Tax incentives for Okatie Crossings questioned

Competitor says Lowcountry mall will not really be high-end retail

rburris@thestate.comDecember 13, 2009 

  • About Jasper County

    Population: 22,300

    Unemployment: 11.4 percent

    Median household income: $36,522

    People living below poverty: 20.8 percent

    High school graduates: 65 percent

    College graduates: 8 percent

    Population: 49 percent white, 48 percent black

    SOURCE: U.S. Census Bureau

    Luring Okatie Crossings

    Details of the incentive bill in the General Assembly for a proposed $400 million retail complex in Jasper County:

    - Officials say the project could produce up to 2,500 jobs. The incentive plans would make developers eligible for more than $70 million in state money to help offset infrastructure costs. Some estimates say the incentive could reach $100 million.

    - Developers project Okatie Crossings could generate $11.6 million in tax revenue annually for the state. This is what the state would get after developers are awarded incentives.

    - The incentives won't activate until developers have spent $100 million and created 1,000 jobs. Additionally, the development must maintain at least 500 jobs at all times to continue to receive incentives, which are paid annually. If employment falls below 500 jobs in any year, then Okatie Crossings would be ineligible for incentives that year.

    - The incentives sunset after five years.

New criticism of a proposed $400 million upscale outlet mall in Jasper County has surfaced that says the mall, which is poised to get $100 million in tax breaks, is a sham.

Pittsburgh-based Costa Land Co., which owns Hilton Head Villages in Bluffton, says the new mall's developers have no intentions of putting up a high-end retail center off Interstate 95.

Costa contends Atlanta-based The Sembler Co. plans to build a huge discount mall on the 262-acre land strip it acquired near Hilton Head Island's upscale retirement residential hub, Sun City.

That charge by Costa, denied by Sembler, has the attention of lawmakers who are considering giving Sembler a 75 percent break on a portion of the state's sales tax.

Sembler representatives have told the General Assembly it would build an outdoor "destination mall" unlike others within hundreds of miles of South Carolina's Lowcountry. Lawmakers are poised to provide incentives if Sembler can deliver such a regional draw that would also create more than 2,000 jobs in one of the state's poorest counties.

The manicured complex is supposed to include a mix of upscale retailers such as Ferragamo and Neiman-Marcus, complemented by more commonplace retailers such as Target and Lowe's, which are more readily found in malls across the region and the country.

"They (Costa) have no knowledge of our luxury center," said Jeff Fuqua, president of The Sembler Co.'s development division. "This is top-secret information."

At issue is whether Sembler should get a 3 percent sales tax break to help defray infrastructure costs - water, sewer and the like - for the development.

The House easily approved the tax break, and the measure got Senate support, making its way as far as a joint House-Senate conference committee in June, where it stalled.

Costa points to a schematic drawing it obtained of the proposed 1.6 million-square-foot development, which appears to be a Sembler document but shows no upscale retailers such as Ferragamo or Gucci listed in the complex.

"Okatie Crossings is scheduled to be a discount shopping complex, and in no way, shape or form an upscale center," said Samantha Hirshberg, Costa's operations vice president. "It would cater to discount-savvy and thrift-conscious shoppers who are looking for a great value."

Costa also says Sembler openly has courted a couple of its Hilton Head Villages tenants - Marshall's and Bed, Bath and Beyond - to open new stores in the proposed Okatie Crossings development, which it claims would harm their businesses.

Sembler, considered to be one of the top retail developers in the country, has refuted the claims as competitive dart-throwing.

"The luxury center is the marquee element of the whole project," Fuqua said. "We are building two kinds of shopping malls here, and I can't be sure this has been done anywhere else in the United States."

The 1.1 million-square-foot outer ring of the development will feature 100 to 200 "best of class, category killers," Fuqua said -- bookstores, office suppliers, sporting goods, electronics and other retailers that chose to associate with mall developments.

That space also includes 15 to 20 top restaurants.

"There will be a luxury outlet center in the middle - high-end, American and Italian label retailers" that will anchor the development, Fuqua said. That 500,000-square-foot inner circle will feature 90 to 100 luxury outlets, he said, businesses that commonly do $1,000 per square foot in sales.

Fuqua said Sembler has signed letters of intent for about half the luxury outlets planned for development, and on Friday, the company released the names of some of those retailers.

They include Gucci, Ferragamo, Canali and Giorgio Armani.

Fuqua said Sembler contacted two retailers located in Hilton Head Villages - Marshall's and Bed, Bath and Beyond - about adding duplicate stores in the Okatie Crossings project, not about closing existing stores.

Neither store is included in Okatie Crossings' plans now, Sembler said.

"They don't build unless there is demand - net new sales," Fuqua said. "In this market, no one is building unless there is net new sales. So, anyone who says we are just moving retailers is being ridiculous."

Jasper County state Sen. Clementa Pinckney, a Democrat who has pushed legislation to get the tax incentive for Sembler, said the project has always been a mixture of high-end and mid-range retailers, and nothing has changed.

But Costa's contentions feed long-standing objections to tax breaks for the project raised by Aiken Republican Sen. Greg Ryberg.

"The Sembler site plan clearly shows that this development resembles the dozens of others occurring across South Carolina and not some sort of 'high-end' outlet mall," Ryberg charged.

"The simple fact is that Sembler simply plans to steal tenants from across town by using low-cost infrastructure, paid for by taxpayers, to undercut the other mall," Ryberg said. "This is taxpayer-subsidized piracy."

Ryberg is a businessman who made his mark decades ago as a retailer in the convenience store business in Aiken.

The 261-acre Okatie Crossings development is supposed to create 2,000 to 2,500 new jobs and pump $175 million in sales taxes into local economies over 15 years, which Sembler said could not help but benefit double-digit unemployment rates that roil most of the region.

Though one-third of the Okatie Crossings mall would lie in Beaufort County, Sen. Tom Davis, R-Beaufort, has joined Ryberg's and Costa's criticism of the project.

Davis said his study of the use of "extraordinary retail establishment" tax incentives in other states shows new businesses in many cases are created at the expense of existing ones.

"This concerns me, especially since operators of our area's existing commercial centers say Sembler is targeting their tenants," Davis said. "Sembler is a good company with an excellent reputation and I want to hear its side of the story, but at this point, I have serious questions that need to be answered."

Fuqua said the company already has poured more than $100 million into the Okatie Crossings project.

The company purchased the land three years ago from a company that went bankrupt, Fuqua said, all while growth in the region has exploded north and west of the city of Hilton Head, toward Okatie Crossings and Sun City.

"There is widespread support among Sun City residents for the shopping center," said 10 Sun City residents in a signed letter last month to the Jasper and Beaufort County councils.

"We surveyed neighbors throughout the community and reported strong interest in a shopping experience not available elsewhere in either Beaufort or Jasper counties."

Reach Burris at (803) 771-8398.

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