The New Orleans City Council advanced a proposal Thursday to assess an additional 1 percent sales tax on all items sold at a shopping center under development on South Claiborne Avenue.
In a unanimously approved resolution, the council — acting as the governing authority of the newly created Magnolia Economic Development District — said it will consider requiring customers of the seven stores in the Magnolia Marketplace to pay more for pet food, makeup and shoes, among other things.
The money generated from the 1-cent tax would be used to support bonds to pay for public infrastructure improvements and other “extraordinary” construction costs that make New Orleans a more expensive place to build, developers have said.
The resolution also sets a date of Nov. 21 for a public hearing on the proposal and retains the firms of Foley & Judell and Auzenne & Associates as bond counsel.
The Magnolia Economic Development District, bounded by South Claiborne and Washington avenues and Clara and Toledano streets, was created earlier this month to cover the site of the proposed $24 million Magnolia Marketplace.
The 98,000-square-foot strip mall will include six national retailers and a Raising Cane’s chicken fingers restaurant.
Developers Stirling Properties and JCH Development said construction costs at the site, formerly part of the C.J. Peete public housing complex, were driven up by the need to relocate a significant number of water, sewage and drainage lines, as well as to comply with the city’s elevation requirements.
The project is not viable without a sales tax increase, Stirling Senior Vice President Townsend Underhill told a council committee this month.
The developers plan to put up $5.5 million for the project.
Nearly $15 million will come from bank debt and new market tax credits, and the development team has asked for $1.6 million in state Community Development Block Grant money.
The city and developers hope shoppers will pick up the remaining $2.3 million through the higher sales tax.
Money generated from the tax increase would be used to fund bonds to cover “pre-approved public infrastructure costs and extraordinary costs associated with meeting elevation guidelines,” a proposed ordinance says.
The higher tax would be assessed only on stores within the Magnolia Marketplace development, and it would expire after the bonds are paid off in about 15 years, a city official said.
In addition to Raising Cane’s, the shopping center will include Michaels, PetSmart, Ross Dress for Less, Shoe Carnival, T.J. Maxx and Ulta Beauty stores.
Construction on the development is expected to begin in January, and the stores could open in April 2015.
With the exception of Ross Dress for Less, which is building a store in Algiers, none of those retailers now has a presence in Orleans Parish.
A separate phase of development includes construction of a Capital One bank branch, a T-Mobile retail store and another unidentified store on an adjacent block across Washington Avenue.
The bank and retail shops, which are expected to open in December and January, will not be subject to the higher tax.