New details emerge about retail complex

By DAN KEGLEY/Staff

Smyth and Marion officials informally agreed Thursday to create a Community Development Authority after a public hearing that brought rare glimpses into plans for the $40 million, 400,000-square-foot Smyth Crossings south of the Interstate 81 Exit 47 interchange.
The county supervisors and Marion Town Council agreed by consensus after the hearing, but without a formal vote that must wait 30 days, to continue establishing the CDA that for the western half of Virginia region is a new and creative financing plan to pay for infrastructure related to commercial development.
Cities in eastern Virginia localities have used CDAs almost since the General Assembly five years ago opened the legal door to the authorities within the Commonwealth. Virginia Business listed 19 in its March issue, all in the Tidewater region.
The Smyth Crossings CDA will be the first west of Charottesville, said Jeff Mitchell of Leclair Ryan, a law firm specializing in corporate law.
CDAs are public-private economic development tools for financing construction of public infrastructure like roads and water lines. The extensive overhaul of the Interstate 81 Exit 47 interchange needed to handle traffic at the proposed shopping center sent Smyth County and Marion into this relatively new frontier of economic development.
A CDA is a bit like the more familiar IDA, or industrial development authority, that carries out for a locality the transactions involved in ushering industries in and helping them get set up to go to work. But where one IDA does its work anywhere within the political boundaries of the locality, a CDA handles infrastructure development on a narrower, case-by-case basis for a specific geographic area.
For a CDA to work, the development for which it is created must be able to generate enough money to pay off the construction debt. A portion of that new money, the tax revenues created by an up-and-running retail development, would be used to pay the debt.
There’s a bit of courtship involved in setting up a CDA. At least 51 percent of landowners involved in a development, like the new retail center proposed for Marion, must petition the locality to set up a CDA. The developers have been in negotiations with current landowners Karl Kalber, J. Burton Eller Jr., Judith Showker and Robert and Patricia Ann Dix, according to the planning commission.
But before the locality can entertain petitions, it has to pass a kind of enabling ordinance that says it will accept, although not necessarily act on, petitions.
Last spring, Marion and the county adopted ordinances saying they are amenable to receiving petitions for CDAs. Those petitions have been received, and Thursday’s hearing on a resolution to create the Smyth Crossings CDA, set its physical boundaries, adopt articles of its incorporation, appoint members of its board, and plan the issuance of bonds.
That last item is a point of concern for those new to the CDA concept, but a point of security for established proponents. The debt incurred in infrastructure development is owned by the CDA, not by the localities. As Rob Walker wrote in Virginia Business, “An advantage for tax-conscious local governments is that the developer bears the ultimate risk of repayment, not the locality. The real estate is the CDA’s collateral.”
The key is that the infrastructure financed through the CDA– roads, waterlines, sewer lines and other features – must benefit the community at large.
“It has to be for the good of the public that uses it,” County Attorney John Tate said. “You can’t build Wal-Mart’s parking lot, but you can build the road to it.”
Wal-Mart has been one of the big names bandied about since talk of a development at Exit 47 began. On Thursday, John Politis of Apollo Realty said Wal-Mart is committed to building in the Smyth Crossings.
Until Wal-Mart closes on its deal to locate in Smyth Crossings, Lowe’s Home Improvement won’t ink an agreement, although Politis said Lowe’s has issued a letter of intent to build there.
“Their criteria is to have Wal-Mart closed on the land and construction under way” before finalizing negotiations, Politis said.
Lowe’s and Wal-Mart, and those smaller stores Politis noted as companions to Wal-Mart wherever it goes, are currently Smyth Crossings’ best bets. Other companies considering a Smyth Crossings location are adopting wait-and-see stances. A county official has said privately in the past that the economic climate in the United States has cooled the new construction plans of many national restaurant chains.
Mitchell echoed that idea Thursday. “In this market there’s a lot of fluid activity. Some folks pulled back for reasons that have nothing to do with Smyth County, but with conditions nationwide.”
“There’s no guarantee on any of this except Wal-Mart,” supervisor Marvin Perry said.
Politis said “strong interest” exists among other parties waiting for Wal-Mart to close. And there are contingency plans, such as a fallback scenario to negotiate with Home Depot, then 84 Lumber, if Lowe’s walks away from the table.
Likewise, while negotiations are on with TJ Maxx for a planned small-box space, Goody’s and Marshall’s are other companies in waiting.
Talks are also ongoing with Hampton Inn for a five-floor hotel at the rear of the property, highly visible to Interstate 81 travelers, Politis said.
The “fluid activity” of corporations changing their minds means revenue projections that are crucial to the CDA’s moving of bonds to the market are likewise fluid.
In the meantime, according to County Administrator Ed Whitmore, examining revenue figures from Wal-Marts in communities similar to Marion and Smyth County is one way to project that retailer’s revenue here.
“We don’t know who the restaurants are,” Whitmore said. “But they all have national averages. The closer to the end we get, the firmer the numbers will be. We’ll have to have firm numbers. But it’s all what-if right now.”
During the hearing, former county planning commission member Earl McClure said he supported “anything that promotes growth.” But he cautioned the supervisors and council members to “protect the county” by restricting the issuance of bonds to preclude county citizens becoming responsible for them if the retail center fails.
Tate said the debts will not be “against the county, but against the properties encompassed by the CDA.” He said people are “always concerned” about IDA negotiations, but “as a legal matter the county is not responsible for those bonds. It’s the same way with this.”
Marion businessman Joe Ellis questioned whether Wal-Mart revenues at Smyth Crossings could be considered new money, the key ingredient in the development’s paying off its own construction debt, since a Wal-Mart is already in the community.
He also said he was concerned about revenue projections for Lowe’s that has stores in Bristol and Wytheville. He said customers won’t come from those communities to shop in Marion, especially with $4 a gallon gasoline, and the Wytheville store appears to have low customer numbers. He said his son likes to go to the Wytheville Lowe’s to roll down uncrowded aisles “for 50 yards” on his wheeled sneakers.
“It’s a great question,” Mitchell said. “All assumptions will be tested again and again and again before the first bonds are sold.”
Testing those assumptions and looking at every minute detail of the CDA will be the job of its five-member board, who members are tentatively set to receive $300 per meeting.
Perry supported that figure in light of the responsibility the board members will bear.
Supervisor Charlie Clark said under consideration for CDA board seats are Jim Gates, Hal Campbell, Bob Shultz, Danny Counts and Ron Thomason.
Whoever is on the board, they will face a long and arduous task in setting up, then running, the CDA that Mitchell said will exist “until the debt is repaid.”
But the county and town are off to a good start, according to Mitchell, who said the leadership they are showing will be seen as encouraging by the bond market when the CDA reaches that step.