CTroyMathis
31 August 2003, 05:22 PM
Luring retailers must be priority
By Mitchell Schnurman
Star-Telegram Staff Writer
http://www.dfw.com/mld/dfw/business/6662388.htm
Residents will always debate the merits of giving tax breaks to private projects, but there's no arguing the payoffs for Grapevine and Hurst.
They gave big incentives to shopping malls in the past decade, and the cities are now generating three times as much per-capita sales tax revenue as the city of Fort Worth.
That number is worth repeating: Grapevine and Hurst are racking up triple the sales tax totals, per resident, largely because of the success of Grapevine Mills and North East Mall.
Those tax-subsidized projects draw shoppers from all over Tarrant County, and they've helped spur a lot of nearby development.
Their impact is worth noting, because they drive home the importance of landing a retail anchor in downtown Fort Worth and the Alliance Corridor, two areas primed for future shopping projects.
They should also prompt some reconsideration of the city's annexation policies, even if they got politicians in trouble a year ago. Former Mayor Bob Bolen once joked about Fort Worth's failure to annex the North East Mall decades ago, but his point was right on: It doesn't make economic sense for Fort Worth to build much of the area's infrastructure and miss out on the big paydays that come from retail sales.
Let's put the Grapevine and Hurst sales tax levels into perspective. If Fort Worth were matching their per-capita sales, the city would generate more than $125 million in additional revenue, which means it could slash property tax rates by two-thirds.
That kind of growth is virtually impossible, given that Fort Worth's tax base is so much larger.
But why shouldn't Fort Worth do as well as Dallas, Houston and Austin? They're producing 20 percent to 30 percent more in sales taxes per person, according to a study by Fort Worth officials.
Get in their league, and the city could double its spending on parks or trim its property tax rate by 10 percent. That goal is not a pipe dream.
The bottom line is that Fort Worth is a laggard in retail sales and has been losing its share of the sales tax pie for years.
Sales tax revenue has been growing here, but at a slower rate than the rest of Tarrant County and much more slowly than in some nearby cities.
For more than a generation, this trend has been playing out across America, as suburbs have been grabbing retail sales from the central cities. More people, with greater income, steadily moved away from downtowns, and developers followed the new rooftops.
In 1989, Fort Worth accounted for 37.5 percent of Tarrant County's retail sales, according to a study by Jerry Grotta, a local market researcher. By 2001, that number was 32.4 percent.
What's worth noting now -- besides the size of the gap in Fort Worth -- is that Grapevine and Hurst didn't just go along for the ride.
Even though they stood in the path of growth, their city leaders had to make the big deals happen, sometimes with creative tax breaks.
Grapevine created a $27.5 million taxing district to aid the Grapevine Mills developer, a bargain by tax-break standards, and helped speed the process so Mills could beat a rival to the punch.
Hurst had to go much further to make its deal fly.
In the mid-1990s, Hurst was staring at a world of hurt, because North East Mall was aging, and new competitors were on the horizon.
Simon Property Group, which owns the mall, approached the city with a renovation plan and found a receptive audience. Hurst agreed to spend $10 million on streets, utilities and drainage improvements.
It enacted eminent domain to force out some homeowners in the path of the expansion, which took four years of legal wrangling. Settling the lawsuits cost millions of dollars and gave Hurst a big PR hit.
The city also structured two deals to rebate sales taxes to Simon, an approach that, at the time, had been used only once before in Texas. Both deals pay Simon a percentage of the increase in sales taxes generated by the projects. If the developments don't create higher sales taxes, Simon doesn't get any money back.
The incentive for the mall lasts for 20 years and rebates up to nearly $35 million; a separate package for the power center next to the mall can total nearly $6 million over 10 years.
City officials say the smaller rebate will be paid off in six years, not 10, because sales have been so strong. But mall sales are lagging projections, and Hurst doesn't expect to rebate the entire amount unless sales surge.
In sum, Hurst agreed to pitch in more than $50 million for a project that tops $200 million.
That's a lot of public money, on a par with much riskier deals in downtown Fort Worth, but Hurst got a lot. The renovated mall includes a Nordstrom and Saks Fifth Avenue, and several sources said that Simon had to pay millions just to lure Nordstrom there.
Allan Weegar, Hurst's city manager, says the project has been a big success. As promised, the city has been able to lower the property tax rate in the past decade, and it's now a bit more than half the level of Fort Worth's.
In the past six months, sales tax revenue has been close to even, despite the economic downturn and the closing of some big-box retailers.
Weegar mentioned Prestonwood Mall, a one-time shopping beacon, as an example of what might have been. That mall, in the middle of wealthy North Dallas, closed in the late 1990s after traffic fell and anchor stores departed.
"What would have happened to North East Mall if we hadn't done this deal?" Weegar said. "I hate to imagine."
That's something to keep in mind when Fort Worth tries to bring some retail giants to downtown and the Alliance area.
New details will soon be emerging for the plan to renovate the Montgomery Ward building just west of downtown, and it's sure to include a big public incentive.
Tax breaks will never be popular, but if Fort Worth doesn't seize the moment, another nearby city will.
Sales tax trends
Fort Worth generates millions in sales tax revenue, but many other cities generate much more sales tax revenue per person. That's because they pull in more shopping dollars from outside their city limits.
For the nine months ended June 30
City Sales tax revenue Total sales per person tax revenue
Grapevine $274 $12 million
Hurst $257 $9.5 million
Southlake $240 $5.8 million
North Richland Hills $151 $9 million
Irving $135 $27 million
Houston $122 $242 million
Austin $116 $79 million
Dallas $114 $138 million
Fort Worth $93 $54 million
San Antonio $89 $114 million
By Mitchell Schnurman
Star-Telegram Staff Writer
http://www.dfw.com/mld/dfw/business/6662388.htm
Residents will always debate the merits of giving tax breaks to private projects, but there's no arguing the payoffs for Grapevine and Hurst.
