Southgate Shopping Center Redevelopment Initiative
Southgate Community Survey Results
The Borough of Chambersburg, in collaboration with the Elm Street Advisory Council, (ESAC) is embarking on a proposed long-term initiative to reclaim and redevelop the Southgate Shopping Center into a mixed-use residential neighborhood.
The project’s goal is to pay respect to the families that were displaced in 1962, when the shopping center was built, by creating a new sustainable neighborhood that promotes a mixture of uses to include housing, employment, retail and business services into the Elm Street Neighborhood.
The Elm Street Neighborhood’s ongoing involvement in the Southgate redevelopment process is vitally important to the success of this community development initiative.
For more information, please download the project summary sheet.
April 7, 2022
The Chambersburg Area Municipal Authority (CAMA) purchased Phase 1 of the Shopping Center. Phase 2 Land acquisition is anticipated for the fall of 2022.
February 14, 2022
Chambersburg Town Council authorized the Chambersburg Area Municipal Authority (CAMA) to proceed with the purchase of Phase 1 of the Shopping Center. Land acquisition is anticipated for the spring of 2022.
Several elected councils over the last few decades have explored the concept of redevelopment at the Southgate Shopping Center. The 2007 Elm Street Neighborhood Plan included the concept of a public-private partnership to redevelop the shopping center into a new mixed use neighborhood. Over the last 14 years, since that plan was adopted by the Town Council and submitted to the Pennsylvania Department of Community and Economic Development in the form of a community goal, the current adopted Comprehensive Plan called for economic development in the Southgate neighborhood. Finally, Town Council adopted the project as a 2021 priority when the 2021 budget was approved in December 2020, directing staff to determine a way to fund such a project.
Economic development is a core mission for Pennsylvania boroughs, townships, and cities. This is why Chambersburg has had a Main Street Plan and an Elm Street Plan for decades; to spur private economic development, encourage public-private partnerships, increase tax yields, and sell more utility services.
On Monday, October 11, 2021, Town Council approved a list of projects to utilize the Borough’s share of the American Rescue Plan Act (ARPA), Coronavirus State and Local Fiscal Recovery Funds (SLFRF). This Federal grant, with no local match, will fund eight transformational projects in the Borough including subsidies for landlords, low-income utility customers, restaurant owners, extensive improvements to the Storm Sewer System, the purchase of a derelict warehouse on South Fourth Street and the Southgate Shopping Center. These projects were important goals in the approved 2022 Budget.
The Borough of Chambersburg, in collaboration with the Elm Street Advisory Council (ESAC), embarked on a proposed initiative to redevelop the Southgate Shopping Center into a mixed-use residential neighborhood.
The Town Council, working with the Chambersburg Area Municipal Authority (CAMA), a separate body politic, organized in the 1940s to assist with, among other things, community and economic development, set about to use the Federal funding provided to move forward with a decades old community vision to redevelop the Southgate Shopping Center.
The project’s goal is to create a new sustainable neighborhood that promotes a mixture of uses to include housing, employment, retail, and health services into the Elm Street Neighborhood while increasing the Borough’s tax base and utility sales. The proposed project is not to be funded with Borough taxes. The project would have no impact on the tax rate.
Town Council and the current owners reached a negotiated sales agreement to permit CAMA the opportunity to purchase the existing shopping center in two phases so it can be subdivided and resold to responsible third-party private developers for redevelopment.
A Resolution was approved by Town Council on October 11, 2021 authorizing entering into an agreement to purchase of the Southgate Shopping Center in the two phases, with a 90 day due diligence period for Phase 1 (the shopping center between W. Catherine Street and W. Washington Street) and 365 days for Phase 2 (the shopping center between W. Washington Street and Loudon Street).
Town Council authorized the execution of an Agreement of Sale for the purchase of the Property, for a total purchase price of $4,500,000 for both phases. The Federal funding will provide any necessary money to accomplish the purchase of Phase 1 and maybe all of Phase 2 as well. There would be no local taxpayer money used.
Franklin Southgate LLC and the Borough of Chambersburg reached an agreement to extend the timetable on the due diligence period until March 1, 2022 to allow the newly elected Town Council time to research the project.
In the preceding four months, at the direction of Town Council, staff has been undertaking research, investigations, engineering studies, and planning in order to permit Town Council the opportunity to make an informed decision on whether or not to proceed with permitting CAMA the opportunity to buy the shopping center.
