EDITOR’S NOTE: This is Part 2 of an occasional series looking at the Buxton retail development study of Emporia and potential new retailers who might be interested in the city.
The city’s top 20 retail targets deriving from the results of the Buxton study indicate, more than anything, that Emporia needs more to wear.
Eight of the top 20 are clothing/apparel chains, a result that came largely from Buxton’s analysis of the Emporia market’s retail leakage — that is, the difference between potential and actual sales in a given facet of retail. Some of the clothing retailers, though, may not be potential matches after all — one recently went bankrupt, for example, while another looks for markets with black populations much larger than Emporia’s.
Kent Heermann, president of the Regional Development Association of East Central Kansas, worked with Buxton and three other city leaders — City Manager Matt Zimmerman, Chamber of Commerce President Jeanine McKenna and Emporia Main Street Director Kayla Oney — to narrow Buxton’s original list of 72 retail matches to 20.
Buxton, based in Fort Worth, Texas, used purchasing data such as credit card and grocery store card information to profile the spending habits of people in the Emporia market — a process known as psychographics, or “demographics on steroids.” In performing the study, Buxton used the intersection of 15th Ave. and Industrial Road as a reference point for analyzing the Emporia trade area, using 10- and 30-minute drive times from that location.
“There was tremendous leakages in the clothing and clothing accessories stores,” Heermann said. “If you were to ask people on the street, there’s truly not a men’s store here anymore. ... Some of the women’s and children’s clothing options are not as plentiful here as other places. So those are some of the ones we were targeting, so they got on that list of 20.”
Heermann recently released the city’s list of retail matches to The Gazette after keeping the list from publication following Buxton’s presentation of the study in April.
Apparel retailers on the city’s list include:
• American Eagle Outfitters, men’s and women’s apparel
• Avenue, women’s
• Christopher & Banks, women’s
• Once Upon a Child, children’s apparel and gently used merchandise
• Pac Sun, men’s and women’s
• Simply Fashions, women’s
• Steve & Barry’s, men’s, women’s and children’s
• Vanity, women’s and children’s
Of the clothing retailers in the top 20, Pac Sun and American Eagle have the most stores nationwide; Pac Sun has 866 stores in the U.S., while American Eagle has 836.
Several of these apparel stores appear to be out of current consideration for Emporia. Steve & Barry’s filed for Chapter 11 bankruptcy early this month, which Heermann said means “there’s no point in talking to them.”
The presence of Simply Fashions on Emporia’s list highlights the difference between psychographics, which is the heart of Buxton’s work, and demographics. When a group of city leaders attended the International Council of Shopping Centers annual convention in Las Vegas, Heermann said, they learned that Simply Fashions doesn’t look to expand into markets with a black population of less than 5,000. According to the Buxton study, the black population of Emporia’s 10-minute trade area is just 878, or 980 for the 30-minute trade area.
“That’s one of them, I looked on their Web sites, and I didn’t think it looked like a store that catered to any specific ethnicity,” McKenna said. “I thought it was a nice women’s clothing store, so that’s why I know I put it on there. ... I felt that it was a good, middle-line type of clothing (store) that I felt would go well with the community.”
Lisa Hill, Buxton’s territorial business manager for the Emporia study, said Simply Fashions was on Buxton’s initial list of 72 matches because the company’s analysis doesn’t focus on demographic factors like age, sex, race and income. In using the results of Emporia’s purchasing data, Buxton looked at whether certain retailers have expansion plans in the next two to three years and whether they’re locating in comparable markets. Simply Fashions and others, she said, were a match for Emporia because they’re expanding in comparable markets with a comparable customer base.
“Now, whether they typically locate around a higher population of African-Americans, OK,” she said. “But what we’re learning, based on our work with over 2,000 retail clients, is they’re moving away from the old school of thought, that demographics are really telling their best story. ... And when we looked at comparable markets, we looked at ‘Do they look like Emporia? Yes, they do.’”
Heermann has begun the process of exploring opportunities that might exist. He said that as time permits, he’s called most of the retailers on the top 20 at least once or more. For example, in a conversation with an American Eagle representative, Heermann was told that because of current market conditions, American Eagle wouldn’t be looking at the Emporia market right now.
“They look at things like sales per square foot, and they figure some of their customers will drive to either Topeka, or Wichita, or Manhattan, or even Ottawa, perhaps, to be able to get their products there,” Heermann said. “And so, if you build a new store, it has to pull away sales from other stores. That’s kind of the trick, how you figure that out.”
Heermann also still has Buxton’s original list of 72 matches, which he said he’s exploring along with the pared-down list. He said he’s talked to some retailers who could have an interest, but doesn’t want to reveal which ones, “because that can cause a deal to go south pretty quick.”
“There’s some I’ve talked to,” he said. “More have said no, or don’t have an interest now, or may have an interest later, but there’s one that’s said, ‘Yeah, let’s keep talking.’ So that’s encouraging. But far from a deal, far from a project.”
He feels the results of the study have given him a good starting point to look for retail opportunities.
“Had I just gotten the (International Council of Shopping Centers) directory and kind of started going through there randomly, I’d have gotten a lot more noes than yeses,” Heermann said. “At least this was some sort of logical criteria based on our demographics and psychographics, of a list to start with. There’s something to be said (for) being at the right place at the right time.”
TOP 20 FOR EMPORIA
• Aaron Brothers (art/collectibles/frames)
• American Eagle Outfitters (men’s/women’s apparel)
• Ashley Furniture
• Avenue (women’s apparel)
• Barnes & Noble (books, CDs, DVDs)
• Best Buy (computers/software, electronics)
• Buffalo Wild Wings (restaurant)
• Christopher & Banks (women’s apparel)
• Fazoli’s (quick-service restaurant)
• Hy-Vee (supermarket)
• Jo-Ann Fabrics (art supplies, crafts, hobbies)
• Once Upon a Child (children’s apparel)
• Orange Julius (ice cream, yogurt, candy, coffee/juice)
• Pac Sun (men’s/women’s apparel)
• Perkins (restaurant)
• Red Lobster (restaurant)
• Simply Fashions (women’s apparel)
• Steve & Barry’s (men’s/women’s/children’s apparel)
• Texas Roadhouse (restaurant)
• Vanity (women’s/children’s apparel)
Comments
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Posted by booker5m (anonymous) on July 24, 2008 at 4:49 p.m. (Suggest removal)
Can we get our $65000 back?
