What Does Elk Grove Have in Common With Detroit?

Detroit's Gateway Marketplace shopping center. On the surface, the two cities have very little in common - with the exception of dea...

Detroit's Gateway Marketplace shopping center.
On the surface, the two cities have very little in common - with the exception of dealing with a company from Chicago.

Regular readers of this site will immediately recognize that company being General Growth Properties (GGP) of Chicago. Elk Grove agreed to allow General Growth Properties to develop what was originally supposed to be a regional enclosed fashion mall that quickly devolved into an overgrown strip mall.

Now the overgrown strip mall sits half-built on our cities south side since construction abruptly stopped four years ago just prior to GGP's Chapter 11 Bankruptcy filing. Since that filing the Howard Hughes Company (HHC) has taken ownership of the uncompleted mall and still it sits there rotting away.

But if misery loves company, Elk Grove was not the only city caught in GGP's overly-ambitious and highly leveraged growth strategy. Detroit was also subjected to GGP's shenanigans.

Detroit, whose problems are well documented, was promised a new development 10 years ago by GGP. While another strip center is hardly monumental news for most communities, it is for Detroit which until just recently had no chain grocery stores within its city limits.

In July 2008, the same month construction on the Elk Grove Promenade abruptly halted, GGP pulled out of Detroit's Gateway Marketplace. At the same time, one of the anchor tenants, J.C. Penney pulled out of the Gateway project.

Sound familiar?

But there are a couple of differences between the Elk Grove Promenade and Motown's Gateway. While construction of the Promenade actually started, GGP never broke ground in Detroit.

Another key difference is that while the Promenade sits on the Elk Grove's south side like a festering wound, Gateway has a new developer that is actually developing, has a 85 percent lease commitment and some solid financing backing it. So important is this development to Detroit that the Gov. Rick Snyder attended the recent ground breaking ceremony.

There is also one other major difference between the current status of HHC's Promenade and the Gateway that could be perilous for Elk Grove - financing. According to published report in Crain's Detroit Business "the development received a series of tax credits from the city and federal government, including a $12 million federal New Markets Tax Credit, $10.75 million in tax incentives from the city of Detroit and a $5.9 million brownfield credit." The city's public employee pension also contributed $28.6 million.

As we heard last week, HHC has recently met with at least three of our city council members and very little new or positive information was conveyed.

Is it possible HHC has seen the city's willingness to give millions of taxpayers dollars to attract a government agency to relocate their offices and is holding out until it can get some incentives in the form of cash grants or long-term property taxes deferrals?

If the semi-parallel life's of the Detroit Gateway Marketplace and the Promenade hold any lessons, it shouldn't come as any surprise if the taxpayers of Elk Grove will be asked to foot the bill in some form or fashion to get the shopping center completed.

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Colonel Walter E. Kurtz said...

HHC can tell when a city is desperate and has established a track record of throwing taxpayer's money around like drunken sailors to entice developers to build. Don't think HHC won't move in for the kill here and of course, our leaders will take credit and put a positive spin to it.

As a side note, the only reason the upcoming budget is maintaining its reserve is because according to the staff report, employees bit the bullet on retirement contributions, overall cuts to department budgets, and the slowing down of replacing vacant positions (This report of course, ignored the $1.5 million budget of the City Attorney's office, about a 25% increase over the last full year when they had a city employee serving as city attorney).

So, the $200,000 budgeted next fiscal year for economic development incentives might pay for some plane tickets and steak dinners in Texas, but to land the big HHC "spruce goose", they will be going back into the reserves. Then throw in a few ballfileds and aquatic center, and boy are we in for an interesting year!

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