Council and Wal-Mart resume discussions         

New development agreement presented

[NOV. 30, 2005]  The air was electrified and the chambers full at Lincoln City Hall last night. Visitors and guests packed the chambers to address the council on the Wal-Mart proposal that was voted down 5-4 with one member out last week.

The evening was filled with new information about a new agreement, the potential impact of a Wal-Mart expansion, and staff from the local store offered testimony that entailed the relationship the local store has with the community at present, as well as the local store's employment stats and benefits to employees. Solid discussion took place between council members, and guests offered public comment.

The new development was referred to as "sweetened" by several aldermen. Aldermen were supplied a red-line copy, and it was explained by city attorney Bill Bates.

Bates said that since there were no outright objections to the previous agreement, Wal-Mart revised the proposal, based on concerns the aldermen voiced. He and Wal-Mart lawyer Troy Pudik ironed out the changes in the last week.

Main points:

1. The former agreement stated that construction would begin by Dec. 31, 2008.
   That date has been changed to March 31, 2007. Additionally, Bates explained that this hinges on the development agreement and annexation being in place by specific dates.
2. Estimates for work that the city was already planning to do at the Zion lift station have been coming in higher than anticipated.
   Wal-Mart has offered to cover the difference of $15,000 between what was budgeted and the higher bids. The company has offered to credit the city from the $600,000 rebate requested in the agreement. That will drop the starting rate to $585,000.

1. The almost 27 acres of prime real-estate property that would be given to the city will be transferred to the city sooner, 60 days after the building permit is issued.
   Wal-Mart requests to be allowed access during construction for construction support purposes and to install the waterline the company will be laying.
2. Major restrictions have been removed on use of the property that is to be given.
   Mostly the restrictions were a "no compete" clause. No longer prohibited are cafeteria, theater, bowling alley, billiard room, nightclub, any recreation or entertainment serving alcoholic beverages. Also, the city would not have to get consent for a restaurant to go in.
3. A landscape buffer, as requested by nearby property owner Doug Muck, will surround the southeast corner of the building and the detention pond. The buffer will serve as a visual barrier, shelter and enhancement that will benefit the city acreage also.

Local Wal-Mart employees were eager to share their appreciation for their employer and set the record straight about the local store employment and benefits.

Barbara Rice DeFrees said that one of the main complaints she hears from customers in the local store is that it doesn't have everything that a Wal-Mart Supercenter has, and they have to go out of town to get what they need.

She concluded by saying, "The community needs jobs and Wal-Mart hires people."

Julie Branson said that she has been with Wal-Mart 20 years. The local store has more full-time than part-time employees and we all have insurance, even the part-time employees, she said.

"We're citizens of Lincoln too. Take care of us too," she said.

Manager Cody Atkins summed up the local store representation. We strive to be a part of the community, he said. And we've been here for 30 years. Beyond sales taxes and property taxes, we give to churches, organizations and others and will continue to do so.

In the three years that he has been manager, they have given over $100,000 in cash and gifts to the community, he said.

Wal-Mart has been a major sponsor of the Lincoln Art & Balloon Festival for years. "We are not anti-downtown," he said. This past year they sponsored children's entertainment, Kickapoo Kingdom, to draw people into the downtown to help the retailers there.

"If we are to be successful, Lincoln needs to be successful," he said.

He said that the current store has 80 percent full-time employees, and they have benefits. Wages are more than competitive in the industry, across the board, he said. All associates either currently qualify or will qualify for health insurance and are encouraged to participate in 401(k) and the stock purchase plan, and the vast majority are participating, he said.

In response to a question from council member Wanda Lee Rohlfs, Atkins said that 34 hours and up is considered full time and qualifies for benefits.

Victor "Vic" Martinek said that he has looked at the Wal-Mart website to see what they offer, and they do provide benefits.

He agrees that it would be good to keep people from having to drive out of town to shop. "True, Kroger would get competition," he said. "But they're a 50-billion-dollar company. I think they can survive the competition."

Another citizen came forward saying he was the only "con." D. Troy Pruitt questioned why the city would agree to $585,000 in tax incentives to a company that just made $10 billion in profit.

