The Cullman city council spent part of an hour-long executive session Wednesday evening clarifying some “clawback” contingencies in a new retail tax-sharing agreement worth up to $6 million, which officials hope will give the city more recourse if the Cullman Shopping Center project doesn’t meet certain expansion levels.
The council approved the document without releasing a copy for public consumption Wednesday night, after nailing down the details behind closed doors. A final version was publicly released late Thursday afternoon once attorneys formalized the changes.
Delaware-based Merchants Retail Partners, under the limited liability company MRP Cullman, recently purchased Cullman Shopping Center in an approximate $10 million deal. The developer must also have an executed lease with a national retailer or tenant by Sept. 1, 2015.
Per the agreement, the company is obligated to spend at least $10 million more renovating and expanding the center, which is currently anchored by Belk, Books-A-Million and JC Penney. The financially-troubled Food World store was not included in the agreement’s list of current tenants.
Moving forward, MRP Cullman reportedly has options on some adjoining land that could be purchased and used for expansion. The company is also eyeing some potential new restaurants on outparcels at the site. Economic officials say the deal could generate up-to 600 new full-and-part-time jobs.
To help fund the project, the city has agreed to pay back some sales and property taxes collected at the development for the next 10 years.
MRP Cullman has not commented on which new businesses they are targeting, but the developer has previously worked with big-box retailers such as Best Buy, Kohl’s, Dick’s Sporting Goods, Target and Bed Bath and Beyond.
Under the deal, businesses in the development will still pay sales tax, though the city will pay back some of those funds for a set period of time. One half of the net sales taxes received by the city from new businesses locating in Cullman Shopping Center will be returned for the first seven years; one half of the net sales tax received from businesses existing in Cullman Shopping Center will be returned during the first three years; and the property taxes received during the first 10 years will also be returned.
The agreement only affects city sales tax (1.75 percent) and does not include education taxes.
Existing Cullman County businesses that might move into the development would not be included under the “new sales tax” guidelines.
Current estimates show the payment amounts would total approximately $276,000 paid back in existing half-sales tax per-year the first three years, with as much as $800,000 generated (then split and repaid) in the subsequent seven years from new retail shops. Those amounts could combine to total $6 million over the 10-year period. If it reaches that cap amount, payments will stop.
If MRP Cullman fails to get an executed lease by the 2015 deadline, the “clawback” clause would allow the city to make MRP Cullman pay back the economic development payments for not meeting the obligations on the contract, including affected sales and property taxes.
Both the city and developer maintain the rights to make changes and amend the agreement if they both deem it in their best interests to do so.
The project area has been clarified and defined as within the boundaries of Second Avenue NW, Cleveland Avenue, NW, Katherine Street, NW, and Loring Street, NW, bordering and encompassed by the regional shopping center in excess of 200,000 square feet.
Trent Moore can be reached by e-mail at email@example.com, or by telephone at 734-2131, ext. 220.