City May Spend a Bundle at the Mall

By FRANK MESSINA

Oct. 3, 1997 12 AM PT

SPECIAL TO THE TIMES

MISSION VIEJO —

City officials are considering spending as much as $35 million to help finance a massive face lift to the 18-year-old Mission Viejo Mall in what would be the largest infusion of municipal funds on a South County project in a decade.

Although the city hasn’t decided how much it wants to contribute, the effort is backed by City Council members who believe the renovated mall, including a Nordstrom Department Store, will generate an additional $2.8 million in annual sales tax revenue to the city.

“For Mission Viejo to continue . . . to do all the things we need to do for the city, we have to guarantee a revenue stream,” Councilwoman Sherri M. Butterfield said. “Clearly an aging, deteriorating mall isn’t the answer.”

Built in 1979, the 990,000-square-foot mall has been a poor sales performer in recent years as shoppers flocked to newer, more attractive malls, according to industry analysts. Annual sales tax revenue to the city has flattened at $1.2 million in the last three years.

“It’s ‘70s ugly and deteriorating,” Butterfield said. “Mission Viejo outgrew the mall, just like we did our library.”

Plans to upgrade the mall remained on the drawing board for years until Nordstrom, a highly desired mall anchor tenant, announced in January it would open a store in Mission Viejo.

The mall is located in a city redevelopment zone, a specially designated area that allows cities to use tax revenue created by new development to pay for projects such as auto malls or shopping centers.

The Simon DeBartolo Group of Indianapolis, which owns the mall, has presented a plan to the city that would expand the commercial facility by another 500,000 square feet. The site plan was approved by the Planning Commission last month.

Rather than fixing the widening cracks in the parking lot and undertaking a minor redesign, Simon DeBartolo proposes to redo the mall “from floor to ceiling,” a company official said earlier this year.

The renovation will include overhauling the mall’s interior and exterior, adding a food court and a new building for Nordstrom.

Sources say the renovations will cost about $250 million and that Simon DeBartolo, the nation’s largest mall developer, is asking the city for a $35-million contribution. Mission Viejo officials have hired a financial consultant and are negotiating with the mall owner over the amount of the city’s participation.

Simon DeBartolo officials say the city’s infusion of cash is critical.

“We would have a project of significantly less quality without the city,” said Art Spellmeyer, a Simon DeBartolo senior vice president. “It will allow us to attract the kind of department stores that in turn will allow us to create the kind of product we think should be created.

“If we can’t work out a deal with the city,” he said, “we’ll put the money into something else and the citizens of Mission Viejo lose out on revenues that would be generated there.”

Although the council supports providing financial assistance to the mall, some believe that the full $35 million is too much.

“I’m thinking more about $20 [million] to $25 million,” Mission Viejo Mayor William S. Craycraft said. “If you asked me five minutes from now about $35 million, my answer would be ‘no.’ But that doesn’t mean that I couldn’t be shown in a month that $35 million is justified. It’s still pretty early.”

City officials say that many issues remain to be negotiated, including a method for ensuring that the city gets back its investment.

“We’re approaching this as a no-risk situation for the city,” Craycraft said.

The city hasn’t decided on a method to guarantee its participation in the project. However, in a similar scenario, Mission Viejo provided $2 million to a 200,000-square-foot entertainment/shopping complex across the street from the Mission Viejo Mall called Kaleidoscope.

Al Gobar, a Placentia-based real estate economist, said that with Nordstrom as an anchor tenant, the city’s estimated sales tax bounty of $2.8 million annually is realistic.

“That’s not unreasonable,” Gobar said. “Nordstrom will add a big kick. The top shopping centers in Orange County are the Brea Mall, South Coast Plaza and MainPlace, and one thing they all have in common is Nordstrom.”

A premier department store will draw several other upscale tenants, Gobar said. Also, developers have plans to build another 13,000 homes immediately east and south of the mall, according to city officials.

If $35 million is provided for the renovations, it will be the largest municipally financed construction project in South County since San Clemente built a $42-million water reclamation plant in 1986.

With the city’s participation still being researched and discussed in closed-door negotiations, there has been little chance for public comment so far.

However, community activist Bradley Morton criticizes the city’s proposed financial involvement.

“It doesn’t matter whether it’s a new car deal or a mall,” Morton said. “Any business coming into a redevelopment area knows that the city has money to throw at them and uses any tactics they can to get a bite of it.”

Morton said the city should place any large expenditure on the ballot.

“We put school bonds and special tax districts to a vote; we should let the people vote on this too,” Morton said.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

A New Face and Space

City officials are considering whether Mission Viejo should spend up to $35 million to help renovate the Mission Viejo Mall. The City Council has not formally approved the plan but tentatively supports investing in the project. Although retail sales in the city increased 54% from 1992 to 1996, tax revenue generated by the mall declined a bit during the same period:

Proposed Mall Changes

1. New three-level, 180,000-square-foot Nordstrom department store

2. Macy’s addition: three levels, 61,596 square feet

3. Existing parking structure addition: four levels, 760 spaces

4. New restaurant

5. Robinsons-May addition: three levels, 51,000 square feet

6. Robinsons-May addition: two levels, 30,000 square feet

7. New store location, 130,000 square feet

8. New parking structure: four levels, 1,816 spaces

City Retail Sales (millions)

1996 686.3

Mall-Generated Sales Tax Revenue (millions)