And if you want to do it, why don't you ask for their environmentally friendly buildings, the cream of the crop, that Wal-Mart is now building, he said. They are environmentally safe and save energy. "Let's have the best, and if not, why not?" Pruitt said.

Lincoln Streets Department Superintendent Tracy Jackson supplied a good response as to why the city would agree to give Wal-Mart a $585,000 tax incentive. "We're not really giving them something we have; it's something we don't have," he said. They're maintaining sales tax revenue that we currently get, and above that amount is what they are going to get until the $585,000 is met, he said.

Lincoln and Logan County Development Partnership director Rob Orr said, "Wow, you have a good attorney (Bill Bates). This is a good agreement." He quickly reviewed reasons, most of which are listed below in the economic impact analysis, which supports the city accepting this agreement.

The apparent reason for most of the "no" votes last week was the number of negative opinions that aldermen received from weekend phone calls. Council members said that residents are concerned about the hardship that a Wal-Mart Supercenter could place on local businesses, particularly grocers.

Continuing to be of concern is the impact that the expanded business would have on local businesses. It clearly would affect grocers, such as IGA in the downtown area and Kroger, which would be right next door.

The IGA store is favored for the unending generosity of owner-managers Bill Campbell and Charlie Lee. The two have earned respect and appreciation from the community. Their business offers a number of unique services and fills some special needs, such as home delivery, which shut-ins and elderly use. Campbell and Lee's motto is "Nobody wants to serve you more."

Statistics listed in the economic development analysis below address this issue.

1. Outlines how the presence of a superstore affects community businesses and local economy.
2. Provides information on goods being purchased outside Logan County.
3. Includes responses from last year's survey on what people want for our county development.

Rohlfs asked if the company could supply a list of services that the new store would offer so the council can consider what other businesses might be affected.

Pudik said he would have a list for next week.

Aldermen also felt that there was not enough time to digest the agreement when it was called to a vote last week. It had been undergoing changes right up to that week.

Aldermen Derrick Crane and Buzz Busby each said that they are more comfortable with the agreement now and appreciative of the work that Bates has done.

Aldermen also said that have continued to receive calls from the public this week. Daron Whittaker and Verl Prather said they have had more response of people wanting it and one or a couple not wanting it.

Rohlfs said that 80 percent of the calls that she has been getting have been negative.

There remained some dispute this week as to whether there was sufficient time to decide for or against it. However, they were told that the revised agreement would be put up for vote again next week, on Monday.

Whether anyone's vote will change remains to be seen. However the voters will have changed. Alderman Marty Neitzel is back, and Alderman Jonie Tibbs, who voted "no," will be gone next week.

Before leaving town for a long-scheduled event, Tibbs called LDN to share the reasons behind her "no" vote. She said that she regretted not sharing her reasons sooner, but her concerns are for the competition that the expanded store would exert. She said she believed that it would take out stores with like products: the IGA downtown and the nearby Kroger, Fashion Bug, Goody's and Aldi stores. "Only the strong will survive," she said.

She personally has not been pleased with service departments in the store, such as fabrics and paints.

After they run businesses out, they will not have competition and prices will be higher, she said.

She planned to stand with her vote.

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Economic analysis of community needs and impact as applies to a Wal-Mart Supercenter

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Proposed Wal-Mart Expansion & Relocation in West Lincoln
Report from the Development Partnership
November 29, 2005

The Development Partnership director prepared this report in response to the proposed Wal-Mart project in Lincoln. The director and Development Partnership board as a whole have not reviewed the proposed Development Agreement between the City and Wal-Mart and did not participate in the negotiations. Individual members of the Partnership board have reviewed some or all of the documents in performance of other duties. This report is intended to provide additional information concerning this critical decision.

