City proposal would give Gallery $175M to maintain public areas

Philadelphia's costs to maintain public areas of the Gallery at Market East would be capped at about $175.2 million over 43 years under a plan that removes the mall from city ownership.

The proposal, on the agenda for the city Planning Commission on Tuesday, calls for the public to pay for "construction, maintenance and operating costs" in public-access areas of the redeveloped mall, according to the text of the legislation posted on the city's website.

The original deal between Philadelphia and the Gallery's operator called on the city to pay for maintaining the mall's public-access areas until 2076 at a rate that increases by 5 percent a year, according to Brian Abernathy, executive director of the Philadelphia Redevelopment Authority.

The city's most recent yearly payment obligation was about $2.1 million, though it only budgeted $1.85 million of that, he said.

Under the proposed legislation, the yearly increases are reduced to 3 percent and the city is off the hook for the common areas 18 years earlier, in 2058, Abernathy said. The city also is absolved from making up its past budget shortfalls for maintenance and other liabilities.

In return, ownership of the Gallery goes to Pennsylvania Real Estate Investment Trust and Macerich Co., which have announced plans to transform the mall into what they are calling Fashion Outlets of Philadelphia. PREIT and Macerich, a California-based mall developer, have said the plan will cost $325 million in new spending for development and construction.

The city also is considering $127.5 million in tax breaks over 20 years to service a $55 million loan to help pay those costs.