Two years after tax increment financing for Merriam Town Center expired, some retail stores are facing the prospect of higher rent — and city officials are keeping a close eye on potential business departures.
The announcement in July that Hen House was leaving the shopping center after two decades in business raised eyebrows among city officials, who are concerned about the associated drop in sales tax receipts that get directed to the city’s budget.
At Monday’s city council meeting, Merriam officials discussed what efforts the city could be taking to keep the center vibrant and prevent other tenants from leaving.
Chris Engel, city administrator, said several things have occurred in Town Center all at once that are probably contributing to the issue, “depending on who you ask.”
DDR, based in Ohio, owns most of the commercial spaces in Merriam Town Center just east of Interstate 35, with the exception of Home Depot and a few other businesses along Antioch Road.
Merriam Town Center is now more than 20 years old, and its aging structures are getting expensive to maintain, Engel said. At the same time, the tax increment financing agreement between the city and Merriam Town Center expired two years ago, so the property tax increment money that had been available to the owner to spend on maintenance and improvements is now being directed to the public taxing entities.
Also, in the past three or four years, commercial property values have gone up “substantially,” especially at Merriam Town Center, raising property taxes.
Finally, 10- and 20-year leases among tenants at the center are starting to expire, which means many contracts are up for renegotiation.
“So basically, what DDR is doing is they’re trying to pass those costs onto the tenants that are in Merriam Town Center,” Engel said. “During those renegotiations, you’ve got people that are exploring opportunities elsewhere if they can find somewhere where they can get a better deal.”
Mayor Ken Sissom called it “the perfect storm that’s in place that might be contributing to some of these businesses, considering…leaving.”
One councilmember asked Bryan Dyer, community development director, if other major retail stores in Merriam Town Center are on chopping block, now that Hen House is gone.
Dyer said the city hasn’t had any conversations with DDR regarding further vacancies or closures, so that information is “unknown at this time.” Nonetheless, he said Engel reached out to DDR to see if the city can offer any assistance.
Dyer said the city typically receives no indication of closures until they occur. In an interview afterward, he added that further closures are all “speculation and rumors” at this point.
Councilmember David Neal asked how the sales tax decrease could impact Merriam’s general revenue stream. Engel said the city doesn’t usually receive detailed information on that; nonetheless, the city “would feel it.”
Nancy Hupp reminded her fellow councilmembers that a significant decrease in sales tax revenue could hurt the city’s efforts to fund its new community center.
Engel told the Merriam council that he has reached out to DDR to see if the city can “appropriately” offer any assistance “in keeping that a vibrant shopping center.”
“It’s a community asset, and I think that we’ve made that point clear to them,” Engel told the council. “We just need to develop, perhaps, some strategies or hear what their level of interest is in doing something over there and if there’s a role the city can play to help out.”
Spokespersons from DDR could not be reached for comment.