11/2/2007

By DARRIN STINEMAN

Salina Journal

A plan that would offer tax incentives to bring a Kohl's department store to Salina will go before the Salina City Commission at its meeting on Monday.

The Kohl's store would be the centerpiece of a multi-store retail development on the west side of South Ninth Street. If approved by the city of Salina, the 11-acre development would be built south of Ashley Furniture, 2434 S. Ninth, and north of Subway, 2610 S. Ninth.

The Salina Area Chamber of Commerce and the city manager's office have been working with the developer Classic Real Estate, Wichita, for several months. Kohl's officials have committed to coming to Salina if city approval can be obtained, said Dennis Lauver, the chamber's president and CEO.

"They're ready to go," Lauver said of Kohl's. "Kohl's has given all of their final approvals."

The plan calls for a 62,000-square-foot Kohl's store to be built, along with a 20,000-square-foot retail development and three "out lots," one in the 12,000-square-foot range and two in the 2,000-square-foot range.

"It is the intent of Kohl's to have their store open to the public by October of 2008 in anticipation of the holiday season," City Manager Jason Gage wrote in a staff report to city commissioners.

The estimated value of all building and land improvements at full site development is about $12 million, Gage said in the staff report, and combined annual retail sales is projected to be up to $18 million.

The Kohl's store is expected to generate about 120 new jobs, Lauver said, and the entire site, when fully developed, would represent about 250 full- and part-time jobs and a payroll of about $2.65 million. Kohl's would relocate management staff to Salina, he said.

An incentive for Kohl's

As an incentive, $3 million in bonds would be issued and repaid through tax-increment financing, as allowed by Kansas law. The funds would be used to pay back infrastructure costs and public improvements that would be necessary to develop the property, Lauver said.

"It's a tool in which a portion of the real estate taxes generated by a project is placed into a fund used to pay back infrastructure costs and improvements that make the project happen," he said. "Properly used, (tax-increment financing) sparks private investment in areas where it would otherwise not occur."

In Kansas, tax-increment financing has been used in at least 20 cities, including Manhattan, Concordia, Hutchinson and Junction City, Lauver said.

Tax-increment financing is limited only to the property tax value of Kohl's, Lauver said. That value would generate a property tax bill of $148,299, and when you subtract the current annual property tax bill on the property ($2,692), the annual "increment" is $145,606. The increment is placed in a fund to pay back infrastructure costs such as water, sewer and storm drainage systems.

"The property owner will pay 100 percent of their property tax bill," Lauver said. "Each of the government taxing units (city, school, county, library, Extension, airport) will continue to receive its share of the $2,692 in the same manner it currently does."

No effect on individuals

An individual's property taxes won't be affected by the incentive, Lauver said.

"Most people hear the word tax-increment financing and they wrongly think it's my property tax that's paying for something else," he said. "That's not true. This is a self-generating (tax) district."

Or, as Gage said in his report to the commission: "Taxes currently generated from any other property, business or residence in the community will not be applied to this project as long as the project meets the financial performance targets."

Lauver said incentives are only appropriate in certain situations, and this is one of them.

Gage agreed.

"I think the competitive climate has changed in the last five or 10 years, and cities in the middle markets are now forced to look at incentives in order to recruit the most popular retail destinations," Gage said. "We do believe Kohl's is one of the most popular retail destinations, and we're real excited to have them in the community."

Salina not keeping up

Salina hasn't been keeping up with peer cities in the region -- such as Manhattan, Hutchinson and Junction City -- which have been using development incentives, Gage said in his report to the commission.

"This means that for Salina to preserve its long-term retail market share in an increasingly competitive environment, a more aggressive retail recruitment effort is necessary," Gage's report says. "We also believe that in recent years, local retail offerings have evolved into a quality-of-life factor for growing communities. In a society that is becoming much more consumer-driven, shopping opportunities are now a factor for where people want to work and play."

Give us a Kohl's

In a recent chamber survey that drew 900 respondents, Lauver said, Kohl's was the most frequent answer to the question: "What three nonfood retail businesses would you like to see locate in Salina?" Kohl's was cited 35 percent more than any other answer, he said.

Kohl's also was the answer -- by more than a 2-to-1 margin -- to the question: "What are the names of the stores that you most frequently patronized outside Salina within the last year?"

The Buxton Company, a firm that researches shopping patterns, determined that Kohl's was the second-most sought after retail business among a survey of 4,000 cities, Lauver said.

"Because of the popularity of Kohl's, it is logical that other firms will want to locate near the store to benefit from traffic counts and consumer activity," Lauver wrote in an analysis of the local Kohl's project. "Thus, the project has high potential to be a stimulus for additional development in the immediate vicinity."

Other Salina retailers?

Asked if he had spoken with Salina retailers regarding the proposed project, Lauver said: "Several retail managers have all told me they think it would be a terrific idea. For example, one manager said to me, 'We've got a sister store located 50 miles away from us. When the sister store opened up, we lost customers coming from that direction. Now, when you have Kohl's, we're going to get all that traffic back.' There were others who anticipated getting more traffic from the west."

Asked if he had spoken with other retailers who thought it was unfair that Kohl's was offered an incentive that wasn't available to them, Lauver said several new incentives are being developed as part of the chamber's new economic development strategic plan.

"(Using tax-increment financing) wasn't the policy in the past, so we're living under the rules that are now in place under the economic development strategic plan," Lauver said. "It's certainly important that strong retail development occur from small existing businesses to large businesses. I don't want anyone to think we're only trying to create growth from bigger boxes."

Amy Fay, manager of Dillard's at Central Mall, said she learned of the Kohl's proposal through her membership with the chamber of commerce but she didn't wish to comment on it.

Steve Galle, store manager of JC Penney at Central Mall, couldn't be reached for comment Thursday evening.

n Reporter Darrin Stineman can be reached at 822¬­-1416 or by e-mail at dstineman@salina.com.