Chattanooga: Mall owners seek new tax to help expand mall

The owners of Hamilton Place mall want shoppers to help to pay for a proposed $100 million expansion of the complex through a new tax that would be charged at six of the company’s East Brainerd shopping centers.

“We’ve been looking for the next step in what we were going to do to take Hamilton Place to the next level,” said Michael Lebovitz, senior vice president of development for Chattanooga’s CBL & Associates Properties Inc., the mall’s owner.

The business privilege tax, similar to a sales tax, would pay for two parking garages, sidewalks, lighting, stormwater drainage and other work, said Mike Mallen, CBL’s public finance adviser.

To pay for the expansion, CBL proposes an additional half-percent to 1 percent fee added to any purchase made at the mall or at five other CBL centers within a one-mile radius of Hamilton Place, company officials said. The other locations are Gunbarrel Pointe, Hamilton Corner, Hamilton Crossing, The Shoppes at Hamilton Place and The Terrace.

Tennessee and Chattanooga sales tax is 9.25 percent. The new fee would be added to that and last for at least 20 years then expire, Mr. Mallen said.

CBL officials said they expect legislation to be filed in the Tennessee General Assembly this week to create a new state statute to allow the fee’s collection, Mr. Mallen said.

Once the measure passes the legislature, it would require approval by two-thirds of the Chattanooga City Council, Mr. Mallen said.

Sen. Bo Watson, R-Hixson, will sponsor the legislation with Rep. Gerald McCormick, R-Chattanooga.

“It’s creative financing that probably will allow for the development improvements to the East Brainerd area that otherwise would not occur,” Sen. Watson said.

Construction could start at the end of 2009, Mr. Lebovitz said. The new sales tax, which is forecast to collect about $10 million, is expected to pay for infrastructure.

CBL would pay for the remainder of the project, which will include 20 to 30 high-end retail shops in a so-called lifestyle center, a hotel and an interior renovation of the mall, Mr. Lebovitz said. CBL has not named any stores planned for the expansion, but Mr. Lebovitz said they would be similar to J. Crew, Williams-Sonoma and the Apple Store.

CBL officials said the expansion would generate an additional $1 million in property tax revenue, $4 million in sales tax revenue and add 300 jobs.

Similar projects

CBL has used similar public-private partnerships to finance developments in Kansas, Missouri and Florida, John Foy, CBL’s chief financial officer, said during a meeting with reporters and editors of the Times Free Press.

Although the legislature adjourns in about three weeks, Mr. Lebovitz said he expects the bill to be approved.

Mr. Watson, though, said he is concerned about the timing.

“I’m not sure we have the time on the clock to get all the pieces in place to get this through,” he said.

Earlier this month, CBL hired a five-member platoon of lobbyists from Miller & Martin law firm to push the bill, according to Tennessee Ethics Commission records. The lobbyists are Mark Smith, Dan Elrod, Holly McDaniel, Mandy Young and Dale Allen.

CBL’s tax proposal has received favorable support from some local politicians.

“The city has no reason to delay it,” said Chattanooga Mayor Ron Littlefield. “We want the mall to be updated as soon as possible.”

In addition to the new fee, CBL has considered borrowing funds through the Chattanooga Industrial Development Board, Mr. Littlefield said.

Chattanooga City Council Member Jack Benson, who represents the Hamilton Place mall area, praised CBL’s plans and predicted the new development should help raise property values and generate more tax revenue for the city.

“I think this will be great because we will have more people coming to shop in Chattanooga, rather than driving to Atlanta or Nashville for some upscale shops,” he said. “The (half-percent higher sales tax rate) is a reasonable fee and isn’t going to stop people from shopping at Hamilton Place. If you go downtown or other places where you have to pay to park, you’ll pay more than this fee just to feed a meter or pay a parking lot attendant.”

New parking

If the construction takes place, one parking garage would be built in front of the Hamilton Place food-court entrance, attached to stores and a hotel, according to CBL’s site plan. Additional retail buildings would be adjacent to the garage, facing the original Dillard’s store, the site plan shows. A second garage could be built in front of the original Dillard’s.

CBL now is building a site for a new Barnes & Noble at the food court entrance, with a scheduled opening this fall. The current Barnes & Noble, located at The Terrace, will be converted into shoe store DSW and Ulta, a salon and cosmetics store.

Mall shopper Hugh Hannah said Monday that he and his family would have no choice but to pay the user fee but would welcome Hamilton Place’s renovations.

“We’d like that,” he said. “We’re glad to see changes come.”

Another shopper, Gail Turner, said new parking garages would help the shopping experience, especially at Christmas.

A store owner, however, said the user fee would be a burden on his family’s businesses.

“I don’t like that idea personally,” said Brian Shartle, whose family owns The Grapevine, The Grapevine-Vera Bradley and Pretzel Time in Hamilton Place. “We’re already paying for utilities and common-area maintenance.”

The Grapevine, which sells Life Is Good clothing, is tucked away near J.C. Penney, away from foot traffic, he said. A number of stores have closed at the mall or are being renovated, he said, which hurts business, on top of rising gas prices and the slow economy.

Staff Writer Dave Flessner contributed to this story.