City loans $2.7M for Kohl's

In an agreement finalized Tuesday night, the city will loan $2.7 million to the developers expected to bring a Kohl’s Department Store to Porterville in October.

City officials agree that the business deal will expand the city’s coffers with interest payments, and the addition of about $100,000 in annual sales tax revenue.

The decision to spend city dollars in ushering in the mid-priced apparel and home goods retailer was made in a 4-1 vote, with councilman Brian Ward dissenting.

“I’m a little weary about becoming the bank of Porterville,” Ward said. “We’re choosing one retailer over others. What about small businesses that can’t afford that type of loan?”

According to the agreement with Prospect-Henderson Partners, L.P., the money will  be used to assist with costs, fees and services related to the purchase of the property at 1275 W. Henderson Ave — where the former Mervyn’s store operated.

Terms of the 10 and a half year loan are that the borrower will pay a compound interest rate of 1.5 percent during an initial 70 month term, then a compound rate of 3 percent in the following 60 months.

“The loan is being treated as an investment,” City Manager John Lollis said.

Prospect-Henderson Partners, L.P. is part of Tustin-based Paynter Realty & Investments, which leases stores like Target, Old Navy and Ross in shopping centers throughout the Central Valley.

Using city money was essential in striking the Porterville deal.

“The transaction with Kohl’s would not have happened without city participation,” Dave Paynter, the company’s president, said.

As the fourth-largest U.S. department-store chain, Kohl’s has opened 37 new stores in September alone, 30 of which were in California and mostly in former Mervyn’s stores. The new store will be located in the Target Shopping Center, and many have speculated it will spur the opening of a Ross Dress for Less.

Collecting revenue from Ross’ sales tax would be an added benefit, but Lollis said it will likely be another five years before that store would open.

“It [all] sounds like a pretty good deal to me,” councilman Cameron Hamilton said.

-- Contact Jenna Chandler at 784-5000, Ext. 1050, or jchandler@portervillerecorder.com.