How Noblesville is seeking to advance development in Hamilton Town Center
Noblesville is looking to preserve its investment and improve economic development within the city by using a unique funding scenario at Hamilton Town Center. The Noblesville Common Council has agreed to pay $1.6 million of the more than $2 million rehabilitation and construction costs to help Simon Property Group transform the former Borders bookstore location for a new tenant.
“We’re making an investment to preserve our investment,” Common Council President Greg O’Connor said. “The cost to us is fairly low.”
For the next eight years, the city will pay $225,000 a year plus 2 percent interest for the $1.6 million bond.
“It’s weird times,” explained City Attorney Mike Howard. “We’ve never done anything exactly like this.”
Howard said the city has entered developer agreements in the past – citing the Stony Creek development along Ind. 37.
“We borrowed about $6 million to put in roads, sewage. We had developer’s agreements with Meijer, Lowe’s, Duke Development and Kite Development,” he said, adding each wrote a check semiannually helping to pay the debt on infrastructure. “It was a win-win. With developments, the first guy in can’t pay for everything.”
When Hamilton Town Center was being built in 2006, the city installed $19 million of infrastructure – roads, sewage and drainage. Howard said the debt service on the infrastructure is $1.5 million and the city generates $2.4 million on tax revenue each year.
“We’re in the black $900,000 a year on that project,” said Howard. “It’s very, very good.”
In exchange for the city’s financial commitment, Simon Property Group has agreed to an annual guaranteed tax increment financing of $2,460,906 – the amount paid last year.
“Essentially, instead of banking on future increases with retail, our goal was to create a basement so existing revenue didn’t go down,” Howard said.
To match the city’s bond, Simon Property Group’s annual guaranteed TIF shall be for a period of eight years beginning with taxes payable in 2012. The agreement shall be reduced to seven years if the total tax increment after March 1 exceeds the annual guaranteed TIF by at least $200,000 during the first seven years. It can be further reduced if the amount exceeds the annual guaranteed TIF by at least $400,000 during the first six years.
“The annual guaranteed TIF shall be used by the city to pay the debt service on the bonds,” said Howard. “It’s $200,000 of taxes they’re paying anyway.”
Simon Property Group also agrees to waive its rights to appeal the assessed value of Hamilton Town Center’s real estate. This is especially important to the city as Howard said appealing and tax codes have changed. The city has already lost assessed value when a store in Stony Creek area had appealed and became retroactive six years with a discounted assessed value of $455,000.
“It’s a conundrum with the economy and alternative evaluating methods. It really makes it tough,” Howard said.
While the chances of Simon Property Group folding during the term of the agreement are slim, language has been written into the contract protecting the city’s investment. Howard said Noblesville has a tax lien on the property, and if something happened, the city has the same priority of taxes, ahead of banks, to recoup its funds.
“We’re secured to the greatest extent possible,” he said.
Bill Hammer, vice president of Simon Property Group, said Hamilton Town Center was one of the last new centers built “before the world stopped in 2008 in the retail business.” Hammer said only one or two other centers have opened in the nation since then.
“Hamilton Town Center is a successful project. Borders was very successful there, but as a chain, it ran into problems nationwide. It was not a reflection on Hamilton Town Center,” said Hammer. “We are working hard to find a replacement.”
Hammer said an announcement of the new business could come shortly, but declined to comment on the name. It is known the new business is a retail store. Part of the agreement specifies to land the new business, Simon Property Group will charge half the lease costs per square foot Borders was paying.
“It helps all of our smaller accounts,” he said. “It’s important to replace that tenant.”
Why should the city help Simon Property Group, which is ranked No. 1 in the U.S. as the largest real estate investment trust? City officials said the new business will stimulate economic development at Hamilton Town Center by retaining existing businesses and attracting additional businesses.
“It’s just really important to keep Hamilton Town Center vibrant. It brings a lot of increment to the city,” said Economic Development Director Judi Johnson. “Hamilton Town Center is on the map for drawing people.”
“We started seeing what was happening in retail,” added Howard. “We don’t know how long the Borders space will be vacant.”
When large anchor stores leave, it begins a domino effect, which causes assessed value to drop.
“We’re trying to prevent hard times. It is a different world,” Howard said.
An example of the effects of an anchor leaving and destroying assessed value can be found here in Hamilton County. City officials cited 116th Street in Carmel near Keystone Avenue and Range Line Road, where Hobby Lobby left the strip mall.
“Vacancies beget vacancies,” Howard said. “Rabbits and bean fields do not pay a lot of taxes.”
In addition to the amenities Hamilton Town Center provides, it also generates 3,000 jobs in Noblesville.
“We made a significant investment out in the area and brought an amenity to the city that wasn’t there then,” said O’Connor. “We don’t need to be in a position where our assessed value is deteriorating. The amenity is too important to the community and a very important asset to the city.”