Thoughts about Target

Reader “Girlfriend” e-mailed with a good question about the Target deal:

Ok then, if they would have gotten a tax abatement what would that have amounted to and can you use the analogy that if we would have done it with the tax break it would have cost the city more? 

I looked up the abatement answers on the IDB Retail Incentive Matrix, and the estimated property tax revenues from notes I took in a meeting yesterday, and came up with something close to an answer.  It doesn’t substitute for a real answer at the work session next week, but I think it’s close.

You know, the tough part about representing Oak Ridgers is that you folks never ask easy questions.

Based on the IDB guidelines for retail incentives, they would be eligible for a 50% property tax abatement over 15 years.

But, the (expected) assessed value of the property, when completed, is substantially less than the actual investment (probably $65 to $70 million).  Steve Jenkins estimated the annual property tax revenue (to Oak Ridge only) to be $282,849 per year.  So, if they got a 50% abatement for 15 years, that would only total $2,121,367.50.  Now, if the County property taxes were abated as well – which Oak Ridge does have the power to do – the value of the abatement would be closer to $5M.

That’s still just about half of the investment that Oak Ridge is being asked to make.

However, the assessment of retail property is based in part on sales volume, so the busier the place is, the more the property is judged to be worth.  AND more sales tax revenue is generated, which is the real cash flow from this kind of development and the one that most benefits the schools countywide.

It IS a risk.  However, our retail sector desperately needs a jump-start; having a healthier retail environment would also help us to attract some of the high-dollar residents that we’ve been losing to west Knox County in the last 10 years, which boosts not only the property tax base but also the sales tax revenues.

Think of economic development as a three-legged stool: housing, jobs, and retail.  For the last decade, we’ve had the jobs, but housing and retail were on the decline.  For the last 6 years or so the City has really put a focus on residency, so we finally have some new housing options that are beginning to pay off.  However, while that was happening, retail continued to slide, and slid so far that it’s negatively impacting the housing market (and possibly even impacting industry’s ability to recruit people to work here).  We need to get this third leg stabilized, then we’ll have a healthy balance.

I’m still feeling burned over the effort I put into Arnsdorff’s mall proposition, because he turned out to be a snake-oil salesman.  I don’t like being fooled, so I’m being tentative on this one.  However, I’ve already seen some differences, and GBT actually has a known track record.

Arnsdorff didn’t, and still doesn’t.

AtomicTumor seems to have gotten behind this idea as well.

2 Responses to “Thoughts about Target”

  1. on 25 Jan 2007 at 1:24 pm AT

    Too right, I’m all about the idea.

  2. on 26 Jan 2007 at 8:21 pm Tracy

    In layman’s terms, why do we have to pay for a large, retail store to build here? They wouldn’t have considered coming here if they thought they would lose money.

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