Modesto City Council committee OKs incentive plan to boost businesses in downtown

kvaline@modbee.comAugust 5, 2013 

A Modesto City Council committee signed off Monday on a proposal that offers cash, tax breaks and other incentives to attract businesses to downtown.

The economic development incentive plan could cost the city as much as $100,000 annually, but it will not take effect unless the full City Council approves it. A date for the council to consider the plan has not been set.

Supporters acknowledged at Monday's Economic Development Committee meeting that the timing of the plan could be better.

Modesto officials are asking voters to approve a 1 percentage point sales tax increase in November, saying it is needed to hire more police officers and firefighters, as well as to fix the finances of the city's roughly $110 million general fund.

But they said Monday the incentive plan is needed as part of a larger effort to revitalize the city's core.

"When do you decide to invest in your downtown?" City Manager Greg Nyhoff said near the end of the meeting. "It's an important part of our community. It's your pulse, (and) it's suffering."

Modesto officials say the incentive plan could create 344 jobs and $13.9 million in business income and workers' wages and benefits. Some of the economic activity would come from the multiplier effect. For instance, a new restaurant would purchase supplies, food and other goods and services, which would generate more activity and more jobs.

The incentives include $50,000 annually toward cash payments to new businesses or businesses relocating to downtown. For instance, a business that creates five to 10 jobs would receive a $2,000 payment. Businesses could get breaks on their sales and other taxes by meeting certain requirements.

The program includes $50,000 annually for matching grants of as much as $10,000 to businesses that improve their facades.

The incentives program targets restaurants and certain types of retailers, such as booksellers, music stores and clothing shops, as well as professional offices, such as legal services.

Modesto resident Ron Jeske questioned the assumptions used in forecasting the proposal's benefits, such as the creation of 344 jobs, and whether the plan would succeed.

"There are 1,000 stores in the (Vintage Faire) Mall that aren't here in downtown," he said. "There is a reason they are there."

But supporters said the city won't be out any money unless businesses open or relocate downtown. City officials said the proposal's benefits were calculated using a well-known economic model that has been modified for use in Modesto. They added that the model has been used in other local economic forecasts.

Nyhoff said the details of funding the program would have to be worked out if the council were to approve it. He said money could come from the sales tax increase if it passes, or the council could appropriate the money in its 2014-15 budget, which starts July 1.

Councilmen Dave Cogdill, Joe Muratore and Dave Geer, who serve on the Economic Development Committee, voted 3-0 Monday to forward the plan to the City Council.

Modesto is not the only city to consider incentives to business. Turlock has offered $1,000 to new businesses since 2011, and Waterford started offering businesses grants this year.

Bee staff writer Kevin Valine can be reached at kvaline@modbee.com or (209) 578-2316.

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