ELKHART -- City Council members took the first step Monday night toward granting a tax break for the planned new Kroger store on the city's south side. And they expressed some reservations about taking the next step.
The council passed an ordinance making most of what is now Pierre Moran Mall an economic development target area, a state designation that makes the grocer eligible for the tax break.
The tax break itself will be up for council approval Aug. 15, though members pondered its merits in a committee hearing followed by a full meeting Monday.
Kroger is seeking to have property taxes on its proposed $7 million, 70,000-square-foot store phased in over a period of 10 years. The grocery chain's total estimated tax savings would be about $500,000.
The city planning staff, however, has recommended the council approve a five-year tax phase-in, at an estimated savings of about $260,000.
It would be the first tax break given by the city to a retailer, a prospect that concerns council President Jim Pettit.
"I feel like we could be opening Pandora's box," said Pettit, R-1st, raising the possibility that the tax break could encourage Kroger's competitors and other retailers to seek incentives from the city.
He said he would feel more comfortable if the proposed tax break were for the developer of a larger retail development -- such as Woodland Crossing, the planned successor to Pierre Moran Mall -- rather than for a single retailer.
Representatives for the project said the tax break would help Kroger be more competitive against larger grocery and general-merchandise chains that benefit from similar incentives in other communities. They said Kroger had signed a lease to remain at the shopping center for at least the next 20 years.
The new 24-hour store would be twice as large as the existing store, would create 11 more jobs and would include a drive-through pharmacy and gas station. It would be built near the northeast corner of the mall area, along Prairie Street.
Kroger officials have pegged construction to begin in the fall, with a summer 2006 opening.
The Pierre Moran area, including the neighborhood directly to the north of the mall, is being considered for designation by the city as a special taxing district in which increases in property taxes -- such as those that would be created by the Kroger and Woodland Crossing developments -- are collected and used to make public improvements in that area.
Some council members and city residents fear that a tax break for Kroger would hurt that effort, depriving the taxing district of money that could be used for new traffic signals, sewer upgrades and other needed improvements.
One condition of the tax break would require Kroger to contribute 10 percent of its tax savings to the city, said Mark Brinson, Elkhart's planning director.
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