Posted by Matt66647 (anonymous) on July 24, 2008 at 9:31 p.m. (Suggest removal)
More than a cursory review of the ICSC "Directory" would have also shown the minimum population requirements, traffic counts, retail space needs, and ideal demographic incomes for any potential retailer to relocate here. This directory is easily available to anyone!
YOU DON'T HAVE TO ATTEND THE CONFERENCE, FLY ALL THE ATTENDEES THERE, BUY THE BUXTON STUDY, ETC....Simply do your research boys...Save our tax dollars!
This whole process can be done much more cost efficiently!
NO NEW TAXES (Look at how there wasted now)!
Posted by nks (anonymous) on July 24, 2008 at 10:27 p.m. (Suggest removal)
I would love to see a Hyvee come to town. The down side would be it would further cut into the Reebles/Price Chopper shoppers.
They are great stores that actually pay their help, unlike Wal Mart.
Posted by justthefacts (anonymous) on July 24, 2008 at 11:23 p.m. (Suggest removal)
I agree no new taxes...just raise the ones we have now. That's ok by me. I'm willing to be responsible enough to my community to carry my own weight. I use the streets, use city services and figure that it's a decent price compared to other places I've lived. How about taking a look at how the other taxing entities, like the school district, resource district, library, county and other taxing entities spend their money rather than always screaming at the city.
Posted by paulkersey (anonymous) on July 25, 2008 at 12:42 a.m. (Suggest removal)
"Can we get our $65000 back?"
+1
Posted by create (anonymous) on July 25, 2008 at 7:25 a.m. (Suggest removal)
Yeah, can we get our $65 thousand back. Especially after this comment: "they figure some of their customers will drive to either Topeka, or Wichita, or Manhattan, or even Ottawa, perhaps, to be able to get their products there,”
It cost us all that just to hear what we already know?
Also, we already have an Ashley Furniture dealer with Wallace's Stitching Post.
Aaron Brothers? We already have a frame shop downtown and they do a great job.
Barnes and Noble? How many bookstores do we want? We already have Town Crier, and Hastings has a coffee shop too. Why dilute their profits?
JoAnn Fabrics? C'mon!!! We had a very nice fabric store downtown and she had to move to Topeka to make it. Okay so they have craft stuff too. We already have a craft store downtown. They just moved in to the old Outfitter's building and it's very nice. What's wrong with Dayton's?
Orange Julius? Don't we have enough ice-cream places in town? What's wrong with Sonic and Braum's? Wrong location? Not in the great NORTHWEST? Ha! You want a recipe for Orange Julius? I'll give you one. Orange juice concentrate, vanilla, milk, ice. Blender. Voila! That'll be $65 thousand please.
Okay, I'll stop. But one more thing, Red Lobster is not going to locate in Emporia so quitcherdreamin.
Posted by momus (anonymous) on July 25, 2008 at 8:39 a.m. (Suggest removal)
Not to throw gas on the fire, but the study was $70,000, and that doesn't include all the man hours spent on this "study", the trip to Vegas and the resulting hours on the phone hearing the word "no" from these potential businesses. The thing that really ticks me off is that the businesses listed are, in almost every case, customers of Buxton. So, Buxton gives these businesses information about Emporia, and then we pay Buxton FOR THE EXACT SAME INFO. Not only does that seem redundant and wasteful, but if Buxton is supplying match information to these companies and we are getting instant "not interested" responses, it seriously calls into question the validity of the data supplied by Buxton. This is why you bid out outside help (unlike this situation). This is why you get numbers concerning how many businesses were placed in similar cities (where Buxton actually had a hand in the process prior to placement). This is why you need matches on a psychographic AND demographic basis. No doubt the Buxton representative was one heck of a sales person, but it is situations like these that frustrate the heck out of tax payers. The city council and Matt Z. take a lot of unnecessary heat for things they are definitely not responsible for, but in this particular case, at least part of the blame lies with our city leadership.
Posted by netloafer (anonymous) on July 25, 2008 at 8:48 a.m. (Suggest removal)
If you look at the city's annual budget you'll be able to see that we fund the RDA to the tune of over $200K per year, and the number is budgeted/forecast for steady increases in the out years of the budgeting process.
As I read this story I'm hard pressed to understand why we are funding the RDA. If all we are going to get is studies like Buxton, to the tune of an additional $65K, and the overhead of the RDA itself, we are subsidizing nothing but the income, junkets, etc. for Mr. Heermann and his staff. There is no bang for the buck in that. We are in essence paying for information we already have. We're paying for the studies and we're paying for Mr. Heerman listen while retailers say, "No, we're not expanding right now." "No, we're bankrupt."
Good sense should prevail somewere in the process, but that seems to be in short supply right now.
Posted by justaflushaway (anonymous) on July 25, 2008 at 9:03 a.m. (Suggest removal)
How does this guy Heerman keep his job?? Doesn't he have more important things to do like GETTING SOME JOBS here??? and I don't mean clothing stores,, there has to be somewhere to work that pays a good wage before a person can go to the clothing stores
How much does the heerman guy get paid for some of his comments? is he city paid? the city is going to hell and I cant afford electricity anymore.......
Posted by netloafer (anonymous) on July 25, 2008 at 9:30 a.m. (Suggest removal)
Mr. Heerman is salaried as the director of the RDA and the city funds the RDA. So, our tax dollars pay his salary, the salary of his staff, etc.
Posted by momus (anonymous) on July 25, 2008 at 10 a.m. (Suggest removal)
I don't think we have been as successful as we should be in the area of industrial recruitment, but I don't think that this Buxton fiasco is Mr. Heerman's fault. I get the sense that he understands that retail options stem from more jobs (and population), and more jobs come from technical, industrial and service applications. I think Kent was put in the position where he had to do what his bosses were telling him to. Unfortunately, I think our leadership based their decisions on faulty assumptions.
