Business/Economy, Commerce city, Economy, Politics, Taxes, Westminster

Guest editorial: Corporate favoritism by cities harms small business

“More unique, locally-owned, small businesses and fewer big-box chain stores.” That is what my Westminster neighbors and many Coloradans say when they are asked what kind of retail they’d like to see in their town. As the owner of a unique small business myself, I can tell you one big reason why there is always a shortage of businesses like mine and why cities instead have big corporate chains: the new companies are getting special deals that existing businesses do not get.money6

Frequently, government will say they need to create jobs.  Since government doesn’t actually create jobs, they give incentives (aka tax breaks) to large corporations to move into the city.  This means your tax dollars, and the taxes paid by the small businesses are going to subsidize the big corporations.  Local, unique small businesses do not get the same breaks given to big, out of state corporations.

All across Colorado, local governments are competing with each other to attract new businesses which they hope will bring new jobs and grow the economic base. They do it by giving rebates on property tax, business personal property tax, use tax, and even sales tax. It’s called Tax Increment Financing and yes, even the sales tax you pay for public services can end up in the company’s pocket. Governments tout this tool as a way to invest in the long-term health of the community, but the drawbacks are clear when governments listen to their economic development staff: newer, usually larger businesses are given special deals.

This is exactly what is happening in Westminster with the Alamo Draft House.  The theatre is part of a 28-location chain, based in Texas. The organization has at least seven more theaters planned.

My drive-in theatre has one location. I would like to expand.  When I approached Commerce City, I received a four page Excel spreadsheet listing expected licenses, fees and permits that would cost $80,000!  Like Westminster, Commerce City also offers tax incentives to large businesses.  I have been a stable small business operating for 40 years. Is it really necessary to charge an existing, small business $80,000, but give breaks to big corporations to build something new? Why not greatly reduce or eliminate the fees and allow the small business to flourish rather than picking winners and losers by subsidizing big corporations with tax dollars?

This creates unfair competition and puts a hardship on the existing businesses. They lose their customers to the new facility, which is flashy, new and can maintain artificially low prices because of tax rebates. Worse, businesses near the new facility might even see their property tax assessment go up, since the new development increased the property value around it. Now everything around the new guy is more expensive, but not for him because he got a special deal from the government. And, as the small shops begin to close, the citizens are left with a large chain store with empty stores and vacant parking lots around it.

Icon_2016_Guest_EdHow much did the Westminster City Council give to the Alamo Draft House? “In a 5-1 vote on July 10th, the council granted $700,000 in “fee and tax rebates”, according to Mike Krause of the Independence Institute.  The building and permit fees rebate was “A 100 percent rebate of building permit fees (excluding utility fees) for construction (approx. $77, 403).” Meanwhile existing small business who wish to expand and upgrade their facilities, do not get ANY rebate.

Further, cities should not be spending money in the private sector. They have no expertise. For example, the national movie theatre chain AMC, which has 346 locations in the United States, recently announced a box office slump and will miss their second quarter stock estimates.  Their stock plummeted a whopping 26%. Cities should not be risking tax money in industries they do not understand.

Just look at the Westminster Promenade. In 1994, tax incentives were given to a developer to bring in AMC Theatre to the Promenade, but it never took off as anticipated and only the large chains have lasted, not the mom-and-pop shops. Still, the city gave another $4.1 million in tax incentives last year to bring in more businesses and activity to the Promenade. That investment will be undermined, however, by another special deal that Westminster made with the Alamo Draft House, which is a direct competitor of AMC and located only three miles away.

When someone risks their own money, they are very careful and work to make sure they are meeting a need.  When a city gives tax breaks, it risks hard earned tax dollars which go into private pockets.  When the investment sinks, the citizens lose big time.

In my case, I don’t want a tax rebate, I just want a reduction in all the red tape, expected licenses fees, permits and taxes so I can take on much less debt, remain stable and GROW!  Absent the kind of cronyism taking place, small businesses will create jobs and grow just fine in response to actual market needs, and not rely on political connections to local governments for corporate welfare.

So, good luck with your dreams of opening a small business and growing it in Westminster.  The residents of Westminster will see locally owned unique businesses crushed. Instead, they’ll see rows and rows of cookie cutter corporations from out-of-state in strip malls and failed commercial developments. City Councils across the country must begin to understand that the playing field should be level for all businesses.  Customers, and not city councils, should decide who succeeds and who fails.

Susan Kochevar owns the 88 Drive-In Theatre in Commerce City, Colorado.

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