When the newly elected Town Council assumed responsibility on January 3, 2022, they began regularly meeting with staff to determine the best course of action.
On December 7, 2021, the Borough Planning and Zoning Commission reviewed and discussed Borough Plan RE-1571, which permits the subdivision of the shopping center to allow CAMA to buy the portion of the site from Catherine Street to Washington Street. Phase 2 would be retained by Franklin Southgate Company until October of 2022. The plan proposes no new land development at this time, only the subdivision of parcels necessary to accommodate the sale of Phases 1 and 2 and to enable the Borough to proceed with management of land within Phase 1, if purchased by CAMA. Council would approve the subdivision in March 2022 if the sale is to move forward.
On January 4, 2022, a special exception permit was granted by the Zoning Hearing Board to confirm that the required parking spaces within the shopping center are all within 600 feet of the principal building uses and would be in the same ownership as the principal uses should the subdivision be approved. This was also a necessary step to permit the shopping center to be subdivided should CAMA move forward with the purchase of Phase 1 soon.
The shopping center will be owned on an interim basis by CAMA until resale, but managed by the Borough.
It is important to note the role the Chambersburg Area Municipal Authority (CAMA) will play if the Town Council decides to permit them to purchase the shopping center. CAMA is an existing entity with the mission to support the community and economic development of the greater Chambersburg area. An independent agency, CAMA is organized under the State Law known as the Municipality Authorities Act. The Act permits CAMA to undertake a series of important projects for the community. Most commonly, CAMA provides "pass through tax exempt debt sales" for community organizations including the Shook Home, Wilson College, SpiriTrust Lutheran, and other tax exempt organizations. In addition, CAMA stands by to help with "pass through financing" associated with the Borough, including the proposed shopping center purchase, and the water and sewer systems of the Borough. They have more flexibility than the Borough when making real estate purchase and sale decisions whereas Council can only sell real estate to the highest bidder through the public bidding process. As such, they are a critical component of the shopping center purchase and redevelopment process to ensure the land is acquired and then sold to developers that will redevelop the land based on a newly developed realistic and market based plan, that was developed by the recently elected Town Council.
A new more realistic and market based concept plan was requested by the newly elected Town Council. This is a vision of what private third-party developers might build at Southgate. The Borough and the CAMA Board will not be the final developers. They are merely providing the conduit to sell the land to private developers for the project.
The Authority is governed by a five-member Board, including Eric Oyer, Chairman and former Borough Manager, Sharon Bigler, Council Member, Greg Lambert, Borough resident and Greene Township employee, Tom Newcomer, Council Member, and Chris Snavley, local business owner.
As a part of the due diligence period, staff has prepared the following information for Town Council and the CAMA Board:
No local taxpayer money would be involved in this plan: the American Rescue Plan Act of 2021 provided a $7,763,037 non-competitive, federal formula grant from the U.S. Treasury Department to the Borough to help the community respond and recover from the COVD-19 pandemic. Of that amount, Town Council allocated $4,151,857 to purchase the Southgate Shopping Center, which qualifies for the funding and would allow CAMA to make the purchase without local match that could impact Borough real estate tax rates. If Town Council authorizes the purchase, and the ARPA funding is used, it is a unique opportunity to provide an avenue for private developers to redevelop this area by leveraging federal grant money rather than local tax revenue and/or bonds or loans.
Using the ARPA money, CAMA is able to obtain control of the site, something no other private developer has been able to do for generations. This is as a result of the Borough obtaining a grant which makes the project make sense.
The purchase price is a negotiated contract between the Borough and the current owners. The Borough’s real estate valuation professional pointed out that the Borough, as a local government, would be required to pay a price based upon “highest and best use” of the property. Furthermore, that consultant has stated that the valuation is very difficult to pin down given the transitional nature of the project site. The average price from the recently sold comparable parcels is $293,934 per acre, which when used as a measure of value, supports a value of over $4,000,000 for Southgate.
In addition to no local taxpayer money being used in this project, none of the ARPA money recovered through the resale of the site will need to be returned to the Federal government. Any money recovered by resale can be re-programed by Town Council for use at Southgate or at any eligible community and economic development project.