Posted by netloafer (anonymous) on July 25, 2008 at 10:16 a.m. (Suggest removal)
Momus
I have no personal axes to grind with Mr. Heermann, but I'm hard pressed to see much justifiable value in the RDA. We're basically supporting overhead.
I recall years ago hearing comedian Jackie Mason talk about his ideas about compensation for congressman, senators, and others in high level positions being compensated by taxpayers. Mason's idea was to shift from guaranteed salary to commission. If the politicians didn't provide value, they wouldn't get paid. If they did, they would, based on the value of the work they did, either in savings, job creation, economic development, etc.
It was a tongue in cheek proposal, of course. We all know our legislators would never stand for it. Too much exposure?
I realize ideas like that would never pass muster here either. But, God, wouldn't it be grand to be able to compensate based on performance. I'd be willing to pay everyone at the RDA a commission on the value of good jobs brought here or for retailers, restaurants, etc that bring tax revenues into the city and county coffers.. I can't say for sure, but I suspect that a real hustler in such a position would be bypassing the studies and shaking the bushes to make things happen.
But then, I digress, I dream, I hope against hope.
Posted by slipandslide (anonymous) on July 25, 2008 at 10:50 a.m. (Suggest removal)
so... the city leaders dont know how to use the internet to find this information without spending 700 thou.
Posted by momus (anonymous) on July 25, 2008 at 10:59 a.m. (Suggest removal)
I completly agree with your point about performance based compensation netloafer. I'm just pointing out that, in this particular Buxton instance, I don't think Mr. Heerman is at fault. If I'm willing to be critical on a blog, I think I also have to be willing to defend people...
Posted by netloafer (anonymous) on July 25, 2008 at 2:36 p.m. (Suggest removal)
Momus
I agree!
Posted by ksflwrpetals (anonymous) on July 25, 2008 at 6:02 p.m. (Suggest removal)
The last think this city needs is another eating establishment. Look at what has happened in the job market and what people are spending their money on before bringing in more specialty shops. Instead of spending several thousand dollars to research what might work here, poll the residents on what we want for our city.
Posted by Matt66647 (anonymous) on July 26, 2008 at 1:07 a.m. (Suggest removal)
Let's not forget that the Buxton study is not the 1st retail study that has been done and then "shelved". It seems that every few years there is an outcry for more retail options here in Emporia. A study is called for, then market conditions change and retailers are no longer expanding.
Real Estate Is Cyclical!
Our City/RDA should immediately do homework and put together an Incentive Plan, Site Development/ Building Plan, Tax increment Financing District, Sales Tax Rebates, Building Permit/Fee Rebates, etc. in order to be prepared for the NEXT commercial building boom.
How many communities were soliciting retailers at ICSC without these tools? I can guarantee precious few would attend such a conference without these basic necessities already in place.
City Officials opposed to such incentives should remember this is all money that we would not have anyway without retail development (Sales and Property tax for example). When the incentives expire we get to keep ALL the new revenue, all the while benefitting from the jobs (Construction and Retail) that are newly generated during the interim.
The old school idea that we just need to bring jobs and the retail will follow has TRULY NOT WORKED for the past 30 years, and does not reflect the current retail environment! If development incentives are what other communities are doing to attract development, we had better get on board or risk continuing to be passed over!
The idea that "retail options stem from more jobs" is truly stifling! Let's think outside the box and acknowledge that one of the first statistics that retailers ask for is Traffic Counts! We happen to have an Interstate running right past our little burg with truly outstanding traffic numbers, Numbers that happen to be growing quite consistently. Further, virtually everyone travelling this way must break up their drive to enter the turnpike. I could see a scenario whereby retail development was encouraged at these nodes principally appealing to travellers, but benefitting the citizens of Emporia as well.
Look no further than Lawrence for an example of an RDA that supports Retail Development with incentives, just as strongly as they do Industrial Development with incentives.
Come to think of it, Emporia is one of the only cities I know of that has ONLY focused upon Industrial Development Incentives (and totally neglected Retail Incentives up until this past year)! It is time to throw the old model out and accept the Retail World as it is!
Momus the Buck stops at the RDA director. He is to lead the development efforts and should redirect the laymen(read council members) in their sophmoric efforts. It is his ultimate duty to research what has worked elsewhere and bring forward a real, working plan. To date commercial development efforts appear whimsical at best.
Posted by momus (anonymous) on July 26, 2008 at 8:39 a.m. (Suggest removal)
Matt,
I'm going to have to strongly disagree with you about incentives. Most studies I'm reading identify disposable income as a fixed pie relative to the percentage of disposable income available to the community. Retailers or restaurants that want to come to the community wish to place their businesses here so they can make a profit, both in the short and long term. So, the problem with incentives for chain retail and restaurants is two fold: first, you are giving money to chains that were already coming here anyway. Secondly, you give companies an unrealistic net income perspective that generally disappears just as they are entering phase three of the typical economic growth model (sales have plateaued or are decreasing at an increasing rate). When the incentives go away, you then face the prospect of a large retailer or restaurant leaving, and even Buxton warned of the devastating effect of this particular scenario.
Some states (recently Arizona just joined this group) have actually outlawed most commercial development incentives. When you look at the numbers to determine why they took this step, their reasoning becomes very clear. The benefits of giving financial incentives to a large scale commercial development plan that focuses on building outside entities as opposed to developing an entrepreneurial base are negligible at best. The only positive data that I have seen concerning tax benefits stemming from commercial development incentives is in the case of "sister cities", or two cities of similar size that are close enough in proximity to contain the same retail trade area. Emporia does not even remotely fit that model.
National retailers and restaurants are not coming here because we don't have enough customers to meet their business requirements. We have a city of roughly 26.000 and a trade area of roughly 55,000 which both have some demographic and median income challenges. Until our population grows SIGNIFICANTLY and our median income improves (both of which require jobs) most chains will not locate in Emporia. We keep looking for quick fixes to get what some people want, and doing that only distracts from larger issues while putting us as a city in a worse competitive position. Emporia is surrounded by larger cities that will always be able to offer more homogenized commercial opportunities. If we choose to compete on the basis of their strengths and our weaknesses we will continually loose market share in the long term!
