published Monday, December 6th, 2010

Retailer incentives called 'can of worms'


by Andy Johns
  • photo
    Staff photo by Dan Henry/Chattanooga Times Free Press - In this file photo, construction is going on at the Costco site on Cloud Springs Road. Some local officials worry that incentives offered to Costco might become the rule for other businesses looking at locating in Catoosa County.

Fort Oglethorpe recently approved its share of $900,000 in incentives to help lure a Kroger supermarket to Ringgold, Ga., but the new mayor says government officials have "opened up a can of worms" by offering perks to retailers.

Catoosa County, Ringgold and Fort Oglethorpe took out a loan to prepare land for a Costco Warehouse Club that opened in October. They plan to do the same for Kroger if the Cincinnati-based supermarket chain decides to build a store on Battlefield Parkway in Ringgold.

"That's the one that opened up Pandora's box," said Fort Oglethorpe Mayor Lynn Long, referring to the Costco deal. "The reality is that precedent that has already been set."

Long said Costco is the first retailer to receive incentives to locate in the county and he expects Kroger and most other prospective retailers to ask for similar incentives.

The county government bought the $4.8 million Costco site, pumped about $4.5 million into improving the land, then sold it to the retailer for $4.8 million. The Kroger project would include $904,000 in sewer, stormwater and environmental work.

Long, who took over for the late Mayor Ronnie Cobb in November, said the Fort Oglethorpe council voted to enter the agreement with Ringgold because Ringgold had done the same for Fort Oglethorpe with the Costco deal.

"I think long term it's just a matter of cooperation," Long said. "What's good for Ringgold is good for Fort Oglethorpe."

During his campaign for mayor, Long said incentives "are going to have to be there in the future."

Jim Cutler, whose district includes most of Ringgold, said Long might be overstating the situation.

"This isn't an open invitation to anyone saying we're going to open up the checkbook and here you go," said Cutler. "Will businesses ask for it? They could, but that doesn't mean we have to give it to them."

Cutler said the county and cities would grant incentives to businesses only when it made sense -- for instance, if the company would bring significant sales tax revenues or jobs to Catoosa County.

About 170 people, including 112 part-timers, will work at the Kroger store, according to the officials. Kroger is expected to contribute about $222,000 in sales taxes the first year, according to officials. In contrast, Costco is expected to bring in about $1.5 million in sales taxes in its first year.

Randall Peters, chairman of the Catoosa County Economic Development Authority, said officials took a hard look at both stores' expected sales and the revenue they would generate. He said tax break requests from smaller businesses with smaller impacts on jobs and revenues have been denied in the past.

"We have had a number of parties come to us and ask for incentives that haven't gotten through," Peters said.

Ringgold Councilman Larry Black, who has been on the council for 12 years, said the Kroger vote was the first time he can remember the city offering incentives for a business. The taxpayer-funded benefits are a new wrinkle in development, but they are not likely to go away, Black said.

"I guess that's just part of the culture now," he said.

Contact staff writer Andy Johns at ajohns@timesfreepress.com or 423-757-6324.

about Andy Johns...

Andy began working at the Times Free Press in July 2008 as a general assignment reporter before focusing on Northwest Georgia and Georgia politics in May of 2009. Before coming to the Times Free Press, Andy worked for the Anniston Star, the Rome News Tribune and the Campus Carrier at Berry College, where he graduated with a communications degree in 2006. He is pursuing a master’s degree in business administration at the University of Tennessee ...

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xsiveporsche said...

Costco was going to build in Ga. with or without the incentives. They wanted the lower taxes to draw customers from Tennessee. It is just a bonus for them to get the land that cheap and not have to pay propeerty taxes as such for how many years? Why give these companies breaks, if they want our business they will build here. We gave enough breaks to get Volkswagon in Chattanooga and now Ga is trying to draw the businesses there way and take away the revenues. Tennessee is the one that drew all the businesses to the area and Georgia is trying to reap the benefits. I live in Tennessee and I shop in Tennessee. The more revenue that we bring in to Chattanooga the less chance our property taxes going up.

December 6, 2010 at 7:31 a.m.
Humphrey said...

costco had to go to georgia to sell wine. This Kroger will be able to sell wine, too.

December 6, 2010 at 1:29 p.m.
alohaboy said...

The dogs (local governments) are fighting over the bones (retail and manufacturing) with this economic downturn. With all these perks to be paid for, local taxes have to rise. Everyone will be bailing out the few that get jobs or perks. Sounds like the government taking from the masses for the benefit of a few.

December 6, 2010 at 1:47 p.m.
memphisexile said...

The problem is if they are going to build "in the area" there are significant sales tax benefits the county of choice will receive. So it makes sense to offer incentives, because in the end you come out way ahead on sales tax. In the case of the Volkswagon factory taxes were not the point, it was the thousands of jobs it would create. These jobs result in more spending by those who have them and creates more sales tax revenue that more than covers the cost of incentives in the long run. The reason you have to give incentives is because if you don't someone else will and you end up with NOTHING.

Xsiveporsche your comment makes no sense. On the one hand you think no incentives should be offered "because if they want our business they will build here." But you also want sales tax revenue to stop property tax increases. I guarantee you people from Chattanooga are going to go across the border to COSCTO to avoid Tennessee sales tax because they are not as concerned about keeping property taxes low. Chattanooga could have had that COSTCO if not for the ban on wine sales that is kept in place by the liquor store lobby.

You give incentives because if you don't another city will and Chattanooga will lose the benefits of more business. Losing business because of a lack of incentives "because if they want our business they will build here" is the height of stupidity. I for one applaud the efforts of Chattanooga to attract business and create jobs.

December 6, 2010 at 2:26 p.m.
Beamis said...

Costco is an asset to the community and gets my business to the detriment of Tennessee retailers who cannot compete on price or the amount charged in sales tax. Georgia was smart to land this company who pay higher wages than most mass merchandisers and have a classy business model that benefits their members with true value for the dollar.

Kroger is on the ropes and I don't think they will be very competitive with already established grocery chains n the area. I wish them well but Publix on the high end and Aldis on the low will eat their lunch, just as they have in the Atlanta market and elsewhere.

December 6, 2010 at 6:30 p.m.
nowfedup said...

All I want to see is the costs and corp welfare verse how long it will take in real world to get it paid back, as now it seems many county-states going broke and still giving away taxes, which someone will make up. So let's see the data and how it all works our, AKA How long and how much will be paid back, and no fun an games with NO Interest stuff, add what they could have earned on the money given away as part of pay back, So let's see the real numbers, how many working how long to pay it back.

December 7, 2010 at 1:11 a.m.
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