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Town considers Big Box changes

With the potential for backtracking on previous limitations set by the town on large retail development (commonly referred to as “Big Box” development), the Pagosa Springs Town Council will entertain the first reading of an ordinance, during today’s noon mid-month meeting in council chambers at Town Hall that will, if passed, repeal Land Use and Development Codes (LUDC) that have constrained the size and scope of Big Box retailers in Pagosa Springs.

The matter of Big box development has a long and contentious history in Pagosa Springs, with council approving an ordinance in 2006 that placed limits on the size of retail space, while specifying design and permitting processes beyond smaller-scale retail development (i.e. less than 40,000 square feet).

Those limits and restrictions were later codified in the revised LUDC that was passed by council this past January. The ordinance presented today would repeal the portion of the LUDC (section 2.4.5) that governs Big Box development.

Economic reality is likely the primary driver pushing council to reconsider Big Box development. May sales tax revenues were down 3.53 percent compared to the same month last year, with year-to-date revenues down 7.58 percent from last year. May unemployment in Archuleta County, while significantly better than the 9-percent figure reported in March, was at 7.7 percent, with 482 county residents out of work, higher than at any time (with the exception of 2009) since the Bureau of Labor Statistics began charting unemployment for the county in 1999.

Given current local economic conditions, changing the rules to allow the development of a Big Box retailer makes sense to many area residents. Along with the short-term impact of providing relief to the suffering local construction industry, a Big Box would certainly provide a number of permanent retail and other service sector jobs. Furthermore, a Big Box retailer would potentially put a partial plug in sales tax revenue “leakage” — local dollars spent in Durango, Farmington or other municipalities with Big Box retailers — money that could stay in local government coffers.

Many opponents to large retail development in Pagosa Springs, vocal during the previous Big Box controversy, claim that the touted benefits of Big Box placement are overblown and that the introduction of a Big Box to Pagosa Springs could cause substantial and irreversible damage to the small town character of Pagosa Springs.

First and foremost, opponents maintain that Big Box stores thrive at the expense of local “mom and pop” stores that cannot compete with a larger retailer’s ability to sell merchandise at prices far below what a small retailer can offer. Opponents say that Pagosa Springs risks losing its small town identity as local businesses lose ground to homogenized corporate retail and restaurant chains. And, although opponents concede that a Big Box store would provide jobs locally, they maintain that those jobs will come at the expense of jobs lost as local merchants are forced out of business. Furthermore, opponents claim that the jobs created by Big Boxes are, more often than not, low-wage and part-time, putting a strain on local social services as those workers struggle to survive on substandard wages and with few or no benefits (such as health insurance).

Kathy Keyes, member of the task force that investigated the impact of Big Box development that informed the draft of the town’s large retail LUDC section, expressed hope that council will carefully consider how it proceeds with inviting development into town.

“The task force looked at all these pieces,” she said. “Environmental impact, decent wages, affordable housing, design standards, et cetera. If these things can be addressed, we’d be open to a mid-box development.”

“We do support economic development that is in line with the vision set forth by this community,” Keyes added. “Perhaps, instead of calling us opponents, you could call us supporters of the LUDC.”

Town Manager David Mitchem, however, sees mid-box development as a half-measure that leaves Pagosa Springs outside the loop of badly-needed economic development and the current LUDC as an obstacle to that development.

“We will not be in the competition if that (LUDC section 2.4.5) stands in place,” he said. “I have no intention of knee-jerking this and compromising.”

In fact, prior to revision, the council agenda included the cryptic item, “Economic Development Incentives — Tax Increment Financing Policy,” as a prelude to the proposed ordinance for LUDC revision.

As normally defined, Tax Increment Financing (TIF) has been used by municipalities to encourage development in a distressed area — usually, a blighted urban area. However, TIF schemes have been increasingly used to encourage large retail development and Big Box retail chains such as Target and Wal-Mart — frequent beneficiaries of TIFs.

In order to encourage development, TIF plans generally designate a TIF “district” in which impact fees and costs are waived so that a developer is free from most or all costs associated with construction of a facility, with the municipality (and its citizens) covering that cost of development either through taxes or a bond. After development, property taxes (and sometimes sales taxes) from the TIF district are divided into two streams. The first tax stream, based on the original assessed value of the property, is returned to the municipality. The second stream, tax revenue generated after development, theoretically assessed at a higher value, is used to pay off bonds taken out to pay for capital improvements in the TIF district, land acquisition through eminent domain or direct payments to the developer for site preparation and construction.

Generally, bond repayment or structured repayment schedules for a TIF plan run anywhere from seven to 30 years. In theory, TIF development recoups public money because of increased property values of the development itself, as well as the increased values assessed on surrounding properties. Furthermore, sales tax revenues generated from the development also go to pay back the initial investment. In short, with a TIF plan, a municipality trades future tax revenue for immediate economic benefit.

However, it could be argued that TIFs favor Big Box development over small businesses (either existing or potential) and is nothing more than a government subsidy provided to big business at the expense of less politically influential competitors and ordinary citizens.

Although the TIF item was scrubbed from the mid-month agenda, a TIF plan is mentioned several times in the replacement item, “Economic Development — A Portfolio of Incentives.”

When asked how the town was structuring a TIF (per language in the discussion item), Mitchem responded, “The TIF is on property taxes and applying that concept to sales tax revenues.”

When pressed on how TIF is normally defined, in opposition to its use (or misuse) in the mid-month agenda, Mitchem stood firm in describing the “tax increment financing initiative” as merely the tax rebates offered to local businesses in the economic development plan being proposed to council.

Nevertheless, in cloaking the definition of a TIF in the language of tax rebates and economic development incentives, Mitchem and the council run the risk of muddying the discussion on the town’s future economic development. Whether or not the introduction of a Big Box in Pagosa Springs is part of that development remains uncertain; how the town decides to pursue that development, however, should remain clear to all residents, without cloudy terms and uncertain motives.

jim@pagosasun.com