CITY MANAGER UPDATE   |   MAY 5, 2009

City  Council  Authorizes Development Agreement Between  the City and Echo/Continental

by Virginia Barney, City Manager, City of UA

I am pleased to report another milestone in our community’s  long-awaited journey toward a revitalized Kingsdale Shopping Center.

At a Special City Council Meeting of Monday, May 4, City Council  adopted Ordinance #41-2009 authorizing me as City Manager to enter into a  Development Agreement with Echo/Continental and a Compensation Agreement with  the Upper Arlington Schools.  Per  the developer’s request, the legislation was adopted with an emergency clause,  providing the level of certainty Continental needs to complete its purchase of  the site and begin its work in earnest.

Part of Continental’s request to the City through the Development  Agreement includes City participation of approximately $5.3 million.  This investment will be used to  support the purchase of approximately five acres to facilitate office  development and public improvements.  The Development Agreement also spells out in great detail the  responsibilities and commitments from both the City and Echo/Continental,  mapping out how this project will occur over the course of several  years.

In order to fund this investment without taking away from other City  programs or projects, Tax Increment Financing (TIF) will be used.  The Schools were asked to partner with  the City through the Schools’ Compensation Agreement, which was approved by  the School Board on the morning of May 4.  Through this Agreement, the Schools  will not lose any of the property taxes it currently receives from the site,  but will forgo 25% of the increased property taxes due on the completed  project (while gaining 75%), until the TIF Program has been paid  off.

Throughout  the years, discussions with interested developers and consideration of various  proposals have always referenced the need for a level of public participation  to make any redevelopment a reality.  Reasons include the high value of the land and the higher costs  associated with redevelopment versus new development.  In addition, while the City would  realize a greater fiscal return from the construction of office space,  developers gain a higher return-on-investment from retail construction.  Therefore, City involvement is  required to help make the addition of office space at the site a reality –  essentially investing to obtain the difference in land and construction value  between office and retail. 

I am confident we have a good solution for Kingsdale and our  community.  Residents will benefit  from a revitalized shopping district that includes Giant Eagle’s  state-of-the-art Market District grocery store, new restaurants and gathering  spaces.  Using a TIF Program  enables the City to repay its debt through the expanded tax base that will  result from the improvements – and based on Contintental’s estimates, the  initial phase will add approximately $15.7 million in new construction,  generating over $400,000 in new property taxes.  And the City gains control of efforts  to achieve office space by purchasing land, with no debt incurred on this  purchase until the initial retail phase has been constructed in order to  generate the necessary TIF dollars to support this  step.