TWO YEARS AGO, the Richland County Council was poised to pay Costco $3 million to open one of its popular warehouse stores in the Midlands, people raised objections, and an amazing thing happened: The talks broke down, apparently because council members started to recognize their own folly.
Then something that shouldn’t have amazed anyone but definitely is worthy of note happened — or rather, didn’t happen. Costco didn’t actually go away. It kept looking at the same Piney Grove Road site that it wanted the council to spend $10 million to improve, and eventually it put together a plan to make it work without a taxpayer subsidy. That plan is being reviewed by local and state officials, and is expected to result in the long-awaited entry into the Columbia market of the much-sought retailer.
The reason Costco’s continued interest in the Midlands is not amazing is the same reason it was so foolhardy for the council to offer incentives to start with: Retailers are shopping for the right shoppers.
While they’re happy to accept tax incentives, all the incentives in the world will not convince Costco or Whole Foods or the Apple Store or any retailer to locate where there aren’t enough of the right kind of shoppers to make it profitable after the incentives run out.
Oh, you might convince a business to locate a few feet on this side of the county line instead of the other, but that’s hardly a good use of tax money, particularly in a community as interconnected as ours.
You might even convince a business to locate downtown instead of in the suburbs. And sometimes that might be worth doing, assuming the benefit to the community very clearly outweighs both the obvious and the hidden costs. That formula was what made it acceptable for Columbia to provide incentives to help transform the Confederate Printing Plant into a Publix in the once-blighted Vista.
No retail tax breaks
But in general, it’s a bad idea to pay for retailers (or student apartments, for that matter). A big reason is the flip side of retail calculations: Since their goal is for an individual store to turn a profit, retailers are not going to stay away from a community that works for them — at least not for long — just because the taxpayers don’t subsidize their venture.
That is why Costco never gave up on the Midlands.
The pending arrival of a Columbia Costco is, of course, wonderful news for all of those consumers who have been clamoring for years for closer access to the popular warehouse club — and for those who will discover it once it’s here.
More significantly, it is a vital reminder for the Richland County Council and any other governments that are tempted to spend tax money to recruit retail development: Absent those extraordinary revive-this-blighted-neighborhood situations, it’s not something you need to do.
I wish the same logic that makes it foolish to provide incentives to retailers applied to manufacturers, which our state and local governments routinely pay to build or expand facilities. Unfortunately it doesn’t.
As long as they can find the workers they need, manufacturers don’t have to worry about how well-educated or wealthy the people near their facilities are. Some might even be better off in not-so-prosperous communities, because that will keep their costs down.
Manufacturers see themselves as doing a favor to the community where they locate, and some of them — particularly mega-manufacturers such as Boeing and BMW — are: They pay much higher wages than retailers, don’t use as many government services, and most of them can do business pretty much anywhere in the world.
So rather than shopping for shoppers, they are shopping for the lowest cost. Since other states and countries are willing to provide incentives, either we play the incentive game or else we strike out.
Picking up some of the cost for a retailer to move in also creates another problem that picking up some of the cost for a Volvo plant doesn’t: a competitive advantage.
A lot of manufacturers never got the sort of tax breaks and infrastructure assistance that South Carolina gave to Volvo and Boeing and Giti, and that is unfair. But those other manufacturers aren’t competing with the new mega-manufacturers, so the incentives don’t threaten their existence.
When a retailer opens with the help of taxpayer subsidies, it can sell its products at a lower price, undercutting retailers that are already in the community, particularly the proverbial mom-and-pop retailers; worse, those retailers have to help pay for the subsidies that can put them out of business. That’s pretty much the definition of an unfair government policy.
I’d like to think that Richland County officials were thinking about these sorts of problems when they got cold feet two years ago. And if not, maybe they’ll be the sort of things they — and officials in other communities — will keep in mind the next time a popular retailer comes looking for a handout.
Ms. Scoppe writes editorials and columns for The State. Reach her at firstname.lastname@example.org or follow her on Twitter @CindiScoppe.