Modesto council to discuss cash rewards for firms moving downtown

kcarlson@modbee.comJune 3, 2013 

DB Modesto Arch 01.jpg

DARRYL BUSH/dbush@modbee.com The Modesto arch which says "Modesto Water Wealth Contentment Health" is lit by the late afternoon sun, in downtown Modesto, Calif., Saturday, October 2, 2010.

DARRYL BUSH — Modesto Bee

  • ABOUT THE REPORTER
    alternate textKen Carlson
    Title: Staff writer
    Coverage areas: County government, health and medicine, air quality, the environment and public pension systems
    Bio: Ken Carlson has worked 13 years for The Bee, covering local government agencies in Stanislaus and San Joaquin counties. His in-depth reporting has focused on access to health care and public employee pensions.
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    E-mail: kcarlson@modbee.com

— Modesto leaders will consider proposed incentives to perk up the downtown area, such as giving cash to new businesses that create jobs there.

Proponents compare the downtown to a sleeping economic giant, with great potential for producing employment and revenue for local government if businesspeople can be coaxed to invest.

For a year, the city worked with members of the Downtown Improvement District, Chamber of Commerce, Convention & Visitors Bureau and others to find ways to make the downtown more appealing as a place to shop, start a business or live.

The slumbering giant analogy comes from urban planners who show that thriving downtowns produce far more tax dollars per acre than malls and big-box stores, which eat up a lot of farmland in the Central Valley.

"We have not had a package to promote the downtown," said Josh Bridegroom, manager of the city's Downtown Hospitality Program.

Cities no longer can use redevelopment, a financing tool that spurred Modesto's downtown rebirth for decades. And officials believe the downtown has needed a boost since the recession to fill empty storefronts with cafes, antiques stores, beauty shops, art galleries and bookstores.

A six-member committee came up with other things to encourage business growth, such as refunds of the revenue-based mill tax and sales tax and development fee exemptions.

The proposal most likely to raise questions is giving public funds to businesses. Modesto would give $1,000 to a retail or office business that creates fewer than five jobs, $2,000 for five to 10 jobs, and $2,500 for more than 10 jobs.

New businesses or those moving downtown from another location would be eligible.

Appeal of 'free money'

Bridegroom said the cash incentive is designed mostly for psychological effect. "Something about getting free money is appealing to people, and every penny counts when you open a new business," he said.

Business owners would need to show a competent business plan and would receive the cash when they open.

Other potential incentives for new businesses include a refund of mill taxes and local sales tax for the first year of operation. Downtown businesses that extend their hours could get a refund of local sales tax collected during those hours.

To encourage residential development, the city would waive capital facility road fees and encroachment permit charges. The city would offer $10,000 matching grants for merchants to improve the appearance of their buildings.

For commercial buildings more than 50 years old, Bridegroom said, facade improvements would focus on restoring the original appearance or historical character.

The City Council's economic development committee is set to discuss the incentives Wednesday. The package would require approval from the full council.

Plenty of questions

Councilman Dave Cogdill said Monday he has questions about the cash-for-businesses proposal. "We would have to look at that more closely," he said. "You don't want to write a check to a fly-by-night organization."

Dave Thomas of the Stanislaus Taxpayers Association said giving away public funds is not acceptable policy. It's not fair to other businesses that are struggling, and it would not help the recipients, he said.

"If you think $1,000 is going to make a difference for a business with $10,000 to $15,000 in overhead, they don't understand business," Thomas said. He said the city could help the economy by cutting mill taxes for all affected stores in Modesto.

Bridegroom said the city hopes that extended business hours, new shops and restaurants, and housing projects will create a buzz of activity. He added that the downtown is a good location for architects, accounting firms and other professional offices, which create some of the highest-paying jobs.

The incentives would be offered to businesses on 10th Street, from K to H streets; 11th Street, from K to I streets; and J Street, from Ninth Street to McHenry Avenue.

The committee found the downtown, with a 16 percent vacancy rate, could employ 32 people per acre if it were fully occupied, or 50 percent more than a typical business park. At double the current density, it could accommodate 10,000 more jobs.

The City Council's economic development committee meets at 5:30 p.m. Wednesday in the basement chamber of Tenth Street Place, at 1010 10th St.

Bee staff writer Ken Carlson can be reached at kcarlson@modbee.com or (209) 578-2321.

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