OREM -- Price Development is following through on its lawsuit that alleges Orem's 1998 redevelopment deal with owners of University Mall and ZCMI is illegal.
The development company, which originally sued the city shortly after the agreement was approved, filed a motion for summary judgment Wednesday in 4th District Court, claiming Orem's incentive package does not meet the valuation criteria established for such deals in January by the Utah Supreme Court.The company, the majority owner of Provo Towne Centre, is seeking a court order declaring the deal unconstitutional and void and requiring the city, ZCMI and University Mall owner Woodbury Corp. to account for all money and real property transferred pursuant to the city's redevelopment agreement. Price also wants a court order requiring "immediate repayment of such funds to Orem City as well as the immediate transfer back to Orem City of any property conveyed."
Since the deal was approved two years ago, ZCMI has undergone a major renovation and Woodbury has spent millions of dollars rebuilding the section where J.C. Penney once anchored the mall. Nordstrom will occupy the rebuilt anchor section.
Under the 20-year deal, the city will return to Woodbury new sales tax revenue generated from mall improvements up to $975,000 a year. ZCMI agreed to spend $5 million to remodel its store, and the city agreed to pay ZCMI $2 million. Woodbury agreed to spend $10 million on
mall improvements. The city will also pay Woodbury $50,000 a year to support an advertising campaign promoting the mall and shopping in Orem. Woodbury and the city will pay ZCMI about $100,000 a year until Nordstrom opens in the mall.
Orem officials approved the deal to keep ZCMI from moving to the new Provo mall and to attract a major anchor to replace J.C. Penney.
The high court ruled that cities can use creative redevelopment deals done outside guidelines of the Utah Neighborhood Redevelopment Act as long as complex and reliable research, similar to that required to justify impact fees, proves taxpayers are getting equal value in return for incentives given.
The court said independent research is more reliable in determining the cost-benefit of such deals and that cities cannot consider sales tax shifting as new sales tax. In multiyear deals, such as the one Orem approved, each year's exchange must meet the benefit standard independent of every other year.
Following the Supreme Court ruling, Price officials said they were confident they could show information considered by the Orem City Council when it approved the deal was not reliable or gathered through an independent study. Price, in its court motion, says Orem admitted in court that the legislative record that it submitted to the court was the basis the City Council used to approve the incentive deal. That legislative record contains materials submitted by Woodbury, sales projections and estimated sales tax growth.
However, Price says the city did not identify the sources or the authors of the information or explain the methods used to collect and analyze the data. Price specifically claims the city has not shown in its agreements with Woodbury and ZCMI the benefit to taxpayers for each year of the 20-year deal as required by the high court's new standards.
"These materials cannot possibly be considered as an independent determination of the value of the exchange, nor do they constitute a year-by-year analysis showing that Orem would receive fair market value for what it gave in each year of the exchanges," the motion says.
Price says the city cannot now attempt to say materials not included in the legislative record were taken into consideration when the agreement was approved. The company says city officials used nothing more than a "best guess" to determine whether the agreement benefits taxpayers.
"The City Council had no way to evaluate whether the sales tax growth predictions were derived from an independent, reliable source or represented a highly optimistic guess generated by parties most likely to benefit from the incentive agreements," the court document says.
City officials say their research was reliable and supported the incentive package's cost-benefit to taxpayers. City officials say there is an annual valuation standard for the 20-year deal because incentives are tied to sales quotas that will result from mall improvements.
City Manager Jim Reams referred comment on the case to the city's outside counsel, Jody Burnett. However, Burnett is out of town and unavailable. So is City Attorney Paul Johnson.
The city will have an opportunity to prepare and file a legal response to the motion. The city also will likely have to present evidence in court showing the incentive deal was supported by reliable financial data indicating taxpayers will receive equal value in return.