STARKVILLE — An $11 million investment that would bring Academy Sports to Starkville is in limbo after developers said the city’s proposed tax increment financing (TIF) package would not cover enough costs to continue forward with construction in February.
Aldermen approved public hearings — not the TIF itself — for a 15-year, $1.5 million-maximum package, which is an offer about $300,000 shy of the $1.8 million developers are seeking.
Developers asked the city to divert 50 percent of ad valorem receipts and 50 percent of sales taxes from the national sports chain for debt relief associated with infrastructure improvements, but officials countered by offering 100 percent of the property taxes and only 25 percent of sales taxes, saying further sales tax obligations could hurt the city’s financial picture.
Despite the developer’s rejection, the public hearing remains scheduled for the next board meeting. The project itself is not entirely dead, as Golden Triangle Development LINK Chief Executive Officer Joe Max Higgins said developers are still open to future negotiations.
The timetable to reach a mutual agreement is short as Higgins said a deal must be made by the next board meeting since developers wish to begin construction in February.
“They’re willing to sit down … and go over the numbers and methodology one on one, small groups or whatever it needs to be,” he said. “The offer that was made has been deemed unacceptable. We’re leaving tonight, and this project probably is in jeopardy unless something happens.”
City officials stood by their offer after news of the developers’ rejection became known. Mayor Parker Wiseman, who presented the $1.5 million alternative, said the city is at a point where pledging high percentages of sales taxes from a business that would tap into existing stores’ sales could hurt Starkville’s finances in the future.
“The issue is the exposure that you have committing a high percentage of sales tax to the project because you don’t know how many purchases will be transfer purchases. Transfer purchases do not create new sales tax revenue citywide,” said Mayor Parker Wiseman.
The rub: Growing liability
In the last 10 years, the city has approved TIFs for various projects — Middleton Court, the Cotton Mill Marketplace, the Mill at MSU and the Parker/McGill car dealership under construction near Mississippi State — which pledged percentages of future sales taxes toward debt relief.
Combined, those four projects represent $13 million in pledges. Only $510,000 of the total amount has been issued, and that was for a portion of the Middleton Court project.
If all of the TIF debt is issued — a move Wiseman said is unlikely since TIFs rarely max out — the city would be obligated to pay $102,000 in property taxes and about $954,000 in sales taxes annually.
“(The property tax pledge) does not scare me because it is less than what we average in one year of property tax growth. Even if all TIF pledges come … we’d still have more property tax growth than we’d have obligated in new debt against our property taxes,” he said. “(The sales tax pledge) is a figure that does concern me. That is just over 15 percent of our current citywide sales tax collection. In addition, it’s four years of sales tax growth city-wide on the rate we’re on now. If we have, over the next two years, three or four of these TIF projects that issue bonds — which is quite possible — that number could be high enough to create a hole in our budget.”
As news of the developer’s reaction filtered through City Hall during a recess, many aldermen said they made the best offer possible considering Starkville’s financial obligations.
“I believe the city responded with a fair and reasonable offer that would give the developer about 70 percent of what they were asking for in making the project happen without putting the city in financial risk,” said Ward 4 Alderman Jason Walker.
If it materializes, the Academy Sports project would build a 62,000-square-foot facility behind Sweet Peppers on Highway 12, near Walmart. The project also includes a yet-to-be-named 4,600-square-foot restaurant.
Ad valorem collections on the 8.4-acre site would increase dramatically, attorney Chris Gouras said. It currently generates about $5,400 annually for the city, and the total would increase by about $24,000. County ad valorem returns would increase from about $14,000 to about $69,000, he said.
The Starkville-Oktibbeha Consolidated School District’s returns, which cannot be waived by law, would increase from $18,000 to about $91,000 annually upon the project’s completion, Gouras said.
In total, he estimated Academy Sports could generate an estimated $26 million in annual retail sales, which would result in a $336,000 rebate for the city. The restaurant, Gouras said, would generate approximately $60,000 in 2 percent food and beverage tax returns.
About 140 jobs would come with the development, which doesn’t include the 120 construction jobs expected to handle the build.
Tensions still apparent
Although Vice Mayor Roy A. Perkins tried to downplay the apparent strained relationship between the city and the LINK, both sides had choice words for each other during Tuesday’s meeting.
Higgins first came out swinging in December after aldermen declined to hear the Academy Sports presentation in executive session.
Then, the LINK CEO said aldermen “kept the bat on their shoulders” and said the board’s lack of interest in the project creates dissonance since all seven aldermen and the mayor campaigned on pro-business platforms.
The icy relations did not improve during Tuesday’s meeting.
Higgins took issue with the city only allocating 10 minutes for the LINK’s presentation, saying the limit prevented attorneys from explaining away many worries the board has about TIF packages.
“I think in light of what all has happened and the reality of talking back and forth … you should give 10 minutes so that you understand what TIF bonds are. Frankly, you don’t, and that’s OK,” he said to Ward 2 Alderman Lisa Wynn after she addressed the LINK delegation. “Basically, you’re offering 70 percent of what they’re asking for. You need to understand that you’re playing a high stakes poker game here. The question is: Are you willing to live with your hand?”
After the bond attorney was allowed to speak, Wynn said to him: “Sometimes when we represent clients, we need to have them understand we can get more flies with honey than with vinegar. Advise your client.”
“I just want the media to understand the vice mayor is not against any businesses being here. I just have a very conservative philosophy,” Perkins said. “There’s something one of the local newspapers said, that there’s some controversy. There’s no controversy I’m aware of. There was one article talking about a strained relationship. This board has extended its arms open. We’re a very diverse board, and we promote healthy discussions. We welcome businesses, but we have different philosophies.”
Carl Smith covers Starkville and Oktibbeha County for The Dispatch. Follow him on Twitter @StarkDispatch
You can help your community
Quality, in-depth journalism is essential to a healthy community. The Dispatch brings you the most complete reporting and insightful commentary in the Golden Triangle, but we need your help to continue our efforts. Please consider subscribing to our website for only $2.30 per week to help support local journalism and our community.