City, county crafting deal for sporting goods store

Monday, October 15, 2012

Dedicating a portion of tax revenue from a new sporting goods store coming to Cape Girardeau for infrastructure improvements will be discussed Monday by the Cape Girardeau County Commission, City of Cape Girardeau and Drury Development Corporation.

The Cape Girardeau County Commission will meet at 9:30 a.m. today with John Mehner, president and CEO of the Cape Girardeau Area Chamber of Commerce, who is serving as the interim director of Magnet, the area's economic development agency, to discuss the proposal.

The agreement, related to the opening of Academy Sports + Outdoors at 270 Shirley Drive, is an amendment to a similar deal put in place between the same three entities when Kohl's was built in 2004.

Work is beginning on the Academy Sports' $1.8 million retail development, located between Sam's and Kohls. Under this agreement, just as with Kohls, the city and county would use a portion of sales tax collected from the new store to reimburse the developer for public improvements. These could include parking lots, lighting, utility work and stormwater detention, said Cape Girardeau City Manager Scott Meyer.

Because the city and county's biggest source of income is sales tax revenue, government officials are motivated to make sure sales tax revenue grows. That means they're often willing to offer breaks for infrastructure improvements to bigger retailers.

"We only see these deals like this when have major new entry into the market. It pays back the developer, but it's only for public infrastructure -- the things the public is using when visiting the new retail addition," Mehner said. "By doing that, the developer can pass along a certain amount of savings in a lease or purchase agreement so they are able to secure the deal."

In addition to Kohls, a similar development agreement was made for the development of Sears Grand, Mehner said.

There are several differences between the agreement for Academy Sports and the original agreement for Kohls, Meyer noted.

The initial agreement for Kohls infrastructure -- built by Drury -- included a 4 percent interest payback rate to the developer, who paid for the construction up front. There is no interest included in the proposed Academy agreement and the term is clearly defined, Meyer said.

"When we first started talking about Academy, I just wasn't comfortable adding to the debt with the interest rate that was on it that could have gone on and on," Meyer said. "I don't believe it's fair to ask for interest if you're using public money to pay it back."

Meyer said the taxes collected as part of this Academy agreement will go first toward paying off what the city and county owe Drury for the Kohls infrastructure projects to which interest applies.

"It's going to go there first and get that done. That's a positive. Once we get that off the books, then we have a no-interest part for the rest of it," Meyer said.

Another difference between the agreement for Kohls and this one proposed with Academy is the addition of a sales tax base, so that the agreement only applies to taxes on revenue over a designated amount.

"There needs to be a base out there, so that if all you are doing is coming in with a new entity and taking business away from existing businesses, you shouldn't get credit for that," Meyer said.

The proposed Academy agreement allows the city and county to keep all tax revenue on the first $2.5 million in sales from Academy. Only after meeting that threshold will the city will be required to pay the developer. City sales tax rates are broken up into several categories. After the initial $2.5 million, the developer, Drury, would receive:

* .25 percent of capital improvements water sales taxes collected from the store

* .25 percent of capital improvements and sewer sales taxes collected

* .50 percent of transportation sales taxes collected

The county would earmark 50 percent of its county sales tax collected, above the $2.5 million base, to repay Drury.

Meyer said a sales tax base was also used in the city's development agreement with Menards.

"They've stepped up and were willing to look at these things differently," Meyer said. "I said we just need to do business differently and they've done that."

A representative of Drury Development Corp. in St. Louis did not respond to requests for comment about the Academy Sports project.

mmiller@semissourian.com

388-3646

Pertinent address:

270 Shirley Drive, Cape Girardeau, Mo.

Map of pertinent addresses

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