FIRESTONE — The three rules of commercial real estate development along Interstate 25 in the Tri-Towns: location, location, location.
And maybe there’s a fourth rule: tax incentives.
If so, commercial retailers could come shopping for tax breaks in the Tri-Towns, along with a good location to serve residents.
Both Firestone and Frederick town boards recently approved tax-reimbursement deals for new commercial development in the towns.
In August, the Firestone Town Board allowed American Furniture Warehouse to retain 75 percent of sales tax revenues for 15 years or $11 million generated by its store and any other businesses on the 132 acres the company is developing along I-25.
The money will reimburse American Furniture for building roads, sewer, water and other infrastructure at the site.
In a much smaller deal Oct. 13, Frederick trustees decided to return about $5,000 of property taxes a year for 10 years to Sopris West Educational Services if it builds a warehouse in the town.
And at the end of the board meeting last week, the Frederick Board of Trustees directed town staff to come up with ideas for a tax-incentive package aimed at enticing commercial developers to locate in Frederick.
“There’s so much you can do here in Colorado, as long as it’s a public benefit,” Frederick town administrator Derek Todd said about reimbursing tax dollars. “If we see that a certain business will be a certain benefit to the town, the town may choose to provide incentives to get the business to locate in the town.”
Though it will take three months to come up with a package for the town to consider, Todd said businesses rich in employment and future tax revenues are worth forfeiting some tax dollars.
Frederick has a handful of development projects showing more than a million square feet of commercial space planned on Colo. Highway 52.
Firestone and Dacono also have projects ripe for big retail centers to serve residents and pad the municipalities’ tax bases with regional shoppers.
“Truly, we are in competition with other communities,” Todd said.
And good tax incentives can become part of that competition.
Dacono landed a Furniture Row complex along I-25 without a tax-incentive deal. The project broke ground two weeks ago.
But Dacono city administrator Karen Cumbo said the city may have to begin playing the tax-incentive game if it wants to lure businesses to Dacono instead of other southwest Weld sites, despite the fact that Dacono has prime I-25-corridor locations.
That necessity becomes even more clear if Frederick develops an incentives package.
“It does put pressure on us,” Cumbo said. “The retailers come to us and say, ‘This is what I can get there; what can you do for us?’”
Barry Poulson, a professor of economics at the University of Colorado, said a trend of tax-incentive deals purely meant to entice commercial retailers results in businesses shopping for the best deal.
“From an economist’s perspective, the downside ... is of course the fact that what you are doing is spreading the tax burden to other businesses, including smaller businesses,” he said.
While large retailers and municipalities realize upfront economic gains of tax incentives, smaller, usually locally owned businesses are left with a disincentive to grow, Poulson said.
If towns are going to provide commercial tax breaks, they should do it across the board, he said.
“In any jurisdiction, lowering tax burdens as a whole is the best way for economic development,” Poulson said.
But not all tax-incentive deals are about free money for retailers, said Andrew Zuppa, the corporate general manager for American Furniture Warehouse.
While incentive deals can dictate where the company locates new stores, Zuppa said, the money is needed to pay for basic services that towns should be providing, like roads and sewers.
Along with its site, American Furniture is preparing 80 acres of land for other businesses to locate, at an estimated cost of $11 million. It’s work the town needs done but can’t afford to do itself, he said.
Firestone planner Bruce Nickerson said that fact drove the American Furniture incentive deal.
“They are fronting all the money. They are paying for everything up front,” he said. “The general policy of Firestone is not to focus on incentives, unless something arises.”
Firestone attracted grocery anchors Safeway and King Soopers at retail centers without tax incentives, he said. Instead, town officials enticed them with a promise to keep the permitting process to less than six weeks, because time is money.
Douglas Crowl can be reached at 303-684-5253, or by e-mail at email@example.com.