Monday, December 17, 2007

Banker: Financial incentives key to drawing retail business

Financing incentives historically granted to manufacturing projects by cities are now being sought for retail development projects, says a Montgomery investment banker.

October 6, 2007

Financing incentives historically granted to manufacturing projects by cities are now being sought for retail development projects, says a Montgomery investment banker.

“Retail is going to go somewhere,“ said Bob Young, president of The Frazier Lanier Company in Montgomery, an investment banking firm which specializes in municipal finance. “The question is: Where?“

Young spoke to local business owners, developers, government officials and guests for almost two hours Friday morning at the Auburn Chamber of Commerce office at the invitation of its Business Development Committee.

In his introduction of Young to the group, Thomas Sparrow said his committee felt the subject of municipal tax districts was something the community needed to understand.

“This is currently being discussed for use in Auburn as a potential fund-raising mechanism,“ Sparrow said.

Young, who gave his time to come from Montgomery and speak to the group, said the more informed that any populous is, the better off everyone is.

“I’m not aware that a forum like this has been held in any other city,“ he said. “Any time there is a public/private partnership there needs to be a full airing and discussion of the pros and cons of these types of public and private partnerships.

“Each community makes their own decision as to the viability and advisability of these participations.“

He said he knows that in other communities around our state there has been a lot of discussion about what is going to be done in a district like the one Auburn is considering.

“The code sections (of Alabama laws) that authorize the issuance of debt for infrastructure purposes have taken a few turns culminating in probably the most liberal interpretation, which kinda throws the kitchen sink in,“ Young said.

“It says you can do anything or everything. Legally, you can do that,“ Young added. “But, ultimately what is done, or is not done, is determined by every local governmental entity that allows a creation of a district to issue debt for these purposes.

“The fact that a particular opportunity is granted in the statute does not automatically mean that that is authorized and granted to every developer who puts a facility in in a community.

“Each city negotiates their own set of circumstances,“ he said.

He said what drives those for each community is competition.

“Competition is going to drive what you do and don’t do,“ Young said.

He said sales taxes contribute anywhere from 40 to 75 percent of the money for the general fund of our cities in Alabama.

“In your city, 40 percent of the general fund and another 8 to 9 percent comes from the occupational license fee,“ he said. “Economic activity generates money for your general fund here in Auburn.

“If the general fund in a city in Alabama is not healthy and growing, then something has got to go stop,“ Young said.

Young said the city must have a growing general fund.

“In Alabama, because of our low property taxes, every time a residential development takes place, you have got to have increased police and fire protection, somebody is going to ask that more ball fields or walking trails be built, and more children are going to come to the schools.

“The numbers pencil out that the ad valorem taxes are just not sufficient to carry all of that,“ he said. “So what you have got to have to keep up your municipal infrastructure is a growing general fund.

“This is the case everywhere and not just here in Auburn,“ he said. “The questions / opportunities y’all are facing here in Auburn now are one being faced everywhere in Alabama.“