Posted by Matt66647 (anonymous) on July 26, 2008 at 9:08 a.m. (Suggest removal)
Momus,
A TIF district is an incentive that costs us nothing! (Not all incentives are created equal!)
Your methodology has gotten us no further...our community continues to have net sales tax leakage!
Why not try at least one part of this new methodology?
Digging in your heals and saying it just won't work is not beneficial and besides your analysis has totally discounted all those travellers whizzing by.
Do a license plate survey up at Starbucks to see who stops and what kind of demographics would support consumption here in Emporia!
Posted by momus (anonymous) on July 26, 2008 at 9:30 a.m. (Suggest removal)
Matt,
TIFF does cost. If you are giving away sales tax revenue, that is a cost. If sales are a fixed pie, the sales gained from the new development are lost from somewhere else.
They have tried and are trying this new methodology. It's not working. It hasn't worked other places either, to the extent that laws have been passed outlawing your "new methodology".
I'm not digging in. I'm being realistic. Remember when outlet malls were supposed to cure the woes of the state's smaller communities? That worked well.
Retailers don't especially care about all those travelers whizzing by. They ask about day time and night time populations, 15 and 30 minute drive time populations, median income and such. People from larger cities aren't going to leave their Home Depot to shop at ours, and I doubt someone whizzing down the turnpike is going to merge into our city in order to pick up some plywood. Wishing won't get this city where it needs to be.
Posted by paulkersey (anonymous) on July 26, 2008 at 9:49 a.m. (Suggest removal)
I feel the city is in a catch-22 right now. In order to get more industry, we need more retail . In order to get more retail, we need more industry whose jobs are high paying enough to support retail. I'm not sure what can be done about this, if anything. I have heard that GE is putting in a plant in Hutchinson that makes wind turbine propellors. Maybe this is an approach to look into. I mean, its not like we have a shortage of empty manufacturing plants.
Posted by Matt66647 (anonymous) on July 26, 2008 at 9:54 a.m. (Suggest removal)
M,
A Tax Increment Financing District would use the NEW sales tax and property tax from the specified development to reinvest back into that new development to pay for improvements...costs you nothing! (This was all money you did not have to begin with anyway!)
Time for a cup of coffee...meet you at Starbucks! We can count the out of town vehicles pulling in to support our local store...and discuss the merits of Fast Tracking /Streamlining the Building Permit/Review process for commercial development (another No Cost incentive). We could also mull over the creation of a Development Plan (a low cost action).
Perhaps it is time to act like we WANT new commercial development and decide just what we CAN do rather than just waiting,hoping and just saying no!
I'll bring my laptop so that we can "You Tube" the RDA/Chamber film marketing Emporia...always good for a laugh...Let's not loose too much sleep over this issue. Remember we have missed this retail development round...have to wait a few more years now!
Posted by jayhawker (anonymous) on July 26, 2008 at 10:28 a.m. (Suggest removal)
Good discussion with good ideas and some meritorious complaints. If we are serious about trying to save our economy, we need to get taxes down. We are very heavily taxed (Kansas is the highest in the region, and Emporia one of the highest in Kansas), which is a disincentive for a capital venture to invest here. In view of the business that has left this town in the last few years (what, 2000 jobs altogether maybe?), one would think that the community's leadership would understand that it is imperative to get taxes down. But what do we see? A proposal to increase the sales tax. What are we thinking?
Posted by Matt66647 (anonymous) on July 26, 2008 at 10:47 a.m. (Suggest removal)
Amen to that Jayhawker!
Posted by create (anonymous) on July 26, 2008 at 10:49 a.m. (Suggest removal)
Good idea Paul. I'm glad you mentioned Hutchinson, and I know you weren't meaning Emporia manufacturing wind turbines per se, but mention wind turbines around here and you get screamed at for messing up the prairie and scaring livestock. I remember when just about everyone around here was vehemently opposed to a nuclear power plant so it located in Burlington. New ideas just seem to fizzle out around here.
Posted by momus (anonymous) on July 26, 2008 at 12:56 p.m. (Suggest removal)
Matt,
One more time... The businesses in development may be new, but the dollars spent at them are not. Nationaly, an average of 86% of these sales are captured, meaning that they were pre-existing sales spent at other businesses, now spent at the new development. Infrastructure must be extended, fire and police must be extended... Nothing is free.
Posted by jayhawker (anonymous) on July 26, 2008 at 1:22 p.m. (Suggest removal)
momus: You have made the point that retail development will not get us out of this. There is, of course, some marginal brief benefit if there is new construction associated with the new business. Between the fact that the sales made by the new store only takes sales from an existing store, the inventory is purchased elsewhere and the profits go to nonresident investors, there is only a small percentage of the sales left for us locally. It reinforces my point that for us to become wealthier, in a macro sense, we need to sell goods and/or services to others outside of our retail trade area. That is the only way to bring in new wealth. To do otherwise only recycles existing wealth and we merely spin our wheels; in fact, we get poorer because most of the products purchased are consumables. In order to bring investment like that into our area, however, we are going to have to get taxes down. You cannot be one of the highest taxed communities in the highest taxed state in the region and expect investors to come our way. I assure you that they will not come here for the privilege of paying high taxes.
Posted by jayhawker (anonymous) on July 26, 2008 at 1:33 p.m. (Suggest removal)
By the way, a higher sales tax will further retard retail sales anyway.
Posted by momus (anonymous) on July 26, 2008 at 2:14 p.m. (Suggest removal)
jayhawker,
I will agree with your take on the sales tax proposal. “Stagflation” is not the time to heap more pressure on disposable income. As for taxes as a whole, I think that a lot of factors are in play. A blanket cut could potentially do more harm than good over the long term. Instead, I think we need to calculate a return on the community’s investment for different line items within the budget. I have promoted "smart growth" policies here in the past which would, over time, reduce the amount of resources needed for infrastructure relative to the population. I think, with some smart planning, we could avoid tax increases over the long term, thus creating a relative low tax zone when compared to the surrounding area.
