Q&A Using Incentives to Achieve Your Community's Goals

On September 8, 2009 Buxton hosted a webinar focusing on offering incentives to retailers and restaurants. Following are answers to questions raised during the session.

To hear a recording of the web seminar visit, www.buxton.webex.com. Should you have additional questions in regards to incentives, please email buxton@buxtonco.com.

Q: Are incentives, like the ones mentioned in the webinar, applicable to only attracting big-box retailers and chain retail, or are they also applicable to local, mom-and-pop retailers?

A:  During the webinar we specifically included a section on community incentives offered to locally-owned retailers.  As we stressed, incentives should be used to achieve community goals.  If retention and expansion of local retailers is a goal, then incentives can be designed for local operations. 

Q: Where does funding for incentives come from? During times like these, so many municipalities are having budget cuts so there is no funding for cash incentives such as façade grants.

A: Often incentive funds come from dedicated sources like Redevelopment Agencies or budgets of economic development departments.  Remember that there are non-cash incentives often called soft incentives. (See following question.)

Q: Can you provide more examples of “soft incentives”?

A: Examples include streamlining permitting processes, improving rules and regulations and creating a climate that fosters public private partnership with developers and retailers.

Q: How can you determine if a particular company will fit in your target area?

A: Once you have delineated your trade area, the next step is to identify and profile the customer within this area. The profile should include not only demographic information, but psychographic information such as lifestyle characteristics and purchasing behaviors. When you understand the customers in your retail trade area, you can identify retailers and restaurants that match your customer base as well as those that are compatible with your community’s goals.

Q: Of the incentives mentioned during the webinar (infrastructure improvements, tax abatements, sales tax rebates, tax increment financing, etc.), which ones appeal most to developers?

A: We are unaware of any comprehensive study of retail developer’s incentive preferences. However, our observation is that incentives that assist in the assembling of sites and infrastructure development have traditionally been favored.  In the past several years sale tax sharing or rebates has gained popularity. 

Q: Regarding performance-based incentives, our elected officials express concern regarding cannibalization of existing sales. Does Buxton have a practical way to estimate new sales?

A: Buxton provides a Leakage/Surplus Report that estimates annual sales by store type. This report shows potential sales versus actual sales and highlights unmet sales opportunities. 

Q: Are there any good economic development models to help a community determine how incentives will pay off?

A: “Thorough impact analysis does require some careful data-gathering and calculations. For this reason, many communities and economic developers rely on third party providers to do the work.  Purchased software is available, and some online programs can help.  When there is insufficient staff and financial resources, university and government research agencies can often conduct a study.  Your choice of external assistance will depend on how much you are willing to spend, how quickly you need the results, and how often you conduct impact analysis.”  Ron Swager, Ph.D CEcD from Buxton enewsletter dated September 2006.

Q: Many long time businesses see these new incentives as unfair competition. How do you get them on board?

A: Providing incentives based on politics and perceptions results in conflicts, distrust and the charge of unfair competition. The justification of incentives requires formal consideration of the local costs and benefits and how the use of incentives assists in achieving the community’s goals.  Also approaching incentives as an investment in the community’s future rather than give a ways helps to gain support.

Q:  Who can help a small city with feasibility studies for a possible retailer?

A:  Small communities can influence retail location decisions by developing data on the consumers in their trade area, identifying potential retail concepts and compiling information of interest of retail prospects. Also study comparable communities and determine what types of stores they support, but you lack.  Develop marketing materials that draws attention to your market characteristics that might otherwise be overlooked.

Q: What sort of requirements do retailers have for signage that municipalities typically do not allow?

A: Retailers and municipalities often disagree on the size of the sign and location. Most retailers prefer stand-alone signs and do not like to be listed on signs with other retailers.  These signs are called pylons. 

Q: What all have you seen included in off-site infrastructure costs?

A: Off-site infrastructure costs generally include, but are not limited to utilities - water, sewer, natural gas, electric service - improvements in roads systems and access.

View the September 2009 Community Matters Newsletter