Are Winston-Salem's guidelines for the use of economic development incentives adequate, or do they need to be strengthened? That was a current topic of debate in September.
Use of economic development incentives: The city council in September approved the offer of an economic development incentives package for the opening of a Mast General Store in Winston-Salem. Mast General is an "old-fashioned" general goods variety store with several locations in western North Carolina and South Carolina. It has the reputation of being a "destination" retail establishment--that is, one which draws customers from a sizable surrounding territory, as if it were a tourism attraction.
I concur that Mast General will be a good addition to our city, especially to a downtown which is in need of more retail sales venues. However, I voted against the economic development incentives package. My 'no' vote was based on my opposition to expanding our use of incentives deals into the retail category. To explain that concern, let me review some background on economic incentives.
Definition: Economic incentives are payments to companies by local or state governments as a way to attract an investment project that the company could choose to send to any one of a number of different locations. The guarantee of these payments is used by the company to help finance the costs of the investment, including new construction, equipment, or employee training associated with that project.
Winston-Salem's approach: Winston-Salem's approach is to consider the provision of incentives when requested by a business considering making a new investment here. Incentive deals normally take the form of a contract between the city and the business, in which the city agrees to payments to the company of up to a particular dollar amount, capped according to other factors. The cap is normally set as a percentage of the net new city tax revenues generated by the project. Incentives requests are considered on a case by case basis, and must meet several tests to qualify. Projects must perform as projected in order to receive the incentives payments, which can also be recovered if a project is shut down or moved away.
"But for" test: A true "incentives" deal must meet the "but for" test: That is, but for the incentives, the project and its benefits would go elsewhere. This means that the deal is truly an incentive to bring to our city development, jobs, and revenue that we would not have had at all otherwise.
Each deal must pay for itself: One of my most important bottom line requirements for an economic incentives deal is that it pay for itself in net new revenues to the city. That is, the project must create more in tax revenues for the city within a reasonable time than it will cost the city in incentives paid. This is a requirement that can be clearly demonstrated for projects that involve new construction of taxable real property, or create new jobs with sufficient local payroll (a calculable average part of which will go toward local sales taxes). New manufacturing or research facilities can often meet this test when the size of the proposed incentives package is reasonable.
Problems with using incentives for retail: Retail development has a special problem meeting these tests. That's because in a community like ours which already has plentiful retail establishments, another retail venue is unlikely to create net new local revenues. Instead, it merely shifts around dollars that are already being spent here. Therefore, any sales taxes generated would most likely have come in anyway from sales at other retail establishments already here. I have no quarrel with new business competition coming into the city. However, I don't think it's appropriate to use city tax revenues to pay an incentive for it to come here if it's just competing for dollars already being spent here at other stores. That's also not fair to our existing companies selling those same items.
Alternatives: There are other programs designed to encourage investment in development or redevelopment of certain targeted locations, such as declining older commercial areas in need of revitalization for the well-being of the surrounding neighborhoods. However, those should be considered separately from general economic development incentives deals, under different criteria designed to measure their actual value to our community. For example, the criteria for programs encouraging redevelopment of declining older commercial areas are associated mostly with the value of preventing or cleaning up their adverse impacts on adjacent neighborhoods.
My conclusions: In my view, a great deal of careful work needs to be done to prepare adequate standards for testing the community benefit of new retail projects before we consider them for incentives offers. Incentives payments already play too great a role in our strategy for attracting new economic investments. I do not believe that it is fiscally viable for our community in the long run to continuing expanding their use. It's an unfortunate fact that they are required for our city to effectively compete for many new business investments, but we should not expand their use beyond what is necessary for us to remain economically competitive. That's because the overuse of incentives cumulatively increases the percentage of community tax burden carried by residential property compared to commercial property. We should be looking for ways to reduce our reliance on economic incentives payments, not expand it.
Update on Fire Station 2: As many of you know from the news, WSFD Fire Station #2 on Somerset Drive was temporarily closed about a month ago in order to fix a recurring serious mold problem that presented a health concern for firefighters there. The mold was located and removed from ceiling and walls in a hallway and bedrooms. The building is now being monitored to be sure that the problem is fully fixed before repairs are completed and the station re-occupied.
Fire safety lesson for residents: Many of you may have noted the news story last month when a cooking fire from an unattended stove caused the temporary evacuation of Healy Towers apartments on Healy Drive. You may not have noticed why the fire was far less severe than it might have been, and most residents were back in their homes the same day. It's because stove tops at this Winston-Salem Housing Authority property have been equipped with automatic fire stop canisters as part of a Federal Emergency Management Agency (FEMA) grant. The Housing Authority purchased 750 of these fire suppression devices and installed them at 615 units in its three residential towers. (It has 135 spares for replacements.) Total project cost was about $33,000. A single fire--like the one at Healy--burning uncontrolled would have created far more damage costs than that, and threatened residents' lives. In the Healy Towers fire, the canister operated as designed, and popped open to release fire-suppression powder to smother the fire before it could spread.
According to the fire department, cooking fires are the most common form of household fires. These stovetop fire-stop canisters cost less than $50 each and are available at local retail stores. The WSFD strongly encourages residents of our city to buy and install these devices (about the size and shape of a tuna can) on stoves. Plus, never leave food cooking on the stove unattended.
Don't text and drive: By mayoral proclamation, September 19 was "No Text on Board Pledge Day" in Winston-Salem. It was part of a public education campaign on the hazards of texting while driving--a serious and growing cause of traffic accidents. Research by the Virginia Tech Transportation Institute showed that texting drivers are 23 times more likely to be in an accident. According to the National Safety Council, texting drivers are involved in more than 100,000 auto wrecks a year. North Carolina made texting while driving illegal in 2009, but too many drivers (especially young drivers) persist in this extremely dangerous practice. An educational site at www.itcanwait.com is designed to appeal to younger drivers with this safety message.
Voting starts Oct. 18: One-stop early voting for national, state, and local offices begins Thursday, October 18. With so many ways and days to vote, there's no excuse to miss it. I wouldn't presume to tell anyone how to vote, but I have no hesitation in offering my opinion that all citizens of our community do need to VOTE for the candidates of your choice!
October events: Some city activities of interest during October:
--Big Sweep: This is our annual community volunteer cleanup day for local waterways. It's set for this Saturday, October 6, from 9 a.m. to noon at over 30 sites from Salem Creek to Peters Creek to Silas Creek.
--Community Roots Day: Our city's 20th annual community tree-planting project will take place this year on Saturday, October 27, from 9 a.m. to noon along New Walkertown Road and the Newell/Massey Greenway. Volunteers are asked to arrive by 8:45 a.m. at the Twin City Baseball Complex at Waterworks Road.
--These are great projects for students, scouts, service clubs, church groups, and other concerned citizens. For more information or to sign up, go to www.kwsb.cityofws.org.
That's my report for September. As always, you are welcome to email me at email@example.com with comments or questions. Thanks!