Ellisville Ups Security With Walmart-TIF Issue Afoot; Final Votes Set for April
Ellisville Police Chief Tom Felgate said the decision to use a metal detector at Wednesday night's council meeting was only a precautionary measure. City council members, meanwhile, agreed to push back final votes for a proposed redevelopment.
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At the City of Ellisville's council meeting Wednesday evening, residents expected to hear a final decision about a controversial tax proposal regarding a potential Walmart Superstore.
Instead, visitors were greeted with increased security and the message from Mayor Matt Pirrello that the council's decision regarding the requested TIF district would be delayed until next month.
Pirrello said an attorney on behalf of Sansone Group, the developer facilitating the project, contacted the City in a memo Tuesday requesting "substantial change" to the proposed ordinance. Pirrello declined to describe the request, citing "contract negotations" as the reason the council met in a closed session where council members were first told of the requested change.
Pirrello previously said the TIF issue would receive a final decision this week.
"It's as big a surprise to me as it is to you," Pirrello told reporters after Wednesday's meeting.
The proposal for the requested TIF or Tax Increment Financing district would allow the Sansone Group to access half of all new sales tax revenues generated at the site, with the stipulation that the revenues be applied to infrastructure improvements for the surrounding area located southwest of Manchester and Kiefer Creek roads. City estimates predict the TIF project would annually generate about $500,000 in sales revenue for the city while providing a multi-million dollar incentive package for developers.
In addition to objections by people specifically opposed to Walmart, non-residents and residents of Ellisville's Clarkchester Apartments alike also have spoken out against the project; along with Westgate Animal Hospital, Valvoline and LC Auto Service, the adjacent 100-unit complex of Clarkchester Apartments falls within the slated redevelopment territory. Ellisville city staff have stated that under Missouri state law, the property containing Clarkchester Apartments could be seized through eminent domain.
“And this is a volatile issue, obviously, when you're talking about people getting displaced," Ellisville Police Chief Tom Felgate said.
In light of events like the 2008 city council shooting in Kirkwood that resulted in six fatalities, Felgate said, he decided to take extra security measures at Wednesday night's meeting. That included additional officers on site as well as a metal detector used to survey incoming visitors, who occupied all 76 seats in the city's meeting chamber.
"We knew there was going to be a big crowd, and we don't know who's going to walk in," Felgate said.
"Believe me, I never felt for a moment that there was going to be a problem," Felgate added. "I just felt it was necessary to err on the side of caution."
A vote on the TIF has been tentatively scheduled for the council's April 4 meeting. Municipal elections are April 3.
E. Schmidt
11:13 am on Thursday, March 22, 2012
So, when does the public get notified of the substantial change Sansone Group wants to make to the TIF proposal?
Chase Castle
12:16 pm on Thursday, March 22, 2012
I can't answer that. However, the following has been added to this article at 12:15 p.m: "Pirrello declined to describe the request, citing "contract negotations" as the reason the council met in a closed session where council members were first told of the requested change."
E. Schmidt
12:35 pm on Thursday, March 22, 2012
Please keep us informed.
If the ordinance passes, it will disrupt the lives of 100 plus individuals and change the character of the community.
It will also put the City of Ellisville on hook if it fails and threaten the credit rating of the city going forward.
John
5:14 am on Friday, March 23, 2012
Maybe it’s just me but I smell a rat when the city council moved the vote till after the election.
John
Michael Rhodes
11:06 am on Friday, March 23, 2012
I also question the change in the vote. I am assuming the next meeting is after the election as well. Although I support the developement I find this change questionable. Maybe they are going to come back asking for less or removing the TIF all together (not likely). In the end if Sansone requested the delay that is in their right even if it was for less than honorable reasons.
E. Schmidt
6:50 am on Friday, March 23, 2012
There's a lot that smells bad about this.
As best I can tell, the city has failed to ask for a "clawback" from Sansone Group.
If Sansone wants the city to stand behind them with a fat TIF in the form of free financing, then Sansone can can stand behind their project forfeit part of their development fee if the project fails to meet certain benchmarks.
At best the City of Ellisville is not very savvy....At worst, to NOT ask for a "clawback" in this economic environment, after we have seen Walmart TIFs fail in places like Raytown, MO, borders on negligence and malfeasance.
If a multi-MILLION dollar developer cannot stand behind a project to build a store for a multi-BILLION dollar mega corporation, they can go find "free" money elsewhere.
E. Schmidt
7:41 am on Friday, March 23, 2012
This is what happens when a Walmart TIF fails and the taxpayers are not protected...not even a "clawback" from the developer to help pay for the failed project.
Currently ALL of the sales tax collected at the Raytown Walmart goes towards servicing the bond debt.
Raytown is on the hook. The municipal credit rating threatened.
http://raytownreport.blogspot.com/2011/01/candidates-for-public-offices-in-city.html
>>>...
Let’s say you go to Walmart and buy $100 worth of merchandise. The sales tax rate is 9.10%. That means you pay $9.10 in sales tax for the $100 you spend.