> Wal-Mart is an existing business in Lincoln. This is an expansion and relocation project.
> Wal-Mart is investing hundreds of thousands of dollars to extend and enhance infrastructure including streets, water lines, and sewer lines.
> The City is leveraging Wal-Mart's investment to create valuable "shovel-ready" sites for future development. Two outlots with frontage on Woodlawn Road immediately become attractive retail lots as does frontage on Malerich Drive resulting from its extension. The Lincoln Industrial Park, a long available, underdeveloped site becomes more attractive and accessible for other developments.
> Upon vacating its current leased space, the current Wal-Mart store should be an attractive location for another business. The building will still have high visibility on Woodlawn Road at a signaled intersection leading to the SuperCenter, a new gas station and other likely businesses.
> As partial payment for these significant infrastructure investments, it was reported that $600,000 will be reimbursed to Wal-Mart from sales taxes created over-and-above existing average revenues based on historical results. The City will continue to receive the base amount it has been averaging from Wal-Mart sales and is merely participating in the high cost of infrastructure to be paid by Wal-Mart.
> The city will also receive a 26 acre site south of the new Wal-Mart store that will be available for a multitude of potential uses including industrial or commercial enterprises. Based on recent land sales in the area and the projected impact on properties in the immediate area, the value of this land could range from $250,000 - $500,000 depending on infrastructure extensions. Potential access to rail is an attractive feature of this site.
> According to Cody Atkins, Manager of the Lincoln Wal-Mart, average hourly store wages are much higher than minimum and 75% of his workforce is fulltime. All associates are eligible for benefits including health, dental, life, and retirement. Wal-Mart pays 2/3 of the cost of its employee benefits. Several good paying management positions will be created.
> The Illinois Division of Employment Security preliminary October 2005 statistics reveal that 690 Logan County residents are unemployed. It is not known how many are underemployed.
(www.ILworkinfo.com)
> Wal-Mart will add close to 200 jobs, of which, about 150 are expected to be fulltime.
> Wal-Mart will be open 24 hours a day providing increased opportunities for those whose employment or living arrangements make it difficult to shop during normal business hours. It also gives Logan County residents a place to make emergency purchases when other stores are not open.
> Local gas prices have become a controversial local issue. Increased competition could help keep Lincoln prices in line with other central Illinois communities.
> This increases the importance of upgrading 5th Street Road which should someday be connected to Woodlawn Road via Malerich Drive. This development should be leveraged to attract state economic development funds from its DCEO Opportunities Return Program.
> The Lincoln Wal-Mart has been a generous contributor to local causes.


Sales Leakage from Logan County:

Although the new SuperCenter will likely impact other local businesses, an analysis of retail sales data indicates that Logan County is losing sales to neighboring counties. It is indeterminable whether this project will improve this condition, but coupled with other developments, it is probable.

The Rural Economic Technical Assistance Center conducts an annual Retail Trade Capture Analysis. This report analyzes retail sales in various categories such as food, apparel, and lumber. A "pull factor" is calculated which compares county sales totals with per capita values for downstate Illinois residents. (http://www.retac.org/, an economic development research division of the Illinois Institute for Rural Affairs. Cook County and collar counties are computed separately.)

• A pull factor of 100% suggests that sales in the county equal what is expected.
• A pull factor greater than 100% indicates that people are traveling to the county to purchase goods.
• A pull factor below 100% indicates that people are leaving the county to purchase goods.

Retail Trade Pull Factors for Logan County 1998-2004:

	1998	1999	2000	2001	2002	2003	2004
Total Retail Sales	89%	92%	95%	93%	92%	90%	91%
General Merchandise	76%	76%	84%	83%	85%	81%	82%
Food	90%	94%	95%	95%	97%	90%	91%
Eating & Drinking	98%	103%	100%	105%	111%	112%	114%
Apparel	37%	47%	39%	30%	23%	23%	66%
Lumber	33%	37%	51%	64%	65%	57%	56%

Total Retail Sales Pull Factors for adjacent counties:
McLean 121%, Sangamon 122%, Macon 125%, Tazewell 118%

Based on this data, it appears that residents of Logan County do a significant volume of shopping outside of the county and it has consistently been the case the past several years.

If the pull factor for Logan County total general merchandise sales would grow from 82% to 100%, this category alone would result in $7.4 million additional annual sales generating new tax revenues of $111,000 for Lincoln and $55,500 for Logan County. (Assumes the increase occurs entirely in Lincoln).

Note that apparel jumped from 23% to 66% from 2003 to 2004. Goody's opened in March 2004 which undoubtedly contributed the biggest impact. Actual sales of apparel jumped $1.9 million in one year. Goody's & Dollar Tree received economic development assistance from the City.

