Commentary

Lessons from local incentives

July 13, 2013 

MY VIEW--Mark Zimmerman

CONTRIBUTED PHOTO

The local business and development environment is expensive and challenging. So it’s not really surprising that our towns have recently had to offer some corporate welfare programs to keep companies from moving away.

Carrboro is the latest to give incentives to businesses that have outgrown their quarters.

Fleet Feet, which has its flagship retail store and its headquarters scattered among three locations downtown, and Kalisher, a photography gallery and design firm, both need more space.

In a complex deal, Fleet Feet would consolidate its operations in a new building to be built as part of the Main Street Partners re-development, Kalisher would buy one of Fleet Feet’s office buildings, and Carrboro would buy the other Fleet Feet office condo and pay extra for Kalisher’s employee parking. Fleet Feet would rent its condo back from the town until the new building is complete, at which time the town would sell it.

The arrangement helps secure financing for the new building, and the resulting tax revenues should more than cover Carrboro’s costs.

The deal is similar to a three-party arrangement in Chapel Hill, in which the town leased Three Birds Marketing’s office space for the new Launch entrepreneurial center, allowing Three Birds to move to larger, vacant space in the Chapel Hill News building owned by Scott Maitland. The town then provided employee parking for Three Birds in a lot across the street.

Most reactions have been positive to these ventures. But the deals aren’t without risk and raise some issues.

In Chapel Hill’s case, the town hopes to create new jobs from both Three Birds and the Launch start-ups. The risk is those new companies won’t find affordable space here and end up leaving for Durham.

In Carrboro’s case, the town is investing its funds for a direct return. A new building increases the commercial property tax base and new retail increases the sales tax base. Its risk comes from the office condo it is buying, which it hopes to sell for as much or more than it cost.

The issues raised involve fairness and precedent. These companies are run by good people who do good things in the community. But there are many like them. What will Carrboro say to other businesses that need parking or financing guarantees?

Elected officials need to follow up with principles to guide their decisions in the future. Without them, they invite subjectivity and favoritism.

Importantly, the towns are making significant statements with these deals:

Jobs and taxes can drive policy decisions. They are the main reasons for each deal. Hopefully they will be weighed more heavily in all development applications.

Parking is key to business and scarce downtown. Both deals concede that by providing employee parking at little or no cost. The anti-auto mantra has hurt the vitality of downtown.

A business doesn’t have to be locally owned to be desirable. Fleet Feet was supported even though 1) its success comes from national franchising and 2) it is owned by the Golden Corral private equity group. Franchises of all kinds deserve more respect in this community.

There is one more lesson coming from these deals. If you want help, threaten to leave. Because of past policies, businesses don’t have many viable options to expand, leaving the towns little choice but to acquiesce to their demands to keep them.

The only way to avoid being put in that position is to provide more commercial space through re-zoning and make the development process constructive rather than destructive. Then, over time, the private sector will answer demand, allowing our businesses to grow here and relieving local government from having to risk taxpayer money by intervening in the marketplace.

Mark Zimmerman owns a small business in Chapel Hill. He can be reached at markrzim@gmail.com or @markrzim.

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