Incentive suggested for Vestar

City’s representative for Kingman Crossing recommends negotiations begin

KINGMAN - The first hour of the City Council meeting Monday was dedicated to the proposed Kingman Crossing traffic interchange and development district.

Brian Kennedy of Stone & Youngberg Capital Group, which the city hired as a representative on the project, brought Council up to speed on the proposed sale of the state land just south of the city's land at Interstate 40, the beginning progress of a major amendment to the city's zoning map and the partial design plans for the Crossing interchange.

The topic everybody had been waiting for was the option to provide a portion of the city's sales tax to Vestar Development Company for fronting the costs of the interchange.

There were clearly two different languages being spoken Monday, and even the terminology of these agreements changed from the original packet to the one presented.

The difference between "infrastructure reimbursement agreements" and "revenue sharing agreements" is purely a matter of rhetoric. The gist of these agreements is that developers front the costs for infrastructure, or in this case, an interchange, and the city provides a portion of its sales tax revenues generated from that development project over an agreed upon time frame. These agreements have extended as many as 15 years for Vestar, and as much as 65 percent of sales tax revenues.

According to Kennedy's report, cities including Casa Grande, Coolidge, Goodyear, Maricopa and Queen Creek have recently entered into "infrastructure reimbursement agreements" with retail developers. The state refers to them as "sales tax incentive" agreements. And according to Arizona Revised Statutes, such agreements must meet certain requirements, which were outlined by Economic Development Director Jeff Weir following Kennedy's presentation.

Mayor Les Byram continued his outspoken opposition to the idea, even after hearing Kennedy's recommendation to begin negotiating such an agreement.

When it was clarified that the cities mentioned by Kennedy had either a property tax or incoming tax revenue from a fire district, neither of which Kingman has, the mayor and three Council members either stated openly that they wouldn't support the incentive or expressed skepticism about it.

Byram said that those cities bring in residents from surrounding cities to shop, whereas Kingman has no close neighboring cities to draw from.

"We will not be competing against anybody but ourselves," he said.

He said that while it's likely that retail options at Kingman Crossing will draw people off Stockton Hill Road, it won't be of any use to these businesses or the total sales taxes netted if they're just drawing the same dollars from other stores.

Councilman Kerry Deering seconded Byram's point, adding that if a Lowe's was built, it would merely pull sales taxes from The Home Depot and Leroy's ACE Hardware.

Kennedy clarified that an agreement could be established whereby sales taxes wouldn't be paid to the developer unless proof could be obtained that the total city sales tax revenues increased.

Kennedy recommended in the end that the city, if it decides to do so, sell its land after the Crossing is built and after construction has begun on some of the development districts, both on the north and south side of the interstate. That will drive the price of the land up, whereas now the city can expect about $10 million for the land, he said.

Kennedy will present to the Council again next month the possible commercial uses of the city's 151 acres, as well as the proposed 17 acres of open space.

Weir followed Kennedy with a presentation on the required policies the city would have to adopt if it were to enter into an incentive agreement with a private developer.

There are two criteria for allowing cities or towns to pay private companies to build.

One is that the incentive is anticipated to raise more revenue than the incentive itself within the duration of the agreement, and second, that without the incentive "the retail business facility or similar retail business facility would not locate in the city or town in the same time, place or manner."

Council took no action Monday night.