“We have never given up hope that the property can be developed,” Wright said. “We’re just caught in the middle between the poor economy and the ability to have protection on the city’s money so we can do it like we want it done.”
The City Council voted to end discussions with Retail Specialists Inc. at its meeting last week and terminate their agreement for exclusive marketing of the city’s 33-acre property near Walmart.
The Birmingham-based development company signed on with the city more than a year ago, proposing a 70,000 square foot retail shopping center. However, attorney Robert Gilpin informed the council at a May 29 work session that he had yet to reach a final agreement with the company.
Along with other issues, Gilpin said Retail Specialists was unable to secure an incentive to give the city the first lien, a specific request to protect the city’s financial interests by guaranteeing payments if the project did not generate the projected sales tax.
“We were not getting the security we wanted, plus the businesses we were potentially getting competed with what we already have,” said council President Jim Heigl. “I wish it could’ve worked out, but we have to protect the city’s interests and look after our local merchants.”
Councilman Manuell Smith said the lack of progress on the project was the final straw.
“They initially said they would have buildings up in six to eight months, and they had still done nothing a year later,” Smith said. “I think the council and our attorney did a good job pursuing the project, but we were right to say enough is enough.”
The city encountered similar issues with a previous developer. In June 2010, Cullman-based Drinkard Development proposed a 145,000 square foot shopping center with a separate food court and movie theater.
Drinkard asked the city to underwrite a $14 million bond that the company would pay back annually, including interest, according to Councilman Walter Jacobson. The city would have retained ownership of the property in case of a default and would have collected the full sales tax revenue.
At the time, the city was eligible for tax-free recovery zone bonds to fund the project, but failed to take advantage of them in the allotted time. With that opportunity gone, the council could not agree on the city having a financial stake in development and Drinkard withdrew its proposal.
The city’s proposed plan with Retail Specialists was to pay a $4 million unrecoverable infrastructure bond with insurance provided by the first lien. This was the first attempted development project for Retail Specialists, which primarily focuses on retail brokerage and property management.
“I believe Drinkard was the better offer of the two,” Jacobson said. “Even though there was slightly more risk for the city, it would have been worth it based on Drinkard’s blemish-free track record.”
Heigl said he also feels Drinkard was the better deal.
“I hate that we couldn’t go to the next step with Drinkard,” he said. “I had always hoped it would work with them, and they seemed to have everything together.”
Councilman Ken Horn said if the city were to attempt the project again, it should offer more tax incentives to the developer.
“We would need to give more tax breaks to entice them to come in and so they can make some money on it too,” he said.
Councilman Doug Murphree agreed, but said the incentives should still come on the back end of the project to ensure the city’s money is protected.
“In the future, we should approach it a little differently, but however we move forward, I will not agree to putting the city at risk of losing the land and money, and I don’t think the other councilmen would either,” Murphree said. “There are other ways to do it. I think the whole council has taken something away from this and seen the direction we would need to go if we try this again.”
Murphree said they may have to take a wait-and-see approach until the economy improves.
Wright said the city is “wide open and receptive” to development ideas in the future.
“There is a lot of opportunity for the property,” he said. “We’re going to let the dust settle here and then continue to march forward. The city is still vitally interested in getting the property up and running. It’s something that is needed for our citizens and for our city.”
Contact Emily Adams at eadams@dailyhome.com.
