Saturday, February 2, 2008


The discussion of using incentives to attract business began with our previous Economic Development & Tourism Director Dave Holder. With the City approaching build-out the question was whether we should let the free market take care of developing the remaining tracts in the city or should the City go out and recruit the type of development that fit the Comprehensive Plan and brought in the biggest return to the City. At the time the discussion centered on an up scale food market downtown.

We had already approached most of the better known markets and were told that at this time we didn't meet their demographics requirements. The question then was whether to intervene in the free market and overcome the demographics issue with incentives. We went forward but ran into problems with a downtown location due to space and parking issues.

Then Wegmans took another look at Celebrate VA and for the third time decided against locating in Fredericksburg. This time there were no space or parking issues to address and Wegmans, at our request, provided us with what it would take them to reconsider their position. We came up with an incentives package that met their needs and they are now in the process of builing a new store in the city.

While in the process of negotiating the Wegmans deal we began to put together the criteria for providing futre incentives. They are--the project has to fit the Comprehensive Plan, in the case of tourism business it needs to be unique and have the potential of attracting visitors from out of the area, a "tourism destination;" and finally the City would always get a majority of the revenue generated. Unlike other localities we would not be providing tax incentives in the 50% to 75% range.

Many people have expressed concerns about the use of incentives on the issue of fairness to exisitng businesses and on the question of why should some pay less than others. And then there are those who feel the free market should determine how the City should build-out.

Speaking for myself I would sat that if we don't take pro-active steps to attract business we are left with only one option--raising yours. Whether it be real estate or business taxes we have few other options.

How do you view incentives? Should we leave the future of the City to the Free Market or are there other options we should be considering?


Bryan said...

Ok, I started writing this on the other post. I think it belongs here:

Are there opportunities to get the state to kick in some financial assistance? This development is right on 95, so there is little other infrastructure needed from the state, yet the state is going to also profit from having another tourist attraction. The city is the also the only locality bearing the burden of incentives, but whatever we put there is going to generate support services in Spotsylvania and Stafford. Any tourist attraction will generate jobs for people in these areas as well. As written now, I don't believe the city is demanding xx% of jobs come from city residents, even though the yearly grants are coming from the city bank accounts.

I think these incentives are good since it is only based on a percent of any money they city will take in. As currently envisioned, the other revenues collected are not handcuffed to the CP/CV area. This area needs the revenue to be spent in the other 95% of the city.

Bryan said...

Matt - how about a post describing the TIF? In other areas, TIFs are used to create bonds to build initial infrastructure, that are then paid back using the incremental revenue from the increased tax basis. In this project, the city isn't building any of the the infrastructure and is not issuing bonds for development.

Can you also expand on how the city would collect on surplus tax increment revenue that exceeds the amount of the incentive? Is the city bound in any way to use all of the tax increment $ in the TIF area. For example, if $100 is the tax increment above base, and the city incentive returns $50 to Kalahari, then what happens to the other $50 - it seems that in other TIF examples, that money is put into infrastructure in that TIF zone.

Really looking for some details, since this seems a bit different than what has been talked about at the last few meetings.