Is the project unique? Does it create jobs and tax revenue? Will it increase the quality of life?
Those are some questions decision makers ponder as they evaluate potential economic development projects.
“Will this project happen without incentives?” is the question currently drawing attention as an increasing number of municipalities take advantage of Amendment 772 to the Alabama Constitution.
Amendment 772 provides Alabama counties and municipalities with tools and incentives to promote economic and industrial development, said Wiregrass Economic Development Corporation Executive Director Jonathan Tullos said about the legislation that passed in December 2004.
Section 94 of the state’s Constitution was “greatly relaxed” by Amendment 772 because it allows municipal and county governments to use public funds “to procure and develop industrial and retail sites of industrial and retail projects.
“This is one of the tools that we have in the state of Alabama for communities to utilize if they choose,” Tullos explained. “It can be a very effective tool to increase the city’s tax base—to grow the goods and services that they are able to provide to the constituency—without raising taxes.
“That is a big deal,” Tullos stressed. “If you had the perfect piece of dirt, you wouldn’t need incentives.”
Incentives have traditionally been used by municipalities to recruit industry. Amendment 772 allows incentives to be used to recruit retail businesses.
“Some of the criteria used when evaluating 772 projects includes the size of the project, the impact on the community and whether it creates jobs and tax revenue,” Tullos said, citing projects in Troy, Andalusia, Slocomb, Ozark and Auburn.
Hobby Lobby and TJ Maxx will anchor the retail center coming to Troy by the end of 2021. In May 2019 the Troy City Council authorized a project agreement to bring the 130,000 square-foot shopping center to the city in exchange for $1.5 million upon completion of the center and a remittance of half of all sales tax revenue generated by the shops.
In 2017 the Andalusia City Council approved a 1.5 percent rebate of city sales tax for three years as an economic development incentive for the Golden Rule BBQ and Grill.
In November 2019, Slocomb city officials proposed sales tax rebates to recruit a Jack’s Family Restaurant, reported to be the first fast-food restaurant in the municipality’ s 118-year history. City officials rebated about 60 percent of the sales tax revenue the fast food restaurant would generate for a specified period not to exceed a $750,000 rebate.
In Ozark, in 2014, the city council approved a $250,000 agreement with Gilland Motors LLC that helped bring a Ford dealership to Highway 231.
Farm Systems Inc. of Asheville opened in Ozark in 2018 making a $1.4 million investment in Ozark’s economy. The city approved grant incentives of up to $82,800.
The Cook Out, Krispy Kreme and Starbucks are three of 15 projects on Opelika Road in Auburn to qualify for the city’s tax incentives program.
“To promote economic and industrial development a municipality may lend its credit or grant public funds of things of value in aid of or to any individual or business entity, whether public or private,” according to Amendment 772.
Two economic development incentive loans totaling $925,000 were approved for Mack Clark and Clark Theaters Inc. by the Enterprise City Council at the meeting Jan. 7.
In reality it is “conduit financing,” Enterprise City Councilman Turner Townsend said. “We are simply the conduit that the project is using to secure the financing.”
Tullos agreed. “For years we’ve been doing it for industrial recruitment. We’ve been able to do that under the Alabama constitution” he said. “The bottom line is that Amendment 772 allows municipalities to do this for retail recruitment.
“772 is a force multiplier that communities can use at their discretion to create jobs and increase revenue and stop leakage,” Tullos said, defining “leakage” as citizen dollars spent outside the municipality.
“The bottom line is most communities have what is called a leakage or surplus factor,” he added.
“It hurts the community’s general fund.
“For most of the cities in the state, the predominant source of funding for the general fund is sales tax dollars,” Tullos said. “All services cost money. We either grow our sales tax revenue or we can increase taxes and most people don’t want their taxes increased.”
“Traditionally I think governments have looked to raise taxes to provide city services,” said
Townsend. “This council and this mayor have been working hard to grow our economy and I think some of the fruits are about to start showing.
“We’re talking about growing the economy in order to pay for the services that the citizens are asking for,” Townsend said. “We’re not talking about raising taxes.
“I don’t think we’ve done a good enough job talking about some of the exciting things we have going on in Enterprise,” Townsend added. “But it’s gotten to the point where we can start talking about these things.
“We’ve got a major retail development that we are right on the cusp of moving to Enterprise that is going to bring strong national brands that are not currently in Enterprise,” Townsend said. “This development is 185,000 square feet with over $70 million in new revenues to the business base in Enterprise.
Townsend estimated it could be worth $2 million to the city alone and $3.3 million to the schools, county and city combined each year. “So in a 20-year period you are looking at over $60 million of revenues generated in the community that can be used for schools, roads, parks and recreation, paying down debt and keeping taxes low or lower,” he said.
“This is money our citizens are currently spending but they’re spending it outside of the community,” Townsend said. “We’re working hard to capture that leakage.”
Townsend said an 80-bed hotel is coming to Enterprise and said 50 miles of city roads are being paved. He said that the Parks and Rec Director is striving to build a new soccer complex that could include walking and bike trails.
“These are things our residents are asking for,” Townsend said. “We’re talking about doing all this and we’re not talking about raising taxes. We’re talking about growing the economy in order to pay for the services that the citizens are asking for.”
“There is no silver bullet to fix any community’s problems,” Tullos said. “It takes a lot of hard work, thought and deliberation and every community has their own unique set of circumstances.
“The elected officials use the resources that are available to them and make informed decisions using those resources,” he said. “There is no definitive roadmap but if you’re not willing to try some new things, chances that you’re going to lose your success or not going to have success is pretty high.
“Elected officials have to make tough decisions,” he added. “But no one is doing this in a vacuum without very, very hard deliberations on the data that is out there.”