Spending town money to entice Coligny area businesses to redevelop their properties won't bring in enough tax revenue to offset the costs, a consultant told the Hilton Head Island Town Council on Tuesday.
Such spending, however, could yield millions of dollars in private development.
"Because the town has a very low millage rate, the more money you spend -- while it may increase more private investment -- isn't really bringing a whole lot of cash back to the town," said David Brandes with Genesis Consulting Group.
Mayor Drew Laughlin and other council members said the analysis confirms what they've long suspected.
"The expense that would be involved in incentivizing (Coligny Plaza) to tear it all down and build something else would be a lot more than we want to do and should do," Laughlin said.
Under one scenario, the town would spend $15 million only to see $1 million in new property taxes and $8 million in new fee and license revenue over 20 years, but that could coax an estimated $43 million in private development.
Under another scenario, the town would spend $23 million only to see $1.4 million in new property taxes and $11.4 million in new fee and license revenue over the same period, but spur $65 million in new private investment, according to the consultant.
Redeveloping the Coligny area has long been a priority for the town, which faces a December 2014 deadline to commit an estimated $13 million to parks, roads, pathways, boardwalks, parking, drainage and landscaping. About $6.4 million of the money, which was captured from a tax-increment finance district, has been set aside for future projects within the Coligny district.
Plans shown to council in November call for redeveloping a mix of town land, private holdings in Heritage and Coligny plazas, and other property. The plans included a hotel, parking garages, a new park and new plazas with outdoor cafes, shops and restaurants. Condominiums or apartments would occupy a second story above the retail space.
Genesis Consulting studied two scenarios, both of which included a hotel and parking garage on town land. One focuses improvements on town-owned land and a small portion of plaza property. The other would demolish both plazas to create a new shopping district, which Brandes recommended against.
"Coligny Plaza is 100 percent leased," Brandes said. "The Coligny Plaza is a very strong commercial enterprise with lease rates at the maximum available in the marketplace. It will take significant incentives to entice redevelopment of this area. The development is aging and will, at some point in the future, need to be redeveloped, but redevelopment is not anticipated within the next 10 years."
Heritage Plaza, however, is being emptied by its owner, Blanchard and Calhoun Commercial, in anticipation of some type of development, he said.
"Its physical configuration is not conducive to current retail trends, and it is likely the entire area will be razed for new construction," Brandes said.
The town also owns an excess of land in the district that could be sold for private development, namely a hotel, which would provide more money for public improvements to the area, he said.
"(A hotel) provides the best anchor project to support additional commercial and retail ... (and) the highest revenue return for the town and other taxing jurisdiction," according to the report.
Mayor Laughlin and other council members said they were not convinced of the need to put a hotel or parking garage on town land.
"Instead, I'd like to see us focus on improving the look of the parking we have there, using our property to create a park or gathering space, possibly accommodate a (satellite campus for the University of South Carolina Beaufort), and then look at streetscape and road improvements to Pope Avenue," Laughlin said.
Councilwoman Kim Likins, who represents the area, agreed.
"It's an area that works, and it may not be in some people's eyes the most beautiful, lush shopping center, but people love going there," Likins said. "We have the funds and we should reinvest in that area of the community, like we're doing at Shelter Cove. ... Let's back away and look and see what makes more sense financially and what's right for that community and the tourism industry it serves."
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