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Aldermen Consider Incentives to Attract Major Retailers to Town

By Paul Tambasco
City Editor

To lure big-box stores and shopping outlets, Garner officials are contemplating offering public money to close deals.

Dr. Andrew Brod of the Center for Business and Economic Research at the University of North Carolina at Greensboro’s Bryan School of Business and Economics spoke with board members last Wednesday about the effectiveness of using retail incentives. The town is considering hiring him as a consultant to help evaluate retail incentive requests.

As town staff initiates plans for future growth in Garner, local officials find themselves examining ways to spur development. In recent months, discussions on building near U.S. Highway 70 and Interstate 40 have brought the idea of retail incentives-an unusual instrument used in past projects-to the table.

Using incentives, or public funds to attract private investment, is not new to Garner’s governing body.

In 2001, local officials agreed to give $1.8 million to Core Properties Inc., the developers of White Oak Crossing, the town’s most frequented retail complex, to pay part of the project’s costs for improvements to surrounding roads. More recently, Garner offered tax rebates of $100,700 to Butterball LLC and $100,000 to Golden State Foods to locate in the town’s Greenfield North Business Park.

Though controversial, incentives are common in deals that involve recruiting large-scale commercial projects like manufacturing plants and corporate headquarters, but their use has been criticized too, with some portraying the funds as a form of corporate welfare.

In a changing market, however, most experts believe incentives are the cost of doing business.

“In a global economy, small towns like Garner are at a disadvantage when competing for an investment from a multi-international company if they avoid incentives, mainly because another community will use them,” said Dr. Andrew Brod of the Center for Business and Economic Research at the University of North Carolina at Greensboro’s Bryan School of Business and Economics.

Brod spoke with board members last Wednesday about the effectiveness of using retail incentives. The town is considering hiring him as a consultant to help evaluate requests from retailers.

Staff looked into an adviser in part because the town’s incentives policy grants board members far-reaching flexibility in evaluating retail requests and negotiating their incentives. Under the policy, criteria for commercial and industrial projects are formulaic, tied to a project’s total tax value in relation to the amount of sewage capacity the town allocates.

In contrast, granting retail incentives is more subjective, leaving board members with wide license in determining when to issue them and how much to offer.

For example, the board can offer an incentive greater than the policy’s maximum if someone brings a long-desired amenity-like a large-chain bookstore or a cafeteria to the town.

Recently, leaders have been in talks with developers to bring more stores to the White Oak area.

In general, Brod said, corporations have few preferences as to where they place new facilities or expansions across the country. But for small towns, a new factory or corporate headquarters can mean a boost in local jobs and tax base.

“It’s a problematic game, but it is hard not to play,” he said.

Incentives for retailers are unusual, particularly on the East Coast, where shopping malls and restaurant chains typically follow economic development-not the other way around.

“In general, [retail incentives] put the cart before the horse. When there is a population that wants to go to Wal-Mart, a Wal-Mart generally happens,” said Brod.

Research, however, indicates that big-box stores like Best Buy, Barnes & Noble and Target are not catalysts for economic development.

“It’s not that [retail] incentives are entirely bad; it is just that they need to meet a higher bar to make economic sense,” said Brod.

A higher standard may mean addressing more than one need with a particular project.

“If you were looking at someone coming through a major corridor-White Oak, [Hwy 70], or somewhere else … they need to make substantial infrastructure improvements, for not only them, but everyone who travels through there. That might be something we’d look at,” said Alderman Gra Singleton. “Who’s it going to impact? Is [the project] going to impact just that site, or are these major corridors that other people travel through each and every day? That’s what you have to consider,” he added.

Mixed opinions about hiring an adviser

In addition to wider latitude, granting incentives case by case opens the town to the risk of paying more than necessary, say town staff.

Town Manager Hardin Watkins has repeatedly urged the board to provide outside counsel to staff to improve their ability to negotiate with developers, similar to the way the town utilizes consultants for other matters such as cable franchising.

Board members, however, are split on the idea of paying for outside help; Singleton, a long-term alderman, and Mayor Ronnie Williams have publicly questioned the value.

“[With White Oak Crossing], the board worked through the process of incentives,” Williams said. “We also done it with Butterball and Golden State Foods. So given some time and some deliberation, we can make a decision without advising. We had to be talked and walked through some stuff, but we used incentives there, and we didn’t use an outside source.”

Given the economy, Williams thinks the town is wise to save money where it can-like the consulting fee.

Others at Town Hall, though, see bigger proposals on the horizon with much larger incentive requests attached.

Williams is convinced the board is better off going it alone.

“The public is aware of what we are doing at [Hwy 70 and I-40]. As of today’s date, there’s been no backlash. In terms of incentives, the project will offer amenities and services to the public. They will be satisfied, because we will bring them more conveniences,” he said.

Related articles:

• Aldermen OK North Garner Consultant, Yet Economy Splits Officials on Timing
• Where Do We Go From Here?
• Big Lots inks deal to fill part of old Wal-Mart space in Garner

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