The Olathe News - June 2, 2005

119th Street Retail Center Agreement Reached
By Dan J. Smith

Construction of Olathe's $270 million retail and hotel complex near 119th Street and Interstate 35 could start within days, city and project officials said Wednesday. John Petersen, the point man with developer RTR, said a deal reached late Tuesday with the Olathe City Council culminates years of negotiations and allows his team to use revenue from two tax incentive mechanisms to build and market the upscale shopping center that could include a Bass Pro Shops store. The 105-acre development could be developed in two years, according to previous agreements between the parties. The latest deal came Tuesday, with the council agreeing to cede sales tax revenue of up to 20 percent of the overall project cost, $55 million, to help the development group pay for construction. "We came out with the understanding that that percentage represented extraordinary costs over and above what you see in a typical development," Petersen said. "Those include extensive road improvements and other components that are done to attract retailers to come to the site."The city stands to gain $18 million in public transportation improvements directly and indirectly related to the 119th Street corridor, Petersen said, and land worth an estimated $6 million will be donated to the city to build a hotel and conference center. "The council feels that it has placed the city in the best possible position, while keeping the project viable," said Tim Danneberg, a spokesman for the city. At one point, the project included plans for a minor-league sports arena. The scope changed most recently in March, when the arena was replaced with plans for the hotel. All along, city and project officials have envisioned a Bass Pro Shops store as the centerpiece of the entire development. Officials on Wednesday continued to refer to what could become Bass Pro as a "lead destination retailer," the term state commerce officials coined in determining whether the project qualified for another form of financing. No timeline was given for an announcement on the retailer, but Petersen said he had spoken with representatives from the business and negotiations were progressing. "That's probably a logical step and what we're focusing on now," he said. "I don't anticipate any hurdles with our lead retailer. Everybody's excited, and we're going to be in a position soon to let them speak for themselves." Ground could be broken before the end of next week. Razing a former McCray Lumber building at 2210 E. Kansas City Road could mark the beginning of physical work at the site. "We're getting into construction now, and we anticipate seeing the abandoned lumber yard building come down literally within days," Petersen said.

Incentives
Work at the center will be split into two phases to facilitate the sale of financing bonds to pay for the project. Olathe will allow the developer to use all sales tax revenue generated by the first phase, which includes the lead retailer, to pay off initial bonds for up to 22 years. In the second phase, half of all sales tax revenue will go for the same purpose, and half will go to the city. No revenue from the voter-approved Olathe parks sales tax or countywide retailers sales tax will be used for the project. Petersen estimated the city could reap $500,000 in new sales tax revenue the first year after the second phase begins.The center could produce $250 million in annual sales once completed, Danneberg said. After the bonds are repaid, the city stands to receive $2.3 million in sales tax revenue.

STAR bonds
Petersen hasn't discounted state participation in the project, though the new deal includes no mention of it."This financing plan that we've worked through with the city I would call an alternative plan of financing," Petersen said. Olathe was granted conditional approval to use $50 million in state-approved sales tax and revenue (STAR) bonds to finance a previous version of the project. The city and developer went to work developing a plan without state aid, however, after broken deals with some tenants kept state officials from signing off on the mechanism. "STAR bonds would enable us to bring some public facilities, like the hotel, much sooner," Petersen said. "The truth of the matter is all of the hard work that's been done by the development group and in Olathe only benefits the state in the amount of new sales tax that it would generate." Petersen said the development group will continue to pursue STAR bonds and may have a better chance once tenants are announced, though the project can proceed without them. "The state wanted to see a bit more retail that would fit at least into what their vision of what STAR bonds were designed to attract," Petersen said. "The state should give a hard look at this project for STAR bonds because that would enable us to do even more."