Public hearing may contrast two faces of economic value: growth vs. equity

News Perspective

In a special meeting Tuesday, the Blount County Commission scheduled a public hearing in connection with a three-way development agreement involving the county commission, the town of Hayden, and High Tide Oil Inc. The agreement covers incentives provided High Tide Oil Inc. for the construction and operation of a large Travel Center in Hayden. The hearing will be at the time of the next commission work session: Thursday, March 9, at 9 a.m. at the courthouse in Oneonta. The meeting will serve as the public hearing for both the Blount County Commission and the town of Hayden.

The economic future of Blount County beckons, virtually dictating the use of mechanisms like tax incentives to lure businesses in the competitive struggle with surrounding areas, many of which have a substantial head start in the ongoing contest. It’s a technique necessary to enable the county and its citizens to thrive and not fall behind economically. Each use of tax incentives must meet the test of serving the public interest. The lawful process seeks to guarantee that requirement is met. But what about the objections of existing businesses, themselves competing with the incented newcomers? What can or could be done to solve the dilemma of competitive inequity? Must meeting the test of “the greatest good for the greatest number of people” necessarily involve sacrificing fairness to others? One who has thought long and hard about the problem came up with this concluding comment – born of frustration – at having no workable answer to the inherent fairness dilemma: “OK, you tell me. What would you do to fix it?” What, indeed?

High Tide Oil has proposed developing a 6,000 to 7,000 square-foot business being referred to as the Travel Center, to include a service station, restaurant, and convenience store at the I-65/Ala 160 interchange in west Blount County. The development agreement states that developer will begin construction on the project by April 15, 2017, and complete or substantially complete it by Oct. 15, 2018.

The hearing is required to comply with state law governing the granting of tax incentives involving public funds to a private entity. Its purpose is to inform the public of the details of the development agreement, and to provide for public comment on the project.

At its business meeting on March 13, the commission will vote yea or nay to ratify the terms of the development agreement outlining the future rebate of a portion of taxes provided as an incentive for the developer to build the business at the designated site. Summary of incentives

The town of Hayden and the Blount County Commission combined will provide High Tide Oil Inc. a rebate (refund) of sales taxes totaling $1.5 million, referred to as the “cap.” Total sales taxes are estimated to be in the $6 million range over 15 years. The rebate runs for 15 years or until the $1.5 million total is reached, whichever comes first. Summary of taxes subject to rebate

• Hayden will refund 1/2 of 1 percent of the 1 percent it collects in municipal sales tax to the developer. The remainder goes to the town.

• Blount County will refund 1/2 of 1 percent of the 2 percent it collects in sales tax to the developer. The remaining 1.5 percent is split 85 percent/15 percent between the two county school systems. Proceeds from the recently-passed 1- cent sales tax increase are not subject to rebate.

• Blount County will rebate 1 cent per gallon of the 3 cents per gallon fuel tax to the developer. Estimates of increase in annual tax revenues from travel center sales

Four county entities stand to benefit from increased tax revenues as a result of the new Travel Center: Blount County, Hayden, Blount County Schools, and Oneonta City Schools. Estimates given here are preliminary. More refined projections of actual revenue and total economic impact will be calculated later when more information on the size and scale of retail operations of the Travel Center – as well as the impact of follow-on development of outparcels – is known. Initially, it is known that $4.5 million in tax proceeds will be divided among the four entities listed above. It will accrue over the period the incentives remain in effect – called the earnback period – and is expected to last between 10 and 15 years, depending on the level of economic activity generated at the Travel Center.

It is estimated the school systems will split about $600,000 over that time, divided according to the 85/15 percent formula for Blount County Schools and Oneonta City Schools, respectively. The remaining $3.9 million will be divided between Blount County and Hayden, with the county receiving the larger share. At the end of the earnback period, the four entities will divide the entire amount of tax proceeds, as the incentives expire. Note: this applies to the Travel Center only. Additional tax revenues derived from sale of outparcels and construction of new businesses there could easily double the economic impact in subsequent years. Rationale for incentives

Amendment 772 of the Constitution of Alabama authorizes public bodies like a municipality or county government to grant public funds as incentives to corporations or business entities for the purpose of promoting economic development. The town and county in this case have determined that the project will, in the words of the development agreement, “create jobs, increase tax revenues, stimulate the local economy, promote the subsequent location, expansion, and retention of commercial enterprises, improve the quality of life of citizens in and around” the development, and in general “serve a valid and sufficient public purpose” that is in the best interests of citizens in the area.