But, we are talking LONG term here... And, patience hasn't exactly been one of Emporia's virtues. Rome wasn't built in a day (not that I want to become Rome). But we have to remember that building a city is a marathon, not a sprint. As long as each generation makes the commitment to leave things better for the generation following them than they inherited from the previous generation, we should be fine. I get scared when I hear about the "one thing" that will cure all of our ills, and magic bullets. Building a community is hard, screwing one up is easy.
Posted by jayhawker (anonymous) on July 26, 2008 at 2:37 p.m. (Suggest removal)
Very well thought through post, momus. If your statement that "we need to calculate a return on the community’s investment for different line items within the budget" means prioritizing programs and being willing to say "No" to programs that cost us beyond our resources, then I agree with you. I also agree with you that we need to get our taxes low in comparison with the surrounding area. I think that we may disagree, however, on the urgency of the matter. I, too, am thinking long term. However, if we don't do something now, it may be too late to pull out of this spiral. I agree that we need to build for the next generation; my concern is that we are making poor decisions that will leave the next generation with little to work with. We are at a significant intersection in our history, and the road that we choose today will drastically effect the future of Emporia. That is a weighty responsibility.
Posted by Matt66647 (anonymous) on July 26, 2008 at 2:56 p.m. (Suggest removal)
Momus,
What if the new development targeted the sales tax leakage that is already flowing away from city coffers (and growing larger by the day)? What if the new development targeted travellers passing through, who would not stop and spend now anyway?
Then the dollars spent would be "new", per your argument!
Additionally, Infrastructure expenses could be covered by the TIF District discussed above (Money that you would not have had anyway). By the way, this is not a give away, it is simply allocating tax revenues derived from the commercial district back to that same commercial district.
Lastly, Fire and Police expenses are fair enough, but you could easily cover those with some of the new tax revenues that would be collected from the new retail district, I never said you would have to rebate everything back to them...
Do a REAL Fiscal Feasibility Study to analyze cost/benefit ratios. I think you will see that police and fire expenses are really quite minimal compared to the benefit of jobs, construction, etc. not to mention Quality of Life!
Rather than make assumptions about what will work, let's let the Marketplace determine what they are willing to invest in...we as a city just need to put our best foot forward by outlining a plan. Can we help them or not? Simple as that! If not we better get used to our third tier status and be content with more tax leakage and shrinking revenues.
I recomended that cup of coffee because it represents "new" dollars in our community, I assure you that Emporians are NOT making 86% of those purchases. The vast majority of those sales, at that location, would never have been made but for the fact that we happen to have Sbucks right here in Emporia, conveniently located right off the interstate for all those travellers.
Obviously I think we can do better! We can easily begin with some of the low/no cost items suggested above!
Once again, what CAN we do rather than wring our hands?
Posted by momus (anonymous) on July 26, 2008 at 6:44 p.m. (Suggest removal)
Matt,
The sales leakage for Emporia, per our latest consultant, is around $11 million across all categories. If you develop a new area, you need an anchor for the new development. Let's say that you decide that you want to anchor an area with a Home Depot. OK, they require sales per year in about the $35 million dollar range per year; more than triple our sales leakage across all categories. My point? Most anchors for new development aren't going to simply target leakage, nor can you recruit most chains to simply target leakage without capturing existing sales. Thus, the sales capture rate that I quoted previously.
There have been cost/benefit studies done by a variety of companies. Typically, developers don't want them done because they look at the net effects of the development on the community. The firm Civic Economics from the Chicago area has studies that are quoted constantly because they consistently found negative impacts to large scale developments in general, even before tax breaks and tax abatements.
I am not making assumptions. I am using data collected from other communities to help determine the probability of success concerning your proposed "new methodology". When you sit at a coffee shop (that is closing 600 stores nationally) and then develop a course of action based off of a few license plates, that could be construed as an assumption.
Again, Starbucks came to town without incentives because they thought they could make money here. Good for them! If other people want to come here without incentives, the door is open. But, if a company doesn't think that they can make a profit in Emporia incentives won't matter. If they do think they can make a profit in Emporia, incentives aren't necessary.
I'm not suggesting that we do nothing. But, if we have restaurants and retailers won't come to Emporia because our population and median income is too low, I suggest that we focus on improving our population and median income. If you think throwing money at the problem will work, ask the people that thought the Modine building would make a perfect retail center, with rezoning and TIF, how that worked out.
Posted by Matt66647 (anonymous) on July 27, 2008 at 9:08 a.m. (Suggest removal)
Momus,
I can see how stuck we are in "Old School" Methodologies here in Emporia.
Your assumptions about leakage and retail have led to a stagnant environment when it comes to commercial development, and a populace that is dissatisfied with the options and now must shop outside the trade area to meet their needs.
That little jingle about "Shop Emporia First". repeated like a mantra ad infinitum on the local radio station, is no longer effective either (if it ever was in the first place)!
I would strongly caution you to be careful with what you read and to be sure to examine the fine print...did you see that your Arizona "No Development Incentives" example is only applicable to the Phoenix metro area (Population Zones over 2 million). This because the subcommunities, Scottsdale, Marana, Paradise, etc. were competing with each other to lure developers.
To the contrary, legislators from smaller communities in Arizona, who voted for the Phoenix proposal, are now terrified that this law will be extended throughout the state! They no doubt realize that 2nd and 3rd tier markets (like Emporia's) need some tools to simply compete!
Although you say you don't want to do nothing, I am hard pressed to find a single suggestion from you about how Emporia might proceed with commercial development, other than to sit on our........
How can you improve "population and median income" all the while ignoring Quality of Life? Look at our stats and ask yourself "has the population improved"? The last census says no. Has the median income improved? Once again...No.
I can not state in stronger terms...your methodology is not working.
All I am doing is looking at a subsection of the problem here in Emporia - Commercial Development and how that is affecting quality of life.
Some would argue that your outlook on retail development is protectionist and altruistic. Fine, but I would counter that you have ignored the potential for Emporia to capture sales beyond the confines of our city boundaries. Your $11M vs $35M argument ignores the additional capture potential that would be found in good retail development. Remember sales tax leakage is not a zero sum game...we could capture above and beyond our limited trade area with the right development mix. I believe that past consultants have pointed out this potential.
