With a big decision at hand to provide economic development incentives for a proposed big box retailer, city councilors agreed more time is needed to review the numbers.
Councilors, only having four days to consider an agreement between the city of Stephenville and Lowe’s Home Center’s, Inc. for tax incentives, tabled the item Tuesday night and scheduled another meeting to further discuss the proposed retail store and real numbers.
Two representatives of the North Carolina-based home improvement retailer appeared before the council to present details for the proposed Lowe’s store in Stephenville, requesting the council approve and enter into an Economic Development Incentive Memorandum of Understanding (MOU).
Jennings Gray, of ROI Consultants, and Scott Mann, program manager with Adams Engineering, said Lowe’s is seeking incentives due to “excessive costs” to develop a site for a new store, and presented estimated tax revenue figures the retail outlet would generate.
In his presentation, Gray informed the council that Lowe’s has been eyeing Stephenville for approximately four years but the market was not favorable to support a local store. “We’re back and real close to getting a property deal worked out for a new store.”
Gray provided details for the proposed home improvement center, saying Lowe’s was looking to invest $10 million for its Stephenville location, including the purchase of land and improvements, and construction of the store.
Mann, representing the engineering firm, said the proposed Stephenville store included a 138,000-square-foot footprint with 94,000 square feet devoted to the sales floor.
While the national sales average for Lowe’s stores is $30 million annually, Gray said the local outlet is estimated to generate half that amount at approximately $17 million. He later informed the council that Lowe’s executives have approved the construction of several stores that were expected to generate $18-20 million.
Also in his presentation, Gray said the Stephenville store would employ 75 to 80 full-time persons and offer 15 part-time jobs, amounting to $1.52 million in annual payroll.
Among those positions, Lowe’s offers benefits to both full- and part-time employees, and would create secondary jobs in landscaping and paving services.
The most anticipated portion of Gray’s presentation involved projected tax revenues, which the council is expected to heavily base their decision upon.
Gray said Year One property tax revenues for the city, based on a $10 million valuation, of the proposed Stephenville location is estimated to be $44,000 and could increase to as much as $59,000 by Year 10.
He also outlined anticipated sales tax revenues, based on 3 percent annual growth, which could reach $2.9 million per year by Year 10.
“Our goal is to create a win-win situation for the city of Stephenville,” said Gray. “If the return on investment is not where it needs to be, you’re not going to invest. That’s why we’re seeking your support.”
Gray explained that each Lowe’s store stood on its own merit, and with the extraordinary site costs primarily dealing with the relocation of a creek and extending Wolfe Nursery Road, the company began to seek the incentives. “That’s when we started talking with Mark (Kaiser) and the city to offset site costs to help boost the return on investment numbers.”
“This project is preliminary. It’s been to committee once and the property is not under contract, despite what you’ve heard,” said Gray.
Councilman Alan Nash asked the representatives if improvements were being considered for a specific site, located on US Hwy. 377 near the intersection of Wolfe Nursery Road, and if back-up sites were eyed. Gray replied that no deal had been made to-date on the property and admitted he was not privy to other site considerations.
Nash also inquired about the MOU provided to councilors, which included a blank space for an amount to be determined by the elected officials, and asked how much Lowe’s was seeking to assist with the costs of developing the proposed site.
Gray said Lowe’s was seeking approximately $1.9 million in sales tax rebates to cover the costs of expanding the entrance road, installing a regional detention pond and relocate an existing creek that runs diagonally across the property. Of the amount, Gray said designers estimated the Wolfe Nursery Road extension could cost up to $900,000.
Based on Nash’s estimates, the city would need to provide approximately $300,000 in rebates annually for up to seven years.
“We didn’t want to be presumptuous on that amount,” said Gray. “That’s up to you and the council to make that decision.”
Councilman Mark Murphy asked Gray how quickly Lowe’s would like to enter into an agreement, based on dates in the MOU that gave a sense of urgency.
“We are (in a hurry). We need to get this back to real estate committee and enter into a contract with the property because we want this store to be a year 2008 project,” said Gray. “Time is of the essence.”
Gray added that Lowe’s plans to construct 50 to 75 stores across the U.S. this year.
Both councilmen Pat Shelbourne and Todd McEvoy expressed their opinion that the developer should cover the majority of costs to prepare the site and open a store.
“You chose the site - that’s Lowe’s responsibility,” said McEvoy. “If it doesn’t work out, Lowe’s can look to locate outside the city (limits) for a higher return on their investment.”
That sentiment was heard from several residents as well when the council provided citizens three minutes to speak on the issue.
Chris Gifford, a local resident involved with a family business, said he would be directly affected by Lowe’s locating in Stephenville. “If they’re generating $49 billion a year, what do they need our money for? I don’t think they should rely on us to provide for them to get started here.”
Gifford also questioned Lowe’s intentions after Gray said the proposed store would generate half of their national average, saying “there’s got to be an underlying reason they want to be here.”
Also speaking against the incentives was local business owner Danny Karnes. “Lowe’s is a retailer and their idea of coming into town is to see how much they will suck out of you. There’s no product that they will bring to town that’s not already available here.”
Karnes also said that if the city was considering to provide incentives with a retailer as large as Lowe’s, the council should not subsidize them.
Another local resident, Carolyn Johnston, admitted being a fan of Lowe’s, but said she was concerned for the local businesses. “If we’re not going to offer incentives for existing businesses, we shouldn’t provide them for the giants.”
Business owner Alan Nix, said his family has operated a local store since the 1930s and has never come to the city seeking incentives. “We have not come before you with our hands out, instead we make our business decisions based on what’s best for us individually. I’m not against new businesses, big or small.”
City Administrator Mark Kaiser said Lowe’s is not the only business that has sought incentives from the city. “Anyone that brings additional employment opportunities or increases our tax base - all are eligible for tax incentives.”
He cited several local businesses, including FMC, Good Tree Retirement Community, Dowell ACE Hardware, Saint Gobain Abrasives, Hampton Inn and Caporal Industries as all receiving tax abatements in recent years, while Wal-Mart and Walgreens were denied their requests.
Following the council’s discussion and citizens’ comments, McEvoy made a motion to request more time to review the MOU and Lowe’s requests. “This is a big decision to make tonight. I’d like to table the item and continue talks next week.”
Nash agreed, saying “it irritates me because this has been in the works for four weeks and we’ve only had three days since learning about it.”
The council OK’d McEvoy’s motion, 7-1, with Councilman Barry Ratliff against, to hold a meeting next Tuesday, March 11 to coincide with the city’s finance advisory committee meeting at 5:30 p.m.