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Shopping Center Developers Apply for Bonds Under New Government Program

Sept. 3, 2008 — The developers of Island Crossing Shopping Center, a planned 250,000-square-foot shopping mall anchored by Home Depot, are applying to be the first beneficiary of millions of dollars of V.I. government largesse under a new economic-development law called Tax Incremental Financing.
Caribbean Development Partners, the V.I. company developing the shopping center in Barren Spot, is a partnership of several individuals from large stateside capital investment firms, including James River Capital, Stern Brothers Real Estate Finance and Boston Capital.
According to its application for the TIF, CDP was incorporated in the territory in September 2006 and has purchased 44 acres in Barren Spot for $2.13 million, financed by a bank loan. It has commitments from Home Depot and several other businesses to come and build their own stores on slabs prepared by CDP. The partners will provide utilities, grading, drainage and other infrastructure. CDP's filing estimates that preparing the site will cost $14.8 million. CDP is asking for an undetermined amount in government bonds under the TIF program to help finance the cost of the development.
The amount is still under negotiation, and financial information in the application is not current, according to staff at the Economic Development Authority offices in Frederiksted. CDP's application refers to $25.4 million in TIF funding. An attorney present at a public meeting of the EDA on the request in August said $17 million was discussed. CDP's application estimates $38 million in investment from the mall's tenants and a total financial outlay of around $71 million in both private and public funds.
TIF is a funding used in nearly every state and territory to boost development in economically under-served areas. It gives private developers public money to help defray their costs, paying for it by pledging projected future gains in tax revenues from the current improvements that will create those future gains. Under the V.I. TIF law enacted June 10, a developer coming in with a project idea first submits development plans to the Economic Development Authority and goes through a public review and hearing process.
The EDA, the Legislature and the Public Finance Authority must all approve the application. The PFA then floats bonds and pledges anticipated increased gross receipts and property taxes to pay for it. The funds are meant to help with associated infrastructure costs, such as roads, sidewalks and utility lines. (See "Governor Approves Economic-Development Proposal, Trims Appropriations.")
As the theory goes, if the public funding makes a project feasible that would otherwise not happen, the increased tax revenues it will bring in can justify and over time actually finance the upfront public expense, bootstrapping economic development. Critics in other jurisdictions using TIF argue it must be guarded against abuse by giving public money to private projects that would have happened anyway, enriching the well-connected at the expense of taxpayers.
There was a public meeting held on August 22, which will continue Sept. 10 at 7:30 p.m. in the Port Authority conference room at Henry Rohlsen Airport.
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