Report: Big-box stores best for budget

Giant retailers add most new tax dollars, but critics point to flaws

Wal-Mart to the rescue?

City commissioners weren’t quite ready to buy that idea on Wednesday, but a long-awaited report that measures what types of developments do the best at paying for themselves found that big-box retailers like Wal-Mart did the most to add new tax dollars to the city’s budget.

As several commissioners had expected, the study found all types of residential construction – everything from single-family homes to apartments – generated more costs for the city than they created in new tax dollars.

Several commissioners pointed to the findings as evidence that the city needs to consider creating new fees for residential development to help offset the deficit.

“It is very obvious to me that how we have done business in the past is not enough to provide us the revenue we need to maintain our infrastructure,” City Commissioner David Schauner said. “If we don’t do something, I think our ability to say yes to the wants this community has will become pretty limited. We’ll only be able to focus on the needs.”

But the report – by Maryland-based TischlerBise consulting – also sparked conversation about whether the city needs to attract more retail development and other types of nonresidential growth. That’s because the study found that every 1,000 square feet of big-box retail in the city generated about $2,700 more in taxes than the city was required to spend – for things such as fire and police protection – to serve those businesses. Other types of smaller retail developments also posted revenue surpluses of between $2,200 and $1,600 per 1,000 square feet.

“We have to make a real conscious effort to bring in development that is nonresidential in nature to increase our tax base,” City Commissioner Sue Hack said.

All commissioners agreed on that point, but stopped short of agreeing that the simple answer is to allow more big-box retail development in the community.

Cost comparisons for different types of development

Here’s a look at what a new city report says about how well different types of growth pay their own way. The study looked at how much the city spends to provide services – such things as police services, fire protection, street maintenance, library services and all the other services that are paid for through tax dollars – for each type of growth. It then looked at how much residents of business owners of each type of growth pay the city in taxes and fees.
The study didn’t examine “spin-off” effects of each type of development, such as the type of wages that businesses pay or the number of jobs residential construction creates. The different types of growth along with their annual revenue surpluses or deficits:
¢ Medium to large lot single family: -$26 per house
¢ Small lot single family: -$65 per house
¢ Duplexes: -$9 per duplex
¢ Apartments: -$341 per unit
¢ Big box retail: +$2,711 per 1,000 square feet
¢ Community retail centers: +$2,284 per 1,000 square feet
¢ Neighborhood retail centers: + $1,631 per 1,000 square feet
¢ Manufacturing: +$74 per 1,000 square feet
¢ Business Parks: + $48 per 1,000 square feet
¢ Office: -$116 per 1,000 square feet

“To look at the data of this report out of context would be a big mistake,” said City Commissioner Mike Rundle, who noted the report did not take into account the “social costs” of big retailers. “I don’t think it is safe at all to make any sort of presumption that big-box retail is some kind of salvation.”

Specifically, Rundle and Schauner said a major addition of new retail in the community may only serve to create vacancies in existing, older retail areas of town.

The study’s retail findings come at an interesting time. City commissioners are preparing for a trial on Monday regarding the city’s decision to deny a building permit for a new Wal-Mart store at Sixth Street and Wakarusa Drive. City planners also are in the middle of discussions about whether new retail developments should be required to go through a more rigorous study process to prove that the community can support the new development and that it won’t harm existing retail areas in the community.

The report also comes about three months after a city-hired consultant said Lawrence had a significant ability to add more retail development because Lawrence residents were leaving the community at higher than average rates to shop.

Mayor Mike Amyx said the data tells him the community needs to be cautious about throwing up too many roadblocks to new retail development.

“We’re going to need retail to help pay our way,” Amyx said.

Commissioners also stopped short of agreeing on whether new fees – such as an excise tax on each newly platted piece of property, or impact fees on new homes to pay for parks, fire stations and roads – were needed.

That discussion likely will lead to a philosophical debate over whether new costs should be borne by the city at large or whether there should be an effort to more directly link them to new development.

“We cannot just keep raising taxes on everybody,” Rundle said. “We need to fairly establish an impact fee or excise tax system.”

Members of the city’s home-building industry watched Wednesday’s discussion with interest. Bobbie Flory, executive director of the Lawrence Home Builders Assn., said her group had hired an independent consultant to review the findings of the city report to determine if its assumptions were accurate. The home builders had commissioned a study more than a year ago that indicated residential development paid for itself.

“We think housing should pay its own way,” Flory said. “We just want to be sure on whether it is or isn’t.”

The home builders previously have expressed concern about adding new fees to the development process because they said those fees ultimately add to the price of a new house.

“We have constant concerns about affordability in this community,” Flory said.

The study cost the city about $140,000. It will include a second phase that will look specifically at how much it would cost the city to grow in particular geographic areas of the community.