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Business incentives working, but Council members want to be involved earlier in process
Date published: 2/9/2011
Fredericksburg's incentives program for business recruitment has been successful, City Council members said last night, but some council members want to look more closely at how much of a say they really have over whether tax breaks are granted.
The discussion came up as the council unanimously approved a five-year, $26,500 incentives package for Castiglia's restaurant on William Street. Castiglia's is in the middle of a $135,000 renovation.
Over the term of the agreement, Castiglia's is expected to generate $61,500 in tax revenue.
Economic Development Manager Richard Tremblay said all of the downtown businesses that have been granted incentives agreements under the city's program are expected to generate a total of $4.2 million in tax revenue; the tax breaks they've been granted come to only $343,000.
Council members George Solley and Kerry Devine didn't question the program's success, and they joined the rest of the council in unanimously approving the Castiglia's deal.
Their problem focused more on the basic question of what the purpose of tax-based incentives is.
"I struggle with calling it an incentive, as if this is the lure, when the investment is already being made," Devine said. "If this was denied by council tonight, would the investment stop? My belief is it would not."
She asked if the council could be brought into the process earlier, so that it could play more of a role than being just a "rubber stamp" on a deal that appeared to be already complete.
Tremblay said it's hard to know exactly what motivates a business to locate downtown, but he said the availability of incentives is clearly helping some businesses come to that conclusion.
"In some cases like Kalahari, the incentive is going to be pivotal in the business decision," Tremblay said. "In other cases, the incentive is a factor, but it may not be pivotal. It's one factor that can make a difference, and it certainly is a lure. Some might call it a reward."
Solley said the problem may be with the ordinance that governs the city's incentives program. It lays out specific criteria a business must meet to qualify for various levels of incentives.
If a business hits those marks, there really isn't a mechanism for the council to deny the incentive.
"We have bars, for example, downtown where there are continual problems where police are called regularly, where they are not a good thing for the city. If one of those businesses came before us and met the criteria, I don't know how we would disapprove it," he said.
"I think we need some ability to make that yes or no decision that we don't have right now."
Emily Battle: 540/374-5413