City, Foster-Regency sign Farah Building shopping center subsidy contract
by Sito Negron
Posted on November 6, 2008
Story updated at 6 p.m. Nov. 6, 2008, and 11 a.m. Nov. 7, 2008. View contract via link below story.
The city has signed a tax-abatement contract with Foster-Regency, the partnership looking to build a shopping center on the Farah Building site, less than a month after an executive with the partnership said the project was dead because the county rejected the deal.
That could mean that the partnership, between Western Refining CEO Paul Foster and mall developer Regency, plans on going back to the county after January, when two new members of the Commissioners Court take over.
Or it could mean that the incentives provided by the city alone will be enough to make the project work.
However, Regency executive West Miller repeated Thursday similar comments to those he made Oct. 13, when the county rejected the deal: “We’re not doing anything now. There won’t be a shopping center built. Until we get an incentive that we can live with that we’ve requested from the city and county, we cannot go forward. We wish we could but we cannot.” [link]
On Thursday, he said: "We don’t plan on going back to the county with the current county commissioners unless the county commissioners would like to revisit (the deal)."
When asked if Regency would go back to the county in January, when a new court takes over, he said, "We haven't fixed a date, we've just made it clear to everybody, and you can help us make that clear, the project does not work without the city (and) county involvement."
El Paso City Manager Joyce Wilson said that the city agreement came with deadlines that had to be met.
"They have to execute the contract with some period of time with us. I'm assuming they did that to meet their requirements with us," she said. "If they don’t meet some of those time frames of course our contract would be void so I'm assuming they're going to continue exploring options with the county."
The contract had to be signed by Regency by Friday, or would have been void.
Other deadlines in the contract have to do with when work starts and finishes, and when the "lifestyle component," the portion of the project that was a key selling point, is added.
The partnership received a commitment of $8 million from the city, to come from the city's portion of sale tax proceeds from sales at the site, as well as the property tax increment from the increase in property tax values at the site. The company had asked the county for a similar deal for $4 million. While the work is estimated at a total of $12 million, the payout to the company over the life of the 10-year agreement will include interest, increasing the total payout to about $18 million.
The reasoning behind the city subsidy of the project was that the Farah Building represents blight, and it's in the city's interest to support a project that would remove the building and eventually pay into the tax and salary base.
There also were expectations raised early in the process that the project would be unique to El Paso in that it would bring new types of stores, and that the development itself would be a new type of shopping center. As the discussion evolved, it became clear that there would be few if any "new-to-market" stores, and that although the project would involve landscaping and other architectural features to make more aesthetically appealing, it generally would be a "power center" similar to Las Palmas or the area around Sunland Park. One unique feature of the project is the promise of a "lifestyle component," which would be structured with freestanding buildings and walking paths.
The fact that it would not be substantially different, and that it was not what originally had been discussed, led into the major opposition to the project, which came from Las Palmas -- whose developer, Artemio de la Vega is brother-in-law to Foster -- and from Simon Properties, which operates Cielo Vista Mall, right across Hawkins from the Foster property.
Those parties disputed the subsidy for a competing project that was similar to theirs, and they also argued that if the primary reason for the public money was to remove the blight alone, the $12 million being sought was excessive.
Because of that, they were not surprised at the contract signing.
“Of course they signed the contract. We’ve said all along that $12 million is much more than they need to tear down the Farah building. The City Council heard yesterday that retail sales are down and they are facing a budget shortage in 2009. Giving away sales taxes that the City is already collecting will only make matters worse. The County was correct in not participating in this tax giveaway,” de la Vega said.
Roderick Vosper, Vice President of Development for Simon, said in a statement that “We’re not surprised that Regency/Foster signed the City agreement. We know that in spite of their public comments, Regency/Foster does not need a county subsidy to move forward. Indeed, we’ve always said that the City is overpaying Regency/Foster for removal of the blighted building by $2 (million)-$4 million dollars.
"As the retail environment continues to deteriorate, it’s frankly unbelievable that the city’s agreement underwrites Regency/Foster to build a strip center anchored by tenants from existing centers in the market. The taxpayers will lose existing sales and property taxes and other shopping center owners will lose their anchors. We’ll continue to look at our options on this matter.”
But Miller said those assertions were incorrect: "He (Vosper) is inaccurate again. We cannot go forward with what we proposed if we do not have the 381 agreement from the county that we proposed.
"The reason we signed the agreement is because there was a termination date of Nov. 7 and we signed that in good faith with a cover letter in addition stating that we would need to have the approvals from the county to go forward."
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