When reviewing a site for a retail operation, there are a number of elements that need careful consideration. Among these factors are the demographics of nearby residents. Questions to be asked include what is their education and income levels, and, given the other competing economic factors such as cost of living in the region considered, what is their disposable income?
Also very important to whether a retail operation will thrive is the attitude of the community toward growth and change. Are the residents eager for new retail operations or are they NIMBY-types — “not in my back yard” — who will resist growth?
Another critical factor is the level of mitigation that will be necessary to prepare a site for new development. How much work is it going to take to get the site prepared to handle the traffic, power and general infrastructure needs to support a new retail operation?
Many of the infrastructure needs that will be critical for the project are municipal in nature, including power, water and traffic support. Because the services are controlled and paid for by a local governmental body, the opportunity exists to partner with the community and develop a package of incentives that lower the overall cost of development for the retailer, while offering the long-term benefit of jobs and tax revenue.
| Having knowledge of what other companies have negotiated in similar developments can bring leverage to the retailer’s side of the negotiation table. |
Retail operators should not be shy about requesting assistance from the communities where they propose to do business. After all, they are bringing a tremendous benefit in terms of tax dollars, jobs and improved quality of life.
Follow Through on Incentives
Many communities offer incentive packages that can offset power costs through energy rate reductions if they have a municipal utility and can also assist with tax credits for hiring certain population segments. The variety of incentives offered is enormous and vary from city, county and state or even region.
Having the local knowledge of what types of incentives are available in a particular locale is critical, and if the retailer is new to a region this can be a problem. This is where having the assistance of a qualified site location consultant who has local knowledge is key.
If you do not have past experience with the community you could very well miss out on some unique programs the community can offer. Also, having knowledge of what other companies have negotiated in similar developments can bring leverage to the retailer’s side of the negotiating table.
The negotiation process, however, is only the beginning of a very long process of incentive management and collection. The sweetest incentive package in the world is worthless if it goes uncollected.
After some municipalities were burned in deals that failed to produce the economic progress promised by the operation coming to town, the way incentives were offered changed. Many have become performance-based and require the company seeking to cash in on the incentive to fill out paperwork and prove they deserve the benefit they are seeking.
For example, a hiring credit could require the HR department to fill out a quarterly form detailing how many people they hired that came from the unemployment office or welfare rolls. In same cases, upwards of 50 percent of their salary could be offset by a tax credit, but if the paperwork is not filed in a timely fashion or correctly the tax incentive is never collected.
The deck is being stacked against those seeking tax and other incentives and the municipalities are counting on the retail operations’ failure in compliance to get the incentive much like the myriad mail-in rebates that go uncollected by the general public.
Wise retail operators will consider the myriad factors and be sure to negotiate the best incentive package they can and make sure that those incentives, once negotiated, are actually collected.
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