A plan to provide $161 million in public support for a new development on the site of the Crossroads Mall marks an unprecedented step for the City of Omaha.
In the past, the city has agreed to provide tax-increment financing deals for big projects, including Midtown Crossing, Aksarben Village and ConAgra's downtown campus. It routinely asks voters to approve bonds to fund street improvements and help build public facilities in newly expanded neighborhoods.
But the deal to help turn a dying mall into a sparkling new hub of stores, restaurants, office and residential space provides a new — and more significant — combination of public incentives.
A tentative deal released Thursday by Mayor Jean Stothert and signed by Crossroads Village developers Frank Krejci and Rod Yates offers a three-pronged approach for the city's contribution to the nearly $400 million project.
First, the City Council will be asked to approve a $50 million bond issue, which would be used to pay for streets, sidewalks and other public improvements around the development district, roughly between 72nd and 76th Streets and between Cass and Dodge Streets. If the plan gets the council's backing, it would be placed on the ballot for the May election.
Next, the council would weigh the approval of $53 million in tax-increment financing. That would allow additional property taxes generated by the development to help cover costs.
Finally, an additional $58million would come from an extra 1.95 percent sales tax that would be added to purchases made in the Crossroads Village district. The additional tax would be on top of the current 7 percent state and local sales tax rate paid in the city.
Krejci and Yates put together a similar plan with the City of Gretna for the Nebraska Crossing Outlets. That $112million project opened in November.
Council President Pete Festersen said the support from the city is crucial to the project's success.
“This is a once-in-a-lifetime opportunity to redevelop one of the most significant commercial properties in the city,” he said.
The $50 million bond issue would not require an increase in property taxes.
Festersen said taxpayers would not be left to carry the risk: Developers have agreed to maintain a reserve fund with a big enough balance to make bond payments, if necessary.
But the general obligation bonds would, ultimately, be the city's responsibility.
“We pledge the full faith and credit of the city,” City Attorney Paul Kratz said.
Kratz, however, is confident that sales tax revenues that will come from people spending money at Crossroads Village will be more than enough to cover bond payments. The city expects to get an additional $6 million annually in sales tax revenue, and bond payments will be about $4million per year.
If those estimates fall short and the city is forced to dip into the reserve fund, the developer is required to replenish it, Kratz said.
The bond issue will be introduced at Tuesday's council meeting, and a public hearing is scheduled for Feb. 11. The council will vote on the matter two weeks later.
Councilwoman Aimee Melton said she likes the developers' plans but wants to do more research on the city's potential risk before she is ready to cast her vote.
“I've very excited about the development, but I don't want to jump into something that sounds good without evaluating all the potential repercussions,” she said.
Other council members said they believe that the new jobs, public improvements and expected spike in sales tax revenues make the deal a solid investment. Councilman Chris Jerram said he's glad voters will get a chance to weigh in on the process.
“The best part about it is that the people of Omaha can decide the fate of the Crossroads development,” he said.
Councilman Franklin Thompson said he's had concerns in the past about using TIF as an incentive for development. But he likes the idea of such a big improvement at such a high-traffic spot — and the idea that it could come with other bonuses, such as a new library.
Current plans for the project call for a 45,000-square-foot branch library, but the details are still unclear.
Gary Wasdin, executive director of the Omaha Public Library, said the library would require funding that isn't included in current development plans. At the current configuration, it would be the largest branch library in Omaha, and Wasdin expects that it would get heavy traffic.
He said there's a growing trend of locating new libraries alongside popular destinations like malls.
“Cities that have done this usually find this ends up being their busiest library,” he said.
If the library stays in the Crossroads plan, Wasdin said, officials will probably need to come up with funding ideas within the next six to eight months.
The $50 million bond issue would join a larger bond package that's already headed to the ballot. In May, Omaha voters will also consider a $92million bond package for street and park improvements, sewer projects, public facilities and public safety expenses.
Thompson said he expects that voters will support the bonds, even as the total expense climbs with the Crossroads addition.
“My gut feeling is that the public will see the greater good,” he said. “During a time when people are tired of bonds and taxes, I think Omahans are sophisticated enough to know the difference between those expenses that are frivolous and those that are investments that have a long-term payoff.”
Highlights of plan, by the numbers
2 Crossroads buildings will remain — Target and a parking garage
2-acre public park. Retail shops and residential space above the storefronts would overlook the urban park.
135-room boutique hotel
400 “luxury loft” residential units
45,000 square feet of “digital, next generation” library space
How Crossroads Village would compare
Crossroads Village — 400,000 square feet of retail shops, department stores and restaurants, 300,000 square feet of office space, 400 residential units, 135 hotel rooms. Public spaces, including a digital library and two-acre park. Estimated cost: $397million. Scheduled opening: June 2016.
Midtown Crossing — 222,000 square feet of retail and entertainment space and 500 residences, plus 132 hotel rooms. Overlooks Omaha's Turner Park. Cost: $365 million. Opened in 2010.
Aksarben Village — 280,000 square feet of retail, service and entertainment and 660,000 square feet of office space, plus 600 residential units and 135 hotel rooms. Projections for 2015: 400,000 square feet of total retail, 1 million square feet of offices and 385 hotel rooms. Cost of redevelopment announced initially was $166 million, but the project's scope has grown and a $50 million Waitt Plaza that would add retail, restaurant and office tenants was announced in December. That project was described as bringing total spending on the former horse-racing property (Aksarben Village, University of Nebraska at Omaha's south campus and corporate offices) to about $650 million. Phase one of Aksarben Village opened in 2008.
Other recently developed open-air malls in the metro area that do not have office and residential components — Nebraska Crossing Outlets in Gretna, 350,000 square feet, $112 million, opened in November; Shadow Lake in Papillion, 880,000 square feet and a cost of nearly $100 million at the time of the 2007 opening; Village Pointe, 650,000 square feet, cost reported as $124 million in 2002, opened in 2004.
Sources: World-Herald archives, developers and commercial brokers