The Gadfly is a series of letters offering commentary on local issues and published in the Warrensburg Gazette.
Warrensburg's City Council has approved a "development agreement" with the new Family Video store. Under this agreement, this new retail business will receive city assistance in paying for a new water main. The "public benefit" is said to be increased fire suppression capacity in that area. The way the assistance will be delivered is by rebating to the company 1/2 of the basic 1% city sales tax over an 8 year period, up to $25,000.
While corporate welfare in the form of tax incentives is an unfortunate part of modern economic development efforts, incentives for retail development are particularly suspect. That's because the calculations do not always take into account the nature of the market for certain products or services. For a big-box store, such as the Lowe's development, there may be a significant net gain in the total market, as local people who shop for that product line in other cities may stay in Warrensburg instead. Assuming such a growth in the video rental market is problematic at best.
Right now we have four companies with significant video rental business, only one of which is near the CMSU campus. It is obvious that Family Video must take market share from these existing businesses in order to succeed. Any dollar spent at Family Video will not be spent at Video Palace, Video Showcase, Blockbuster or Hastings. For each dollar spent at Family Video instead of the other stores, the city will net only half the tax. To break even, the new store must increase the total market by almost 20% above what it would have otherwise been. That’s unlikely.
It is obvious that the store would have been built with or without the agreement, since the agreement was not approved until the store was half-finished. Would the $30,000 difference in water main cost between the original estimate and the actual bid have changed the company's plans? I doubt that, as well. If the cost of the water main was a deal-breaker, was the need evident when the company first investigated the site? Were promises made by the city (as I believe happened in the Applebee’s TIF situation in 1998)?
I believe local government should do everything it can to ease the path for businesses opening and operating in the city. That means cooperating up front and removing unneeded bureaucratic red tape, not subsidizing the development with tax dollars.
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