Simply think about what capturing that leaking $11M could mean here in Emporia...Heck, we could almost buy another Courthouse!
Posted by momus (anonymous) on July 27, 2008 at 12:39 p.m. (Suggest removal)
Matt,
First, my "old methodology" is called the "real world". As I said before, "If other people want to come here without incentives, the door is open. But, if a company doesn't think that they can make a profit in Emporia incentives won't matter. If they do think they can make a profit in Emporia, incentives aren't necessary."
Let's say that there is an $800,000 leakage in a home improvement category that we plop down your Home Depot to fix. Do you really think that people outside of our trade area are going to generate the additional $34,200,000? If not, where will that money come from and what will the net effect be on properties and sales throughout the community? Do you actually think, contrary to multiple multi-year studies, that peoples shopping habits will change overnight and Emporian's will stop going out-of-town while those from outside our trade area will flock to Emporia?
Your method that you are proposing isn't working right now. Even with TIF we are getting a series of "No's" from retailers. Why? It isn't because of an "old methodology", or "people resisting change"; we aren't getting new development because companies that we are targeting don't think they can make money here. Why? Because we don't have the quantity of customers and the level of median income they need to make a profit. How does your "new methodology" fix that problem?
Again, our most recent consultant stated quite bluntly that people aren't going to travel to Emporia to get the exact same products from the exact same retailers they have in their own back yards. People that live in a mid-point between Emporia and a larger city most likely will travel to a larger city for "Big Box" items because larger cities can support more variety (they have a larger population and higher median incomes). People travel out-of-town for large scale sporting events and other activities that are not available to the local public.
If you are surrounded by larger communities that will beat you every time in large scale developments, the best option is to promote unique environments and businesses that have been choked out of larger communities. These types of businesses can usually act as destination locations that DO pull individuals from outside the trade area. Yes, we need to make development and re-development easier throughout the community. But, incentives for large scale development lead us into a battle that we cannot win with larger communities. We can, however, divert resources to producing jobs which will give us the population and incomes that will result in larger retailers WANTING to locate to Emporia.
Rezoning on Industrial, the addition of TIF, the retasking of the RDA, the updated comprehensive plan and Buxton were all efforts to introduce your "new methodology". Those efforts have lead to zero development with an additional zero development on the horizon. Can you explain that?
Posted by netloafer (anonymous) on July 27, 2008 at 1:09 p.m. (Suggest removal)
Like a lot of folks I was quite enamored of TIF's and TDD's for a while. But I found as I researched the subject that they rarely do what proponents say. One of the early hooks was the mantra, "It's all about development." But when cities approached them with needs in the urban core and the desire to use TIF's as a tool to eliminate blight and restore community core the developers went running. They wanted a sure thing and didn't want to take on the risk.
One of the other arguments was that TIF's were tax neutral. Not true. Municpalities have to issue bonds (debt) against potential/future tax revenues to do the infrastructure work. That debt shows up on the municpality's balance sheet and come levy time it will show up on the bills of property owners.
It may seem appealing at first blush, but there are significant down sides to TIF's and TDD's. They can't be brushed aside with proclamations of "those opposed are only thinking old school."
Kansas City is working on a different kind of model, with a different approach to incentives. My wife and I bought a loft in the River Market two years ago. One of the incentives in buying was that buyers were being offered fifteen year residential property tax abatements. That attracted a lot of people, particularly young suburban professionals who saw living close to downtown as socially and fiscally attractive. My wife and I were among the first purchasers. Now all the lofts have been sold. There was a rundown building across the street butting up against the river that was renovated. All of those lofts have been sold.
Almost on cue, retailers and restaurants started moving in. Bo Ling's opened a place and little places started springing up to meet the needs of people moving in. There are also engineering and architectural firms, etc. moving in, bringing in folks with disposable income and a desire for tight knight community. A supermarket is being built. Light rail from the north and east are now in the planning stages. An esthetically pleasing river walk is under construction. When we first bought the place there was "alright" traffic. Now there is activity everywhere. It seems to be contagious and is spreading east toward 18th and Vine and to the west in the Freighthouse district and the Arts district, which are other areas that have been blighted for years.
The same holds true for the Power and Light district just south of downtown. It's successful because people are moving into the area. And, what's more, none of it is diluting the consumer traffic down at the Plaza.
I don't think it's fair to say that Momus or others are all for hand wringing. We care about what happens to Emporia and we give that much credit to those with opposite views. It would be nice to see something reciprocal from those favoring TIF's, TDD's. etc.
Posted by jayhawker (anonymous) on July 27, 2008 at 1:24 p.m. (Suggest removal)
Can anyone who knows inform us on our city's government's position on all this and what steps are being taken to promote whatever that policy is?
Posted by netloafer (anonymous) on July 27, 2008 at 3:19 p.m. (Suggest removal)
Jayhawker
I don't think it has changed much. In the last city commission election cycle the development strategy was to attract big box retailers and low wage manufacturers. There was a lot of talk about the potential of a Home Depot or something like that. In terms of restaurants it was either Red Lobster or Olive Garden.
Posted by jayhawker (anonymous) on July 27, 2008 at 3:58 p.m. (Suggest removal)
Thanks, netloafer. Other than promoting a sales tax, what action is there on those proposals?
Posted by netloafer (anonymous) on July 27, 2008 at 4:18 p.m. (Suggest removal)
Jayhawker
I don't know of anything specific. The sales tax has leadership support. Byeond that, I think the in thing to do right now is to commission studies like Buxton, then follow the studies up with junkets to Las Vegas so that big box retailers can tell us they're not interested right now.
Posted by jayhawker (anonymous) on July 27, 2008 at 4:28 p.m. (Suggest removal)
Thanks, netloafer. Help me out on something else if you would. If the strategy is to attract retail, how do the city fathers reconcile a sales tax increase which would make retail products more expensive to buy? If the product is more expensive, they would sell less, thereby make less, all making me wonder why a retailer would want to do business with us. I'm lost here.
