WEST BOUNTIFUL—City leaders came to an agreement recently with the Thackeray Garn Company, for a one-time payout of $1.107 million to end a suit the developer had brought against West Bountiful.
The developer, formerly known as Johansen/Thackeray, came to the city in 2002 with a proposal to build The Commons, a retail area near 400 North and 500 West that included Costco and several other businesses.
“It was really kind of a blight area,” said West Bountiful City Administrator Duane Huffman. “It was not attractive and it wasn’t producing much revenue for the city. In order to do it, the developer had to acquire many properties and prices tend to inflate when that happens. Thackeray came to the council and explained their costs were rather high for the redevelopment and requested participation from the city through tax credits.”
Huffman said the city was amenable to the proposal and sales tax was part of the initial discussion. “In 2004 they made a participation agreement,” he said. “It included property tax increments and a percentage of sales taxes from just that new development. The agreement was originally phrased that the developer would receive $12.8 million plus interest over 10 years. If they didn’t receive that in 10 years, the city would extend it for another 10 years. The property tax increment was for 25 years.”
Costco opened in 2006 followed by other stores. “For a variety of reasons, the tax didn’t come in as expected in the 2004 agreement,” said Huffman. “When we reached the 10 years, the developer hadn’t received $12 million – not even close. So they came to the city. The city looked at it and acknowledged that they hadn’t received what they had hoped to receive and decided not to extend. The city council was prepared to take a vote, but the developer asked them not to, instead they wanted to continue discussions. But then they decided to sue.”
The developer’s understanding of the agreement was that the city had to extend, said Huffman. But it was not as clear as it could have been. The city was not required to extend another 10 years.
“For several months the city and developer continued discussions,” he said. “They finally negotiated a settlement. Rather than continue to share a portion of the sales tax (which had been about $380,000 a year to the developer) they agreed to a one-time payment of $1.107 million.”
This allowed the developer to reinvest and the city to end the lawsuit, he said. “Now the city can budget yearly the full amount of the sales tax. The city acknowledges the developer was expecting a certain amount and never received the full amount they were hoping to receive.”
Huffman said the money will come from the city’s general fund/reserve account and won’t have any implications on proceeding with future plans the city may have.
“The development has still been very successful for the city before and after the suit,” said Huffman. “We recently did a cost/benefit analysis and it confirmed that indeed it’s been very successful for the city and will continue to be successful.”
In spite of the legal wrangling, Huffman said the city has a good relationship with Thackeray Garn. “Like with any negotiation or settlement it’s neither party’s preferred outcome,” he said. “But the city wouldn’t do it if it was not in the best interest of the city and the residents.”