Senator Bob Corker’s (R-TN) unprecedented attacks on President Trump have garnered massive attention from the mainstream media this week, allowing the junior senator from Tennessee who announced last month he will not be seeking re-election in 2018 to keep the focus away from the sweetheart deal in which Alabama taxpayers paid him $108,682 in 2016.
But one month after Breitbart News broke the story about Corker’s lucrative investment in a controversial real estate development deal in Mobile, Alabama’s McGowin Park Shopping Center, six significant questions remain unanswered about that transaction.
(1.) Why are any sales tax incentive rebate payments being made to McGowin Park Incentive, LLC (13 percent of which–$40,349 in 2015 and $108,682 in 2016, according to his financial statement, went to Senator Corker) when an Alabama statute (the Alabama Improvement District Act) expressly prohibits the payment of sales tax incentive rebates for any purpose other than repaying the purchasers of a $21.8 million bond offering issued in 2016 by the McGowin Park Improvement District–a separate company controlled by Senator Corker’s partners from the Hutton Company?
Section 11-99A-17 of the Alabama Improvement District Act states that “If bonds are issued with respect to an assessment, all proceeds of the assessment shall be pledged to secure payment of the bonds and shall be paid directly by the property owners to the board or to a trustee or other holder of funds as may be appointed by the board for the benefit of the holders of the bonds.” (emphasis added)
In 2013, McGowin Park, LLC, a development company organized in Alabama by the Chattanooga,Tennessee-based Hutton Company, whose owners are Senator Corker’s long-time allies and contributors, signed project development agreements with both the City of Mobile and Mobile County to develop McGowin Park Shopping Center in return for a substantial sales tax rebate: “28 percent of all city sales tax collected and 30 percent of all county sales tax collected from stores in the center is paid out to McGowin Park Incentive, LLC, in two securities known as City of Mobile Limited Obligation Project Revenue Warrants, Series 2013 and Mobile County Limited Obligation Project Revenue Warrants, Series 2013,” as Breitbart News reported earlier .
In July 2014 Senator Corker invested between $1 million and $5 million for a 13 percent interest in McGowin Park, LLC. One week, later, Wells Fargo, a bank with a long-standing and controversial relationship with Corker, provided about $5 million of construction financing for the project. Later in 2014, the owners of McGowin Park, LLC formed McGowin Park Incentive, LLC as a Delaware based business, and Corker secured a 13 percent interest in this new company as well.
McGowin Park Shopping Center opened in June 2015 with more than 24 stores in 2015, including “Dick’s Sporting Goods, Field & Stream, HomeGoods, Ross Dress for Less, Hobby Lobby, Best Buy, Old Navy, Petco, Ashley Furniture HomeStore and Dollar Tree,” as one publication noted, and is strategically located right off heavily traveled I-65.
When sales tax revenue started coming in to the stores in McGowin Park Shopping Center, the City of Mobile and Mobile County began making sales tax incentive rebate payments to McGowin Park Incentive, LLC. Instead of reserving those payments to pay off future purchasers of $21.8 million bond offering anticipated to be issued the following year–as the Alabama Improvement District Act requires, McGowin Park Incentive, LLC chose to distribute part of those rebates to its owners. In 2015, those payments were about $300,000–13 percent of which, $40,349, went to Corker. In 2016 those payments were about $850,000–13 percent of which, $108,682–went to Corker.
The current mayor of Mobile, Alabama, Sandy Stimpson, recently acknowledged “that he’s not a fan of the [McGowin Park Shopping Center] incentive package.”
“The mayor has said we’d never do one of these [deals] again, and I support him on that,” City of Mobile finance director Paul Wesch told Al.com last week.
Stimpson has not elaborated on why he says the City of Mobile would never do a McGowin Park deal again, but his silence on that may be understandable, given the complications that might result for the city if the deal that was finalized one month before he was inaugurated in November 2013 were to unravel.
The owners of McGowin Park Incentive, LLC, including Senator Corker, have apparently done very well in this deal financially even without the ongoing sales tax incentive rebate payments. Their initial investments were repaid from the proceeds of the 2016 $21.8 million bond offering issued by McGowin Park Improvement District, and in May of this year McGowin Park Shopping Center was sold to an Arizona Real Estate Investment Trust for $77.8 million.
