It’s been more than a year since the announcement of a project to rejuvenate the defunct outlet mall in Warrenton. This year has brought signs of new life at the rebranded Shoppes at Warrenton mall, with several businesses opening doors there in the spring and summer.

Most recently, officials confirmed a Rural King farm and home store would be built from the ground up next to the existing mall structure. That marks a step toward fulfilling one of the major promises of the mall redevelopment project.

But the means used to fund that project, and the relationship between the city of Warrenton and the developer, RAK Development, can be a bit confusing.

A story published in October incorrectly stated the city pays for the redevelopment. That’s not true.

City officials have previously said RAK Development is supplying all the money up front to redevelop the mall, not the city.

However, the city of Warrenton will help reimburse some of that cost. The city and the developer have an agreement to use a process called “tax increment financing,” aka TIF, to help pay for the project.

The state law outlining the TIF process has complicated details, but the basic description is fairly simple:

1.) The developer spends money to rehabilitate the mall.

2.) New retail businesses move into the mall, generating new sales tax revenue.

3.) The value of mall property as a whole goes up, increasing real estate tax revenue.

4.) The influx of new tax revenue from the mall is used to repay a portion of the development costs. So when a shopper or restaurant customer pays sales tax at the mall, part of that tax will be used to reimburse the mall developer. 

Only tax money generated at the mall is used to pay for the project. Taxes collected from other businesses around the city will not be used to reimburse the developer.

The TIF agreement doesn’t include any increase in the actual sales tax rate. It only states that tax revenue from the mall will help pay for the redevelopment.

However, there is a mechanism available that would allow for businesses at the mall to collect an extra 1 percent sales tax to help pay for the project. That’s according to public finance attorney Mark Grimm, who advises the city.

That extra sales tax would be limited to businesses within the mall development project, Grimm said. It would also require an additional agreement between the city of Warrenton and RAK Development, which does not currently exist.

Businesses outside the mall would not be subject to that extra 1 percent sales tax, if such a tax were to be approved.

The TIF deal

Up to the beginning of 2017, Warrenton had a mall that was nearly empty of businesses. Relatively low property value and little to no sales meant the mall was generating relatively little tax revenue from property tax and sales tax.

By helping reinvigorate the mall, city officials hope to create a win-win situation. The mall can once again be a successful economic center, and Warrenton can get a renewed source of tax revenue that could last after the city’s part of the project has been paid.

Grimm said RAK Development doesn’t receive any money from the city until it completes its part of the agreement.

“TIF revenues . . . are generated only when a project is completed and occupied. Thus there is no immediate pot of money for the developer,” Grimm said. “Rather, the developer must finance the project through debt and equity, then get reimbursed from TIF revenues if and when generated.”

The predicted cost of the redevelopment project is $25 million, according to the city’s agreement with RAK Development. Warrenton has agreed to reimburse a maximum of $6 million in TIF funding to the developer, which can be paid out over several years. 

The developer will have to meet several major requirements to receive the full reimbursement. Bringing in Rural King will satisfy part of those requirements.

However, to collect any TIF reimbursement at all, RAK Development must show it incurred project expenses that fall within a list of “eligible costs.” Documentation of those costs must be reviewed and approved by city staff before any money is paid out of the collected TIF revenue.

TIF dispute

One more complicating factor: The city of Warrenton isn’t the only governmental body that collects taxes from the mall. Warren County and several emergency service agencies also collect revenue from that property.

Those agencies also contribute TIF revenue in the same way the city does. All the money is collected by the city and placed in one special fund for reimbursing the development project.

This has led to a legal dispute between the city of Warrenton and the Warren County Emergency Services Board, which oversees the county 911 dispatch center. The board declined to pay two TIF invoices sent by the city in September and October.

In response, Warrenton has filed a lawsuit, seeking a court order that would force the board to pay its portion of the TIF collection.

A Rural King location to be built in Warrenton is a major focus of a deal between the city and mall developer RAK Development. Sealing the deal with the farm and home store would unlock access to millions for reimbursing development costs at the mall in Warrenton. Record photo.