Here is where that $9.10 of sales tax goes: $4.23 Goes to the State of Missouri $1.13 Goes to Jackson County 0.25 cents Goes to the Raytown Fire District 0.13 cents Goes to the Raytown Parks Department
The following taxes end up paying for Walmart:
0.13 cents Goes to a Transportation Development District (TDD)
0.87 cents Goes to a Community Improvement District (CID)
$2.36 Raytown Sales Tax dedicated to pay for TIF Bonds
The following taxes end up in the City of Raytown coffers. 0.00 cents
ALL of the city sales tax is dedicated to pay off TIF Bonds...<<<
And it get worse for Raytown...
http://raytownreport.blogspot.com/2011/04/raytown-to-pay-shortfall-for-city-of.html
>>>Projected deficit (-$72,913.00) would need to be paid from other city funds.<<<
Michael Rhodes
10:51 am on Friday, March 23, 2012
E. Schmidt is correct; almost. The part left out of the "blog" was that the city pledged all sales tax revenue from the project to pay for either Economic Activity Taxes or as a pledge to its debt service. They have choosen that route as opposed to banking the additional sales tax. From the last audited financial statements the city received $1,466,567 in tax revenues for the district. They used $733,288 for TIF and the remainign $733,288 to pay down it's current debt level. Information is availabe on their website in the last audited financial statement. I as a rule do not take "blogs" at their word as they are usually slanted opinion pieces.
E. Schmidt
11:36 am on Friday, March 23, 2012
The Raytown, MO Walmart TIF was a spectacularly bad deal for the taxpayers.
The terms and conditions of this situation weren't left out. It is explained here in a different entry-
http://raytownreport.blogspot.com/2007/12/walmart-tif-explained.html
The lessons Ellisville can learn from the Raytown situation and other communities are:
Walmart TIFs aren't necessary. They and their developers have enough money to build where they want, without any kind of abatement, subsidy or "free financing" at market rate. They have done so in the past and will in the future if municipal governments stand their ground and refuse to play their game.
Walmart TIFs (and any TIF) should contain a well thought-out "clawback" provision to protect the taxpayers including a substantial refund of the developer's fee/profits if the project fails to meet certain benchmarks. This is at minimum the kind of financial prudent behavior taxpayers should expect from their elected leaders and hired attorney.
When "clawbacks" are required, the developer often "crawls back" away from the deal. (Google the keywords clawback and TIF)
Walmart TIFs can and do fail...and fail spectacularly.
Michael Rhodes
1:50 pm on Friday, March 23, 2012
I don't see how that was a bad deal if the city was able to use taxes generated there to pay it's other debt down by $700k in one year. Money that would have had to come from elswhere. Also, the blog post you linked to is from December 2007 before the Walmart was built. Also, the "blog" you are qouting was created and run by an indivudual who was running for mayor of Raytown. I would be more than happy to look at any figures you could provide showing the negative impact of the TIF. Maybe I am missing something.
Michael Rhodes
2:15 pm on Friday, March 23, 2012
Sorry, another point that is important to make. The TIF for the Raytonw develope ment was $32 million. Almost three times the amount of the requested Ellisville TIF of $11 million.
E. Schmidt
3:46 pm on Friday, March 23, 2012
Yes back to 2007. This is a long and sordid failed Walmart TIF story. Raytown will be paying for this for years and years to come...and have been doing so out of their reserve funds.
My larger point was the TIFs are unnecessary, TIFs can and to fail and when taxpayers are not protected (with even a minimal “clawback”) the results can be horrendous.
You mis-read what is happening there. Begin reading at--Raytown to Pay Shortfall for Walmart
http://raytownreport.blogspot.com/2011/04/raytown-to-pay-shortfall-for-city-of.html
Note this: >>>The City has paid out over 1.8 million dollars from reserve funds to make up shortfall of revenue from the Walmart TIF since its creation. Most of that payment was due to the fact that Walmart did not open on schedule. Payments to bond holders were due and had to be paid. The City of Raytown has guaranteed the bonds, so it fell upon the City to use taxpayer dollars to make payment on the Walmart TIF bonds.<<<
This was their 2010 situation. Their 2011 audit report will be out April, 2012? Hopefully, it won't be worse.
What is even sadder is that some combination of Walmart, board members and officers or related entities are likely the tax-free municipal bondholders. So, they are sucking this place dry as hard as they can.
This kind of situation occurred in the past with their Industrial Revenue Bonds until IRS stopped it.
Michael Rhodes
7:45 pm on Friday, March 23, 2012
The $72k is listed in their audited statements as the property tax that the city agreed to pay at the begining of the project. Not sure where the writer came up with it as a short fall (they were basing their information off of expected 2010 numbers not actual). In the end the city realized $1.4 million in sales tax in the first full year of the project. Can you you point out in either in audited financial statements where they made this $1.8 million in shortfall payments? I can not locate it. I will gladly admit this $32 million dollar TIF was a bad idea if the numbers bear that out. With exception to the city having to issue a first bond payment on delayed opening it appears it si now eaily exceeding it's projects. Will that continue is anyones guess at this time. I am by nature a numbers guy (mainly becuase they don't lie). That is all I ask is to show me the audited numbers. If the writers statements are accurate they have to be there somewhere.
Michael Rhodes
2:42 pm on Friday, March 23, 2012
Excellent point Adam. Looks like it has met it's obligation each year and is projected to do so again in 2012:
"The TIF and TDD bond financing was provided by A. G. Edwards. The bond
trustee is Commerce Bank of Kansas City. Since its inception, all financial obligations have been met. Based on historical data and economic forecasts, it is expected that this trend will continue in 2012."
Did I miss something else?
Michael Rhodes
3:27 pm on Friday, March 23, 2012
Sorry, having some troubling typing (like everyday). It should have read " You stated Mayor Pogue had to fix this". Sorry for the error.