Municipalities Serve Up Tax Incentives to Lure Retailers and Developers.

by Jennifer Popovec - Retail Traffic

This summer, The Outlet Shoppes at Oklahoma City will open, bringing a new offering to the local shopping scene. Developed by Horizon Group Properties Inc. and CBL & Associates Properties Inc., the 350,000-square-foot project is the first outlet center in the state and the only one within a 145-mile radius.

Situated on 65 acres just eight miles from downtown Oklahoma City, the center will create more than 1,000 new jobs for the community and generate more than $110 million in annual sales. It also will provide approximately $4 million of incremental local sales tax revenue to Oklahoma City, according to Horizon.

However, the center (and its sales tax revenue) could easily have ended up in Yukon, a western suburb, if Oklahoma City hadn’t offered several incentives, according to Brent Bryant, economic development program manager for the city of Oklahoma City.

“Historically, we’ve been very limited in what we do for retail incentives,” Bryant says. “Our city council is conservative and reluctant to get into the retail incentive game. Our decision to offer incentives for the outlet center was more of a defensive posture rather than offensive posture.”

Indeed, the city found itself between the proverbial rock and a hard place. “The lifeblood for our operating budget is sales tax, and it would have really hurt us for those tax dollars to go to Yukon,” Bryant explains. “Plus, we were worried about the outlet center cannibalizing an existing mall nearby. We absolutely didn’t want it to go to Yukon, which has been very aggressive in pursuing retail projects by offering incentives. That’s why we were so aggressive with our own incentives.”

The incentive package included both infrastructure improvements and a sales tax rebate, which refunds a portion of the center’s sales tax to retailers. The city allocated $3.9 million in general obligation bonds to fund the installation of new traffic signals, the construction of a new street and turn lane and the creation of drainage improvements. The sales tax rebate could be worth up to $5.5 million over five years, if the development meets certain requirements.

Michael Lebovitz, executive vice president of development and administration for CBL & Associates, says the city “really stepped up and provided incentives that made it the best place for the center to be built.”

Oklahoma City is not unique. It is one of hundreds—if not thousands—of cash-strapped municipalities across the United States that are trying to manage through difficult fiscal situations. Many cities and counties face shortfalls in revenues at the same time that expenditures are rising. Politicians across the country are juggling how to cut costs and raise revenues.

For retail developers, that means that incentives are available. Malls and shopping centers can deliver sales and property tax revenues for years. As a result, municipalities may provide incentives in the short term to make new developments a reality.

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