Most long-term Provo residents will remember (and lament) the great debate about bringing a mall to Downtown Provo. As the story is generally told, we had a chance to have what is now called the University Mall in Downtown Provo. In summary, we blew it and the mall went to Orem taking with it any chance of Provo succeeding in retail for the rest of forever. (insert sarcastic smile and possible eye roll)
The story is as much lore as it is fact, but what is true is that Orem has been very successful attracting the traditional retail dollar. I meet many Provo residents who want us to be more like Orem (in a retail sort of way). I try to help them understand that what’s been good for Orem may not be what’s best for Provo. We are different cities with different cultures. The uniqueness found in our two cities brings strength to both of us. Just as we look over our fence and see things in Orem that we admire, they look over at us and see things in Provo to envy.
The cry for more retail in Provo is legitimate and I hope residents know I’m listening and taking action. I have personally met with brokers who represent retailers and property owners. These deals do not happen overnight, but they are in the works. As we have the retail dialogue, I hope all Provo residents will keep a few things in mind —
1-Although we don’t benefit directly from Orem’s sales tax revenue, we do enjoy many indirect benefits. Much of the $65,000,000 match for BRT is generated from Orem sales tax dollars, as are several of the roads and trails in the county. Many Provo residents enjoy Orem’s parks, soccer fields, Scera Shell, Story Telling Festival and other amenities that are enhanced with sales tax dollars generated in Orem. A strong Orem helps Provo and is part of our healthy economy.
2-It’s also important for Provo residents to understand that when they spend money outside of Provo, or on the Internet, we lose sales tax revenue. When a dollar is spent on a taxable item somewhere in Utah, one penny of the total sales tax goes to cities. Of that one penny half of it goes to the city where the item was purchased and half of it is collected and distributed to cities based on population. In Provo, this sales tax revenue is our largest source of income (roughly 30%). It helps us keep property tax low and pays for police, fire, parks and many other services offered by Provo City.
3-Left on its own, retail will locate where the free market will bring the most sales with the highest profit. By using incentives, government can entice free market forces and push retail to locate where it otherwise might not go. That said, incentives are a little bit like dynamite. They can be very effective but they also come with a high cost and high risk. For example, years ago Nordstrom was incentivized to come to the University Mall. When the incentives ended, so did Nordstrom’s interest in our community.
We attempted to incentivize Target into our community five years ago. The incentive package included free land, a 20-year sales tax wavier, and a commitment from the City to spend almost $6,000,000 to buy property and move part of the golf course. The incentives were borderline ridiculous and yet Target walked away from the deal. If not careful, incentives can wipe out all the financial benefit of bringing retail to a city. Over the years, Provo has concentrated more on job growth than on incentivizing retail. Provo has generated numerous accolades for this policy, even being ranked #1 for Business and Careers by Forbes. Nevertheless, state tax policy does nothing to reward cities that create jobs and instead fosters an environment that makes cities give more and more away to attract retail offerings.
4-No discussion about retail would be complete without mentioning the successes we are enjoying. Sales tax revenues have increased each year for the last five years. Provo’s retail base is growing at a slightly higher rate than that of the State. Downtown is a fabulous retail success as is the Shops at Riverwoods. These two areas have become a jewel and a source of much pride for Provo residents.
5-We know there are other areas in our community that need retail offerings, namely East Bay and Plum Tree Plaza on the Parkway. Long before Kmart left Provo we were working with the property owners to shift the momentum in East Bay. Shopko, to be honest, was a bit of a surprise, but if you shopped there you will know why it closed. Parking was too plentiful, the lines were never crowded and selection was marginal – three things that spell disaster for retail. Also, Shopko recently announced that it would be closing several stores nationwide and Provo happened to be on that list.
Provo Retail Summit
As we continue this community discussion, I would like to hold a Retail Town Hall to openly talk about the retail environment in Provo. Mark your calendar for Wednesday, February 11 from 7:00-9:00 pm in our Recreation Center.
At this event, I would like to discuss what the City is doing to attract sales tax dollars, some of the ins and out of incentives, what retail is doing on a more national scale, and how we are seeing the effects of it in our community.