Hoover council grants sales tax rebate for U.S. 31 retail development

The Hoover City Council on Monday night approved a sales tax rebate for a company that is redeveloping a commercial property on U.S. 31 near the entrance to the city from Vestavia Hills.

The property is at 1539 Montgomery Highway, which is the site formerly occupied by a Mr. Transmission auto repair shop and Mexico Lindo restaurant. Orange Development bought the property and plans to build a 14,748-square-foot strip retail center on the site.

The City Council agreed to give Orange Development a rebate equal to 25 percent of sales tax revenues received by the city from businesses on that property over a period of 10 years, not to exceed $500,000.

Orange Development had asked for a 50 percent rebate, but the council cut the rebate to 25 percent Monday night.

Councilman Curt Posey said he recommended cutting the rebate to 25 percent because the size and scope of this project is not as large as most of the projects that have received tax rebates from the council. Council members believe they need to consider the size of the development when looking at requests for tax rebates.

Plus, in this case, Orange Development has given no indication of what businesses may go in the development or how many jobs would be created, Posey said.

After the council’s work session on Thursday, Councilman Mike Shaw said he was concerned about what kind of signal the council would be sending to other businesses if it approved the 50 percent rebate for Orange Development. “Does everybody get one of these?” he asked.

Greg Knighton, the city’s economic developer, noted that Orange Development’s retail project sits at a gateway to the city and, in its previous state, was rather an eyesore. Having a nice retail center there should help improve people’s first impression when entering the city, he said.

This development must meet strict architectural standards that include the use of architectural stone, brick veneer, dryvit and metal awnings.

Council President Gene Smith said anything would be an improvement over what was there before. “That property has been kind of an eyesore for 15-plus years,” Smith said.

Knighton also noted that uses for that property are limited because of its terrain and narrow layout. Orange Development intends to invest $4.76 million in development of the site, according to the sales tax rebate agreement.

Work already has begun. The former transmission repair shop and Mexican restaurant, which burnt down in July 2018, have been demolished. Orange Development cut into the hillside by Lorna Road to allow more space for a building and is building a new retaining wall.

Orange Development also has committed to invest about $150,000 in a new southbound turn lane from U.S. 31 into the site, with the city paying an estimated $20,000 to redo the traffic signals there, Knighton said.

If more than 50 percent of the new building is not filled with retail, Orange Development will fully reimburse the city for the cost of redoing the traffic signal, according to the rebate agreement.

However, Orange Development and the city expect the new development to generate $1.45 million in sales tax revenues for the city between 2020 and 2030, Knighton said. So the city should gain about $1 million in new sales revenue even if the full rebate is granted, he said.

Redevelopment of the site also should increase property taxes, Knighton said. Jefferson County currently has the property valued at about $1 million, he said. If that amount doubles, property taxes likely would be more than $18,000 a year to the city, with about $16,000 of that going to Hoover City Schools, Knighton said.

The tax rebate agreement does not allow Orange Development to count any tax revenues from businesses that relocate from within the city of Hoover or anywhere in Jefferson County, in order to honor an anti-poaching agreement between Hoover and numerous other cities in the county.