Orange Beach Council OKs Bama Bayou negotiations

Originally published by the Mobile Press Register

City and developers discussing tax-revenue deal and special tax district

Friday, October 05, 2007
By RYAN DEZEMBERStaff Reporter

ORANGE BEACH -- Lawyers for the city and the 144-acre Bama Bayou project got the green light Tuesday to negotiate a revenue-sharing deal that both sides hope will allow the developers to finance a convention center and hotel.

The City Council voted unanimously to pursue a 30-year arrangement with the developers of the project, which would allow them to recoup nearly half of the sales and lodgings tax collected at Bama Bayou and also to create a special district on the property so that additional taxes can be levied.

Bama Bayou, formerly known as Orange Beach Riverwalk, is an entertainment district being built on formerly city-owned land at the northern landing of the Foley Beach Express toll bridge.
The project is a collaboration between Orange Beach-based Joe Raley Builders and Mobile real estate conglomerate The Mitchell Company Inc. The developers plan to build hotels, condos, a Gulf World Marine Park, restaurants, shops, a convention center and marina on the property.

To finance construction, the developers have secured a $200 million allocation of the state's low-interest Gulf Opportunity Zone Act bonds. That federal law, drafted in response to 2005's Hurricane Katrina, is intended to attract new investment along the Gulf Coast through tax breaks and access to capital priced below bank rates.

From the city, Bama Bayou's builders want help paying off about $35 million of those bonds, which would be used for a 68,000-square-foot convention center, an affiliated 453-room hotel and another hotel with 208 suites near the development's marina, according to a proposal from the developers.

Specifically they want Orange Beach to:
Rebate to them over a 30-year-period 2 cents for every dollar in sales and lodgings levies coming from Bama Bayou. Orange Beach collects a 3 percent levy on every sale and 5 cents on every dollar spent on lodging throughout the city.

Create a special district encompassing the development that will allow them to levy an extra 2 percent sales and lodgings tax there.

Orange Beach has a similar 15-year deal, $25 million tax-sharing deal with developers of The Wharf, which sits across the Intracoastal Waterway from Bama Bayou.

Though the city would be giving up about half the sales and lodgings tax revenue Bama Bayou would generate, city officials said it was a worthwhile concession if it leads to a successful convention center.

"We've been looking at getting a convention center on this island for I don't know how many years," Mayor Pete Blalock said.

"The majority of all the large conventions go straight to Florida out of Alabama. That is a crime."
The council looked into building a municipal facility next to City Hall that would serve dual roles as a convention center and civic gathering place, but the price tag -- at least $38 million -- gave them pause. Also, the city can't put a hotel on the property, which city officials consider crucial, because of use restrictions placed on the land, Blalock said.

Paul Wesch, a Mitchell Company executive, said Bama Bayou's convention center will be managed by a national company, of which the developers have interviewed 13 for the job: "It will likely have a flag of Hilton or equal."

The management agreement will have to be in place before the project's bonds are sold and prior to the city signing off on any deal, Wesch said.

"We are so much closer to having a world-class hotel and conference center than we ever were before," Councilman Larry Alexander said. "The (Alabama Gulf Coast Convention and Visitors Bureau) gets questions every week, if not every day, about a group coming down here and we don't have the accommodations for it."

"We are so much closer to having a world-class hotel and conference center than we ever were before."-- Councilman Larry Alexander