Costco Controversy: Q&A With Hamilton Crossings Developer

The following is an email Q&A conducted with Hamilton Crossings developer Jeremy Fogel, executive vice president of The Goldenberg Group. 

Q: What will the completed Hamilton Crossings look like?

A: The project will be a first-class regional shopping center anchored by some of the finest retailers operating today. Several will open their first stores in the entire Lehigh Valley in the Hamilton Crossings project. 

Q: How would you characterize the shopping center?

A: The project is a hybrid between a regional shopping center and a town-center. Some aspects of a shopping center that are favored by land planners force developers to think “outside the box” and improve on traditional design. Other aspects are not supported by retailers, as they may have a negative impact on the long-term viability of a shopping center. As an example, many land planners want to encourage pedestrian activity and minimize large parking fields. While that is an excellent goal, most people that shop at the larger format stores still use their cars and want to be able to find convenient parking in front of each store that they patronize. There is an inherent conflict and our project attempts to find a balance between the two concepts by providing sufficient parking, but also including 2.5 miles of biking/walking paths and rest/gathering areas throughout the project to facilitate those that will walk or use their bicycles.

Q: What has your market research shown about the area?

A: The higher-end retailers that we are looking to attract seek higher disposable income and education levels in the area surrounding their stores. The local demographics around Hamilton Crossings are very strong. These demographics, combined with the ability to combine many retailers in a single, convenient location, with excellent accessibility to/from the site and excellent visibility of the site help the retailers project strong sales forecasts. We feel the center will be very successful and provide a first-class asset for the community for many years to come.

Q: How do you respond to concerns raised about traffic?

A: Our project will be required to handle its traffic impact. That requirement is difficult to achieve, as Rt. 222 is already experiencing traffic volumes that were not projected to occur until after the year 2020. Regardless, we need to get permits from PennDOT, and they require us to handle our traffic. We must satisfy them by offering a scope of traffic improvements that not only handle our traffic impact, but also the significant growth that is already occurring in the area. Keep in mind that our interests are aligned related to traffic – if the shopping center is difficult to get to/from because of traffic, folks will go to a more convenient location. In the short-term, we understand that people will shop at the center because of the excellent retailers that are not currently represented in the Valley, but in order for us to be successful in the long-term, we need to make shopping at Hamilton Crossings as convenient as possible for the patrons.

Q: Why did you apply for the TIF?

A: There are approximately $28.5 million in extraordinary costs associated with the project. While the developer and retailers are stretching to pay for the large majority of those costs, both have determined that they cannot handle the total amount and, if unable to get support, the costs would render the project economically unviable. A TIF is a tool that makes sense in this case….if there is no TIF, the land will continue to provide $57,000 per year to the taxing bodies. If a TIF is approved, even after 50 percent of the NEW tax revenue goes toward the TIF, there is still more than $700,000 in NEW tax revenue to the taxing bodies for the 20-year term of the TIF. Thereafter, there is $1.4 million in NEW tax revenue.

Q: How do you respond to those who say that this is simply a misapplication of the TIF concept? That it's for urban, not suburban development?

A: I think some folks think of a TIF as tool that is only appropriate in lower income areas. In fact, the TIF Act of Pennsylvania does not have any requirements related to local income. The purpose of the TIF is to help promote economic growth. The higher-end tenants that we are attracting will only look to locate in affluent areas. They do not forecast successful stores in lower income areas – so this project is not taking away from potential economic development in lower income areas, but helping to create a project on a site where the tenants want to locate, but where economic conditions have prevented development from occurring because of the extraordinary costs. 

The jobs and taxes that the retailers will create will be to the benefit of the residents of the entire Lehigh Valley, not just the local Township. The real estate tax revenue that the project creates will be to the benefit of the residents of the entire Lehigh Valley, not just the local Township. 

Q: If the TIF falls through, is there other funding you are considering to make the project happen?

A: We have exhausted the search to identify other funding sources – the TIF represents the final source of funding to close the financial gap.  We must have the TIF to make the project feasible.

Q: Is there another place in the Lehigh Valley you would consider for the Hamilton Crossings project? A smaller scale endeavor to bring Costco in?

A: The retailers are expanding at a very slow pace and the anchor tenants are growing their store base by only 15 – 20 stores per year. They are attracted to the Hamilton Crossings site because it has unique characteristics that allow the retailers to project very strong retail sales. We do not think they will be able to attract comparable sales elsewhere. By way of example, Home Depot looked to develop a site only a short distance from the Hamilton Crossings site. The site shares the same demographics, but not the other critical elements. Even though that site has been approved and Home Depot has paid to build much of the necessary infrastructure, nobody has agreed to locate on that land.  The cost to our retailers would be significantly lower to locate on Home Depot’s land, but the drop in projected sales is so significant that nobody has been willing to consider the location.