The City of Oklahoma City’s revenue lifeblood is sales taxes, around 55 percent of its total revenues are derived from them. Retailers drive sales taxes.
It follows that the City would do all that it could to attract and nurture retailers, particularly since neighboring municipalities have conducted a successful campaign over the last 10 years to move Oklahoma City’s retailers to their markets. Moore and Edmond have been uniquely successful using a combination of monetary incentives and doggedness.
During the economic expansion, it didn’t matter as much as sales were good and budgets were increasing. But, in a downturn, like we have now, it’s an issue. In response, Oklahoma City is putting an increased emphasis on attracting and retaining retailers. It put together a package of sales tax rebates to help close the deal to get Terrell Zerby’s outlet mall done with Horizon (the development is planned but construction has not yet started). And, the City is being more aggressive in offering infrastructure improvements and other inducements for retail. The City has, in my opinion, always been good in working with developers on a one-on-one basis. All of this will benefit retail developers as the market turns around which in turn will benefit retailers and ultimately lead to increased sales tax revenues.
But, the City is sending mixed signals to both retail developers and retailers.
City staff is pursuing two ideas that are particularly punitive to retailers and retail development. The first, impact fees, was floated a couple of years ago and has been put on the back burner due to the outcry from the commercial real estate community. The idea of impact fees is that new development has an impact on the City infrastructure and that developers should pay for that impact. Retailers draw a lot of traffic (hopefully) and are therefore charged a much higher fee. In reality, impact fees are a tax on development and would retard retail development. The main reason City’s gravitate toward them is that these types of fees can be done administratively without a vote of the city council or public. If the funds are truly needed, and they probably are, the fair way would be to increase the ad valorem tax rate marginally which would spread the cost across all the users of the new development.
Why is this fairer? Development is market driven, projects are only built when there is sufficient market demand; therefore, the market, ie, the public, should pay for infrastructure improvements. If there isn’t the political will to do it and you can’t justify it to the broader public, then it’s probably not a good idea anyway. You will hear the argument that other cities have impact fees, wouldn’t it be nice to do what makes sense for Oklahoma City instead.
The more recent proposal that has the effect of hurting retail is an ongoing review and revision of the neighborhood appearance standards. The goal is to revise zoning requirements to improve the appearance of buildings and developments, something I think we can all get behind. The proposed language from the City planning staff would significantly change the landscaping, parking and appearance standards for any building over 50,000 s.f. And, while it would apply to all buildings, it appears geared toward retail.
A couple of the requirements are particularly bothersome too retailers. Only 60 percent of parking could be in front of a store; this makes no sense for retailers or for their customers. People want the shortest walk possible and no one wants to park on the side or behind a building, particularly at night. Virtually no current retail developments in Oklahoma City meet this requirement. Other requirements add designated walking paths in parking lots and a buffer strip of landscaping in the parking lot with the goal of making it greener and more hospitable.
Some of these ideas make sense, but the proposals give developers little latitude in design and all add to the cost of the project. Adding to development costs and making the development process more cumbersome will be a detriment to development. Again, other cities have similar codes, but our community is unique and our zoning regulations need to reflect it.
It’s worth noting that household income in Oklahoma City is significantly less than Edmond, which has a more rigid code, and significantly less than Austin, which has a more rigid code.
Our market rates act as a limit to how much developers can spend and retailers can pay for a new development. Anything that drives up costs needs to be thought through. Retail and retailers are very much consumer driven. Retailers demand what customers want. Developers build what retailers demand.
Let’s have the goal of improving appearance but give developers the flexibility to meet retailer and consumer demand. I love Oklahoma City and want the best for us. It is important that the mixed messages be reconciled in favor of Oklahoma City consumers and the City will be the ultimate beneficiary.
