Dollars and sense

Although I am tired of talking about the Crestpointe issue, it’s important to note some observations about the financial aspects of the Crestpointe proposal and some potential alternatives.

City estimates of Crestpointe finances (see http://www.cortn.org/summit/summit-crestpoint.pdf) show a net yearly gain to the city (including our schools) of $511,389 for the first year of operation. This assumes, among other things, that the $10.5 million city contribution is paid off over 20 years at $842K per year, that the city captures the county portion of the property tax, that the shopping center nets $60 million in new sales to the city (this is the portion of sales not cannibalized from existing businesses), that loss of sales at existing local stores (including closure of existing stores) due to competition from Crestpointe do not cost the city any revenue other than the lower sales taxes collections at these stores, and that the existence of the shopping center does not require the city to increase spending for municipal services.

Taking that analysis at face value (not arguing with those assumptions), I ask “What other options does this city have for raising that amount of new revenue?” Recognizing that not every option is good, I’ve reviewed a few possibilities:

*The city could increase property taxes. To raise an additional $511,389 per year, the property tax rate would need to go up by 3.1% to 3.2% (depending on whether the calculation uses a basis of $15,985,000 from the city’s FY 2007 budget or $16,436,000 from the city’s Crestpointe presentation). That’s an 8-cent increase in the tax rate, from $2.55 to $2.63. On a home with an appraised value of $100,000, that’s $20 per year. (For comparison, the Crestpointe proposal asks the city to kick in more than $800 in public money for every household in the city — to help a developer build a shopping center that we hope will produce enough sales tax revenue to allow people to equal what could come from that $20 per year in added property taxes.)

As a bonus, the higher property tax rate would also increase the yearly in-lieu of tax payment from U.S. DOE by about $50,000, so the total gain in revenue from this tax increase would be over $560,000 a year.

*The city could cut spending, on the principle that “a penny saved is a penny earned.” Of course, if it were easy to find half a million dollars that could be cut from the budget, that amount would have been cut a long time ago. However, every item in the budget should be justified, and almost anyone can find at least a few items in the budget to question. I would start by pointing to the $8000 to $8500 per month (that’s $96,000 to $102,000 per year) that goes to a lobbying firm in DC (see blog category Oak Ridge > Lobbyists); the city also pays $4,650 a month (almost $56,000 annually) for lobbying in Nashville.

[Hmm… This post was longer when I wrote it, but a big chunk got lost somewhere. )

Added April 7th, attempting to re-create lost content:

*Additional property and sales tax revenues could be generated by fostering retail in or near existing retail districts. Until Crestpointe was proposed, most Oak Ridgers thought we had an excess of retail sites, not a shortage. It appears to me that opportunities to foster retail abound. Here are just a few:

*Elsewhere I’ve referred to the failed promise of the city center (mall) redevelopment. Even a partial redevelopment of that site would boost property valuations in the center of town (thus increasing property tax revenue) and increase sales tax revenues.

*Oak Ridge has more than its share of other unoccupied and under-utilized sites that are currently zoned for retail and fully served by appropriate infrastructure. Out-of-town retailers interested in tapping this market have plenty of options. If businesses are rejecting certain sites because the sites are over-priced or have existing structures that aren’t suitable for new uses, perhaps the Chamber of Commerce (or perhaps one of the other economic development organizations that receives public funds to market Oak Ridge) should be working to convince the private property owners to market their sites more realistically.

*Bob Monday’s 43-acre site behind Dean Stallings Ford would be, in many respects, an ideal location for a big-box store. If just 19 acres of that site were developed for a Target store, with the remainder remaining as undeveloped woods and wetland, and Target’s property value and sales results are the same as the city staff assumed in its presentation on Crestpointe, the city would receive $91,000 a year in added property taxes and $368,000 in sales tax on sales revenue new to the city. If the city had to spend $1,050,000 (a wild guess, but likely to be in the ballpark) to develop new public road access to that site and paid off the debt for the expense over a 20-year period at a cost of $84,000 per year, the new annual revenue of $375,000 per year would be nearly 3/4th of the revenue projected for Crestpointe, at 1/10th the cost to the city, without spending money solely to benefit private property, and without Crestpointe’s deleterious effects on existing retail.

Bottom line: It’s clear that Crestpointe is far from the only way to enhance the city’s financial bottom line.