Mega-stores, mega-breaks in Columbia?

krupon@thestate.com jwilkinson@thestate.comDecember 13, 2013 

  • Retailer incentives

    Traditionally, economic-development incentives have been reserved for manufacturers, which bring hundreds of jobs and millions in investment. However, Costco’s decision last week to drop its plans for a Midlands site has some questioning whether deals also should be offered to retailers. In some cases, they already are. A look:

    Amazon

    The online retailer received:

    •  A property tax break for 20 years, worth roughly $2.5 million a year

    •  A rare sales tax collection exemption at least through 2015

    •  Job-creation tax credits

    Mast General Store

    The Main Street retailer received:

    •  Low-interest financing

    Discounts for employee parking from the city

— Columbia-area shoppers want more national stores. They create Facebook pages begging retailers to open. They line up by the hundreds when Whole Foods and Mast General Store open, and crowd the parking lot at the new Trader Joe’s to overflowing for weeks.

But should government offer incentives to a retailer to locate in the Midlands?

It has happened before – think Mast General Store along Columbia’s Main Street.

But it’s a bad idea, critics say.

Still, many shoppers expressed disappointment – on social media and beyond – when a deal fell apart earlier this week to bring the first Costco to the Midlands.

Developers had asked Richland County for tax incentives to help with nearly $3 million in cost overruns at Costco’s proposed site – along Piney Grove Road, near the Harbison area. The overruns stemmed from topography concerns and needed road improvements.

But the warehouse retailer dropped its Midlands plans when Richland County did not offer enough assistance, developers say. Neither side will say how much was offered.

Part of the problem is that economic incentives, including tax breaks, traditionally have not been offered to retailers. Instead, they have been reserved for manufacturers, distribution centers and call centers, which bring hundreds of jobs and millions in investment to an area.

But, perhaps, the time has come to offer deals to retailers as well, some say.

“You can see the economic development it brings to the area when someone like a Costco comes to town,” said Richland County Planning Commission chairman Patrick Palmer, a senior broker with the NAI Avant commercial real estate firm who was not involved in the Costco deal.

“When you’re able to put something on the tax rolls of this significant size, you need to take a look at it in the long haul,” Palmer said. “It would be helpful if (County Council) would look for ways to help with deals.”

Costco would have brought more than 200 jobs to the area and $7 million in sales taxes annually to the county, its Mount Pleasant-based developer said.

And, once Costco had established a foothold in the Midlands, the warehouse retailer likely would have opened a second store, said Palmer, who has worked with Costco in the past. The development also would have boosted the Piney Grove Road area, attracting new development along that corridor, he said.

But Ashley Landess, president of the S.C. Policy Council, says incentives packages for retailers are a bad idea.

“What is particularly dangerous about retail incentives is that not only are you forcing taxpayers to subsidize a private business, but you really are forcing businesses to subsidize their competition,” she said. “Politicians are deciding which businesses don’t have to pay their taxes. … They are literally creating monopolies and hurting independent businesses.

“Who decides which companies are worthy of us investing our money?” she asked.

Some retail deals already made

There are precedents for offering incentives to retailers in South Carolina.

In Horry County, Myrtle Beach Mall received extensive property tax incentives. At the state level, retailers in poor counties – those considered distressed by the state – are eligible for tax credits for job creation. (Almost half of South Carolina’s 46 counties are considered distressed.)

In Columbia, tax increment financing districts – called TIFs – have been used to build infrastructure to support retailers, including parking garages and streetscaping. Those infrastructure improvements are credited, in part, for the retail success of the Vista.

“Streetscape projects – if they are done in correct areas of the city – will be followed by huge amounts of retail development,” said Fred Delk of the Columbia Development Corp., which encourages and guides development in the city. “The Vista is the best example of that in the state, and Main Street is another great example.”

On Main Street, the city helped Mast General Store secure low-interest financing for a new store. In that case, the city and a state agency used a federal stimulus program to issue bonds with tax-exempt interest. Additionally, Mast employees received a discount from the city for parking.

“On a case-by-case basis, we provide discounts for parking for people who renovate buildings and build new,” said John David Spade, the city of Columbia’s parking director. “And there are a host of other finance incentives that the city uses to work closely with a developer or business, things like the Bailey Bill for historic tax credits that provide sizable savings for developers.”

But Delk said that many of the incentives that the city uses wouldn’t translate very well in the suburbs.

“The land value is not as high and density issues are not as important,” he said.

Still, Delk added, in other cities, “Costco (has been) pretty good at getting things like an interstate interchange. But (Columbia), traditionally, hasn’t offered a big mega-package like that.”

One exception is the redevelopment of the former State Hospital campus along Bull Street.

There, the city is planning to provide an Upstate developer an estimated $50 million in incentives for parking garages, water and sewage systems and streets. The first phase of the estimated 20-year, 165-acre redevelopment project is mostly retail.

Internet retailer Amazon also succeeded in landing a package of incentives tied to job creation from the Legislature to open fulfillment centers near Cayce and in the Upstate. Additionally, the online retail giant received a rare sales-tax exemption for its online shoppers in South Carolina.

In recent years, however, the state has shot down incentives designed to lure big-box sports and outdoor retailers Cabela’s and Bass Pro Shops to South Carolina. (Cabela’s recently announced it would open its first S.C. store, in Greenville, next year – eight years after tax incentives for a Lowcountry store were rejected.)

Better if it is for everyone?

Attracting high-profile national retailers is important for a variety of reasons – ranging from improving the quality of life for residents to helping attract and retain talented workers, Richland planning commission chairman Palmer said.

“There are certain things that towns that are going to grow just need,” he said.

In recent months, the Midlands has been gaining momentum in attracting national retailers – from Whole Foods in the Devine Street area to Trader Joe’s in Forest Acres to Urban Outfitters in the Vista. But, as Midlands shoppers can attest, the area still is missing some attractive offerings, including Costco and an Apple store.

Having a setback on the Costco deal is not helpful in attracting other new retailers, Palmer said. “The more first-timers we get in, the better it is for everyone.”

Incentives compared

Traditionally, economic-development incentives have been reserved for manufacturers, which bring hundreds of jobs and millions in investment. However, Costco’s decision last week to drop its plans for a Midlands site has some questioning whether deals also should be offered to retailers. In some cases, they already are. A look:

Amazon

The online retailer received:

A property tax break for 20 years, worth roughly $2.5 million a year

A rare sales tax collection exemption at least through 2015

Job-creation tax credits

Mast General Store

The Main Street retailer received:

Low-interest financing

Discounts for employee parking from the city

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