Do “Economic Development Incentives” relate to city income sources? Communities that are sales tax dependent seem more likely to offer incentives to superstar retailers. Creating income from sales tax for city government becomes more important than the sustainable approach of improving education and creating higher incomes per resident. Sales tax dependency is resulting in corporate welfare subsides to “big boxers” that concentrate the regional market by offering lower prices or achieving the shopping phenomena status of tourism attraction. These incentives ultimately decelerate the economy. Smaller communities in the region loose and the total retail jobs decline as these superstores redistribute the same regional dollars using fewer employees per square foot than the smaller retailers they displace. Over the longer term not only jobs but also property taxes are reduced and infrastructure problems exacerbated as concentrating sales in big boxes increases congestion in places that were not adequately designed for these “attractions”.

Retail incentives are more productive for the economy when connected to achieving outcomes, such as, stimulating investment in redevelopment neighborhoods or as part of catalyst projects that promote compact mixed-use development. Will a new super retailer or retail center add to the costs of government services? Will it expand public infrastructure? Will it capture regional market share in a manner that will adversely impact other neighborhoods or surrounding communities in the region? If the answer to any of these questions is yes, or even maybe, then public investment in incentives can be better directed.

In March 2004 The UIC Center for Urban Economics released an interesting report that is instructive for communities considering any incentive for big box retail: The Economic Impact of Wal-Mart: An assessment of the Wal-Mart store proposed for Chicago’s West Side.

Check out these related Competitive Communities entries: Retail Recipe, Will the real Santa Fe please Stand Up, Leveling the Playing Field, and Do City Income Sources affect Growth Policies.