From the (maybe not so) Good Ideas File: Chasing retail because taxes

You always have to be a little careful about how much you read into a mainline press story about another city, but I have to say, this one worries me.  

According to this story from the Denver Post, that city has decided to place an emphasis on recruiting retailers to the city:

“Retail activity is extremely important to our fiscal health, and our goal is to make Denver truly one of the nation’s landmark retail cities,” [Mayor Michael Hancock] said at a news conference on JumpStart 2014, the city’s economic-development blueprint.

The city has targeted $200,000 out of the general fund to recruit more retailers, said Paul Washington, the city’s economic-development director.

The city would like to see a continuation of niche projects that reuse old buildings, Hancock said while speaking at the Source, a former foundry on Brighton Boulevard that is home to 15 retail and restaurant tenants.

But the city also needs to attract more general-merchandise and big-box retailers to serve neighborhoods across the city, Hancock said.

Much of the article focuses on a story about the need for grocery stores in food desert neighborhoods, and that’s definitely a crucial need and a perfectly valid place to put recruiting efforts for the good of the community. But that’s hardly the same as trying to establish yourself as “one of the nation’s landmark retail cities.”

Here’s the part that would particularly worry me if I were a Denver resident: based on this brief article, the main objective behind this effort would seem to be growing the city’s tax base, and enhancing it’s regional image. Both of which are important to any city.

But is brick-and-mortar retail a viable investment?  What’s the odds that it’s going to pay off?

How much retail space is already sitting vacant nationally?  In the Denver region?  

How much of our purchases, of everything, have  left the stores and gone (partially or completely) online?  And what direction is that trendline likely to go in the next 20 years?  

It could be that this policy is built on the back of good, substantial, forward-thinking analysis that evaluates how the various subsets of the retail market have changed over recent years, considered the possible trajectories that those issues might take in the future and how those might fit with Denver’s unique regional assets, and mapped out some intelligent strategies for targeting the city’s investments to the specific market segments that have the most potential to work.  If that’s the case, bravo Denver.  I wish you great success.  

Or it could be that this policy was based on an “economic impact” study that threw out some massive money number based on blanket assumptions about regional growth or the hordes of people who will come to town ’cause it’s so wonderful and the zillions of jobs that will magically appear because all those highly paid retail employees need to dine out and buy widgets too, of course!  And of course they won’t do any of that online.  In which case…. ya might have bought an expensive lemon.  Good luck, guys.  

Or it could be that this initiative isn’t based on much analysis at all, but on a piece of too-simple, unexamined “logic:”  We need more taxes, and the way we are set up is to get taxes from retail sales.  So we need more retail sales.  Let’s go get ’em!

In which case, the best case scenario may be that the City wastes $200,000 chasing retailers who don’t benefit the community for the long term.  The more likely scenarios may include a variety of long-term unintended consequences:

  • More retail buildings to sit vacant in the future while the current staff’s successors try to figure out how to get all these expensive obsolete buildings redeveloped.
  • More market share-stealing among the retailers who do show up depite the fact that the market for their particular thing may be saturated (if you build your business around grabbing market share, the saturated markets are the ones that look the best).
  • Less attention given to growing Denver’s inherent advantages and building an economically resilient city, since the staff is busy chasing retailers.

That’s a lot to read into a very short article, and chances are I am getting something wrong.  But the possible interpretations aren’t unique to Denver — I spun these based on what you and I have seen in city after city across the nation.  For decades.  

I am not anti-retail, and I love Denver.  I am anti-not thinking, though.  I just hope that they are thinking more in Denver  -and in your town – than this article might appear to indicate.  

 

 

 good policy for supporting healthy and resilient community, but emphasis on retail seems misguided–they expressly say it has to do with their fiscal structure. But the fact that you tax it doesn’t mean the market is there, or that it’s a good use of your precious funds. 

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