It remains to be seen what will happen to the existing businesses as the site is redeveloped. CAMA will inherit the leases for the businesses which are of various lengths of time, and have many other commercial lease attributes. While the businesses remain open and the shopping center redevelopment plans unfold, the businesses will continue to pay rent and taxes. The rent income will help subsidize the planning process. Most of the leases make the tenants responsible for many things including ongoing maintenance of the stores and even the local property taxes. The stores or the commercial part of the shopping center will continue to be taxable property. CAMA and the Borough hope that the large parking lot will become tax-exempt. Generally, public parking lots, such as the Borough-owned parking lot next door near the CVS, are tax-exempt properties. The Borough will ask for the large parking lot to not pay taxes, but ultimately that is up to a Franklin County board that makes such decisions.
On February 14, 2022, Town Council authorized the end of the Due Diligence Period and asked CAMA to proceed with land acquisition. On February 25, 2022, CAMA agreed to enter into those agreements necessary to buy the shopping center.
Following public comment, Town Council will consider requesting that the Chambersburg Area Municipal Authority (CAMA) obtain from the Borough the Sales Agreement previously agreed upon between Town Council and Franklin Southgate LLC, which is fully assignable to CAMA. Also, to permit CAMA to enter into a Subrecipient Agreement, which provides sufficient funding from the Federal American Rescue Plan Act, to CAMA, to permit the Board to execute the purchase of Phase 1 of the shopping center by CAMA. Finally, this action will permit the leaseback agreement between the Borough and CAMA whereby the Borough will manage the shopping center on behalf of CAMA until the site is resold to private developers in parts. The CAMA Board would proceed from this point forward to complete the purchase items if Council permits the transactions to move forward.
Town Council reaffirmed the following project attributes:
In no way would the Borough of Chambersburg or CAMA be the long term owners nor the developers of this site. The proposal is to allow CAMA to buy the dilapidated shopping center, which still brings in significant rental income, and sell it to a new responsible third-party developer or developers to repurpose the land to generate additional tax and utility revenue for the Borough. Further, no local taxpayer funds should be needed. Also, most of the facility will remain taxable even during interim ownership.
Moving the Southgate Shopping Center from its current status to a more beneficial use for the community has been a multi-decade goal of the Borough of Chambersburg. Federal funding is providing Town Council with a choice to do this now with no local taxpayer funds. Staff is proud to have provided a business plan to allow Town Council and the CAMA Board to make informed decisions.
Included with this information are images from the new realistic and market based concept plan for Southgate.
A final decision of Town Council whether to proceed or not may come as soon as February 14th.
Here are some common questions and answers on the project
Is the proposal for local taxpayer money to be used to acquire the Southgate Shopping Center?
No, the American Rescue Plan Act of 2021 provided a $7,763,037 non-competitive, federal formula grant from the U.S. Treasury Department to the Borough to help the community respond and recover from the COVD-19 pandemic. Of that amount, on 10/11/2021 Town Council allocated $4,151,857 to purchase the Southgate Shopping Center, which qualifies for the funding and would allow the Borough to make the purchase without local match that could impact Borough real estate tax rates. If Council authorizes the purchase, and the ARPA funding is used, it is really a once-in-a-lifetime opportunity to redevelop this area with federal grant money rather than local tax revenue and/or bonds or loans.
Who determined the sale price?
It is a negotiated contract between the Borough and the current owners. It has been evaluated by a real estate valuation professional. Furthermore, that consultant has stated that the valuation is very difficult to pin down given the transitional nature of the project site.
Here are some sites to look up from public real estate records online:
Parcel #04-1D16.-087.-000000
Former County Market Building (formerly a part of Southgate but sold off)
Date of Sale: 2015
Size: 0.87 acres
Sale Price: $608,500
Price per Acre: $699,425 per acre
Parcel #05-1D08.-002A-000000
CVS Building (formerly a part of Southgate but sold off)
Date of Sale: 2017
Size: 0.92 acres
Sale Price: $2,861,491
Price per Acre: $3,110,316 per acre
Parcel #05-1E01.-181.-000000
Washington Square Senior Housing (formerly a part of Southgate but sold off)
Date of Sale: 2009
Size: 2.33 acres
Sale Price: $415,000
Price per Acre: $178,111 per acre
Parcel # 05-1B64.-125.-000000
Goodyear Tire Center (50 yards from Southgate)
Date of Sale: 2016
Size: 0.46 acre
Sale Price: $540,000
Price per Acre: $1,173,913 per acre
Parcel # 11-0E13.-088A-000000 & 11-0E13.-088.-000000
Former Eastland Motors Site (blighted abandoned retail 1 mile from Southgate same street)
Date of Sale: 2020
Size: 3.4 acres
Sale Price: $400,000
Price per Acre:$117,647 per acre
In Pennsylvania a state license is required to be an appraiser of property. This is because valuing real estate is extremely complicated.