Posted by netloafer (anonymous) on July 27, 2008 at 5:32 p.m. (Suggest removal)
Jayhawker
You've got me. As Momus said retailers aren't going to come here unless they can profit by doing so. So, I guess my answer is that I'm stumped. TIF's and TDD's aren't proving to be a great magnet to this point, are they? Nor does it help at all to have an economy in a downturn.
There are some interesting case studies about the impact lower taxes have on sales. In New Jersey a Swedish Company, IKEA, approached the city of Newark. They would locate a store and pay the startup costs themselves and also hire the majority of its employee base from Newark's economically depressed neighborhoods if the city would agree to cut the NJ sales tax in half by creating an economic opportunity zone. It took hold. IKEA profited, inner city people got good paying jobs and the increased volume of sales made more than made up for what city leaders had originally assumed would be lost revenues. It was a win-win-win.
Posted by jayhawker (anonymous) on July 27, 2008 at 5:54 p.m. (Suggest removal)
I'm not educated on these issues, but it seems elementary that high taxes discourage capital investment in general and high sales taxes discourage retail specifically. Retail seems to be a slow and inefficient way of building the economy because so little of the money remains local (out of town manufacturers provide the inventory and profits go to absent investors, leaving only a small percentage for us). A new retailer (unless his product is very unique) only takes sales from another local retailer. However, if our policy is to put our limited resources into attracting retailers, I don't understand increasing sales taxes. I assumed that the city fathers had "war roomed" strategies that they are now executing, but I have to say that if they are, they are doing so in a very confusing way.
Posted by jayhawker (anonymous) on July 27, 2008 at 6:19 p.m. (Suggest removal)
I certainly don't want to throw rocks at anyone, but I really am very concerned that we don't have anyone at the helm on this crisis. Although momus, netloafer and matt66647 (66647 is a Topeka zip code) have conflicting ideas, they understand economic development. I hope that they are involved in the process, if there even is a process underway. I think that we would all feel better if the City Commission or the City Manager would reassure us on this. I understand that if there are negotiations underway that they cannot, and should not, disclose that, but some information, at least as to a broad strategy, would help. I also wish that they would tell us how the sales tax would promote (or hinder) whatever strategy they have adopted in order that we can make an informed choice. We are at an intersection, and the roads available lead to very different tomorrows for Emporia.
Posted by slipandslide (anonymous) on July 27, 2008 at 7:28 p.m. (Suggest removal)
heres a story of how one town handled it when it started to decline.
http://innercity.org/columbiaheights/new...
Posted by Matt66647 (anonymous) on July 27, 2008 at 8:06 p.m. (Suggest removal)
Excellent Examples Netloafer!
BOTH the Power and Light District and the River Market Developments in Kansas City used tax increment financing (TIF).
In fact the River Market is on its' third EXPANSION of the allowed district! As you point out they also offer Property Tax Abatements and did you know they have a Revolving Loan Program if you want to start a business down there!
Looks like if you want development in a less than premier spot you better get ready to offer some kind of incentives..........Hmmm....Food For Thought!
Posted by netloafer (anonymous) on July 27, 2008 at 8:20 p.m. (Suggest removal)
There were some TIF's given, but newly elected Mark Funkhouser is not doling them out any more. The reason development has really taken off is the influx of people living in the downtown area.
Momus has been absolutely right all along. Incentives will have absolutely no value if the potential businesses don't have a pool of educated, motivated, skilled workers. The incentives will have no value if there aren't enough customers to make them profitable.
As I said before, I once was quite enamored of the idea of incentives. While I can't say I'm violently opposed to them now, I don't feel nearly as good as I did some time ago. First of all, because I don't believe that the current strategy has anything to do with what should be the core intent of TIF's. It should be to revitalize blighted areas in city cores. I seriously doubt that is going to be given any sway in the current scheme of things. To parapharse the musical Godspell - "The best is all for the west."
Posted by momus (anonymous) on July 28, 2008 at 8:32 a.m. (Suggest removal)
Netloafer,
Thank you! After spending the past few years researching development issues, I am amazed at how much I didn't know when I began my initial search to learn more. I once thought like Matt, and a lot of other Emporians. I thought that if we just dangled a big enough carrot businesses would come and all of their sales would simply be added on top of our pre-existing sales volume. After some rudimentary research it quickly became clear that my initial assumptions were severely flawed. But, I've learned that some people don't want to be confused with facts, like the fact that TIF was developed to REdevelop dilapidated areas (not Greenfield development).
If we want more shopping and restaurant options here, we have to think like a restaurant and retail owner. Incentives are secondary considerations (if they are considered at all) well behind the amount and affluence of customers available. Cedar Point could give away land, make it tax free and rebate all sales taxes in perpetuity and they probably couldn't land a large retailer. Why? Because the customers aren't there! I can see Netloafer's example of incentives for upper story redevelopment working to increase population density in our downtown area resulting in some more entrepreneurial retail and restaurant options, but if we ignore the population and median income components to development we are simply wasting resources. I'll keep repeating my initial argument (that I am paraphrasing from a former retail placement official from the east coast) until someone successfully refutes it (so far it hasn't been acknowledged by the other side of the debate) "If other people want to come here without incentives, the door is open. But, if a company doesn't think that they can make a profit in Emporia incentives won't matter. If they do think they can make a profit in Emporia, incentives aren't necessary."
Posted by jayhawker (anonymous) on July 28, 2008 at 9:17 a.m. (Suggest removal)
Very informative post, momus, thank you. Of course, if there are several markets competing for a business, all things being equal, incentives may be a deal maker or breaker. I suspect, though, that rarely are all things equal.
Posted by momus (anonymous) on July 28, 2008 at 9:27 a.m. (Suggest removal)
Jayhawker,
You point out the one scenario where I have seen incentives work: sister cities. Two cities in the same trade area can sometimes fight over the same store and incentives can make a difference in that instance, but I don't think that will happen to Emporia :)
Posted by jayhawker (anonymous) on July 28, 2008 at 9:38 a.m. (Suggest removal)
I can see a chain that is looking at certain demographics that fit Emporia and, say, a city in Iowa. In making a final choice, incentives would be a consideration. I understand, however, that that scenario is rare. On the other hand, we are not in a strong position to attract new ventures right now, and if it truly takes incentives to do it, we should not reject it out of hand.