They gave big incentives to shopping malls in the past decade, and the cities are now generating three times as much per-capita sales tax revenue as the city of Fort Worth.
That number is worth repeating: Grapevine and Hurst are racking up triple the sales tax totals, per resident, largely because of the success of Grapevine Mills and North East Mall.
Those tax-subsidized projects draw shoppers from all over Tarrant County, and they've helped spur a lot of nearby development.
Their impact is worth noting, because they drive home the importance of landing a retail anchor in downtown Fort Worth and the Alliance Corridor, two areas primed for future shopping projects.
They should also prompt some reconsideration of the city's annexation policies, even if they got politicians in trouble a year ago. Former Mayor Bob Bolen once joked about Fort Worth's failure to annex the North East Mall decades ago, but his point was right on: It doesn't make economic sense for Fort Worth to build much of the area's infrastructure and miss out on the big paydays that come from retail sales.
Let's put the Grapevine and Hurst sales tax levels into perspective. If Fort Worth were matching their per-capita sales, the city would generate more than $125 million in additional revenue, which means it could slash property tax rates by two-thirds.
That kind of growth is virtually impossible, given that Fort Worth's tax base is so much larger.
But why shouldn't Fort Worth do as well as Dallas, Houston and Austin? They're producing 20 percent to 30 percent more in sales taxes per person, according to a study by Fort Worth officials.
Get in their league, and the city could double its spending on parks or trim its property tax rate by 10 percent. That goal is not a pipe dream.
The bottom line is that Fort Worth is a laggard in retail sales and has been losing its share of the sales tax pie for years.
Sales tax revenue has been growing here, but at a slower rate than the rest of Tarrant County and much more slowly than in some nearby cities.
For more than a generation, this trend has been playing out across America, as suburbs have been grabbing retail sales from the central cities. More people, with greater income, steadily moved away from downtowns, and developers followed the new rooftops.
In 1989, Fort Worth accounted for 37.5 percent of Tarrant County's retail sales, according to a study by Jerry Grotta, a local market researcher. By 2001, that number was 32.4 percent.
What's worth noting now -- besides the size of the gap in Fort Worth -- is that Grapevine and Hurst didn't just go along for the ride.
Even though they stood in the path of growth, their city leaders had to make the big deals happen, sometimes with creative tax breaks.
Grapevine created a $27.5 million taxing district to aid the Grapevine Mills developer, a bargain by tax-break standards, and helped speed the process so Mills could beat a rival to the punch.
Hurst had to go much further to make its deal fly.
In the mid-1990s, Hurst was staring at a world of hurt, because North East Mall was aging, and new competitors were on the horizon.
Simon Property Group, which owns the mall, approached the city with a renovation plan and found a receptive audience. Hurst agreed to spend $10 million on streets, utilities and drainage improvements.
It enacted eminent domain to force out some homeowners in the path of the expansion, which took four years of legal wrangling. Settling the lawsuits cost millions of dollars and gave Hurst a big PR hit.
The city also structured two deals to rebate sales taxes to Simon, an approach that, at the time, had been used only once before in Texas. Both deals pay Simon a percentage of the increase in sales taxes generated by the projects. If the developments don't create higher sales taxes, Simon doesn't get any money back.
The incentive for the mall lasts for 20 years and rebates up to nearly $35 million; a separate package for the power center next to the mall can total nearly $6 million over 10 years.
City officials say the smaller rebate will be paid off in six years, not 10, because sales have been so strong. But mall sales are lagging projections, and Hurst doesn't expect to rebate the entire amount unless sales surge.
In sum, Hurst agreed to pitch in more than $50 million for a project that tops $200 million.
That's a lot of public money, on a par with much riskier deals in downtown Fort Worth, but Hurst got a lot. The renovated mall includes a Nordstrom and Saks Fifth Avenue, and several sources said that Simon had to pay millions just to lure Nordstrom there.
Allan Weegar, Hurst's city manager, says the project has been a big success. As promised, the city has been able to lower the property tax rate in the past decade, and it's now a bit more than half the level of Fort Worth's.
In the past six months, sales tax revenue has been close to even, despite the economic downturn and the closing of some big-box retailers.
Weegar mentioned Prestonwood Mall, a one-time shopping beacon, as an example of what might have been. That mall, in the middle of wealthy North Dallas, closed in the late 1990s after traffic fell and anchor stores departed.
"What would have happened to North East Mall if we hadn't done this deal?" Weegar said. "I hate to imagine."
That's something to keep in mind when Fort Worth tries to bring some retail giants to downtown and the Alliance area.
New details will soon be emerging for the plan to renovate the Montgomery Ward building just west of downtown, and it's sure to include a big public incentive.
Tax breaks will never be popular, but if Fort Worth doesn't seize the moment, another nearby city will.
Sales tax trends
Fort Worth generates millions in sales tax revenue, but many other cities generate much more sales tax revenue per person. That's because they pull in more shopping dollars from outside their city limits.
For the nine months ended June 30
City Sales tax revenue Total sales per person tax revenue
Grapevine $274 $12 million
Hurst $257 $9.5 million
Southlake $240 $5.8 million
North Richland Hills $151 $9 million
Irving $135 $27 million
Houston $122 $242 million
Austin $116 $79 million
Dallas $114 $138 million
Fort Worth $93 $54 million
San Antonio $89 $114 million