The Borough is employing such an expert.
The average price from the above recently sold comparable parcels is $293,934 per acre.
If that were accurate, using just this quick look, the land at Southgate would be worth $4,056,289. The Borough's consultant agrees that using the "highest and best" method of land valuation, the site may be worth much more than the $4.5 million that the Town Council agreed to spend on it.
If redeveloped, would the Borough of Chambersburg be the owner or the developer?
No, on 10/11/2021 Town Council approved a Sales Agreement to purchase the shopping center for a total of $4,500,000. Aside from Borough costs associated with staff time committed to the project, if ARPA funding is used there will be very little cost to the Borough. The goal would be to sell most of the land to a private developer, or developers, to be redeveloped based on the Conceptual Master Plan. Council could decide to reinvest revenue collected from those sales back into the project. The proposal is to transfer the ARPA grant money and the sales agreement to the Chambersburg Area Municipal Authority (CAMA) who would be the legal owner of the shopping center until it is resold.
Who is the Chambersburg Area Municipal Authority and why would they assist in the purchase and resale of the shopping center?
The Chambersburg Area Municipal Authority (CAMA) is an existing entity with the mission to support the community and economic development of the greater Chambersburg area. A separate body politic, the authority is organized under the State Law known as the Municipality Authorities Act. The Act permits the authority to undertake a series of important projects for the community. Most commonly, the authority provides "pass through tax exempt debt sales" for community organizations including the Shook Home, Wilson College, SpiriTrust Lutheran, and other tax exempt organizations. In addition, the authority stands by to help with "pass through financing" associated with the Borough, including the proposed shopping center purchase, and the water and sewer systems of the Borough. The Borough Manager acts independently as the Authority Manager and the Borough Solicitor serves as Authority Counsel. While appointed by the Town Council, CAMA is independent and makes its own organizational and financial decisions. CAMA has more flexibility when making real estate purchase and sale decisions whereas Council can only sell real estate to the highest bidder through the public bidding process. As such, CAMA is a critical component of the shopping center purchase and redevelopment process to ensure the land is acquired and sold to developers that will redevelop the land based on the Conceptual Master Plan.
Why is it in the best interest of the Borough to purchase the Southgate property?
To redevelop a dilapidated, code deficient property with a neighborhood of land uses that the community expressed interest in, such as residential, health care and commercial uses supported with public recreation and open space amenities. From a zoning standpoint, all of the uses contemplated through the Conceptual Master Plan are permitted in the Distributed Commercial Highway zoning district where the shopping center is located. Furthermore, there is a once-in-a-lifetime opportunity to use Federal resources for this project.
Will the project and redevelopment use local taxpayer funds?
No, the redevelopment will be done by other parties using private funding. It will not be a Borough project. The one exception is the stormwater improvements, which are required to be undertaken throughout that neighborhood and are a municipal responsibility; and, a planned construction of parkland as a part of the new development, which is also a municipal function.
Will all the businesses close?
No, it remains to be seen what will happen as the site is redeveloped. CAMA will inherit the leases for the businesses which are of various lengths of time, and have many other commercial lease attributes. While the businesses remain open and the shopping center redevelopment plans unfold, the businesses will continue to pay rent. The rent income will help subsidize the planning process. Most of the leases make the tenants responsible for many things including ongoing maintenance of the stores and even the local property taxes.
Will the shopping center still pay taxes?
Yes and no. The stores or the commercial part of the shopping center will continue to be taxable property. CAMA and the Borough hope that the large parking lot will become tax-exempt. Generally, public parking lots, such as the Borough-owned parking lot next door near the CVS, are tax-exempt properties. The Borough will ask for the large parking lot to not pay taxes, but ultimately that is up to a Franklin County board that makes such decisions. That is why in the proposed subdivision, the parking lot will be on its own tax parcel. Finally, once the neighborhood is redeveloped by a developer or developers, that will all be taxable. It is envisioned that in the end the taxes collected for the new neighborhood and all the utilities sold in the neighborhood (water, sewer, natural gas, and electricity) will be far in excess of what is generated for the public good by the current dilapidated shopping center.
Who's idea was this project?