Do Logan County residents want a Wal-Mart SuperCenter?

The Logan County Regional Planning Commission recently surveyed the community and nearly 400 people responded. Here are a few of the questions that relate to the Wal-Mart project.

Would you like to see more of these types of businesses in your community or the county?

• Large scale retail stores - 88% definitely or somewhat agree
• Small scale retail stores - 92% definitely or somewhat agree
• Gas stations - 55% definitely or somewhat agree (survey was pre-Katrina. With gas price increases, the % would probably be higher if surveyed now.)
• Restaurants - 95% definitely or somewhat agree
• Strip mall centers - 72% definitely or somewhat agree

Note: The Wal-Mart SuperCenter will cause all of these to occur. Although some might argue that net result will cause small scale retail to suffer, other potential developments are waiting for the SuperCenter to happen. Restaurants and other retailers will follow this Wal-Mart's expansion and relocation decision. It can be argued that if more people come to Lincoln to buy groceries and shop Wal-Mart, other retailers could actually benefit. If people aren't in town, they aren't buying. This location is not immediately adjacent to the interstate. Wal-Mart shoppers coming to Lincoln on Interstate 55 will pass many Lincoln businesses on the way.

Indicate the THREE most important focus areas for your community/Logan County. (The top 3 are listed.)

1. Economic Development, job growth - 88%
2. Provide more Shopping - 36%
3. Crime & Public Safety - 35%

Indicate the three most important quality of life issues facing your community or Logan County in general (The top 3 are listed.)

1. Economy / jobs-91%
2. Not enough development - 78%
3. Roads / transportation - 50%

The Development Partnership conducted a survey to determine what its role should be with respect to various business developments and opportunities. One of the questions:

Does Logan County need more of these business types?

• Retail, large scale, "big box" - 77% replied YES
• Restaurants - 92% replied YES

According to Kenneth E. Stone, Professor of Economics, Iowa State University, the impact of big box stores for towns:

   Advantages:
          > Will increase town sales because
                    o it will keep residents in town and
                    o attract more shoppers from outlying areas.
          > Town will become a regional trade center
          > Will attract other new stores to town
          > Will improve tax base
          > Will improve sales of non-competing stores

   Disadvantages:
          > Will capture sales from competing stores
          > May result in vacant stores
          > Will capture sales from smaller outlying areas
          > May increase police, fire and traffic control costs

"When city officials go to extraordinary lengths to keep a big box store out of the community, they often harm existing retailers more than if they allowed it in."

Presentation "Are Big Box Stores Always a Threat" at the 15th Annual Rural Economic Development Conference
Peoria, Illinois March 10, 2004
 

It is the Development Partnership director's opinion that retailers should generally not receive additional local tax incentives other than Lincoln & Logan County Enterprise Zone benefits which are significant, unless one or more of the following conditions is met.

(1) The retailer is a regional attraction drawing consumers from all of Logan County and beyond
(2) Infrastructure is extended to areas that have great development potential and create shovel-ready sites
(3) Retailer locates on a site or in a building that is underutilized, abandoned or blighted
(4) Fills a void in the community that can be documented by data and public input

The proposed Wal-Mart project as it has been presented publicly would appear to satisfy three of these conditions.

Establishing consistent guidelines for sales tax rebates and other business incentives is a matter that should be addressed by communities, preferably in advance of development. Although each project is unique and must be considered individually as it is presented, principles and policies that apply to all potential developments ensures fairness and responsible consideration of the use of taxpayer funds. It also provides developers with some guidance as to what can be expected from local taxing bodies.

Sangamon County held a public hearing October 3, 2005 to announce its newly created incentive policies and shared a draft copy of a report titled "Principles in the application of financial incentives to expanding employers." Lincoln and other municipalities in Logan County should consider a similar approach, and the Development Partnership can help facilitate that process.

This report is submitted to the Development Partnership board and the Mayor of the City of Lincoln, November 29, 2005 by its Executive Director, Rob Orr. To request additional information or share any comments, please e-mail EconDev@LincolnLogan.

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