Super leak?

Craig Wal-Mart threatens to deflate Steamboat tax receipts

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When a new Wal-Mart Supercenter opens in Craig in early 2007, the city of Steamboat Springs could experience a hit in sales tax revenues as dollars flow down valley.

A Wal-Mart official has gone on record saying the company's intent is to sift a portion of sales away from its undersized Steamboat store to the new store in Craig.

If the experience of Glenwood Springs is any indicator, sales tax revenues here would bounce back significantly after a couple of months. Glenwood experienced 11 percent drops in tax revenues in the last two months of 2003, after a supercenter opened 25 miles down the interstate in Rifle. Sales in Glenwood absorbed that drop in spite of the fact that the city has a Wal-Mart of its own.

"People eventually get back into their normal shopping habits," city of Glenwood Springs Finance Director Mike Harman said. "By January (2004), we were down 7 percent, and by March, it was 1.28 percent. We actually ended 2004 down 1.78 percent."

Not all of Glenwood's sales tax loss in 2004 is attributable to the Wal-Mart Supercenter. However, a study by the Glenwood Springs Post Independent showed that in the last two months of 2003, when the city suffered back-to-back monthly hits of more than $100,000 in sales tax revenues, Rifle's revenue was up by a corresponding amount.

The Post Independent observed that county sales taxes were level during the same period and concluded that Glenwood's loss had been Rifle's gain.

Steamboat Springs City Council President Paul Strong is aware of the influence big-box retailers have on city revenue. City Council passed a big-box ordinance in June directing stores greater than 20,000 square feet to the west side of town and subjecting them to a higher level of planning review that requires they demonstrate some benefit to the community.

"We've talked a lot about it," Strong said. "I don't think there's going to be that big an erosion," of sales tax revenue. "Is there going to be some? No doubt about it. It's a concern, but you have to adapt. For our town, big boxes and (the prospect of) beginning to look like every other town is an economic issue, too."

Official explanation

In a newspaper interview this month, a Wal-Mart official acknowledged that company strategy includes pulling a percentage of sales away from Steamboat, to the new supercenter in Craig.

Wal-Mart spokesman Keith Morris told reporter Christina Currie of the Craig Daily Press that the intent is to relieve some of the pressure on the Steamboat Wal-Mart.

"We want there to be an impact on Wal-Mart in Steamboat Springs," Morris said. He explained that the 57,000-square-foot Steamboat store is serving more customers than it was built to serve. As a result, he said, it is a challenge for employees to keep shelves stocked.

Wal-Mart's in-store surveys tell company executives that 20 percent of the customers visiting the Steamboat Wal-Mart live in Craig.

Morris also said that had the company been able to expand the Steamboat store, it still would have considered a new store in Craig, but it is likely it would have delayed the project.

Big-box debate

Strong adopts a regional outlook when asked about the effects of the arrival of a supercenter 42 miles west of Steamboat.

"The downside of regulating big-boxes is that we recognize they provide affordable shopping," Strong said. When people ask me, 'How would you feel if (a Wal-Mart Supercenter is opening in Craig?' I tell them that's fine. Our community is larger than Steamboat Springs. Many of our workers live in Craig. If they get some additional sales tax, that's good for them. There's some equity in that. It's in some ways a form of revenue sharing."

Former Basalt City Council member Jacque Whitsitt, said her town offers very little shopping, let alone a big-box. Basalt residents have been going to Glenwood to shop in the existing Wal-Mart for years, as have residents of Aspen. Whitsitt said a casual observer can see the differences between the Aspen and Glenwood communities in the Wal-Mart parking lot. All of the Aspen residents tend to park in the south side of the Wal-Mart parking lot closest to Aspen. Conversely, Glenwood residents tend to stick to the other end of the parking lot. The two groups also tend to use checkout stands at opposite ends of the discount store.

Whitsitt, who also is the director of the Colorado Association of Ski Towns, said growth in mountain towns combined with their dependence on sales tax revenues have put a squeeze on municipal governments. Whitsitt was careful to say she doesn't speak for the Association of Ski Towns. However, she is uniquely positioned to hear from community leaders in a variety of resort towns.

"I don't know where it's going to end" she said. "Folks have mixed feelings about the threat to mom-and-pop businesses. But all of the ski towns have to support growth. Twenty years ago, there were not as many services to provide."

Effects in Glenwood

Former Glenwood Mayor Bob Zanella said even as the city of Glenwood absorbed a sales tax hit with the opening of the larger Wal-Mart in Rifle, downtown businesses were growing.

"Our downtown did not suffer that much," Zanella said. "Their revenues were actually up. "The biggest hit was in the Roaring Fork marketplace (where Glenwood's traditional Wal-Mart and other busines--ses are situated). City market and Safe--way were probably affected, as well."

Zanella was ser--ving as the interim director of Glenwood's downtown development authority at the time the Wal-Mart Supercenter opened in Rifle.

Collectively, the stores in the Roaring Fork Marketplace generated $2.3 million in city sales taxes in 2002, Zanella said. By the end of 2004, that number had slipped to $1.9 million.

Scott Schlapkohl, gener--al manager of the Ace at the Curve hardware store in Steamboat, has insights into how downtown retailers fare when a supercenter opens down valley. His company also owns a True Value hardware store that has been established in Glenwood for many years.

"Our sales (in Glenwood) definitely went down that first holiday season (in 2003)," Schlapkohl said. "But we saw a gradual rebuilding throughout 2004."

The impact now is negligible, he said.

Rebuilding revenues

Glenwood's municipal government has new reason to be optimistic that sales tax revenues that have stagnated just above $10 million annually since 2001 will rebound with double-digit growth in 2006. A new, 125,000-square-foot Target store (bigger than the Target in Grand Junction) opened this month in the Glenwood Meadows commercial center on the city's west side. And a Lowes Home Improvement Cen--ter big-box is set to open in November. It will be followed by a raft of smaller stores, some chains and some independent stores.

Bobby Magill of the Glenwood Springs Post Independent reported that Lowes will be 94,000 square feet with a 30,000-square-foot garden center. It cost $12 million to develop and will employ about 120 people.

In addition, Magill said, Pier 1 Imports, Petco, Bed Bath and Beyond, Vitamin Cottage and Chili's are on tap for Glenwood Mea--dows, with more to come.

It would be reasonable to con--clude that the new Target would provide heavyweight competition for the True Value home accessories department in Glenwood, but Schlapkohl said in the two weeks since Target has opened, the store's sales actually have been up.

Harman is assuming that some of the sales tax receipts generated by Target and Lowes will be taken from other retailers in the city. But using sales projections provided by developers and factoring in some guesswork to account for the dollars taken from other stores, Harman is projecting sales tax growth in 2006 of $2.2 million, based on the city's 3.45 percent local sales tax.

Whitsitt suggests it may take reform of municipal tax structures at the state level to unravel the knot of sales tax dependency and growth that binds the goal of preserving the character of mountain towns.

She said people in Northwest Colorado should count themselves fortunate the sales tax competition among neighboring governments isn't as intense as it is elsewhere in Colorado.

Some county governments have approved big-box centers in unincorporated areas at the expense of municipalities.

"You're lucky your county commissioners don't think that way," Whitsitt said.

-- To reach Tom Ross, call 871-4205

or e-mail tross@steamboatpilot.com

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