By Brian Cain
At least one local business owner disagrees with cash provisions included in a high-volume retail and restaurant incentive program recently approved by the Louisa County Board of Supervisors.
Jeff Brown, owner of Louisa True Value Hardware, said the new measure offers large corporations an unfair competitive advantage over local small businesses.
“The big box stores are tough enough to compete against as it is without letting them have money as well,” Brown told supervisors during the board’s regular March 19 meeting.
Andy Wade, Louisa County economic development director, said the program—which is designed to incentivize big businesses to locate in the county’s designated growth areas, provide residents with more shopping and dining options, increase the county’s tax base and create jobs—included the option to offer qualifying new businesses a $500,000 lump sum cash grant.
“Incentives play a huge part in economic development these days,” the director said. He added that such incentives have historically been reserved for manufacturing and industrial businesses.
“But going forward, incentives are increasingly moving into the commercial sector in addition to the industrial and manufacturing sectors,” Wade said.
Brown said he didn’t have a problem with incentivizing certain businesses.
“We all want big business and to see that growth,” he said. “But that up-front cash is probably the worst thing you can do…It doesn’t make the playing field very fair for a smaller businessman trying to compete in today’s world.” He added that tax rebates make more sense.
According to Wade, the cash provision would sweeten the deal to lure big businesses into the county while increasing tax revenues and offering the county bigger returns on investments.
“When a retailer is considering a location, there are certain underlying criteria that they evaluate prior to making their final decision,” he said. “Given our current situation in some of our growth areas, we may not necessarily meet those criteria.”
He said businesses often analyze traffic, volume and housing density data before making a decision to open new stores.
“All those underlying criteria lead back to return on investment,” Wade said. “This program is put together to try and accelerate that return on investment, thereby incentivizing businesses to locate in our growth areas sooner than they may otherwise.”
According to program documents, a restaurant with $3 million in annual revenue would generate $150,000 in sales and meals taxes each year. A $500,000 investment by the county would produce a 30 percent return in a little more than three years.
Wade said the same $500,000 placed in a typical money market fund would result in a $5,000 return in the same period.
“So there’s a huge upswing in letting the taxpayer dollars work for them while also providing more options and additional revenues,” Wade said, although he acknowledged that such investments come with additional risk.
But Brown disagreed with program’s figures.
“In [Wade’s] proposal, he talks about the restaurant chain getting $500,000 up-front and an ROI of 30 percent. Well, unfortunately that’s not how it works,” he said. “You don’t make anything in that 3.3 years. You just get your initial investment back.”
Brown also told supervisors that they should be wary of factoring the meals tax into the calculations.
“Giving meals tax money back to big business is not what it was slated for to begin with,” Brown said.
In addition to the cash option, the new program also offers selected new businesses other incentives such as tax rebates, help with land costs and reduced or no-cost water and sewer connection fees—if approved by the Louisa County Water Authority.
All incentives will be approved by the board on a case-by-case basis.
“Smaller businesses are left out of this whole picture,” Brown said. “You’ve got to remember that they’re the guys who are actually supporting the community every day. They’re the guys that come when you need a free gift or you need a donation or you need advertising spots. They’re the guys that are supporting this community and doing it every single day.”