(2.) Exactly how much money will Senator Corker be paid in sales tax incentive rebates by Alabama taxpayers over the twenty year life of the deal when the Alabama Improvement District Act expressly prohibits sales tax incentive rebates to be paid for any purpose other than repaying purchasers of the $21.8 million revenue bond offering?
Depending on the validity of the underlying projections, those payments could amount to $3 million, some amount less than $3 million, or as much as $28 million.
“We think the amounts you are referencing [$3 million over 20 years] are based on hypothetical sales projections and are not guaranteed to the investors,” a spokesperson for Senator Corker told Breitbart News in September.
“For Corker to collect the [potentially $28 million over 20 years] suggested by Breitbart, McGowin Park would have to see, and sustain, a remarkable explosion of retail activity three or four times as great as its current level,” Wesch told Al.com, a statement which suggests the “current level of retail activity” would support payments to Corker over the 20 year life of the agreement of $7 million to $9 million.
(3.) Will Senator Corker and his partners in McGowin Park Incentive, LLC voluntarily agree to return the estimated $1.15 million they received from Alabama taxpayers in 2015 and 2016 and apply those funds to pay the owners of the $21.8 million in bonds issued by the McGowin Park Improvement District in 2016?
The Alabama Improvement District Act appears to be quite clear that sales tax incentive rebate payments may not be used to pay anyone other than bondholders when sales tax incentive rebate payments are identified in the bond prospectus as the source of funds to repay those bonds.
The City of Mobile, which is collecting and paying those sales tax incentive rebates, appears to be turning a blind eye to this situation.
“For the city’s part, [finance director Paul Wesch] said, it pays the rebates to the ‘Paying Authority’ authorized to disburse the money, and that ends the city’s obligation,” AL.com reported recently.
“Our eye does not see beyond that transfer to the paying authority,” Wesch told Al.com.
(4.) Why was the 2014 assignment of those sales tax rebate incentive payments from McGowin Park, LLC–the Alabama developer of the project whose assets were subject to use as collateral for any loans to the project–to McGowin Park Incentive, LLC–the Delaware company with no assets subject to collateralization for the project–approved by the City of Mobile and Mobile County, when that assignment may have violated the October 3, 2013 court order that validated the July 23, 2013 Project Development Agreement between the City of Mobile and McGowin Park, LLC?
A spokesperson for the City of Mobile told Breitbart News that McGowin Park, LLC had the legal authority to assign the sales tax incentive payments to McGowin Park Incentive, LLC under the terms of the July 23, 2013 Project Development Agreement that was validated in the October 3, 2013 court order.
“The re-assignment or transfer was not re-validated because the authority to assign/transfer the warrant was expressly set out in the development agreements,” George Talbot, director of communications for the City of Mobile, told Breitbart News.
That court order, however, explicitly stated that the July 23, Project Development Agreement was required to comply with the laws and Constitution of the state of Alabama, and likely anticipated that any such assignment would be made to the McGowin Park Improvement District which issued the 2016 $21.8 million revenue bond.
That assignment, and the subsequent payment of sales tax rebate incentive payments to McGowin Park Incentive, LLC and its 13 percent owner, Senator Corker, rather than purchasers of the 2016 $21.8 million revenue bond, could be challenged in a potential lawsuit by those bond purchasers, as well as residents of Mobile.
Again, the City of Mobile seems to be turning a blind eye to this situation.
“[Mobile finance director] Wesch said he hasn’t heard of any aggrieved party and has no reason to think there is one,” Al.com reported.
(5.) Why was the 2014 assignment of sales tax rebate incentive payments from McGowin Park, LLC to McGowin Park Incentive, LLC –which gave control over the disbursement of those sales tax incentive rebates to McGowin Park Incentive, LLC rather than McGowin Park Improvement District–the issuer of the 2016 $21.8 million revenue bond offering–not disclosed in the prospectus for that bond offering?
The failure to disclose this assignment, and the associated ceding of control of disbursements to McGowin Park Incentive, LLC, rather than the issuer, McGowin Park Improvement District, is a material matter.
(6.) How did the chairman of the Senate Foreign Relations Committee find the time to be an active investor in such a complicated real estate transaction and why has he gone to such great lengths to create multiple layers of businesses to hide and protect his interest in public monies collected from residents of a neighboring state?
Given these six unanswered questions, Senator Corker’s recent attacks on President Trump can perhaps best be understood by an old axiom from the world of sports: “The best defense is a good offense.”
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