Traditionally, communities and states have used incentives to overcome situations that inhibit business development. Local and state leaders designed these incentives to influence retail and industry location decision makers by making the community more competitive.

Many communities today view incentives not only as a way to negate disadvantages but also as a proactive way to achieve both short- and long-range goals. Incentives are being structured to make specific projects more attractive or competitive.

Incentives for retail development are being used more frequently by communities. They tend to be more targeted and focus on a limited geographic area or specific sites. Following are examples of retail incentives used by communities to achieve established goals.

Renovation of Older Centers – To encourage the new owner of a 1950’s strip center to invest in a $1 million renovation, the City of Chandler, Arizona (population 242,000) contributed $152,867 to the facade improvements. The city’s policy is to pay half of the cost of improving facades, landscaping and signage as well as paying half of the city fees and architectural and engineering costs. The program is limited to centers that are at least 15 years old or 50 percent vacant.

Downtown Revitalization – The City of Brighton, Colorado (population 31,000) put $6.1 million into a tax increment financing district (TIF) to start the Brighton Pavilions, a $17 million retail and entertainment center in the middle of an aging downtown district. The project includes a 12-screen theater, 57,000 square feet of retail and restaurant space, and a 240-parking space park-n-ride on 14 acres of undeveloped land.

Encouraging Retail in Geographic Areas – Certified retailers in New Jersey’s 32 Urban Enterprise Zones are allowed to charge 50 percent of the current tax rate.

Attracting Sit-Down Restaurants – To balance the prevalent fast-food operations, the City of Carrollton, Texas (population 116,500) offered 30-percent tax abatement for 5 years to restaurants of at least 5,000 square feet that did not have drive-thru window service.

Filling a Vacant Store – When Kmart closed in Brookings, South Dakota (population 18,500), the city wanted to preserve and even expand its trade area. Lowe’s expressed interest but would only pay $600,000 for the former Kmart property. The sales price for the site was more than $3 million and the demolition of the building would be an additional $250,000. The City established a “Large Retail Economic Development Investment Fund” and, with voter approval, issued general obligation bonds to purchase the property and prepare it for construction. Lowe’s paid $618,000 for the property.

Providing Infrastructure Improvements – By providing $2.8 million in road improvements and utilities upgrades, the City of Draper, Utah (population 36,000) was able to secure the location of the furniture retailer IKEA on a 40-acre site. The store is scheduled to open in 2007 and will create around 300 jobs.

Assembling and Preparing Sites – In 2002 the City of Liberty, Missouri (population 27,000) created the Liberty Triangle Tax Increment Finance District (TIF) to develop an 88-acre site for development. Lowe’s opened a 160,000-square-foot store in the district in 2004. The total cost of the Lowe’s project was $19.5 million of which $7 million was reimbursed from the TIF for land acquisition, site preparation, infrastructure and development costs, and financing.