. “In fairness, the developer and others have argued the project will stop a certain amount of ‘leakage,’ meaning shoppers spending their money in Auburn, Opelika, Montgomery and Birmingham. But this leakage does not come back to the city in the form of sales taxes because under the current development agreement the developer gets the benefit of the leakage. Again, all general fund sales and use taxes go to the developer for over a decade or until it gets its $9.7 million.”
Baird said the developer would get the most of the leakage because shoppers leaving town would stop there benefiting the developer.
Financial advisors have said there are ways to use a sales tax rebate as an incentive that is not detrimental to the city.
“They have provided examples from all over the state where cities share only a percentage, for example 50% of general fund sales and use taxes, so that when the developer wins, the community does also,” Baird said.
Many services in the city are in the general fund. The Alexander City City Council approved several transfers the last several years from the city’s utilities to shore up the city’s general fund. The general fund is the budget from which services such as fire and police protection are funded.
Baird said he tried to look out for the best interests of the city and negotiate a deal good for all.
“My job is to ensure that our police and fire protection and other city services remain funded at a level that maintains excellent standards Alexander City citizens are accustomed to and have the right to expect,” Baird said. “The (information given for the article earlier this week) appears to have been an attempt to pressure the city council, through public deception, into handing over $9.7 million to the developer. I am a businessman and expect honest dialogue, fair dealing and common sense when conducting business. I, more than anyone, desire more development and opportunity for our citizens, but the citizens cannot suffer because of a bad deal. We will see new opportunities in the future for development. However, if this deal is passed by the city council, no developers will want to deal with a city that cannot offer competitive services and quality of life.”