Several elected town councils over the last few decades have explored this concept. The 2007 Elm Street Neighborhood Plan included the concept of a public-private partnership to redevelop the shopping center into a new mixed use neighborhood. So, this concept is at least 14 years old. That plan was adopted by the Town Council and submitted to the Pennsylvania Department of Community and Economic Development. The adopted Comprehensive Plan called for economic development in the Southgate neighborhood. Finally, the Town Council adopted this project as a 2021 priority when the 2021 budget was approved in December 2020. Staff was directed to determine a means to accomplish this goal. Until the funding presented itself by the American Rescue Plan Act in 2021, no other funding method was identified.
October 2021 Update
The approved purchase will be in two phases. The first phase will occur sometime before the end of 2021, the Borough will assign to the Chambersburg Area Municipal Authority (CAMA) authorization to purchase Phase 1 of the Shopping Center in the amount of $3,250,000. A non-refundable deposit of $35,000 is due upon execution of the sales agreement. The second part of the Shopping Center will be purchased within one year of the first part for an additional payment of $1,250,000. The total purchase price is $4.5 million. The site is 13.8 acres.
The Borough has completed a year-long public input planning process to develop a conceptual plan for the redevelopment of the site. Redevelopment is a core mission of municipalities throughout the Commonwealth. The goal of the project is to increase the Borough's utility sales and tax revenue by replacing this derelict shopping center with new private uses. A portion of the site will be used for storm water management and recreation. The full plan is available on the Borough website.
The purchase of Phase 1 is completely funded, without local match or contribution, by the money appropriated by the Council-approved American Rescue Plan Act funding. Further, the grant award along with tenant rental payments should provide sufficient working capital to provide the Borough and CAMA with the ability to move the shopping center to re-sale as fast as possible. For your information, in the interim, the retail center remains taxable property on the tax rolls.
The Borough will enter into an agreement with CAMA whereby CAMA buys the Shopping Center and leases it back to the Borough for management for $1. This is so that CAMA and not the Borough can be the legal owner. CAMA has the power, under the PA Municipal Authority Act to sell the Shopping Center to those developers who are in the best interest of the Borough rather than just the high bidder. The Borough will enter into a sub-recipient agreement to provide CAMA with the funding from the American Rescue Plan Act (ARPA) to allow them to undertake the purchase.
The Borough will also manage the Shopping Center on a short-term basis until resale. The Borough will not be undertaking redevelopment or any construction itself other than possibly maintenance of public rights of way and utility systems.
The Borough will also undertake a process in coordination with the Planning & Zoning Commission to adopt an overlay-zoning district to guide the redevelopment process. MBI will assist in development of the new zoning for the area. The goal of the zoning is to make the resale more likely by providing prospective developers with incentives (such as parking, setbacks, and density of development) to maximize the redevelopment potential of the site. The current zoning is Distributed Commercial Highway, which has generous zoning rules. Staff believes only minor tweaks to incorporate some rules from Downtown Core zoning and other attributes such as the role of the ESAC as advisory board, is needed and can be done expeditiously.
The Borough has applied to Franklin County for funds associated with this project including funding to execute the demolition of the Golds Gym Building in preparation for the resale of that lot.
GMS Funding Solutions has been retained by the Borough to develop a Request for Proposals to seek private third-party developers to buy the Shopping Center from CAMA.
In addition, sometime in early 2022, the Borough will either recruit or retain a part-time contract or employee to assist the Land Use and Community Development Department with the day-to-day management of the Shopping Center. This action is dependent on approval of the 2022 Budget and should be fully paid for by tenant rents.
Finally, the Borough does not need to repay the money used from ARPA. CAMA and the Borough can choose to resell the property for less than the purchase price in order to encourage redevelopment with no impact on citizens or taxes. The worst-case scenario is a quick resell of the site to the private sector. Further, any money recovered through resale can be used for this project or any other eligible ARPA project as determined by Council.
There is no guarantee that the resale of the site will return money equal to or greater than the investment of ARPA funds although that is the goal. Unlike any other scenario, recovering these funds is nice but not a requirement of the project.
The main risk to the Borough is whether there are unforeseen management expenses before the site is resold. While this is possible, as landlord, the buildings can be shuttered and resold fast if that were the case. Staff is therefore comfortable with this level of risk.
Council approved this plan on Monday, October 11, 2021.
- Mixed-Use Neighborhood Resources
Southgate Urban Design Workshop
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Southgate Urban Design Workshop Part 2
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Please address questions to:Guy E. Shaul
Community & Economic Development Specialist
Borough of Chambersburg
100 South Second St., 2nd floor, Chambersburg, PA 17201
Office: 717-251-2446 |
gshaul@chambersburgpa.gov