I appreciate your posts. You are obviously well informed on the subject. I hope that you are involved in economic development because we desperately need your talents right now. I am very concerned about our future.
Posted by netloafer (anonymous) on July 28, 2008 at 11:03 a.m. (Suggest removal)
Momus
The reason retailers, entertainment venues, etc. started moving in to downtown KC is precisely because people with good incomes moved in to the downtown area first. It was a case of a perfect storm, in the good sense of the term. Professionals, particularly young professionals started abandoning the suburbs when the price of fuel started skyrocketing. When things got really bad the flow increased dramatically. The city saw this and started making many of the old abandoned warehouses in the River Market and the area around Southwest Bldvd adjacent to Union Station available for retail development, with the incentives going to those who bought lofts, condos, etc. This had started a few years earlier with the residential redevlopment in the Quality Hill area. Once the people and the good salaries came, the businesses followed. The interesting thing is that the people living in these areas still have plenty of disposable income. For some it's because they no longer have the burden of high fuel costs or property taxes. For some the cost of fuel has been eliminated altogether. Bicycles are beginning to replace cars. For the vast majority they've discovered that the bus service is very reasonable. It costs a buck and a quarter to take a bus from the downtown lofts to the Power and Light District, Crown Center, and the Plaza. For retirees like my wife and me it costs 60 cents.. A couple fo weekends ago, for example, we got some Friday night tickets to Cirque de Soleil at the Spring Center, had a bite to eat at Ragland Road, and capped it off with a nice cold bottle of German beer at a little downtown pub. It was very pleasant, and affordable. I know for sure that none of the restaurants or night spots would be there if people didn't come. All of this goes on in this area during the week irrespective of things at Sprint Center. I think it's that people just like to gather, converse, and enjoy being together. The restauranteurs, etc are just taking full advantage of this fact.
Posted by jayhawker (anonymous) on July 28, 2008 at 12:10 p.m. (Suggest removal)
Exactly, netloafer. When there are people, business will come. But to get people, we have to provide them with jobs. To do that, we have to have business. The proverbial chicken and the egg. It can be done, but we are going to have to be smart in our strategies. I hope that we are.
Posted by Matt66647 (anonymous) on July 28, 2008 at 1:17 p.m. (Suggest removal)
Jayhawker & Netloafer,
Once again good examples in Kansas City! Just be aware, ALL of these projects used TIF financing! ($137,000,000 in the case of just one parcel within the Power and Light District!)
Posted by netloafer (anonymous) on July 28, 2008 at 1:20 p.m. (Suggest removal)
Jayhawker
Jobs are needed to be sure. But keep in mind that Emporia has employed a strategy of attracting low wage manufacturers, and gave them big incentives to get here. Tyson got huge tax breaks and they also got huge breaks on water rates as well. Our water bills are going to go up substantially with Tyson gone, but we certainly won't be getting the rate breaks they got.
That strategy has left us in a place where our median incomes are about the lowest in Kansas. It's an environement favorable for the slum lords and the payday loan shops. If you look around town you'll see that it's the payday loan shops that are doing what little hiring is going on in town. Some, in an illusory way, are hiring. I know a young guy who worked for Menu for a couple of years, worked his way up from casual to a regular job with benefits paying about $15 an hour. It wasn't great, but it was above average for Emporia. They laid him off about six months ago. He found a job in Council Grove. Menu just called him back and offered him a "replacement" job for the one he'd lost. It was a "casual" position paying minimum wage, with no benefits. Now this is a young guy who is bright, hard working. He just got married and has a family to support. And Menu was offereing him a miimum wage job with no benefits. There is no way he could support a family like that.
I haven't seen any change in strategy on the past three or four years. There may be, but it does not appear so.
I think there are at least three ways this city needs to look at things. There are probably more. We need to look short, mid, and long term and develop a coherent strategy that will link all three. Included in the components are tax policy (I say we need to reduce them), quality of life issues (the slum lords, dowtown re-development, etc), and good paying jobs that will lift our median income levels.
I'm only a layman. I do recognize that the road ahead I envision is difficult. The economic times are tough, but that's not nearly as tough as the current philosophical environment here in Emporia. I don't know how many times I've heard folks say they are quite satisfied with things, that everything is absolutely fine. I heard it a lot when I was running for office. "Don't be a naysayer." "Talk like this gives everyone a bad impression of this city." I suspect the majority of the public here feels that there is absolutely nothing wrong with this city's economics and development.
The crazy thing was that I think I cared more about this city and its people than my detractors. I want Emporia to be successful. I want to see people's income levels rise. I want to see a vibrant downtown and a city that is a regional magnet for the arts, culture, and economics. I just dont believe that current strategy is going to get us there, nor do I think the strategy is going to change any time soon.
Posted by jayhawker (anonymous) on July 28, 2008 at 1:36 p.m. (Suggest removal)
I have noticed the same thing, netloafer. When times were good, it wasn't a big deal. However, one of nature's laws in just about everything is that nothing is static - it is either growing, or withering. Once a trend starts, either way, it is hard to stop. I was one of those people that you referred to. I wanted a small city, with little traffic, short lines at the theater and grocery store, etc. Things have changed now, because the spiral that we are in could eventually lead us to having no theaters or grocery stores (an exaggeration, but not by much). People will be hurt, families will be split (children having to move away, etc.), services more expensive, taxes even higher with fewer of us to pay, wealth reduced and so on. I don't have the answers, but the questions are obvious. I really appreciate people like you, matt66647, momus and others who have taken an interest, even though each suggests different strategies. I hope that people in positions to do something about it are as interested and informed. I'm not sure who you are, but perhaps you will run for office again. The audience may be more receptive this time.
Posted by glarson (Gwen Larson) on July 28, 2008 at 1:53 p.m. (Suggest removal)
Time to move:
http://www.emporiagazette.com/forums/ope...