“The Legislature deemed it wise to provide a way for towns and counties to incentivize economic development of our communities,” said Commission Chairman Chris Green. “Considering how competitive development has become all around us – and we’re just now beginning to use this method compared to many entities who have been doing it for years – we won’t get these major businesses that can advance our economy unless we provide them with incentives. We will not get them. That doesn’t mean we have to give up our revenues every time a business comes here, but we have to be willing to use incentives judiciously when the benefit analysis justifies it, and when it’s necessary for a breakthrough.”

Green said the Travel Center site in West Blount was seen as being in direct competition with a similar project under study by the developer for a site in Tuscaloosa County. The other side of the coin

The Travel Center at I-65 and Ala 160 is being designed for construction directly across Ala 160 from Logan’s Store – a service station, short order restaurant, and general store that has occupied that site for more than 50 years, 48 under Bill Logan’s ownership. The incentive package for the Travel Center puts him at a competitive disadvantage in several respects. A cadre of as-yet-undetermined size has formed in sympathy with and support of the store owner and his wife Lela, whose openhearted contributions to the community, other businesses, the schools, the fire department, many other organizations, and untold numbers of individuals over the years is virtually legendary. When the West Blount Chamber of Commerce announced its first Citizen of the Year award in 2014, it featured a distinguished two-fer: the Logans.

Understandably, Bill Logan opposes the Travel Center incentive deal, but not quite in the way you might imagine. The Blount Countian spoke to him last week. His objections in a nutshell come to this: It’s not the competition that bothers him – he feels he can handle fair competition. It’s the disproportionate unfairness of it (not his words, but his sense of the situation). That’s what grinds his gears.

Logan appeared at the Hayden Town Council work session last week to request de-annexation of his property from the town of Hayden. It resulted in a heated exchange with Hayden Mayor Larry Armstrong, but efforts will be made to accommodate the request. Asked why he asked for de-annexation, Logan said, “I don’t want to be part of a town that is so unfair to its other businesses, and besides that, I get no municipal services from the town.”

Here is a quick summary of Logan’s talking points on the incentive agreement and all that surrounds it. It was delivered in an unexpectedly mild-mannered tone, as he sat in a booth in his red, full-length cook’s apron, speaking softly while short-order servers and morning short-order customers swirled to and fro around him one morning last week. Objections

• The entire incentive agreement was done in secret; anything involving transferring public funds to a private business should be done in full view of the public.

• The incentives granted the developer of the new Travel Center are excessive. They are too great and last for too long a time: $1.5 million, that could continue as long as 15 years. It constitutes an unfair competitive inequity. “How much of a contribution has he made to the life of Blount County over the last 48 years?” Logan asks.

• Logan points out that he never received incentives to launch his business, and receives none now, yet must go head-to-head with a heavily-incented competitor, with the cards stacked in the competitor’s favor in other ways as well.

• It has been impossible, for example, to get necessary information from the Alabama Department of Transportation concerning the expected far-reaching redesign of the intersection of I-65 and Ala 160, across which the two competing businesses – new and old – will face each other. The design will greatly affect traffic flow into and out of his business, perhaps profoundly altering traffic patterns, as well as customer convenience, safety, and behavior.

• Nothing has been done to prepare for the anticipated great increase in 18- wheeler traffic which will be entering and exiting I-65 to get access to the fuel stations; the preliminary design proposed by ALDOT for the intersection, featuring two nearly adjacent roundabouts, in the absence of adequate information, is widely suspected to be misguided and inadequate.

• “I have a right to know how all of this will affect my business and my customers. All the swamps that need draining are not in Washington, D.C,” he said, leaning forward for emphasis. Sources

• Summary of incentives and taxes subject to rebate: interview with Probate Judge/Commission Chairman Chris Green.

• Estimates of increase in annual tax revenues: data from interview with Don Mitchell, executive director, Blount County Economic Development Council.

Rationale for incentives: development agreement document and amendment 772 of the Alabama Constitution.

The other side of the coin: interview with business owner Bill Logan.