James Murphy, center, is a Nashville attorney representing Oak Ridge Mall redeveloper Crosland Southeast. Also pictured during a recent public hearing are Ray Evans, right, Oak Ridge economic development consultant; and Tim Sittema, a Crosland Southeast partner.
Note: This Nov. 14 e-mail from an attorney representing mall redeveloper Crosland Southeast was written in response to a nullification proposal submitted by Oak Ridge City Council member Trina Baughn to Anderson County officials.
I represent Crosland in connection with the proposed Economic Impact Plan for the Redevelopment of the Oak Ridge Mall Economic Development Area (the “Economic Impact Plan”). The Economic Impact Plan has been approved by the Industrial Development Board of the City of Oak Ridge (the “IDB”) and the City Council for the City of Oak Ridge, and it is on the agenda for the Nov. 18 meeting of the Board of Commissioners of Anderson County. I would like to respond to Ms. Baughn’s suggestion that the tax increment financing (“TIF”) funding for the redevelopment of the Oak Ridge Mall be nullified if at least 65 percent of the planned new retail square footage is not completed by December 2018.
As has been explained by Ray Evans in the meetings of the Anderson County Operations Committee and the Budget Committee, the proposed redevelopment of the Oak Ridge Mall requires a public-private partnership. After carefully reviewing the project’s pro forma, the city officials who have been involved in negotiating the incentives with Crosland were convinced that there was a funding gap of $13 million that could be bridged by the use of the TIF funding. Without that $13 million in TIF funding, the project would not go forward.
To obtain the $13 million in TIF funds, Crosland will have to find a lender willing to loan the $13 million to the IDB so that the funds will be available at the time that Crosland closes on the acquisition of the mall. That lender will have to be comfortable that the incremental increase in property tax revenues resulting from the redevelopment of the mall will be sufficient to pay the principal and interest on the $13 million TIF loan since the lender will have no recourse against the county, the city or the IDB, other than the amount of incremental property tax revenues received by the IDB. Therefore, Crosland will not be able to obtain a commitment from a lender to loan the $13 million to the IDB unless Crosland can convince the lender that there will be sufficient new development within the project to generate enough incremental property taxes to pay the principal and interest on the TIF loan. So there is no real risk that the lender will make the TIF loan to the IDB and then no significant retail development will be constructed.
Adding the proposed nullification language also makes the TIF loan impossible to finance as no lender will loan money that is to be paid back out of incremental tax revenues if the avaibility of those incremental tax revenues can be terminated before the loan is paid off. In addition, the potential tenants that Crosland seeks to attract to the redeveloped project want to be assured that the TIF funding needed to make the project possible will be available when Crosland is ready to close on the land. Having the possibility that the TIF funding will not be available due to the fact that no lender will make a loan where the payment stream could be eliminated before the loan is paid off will prevent Crosland from securing the commitments from the tenants who are needed to make the project a success.
James L. Murphy
Attorney
Bradley, Arant, Boult, Cummings LLP
Nashville
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