DEAR EDITOR:
I find it amazing that people continue to speak the lie that
Wal-Mart is being given money from the City of Gilroy to build a
Super Wal-Mart in Gilroy. Nothing is further from the truth.
DEAR EDITOR:
I find it amazing that people continue to speak the lie that Wal-Mart is being given money from the City of Gilroy to build a Super Wal-Mart in Gilroy. Nothing is further from the truth. Wal-Mart is NOT being given ONE CENT by the City of Gilroy. Nor is the Newman Development Corporation that is building the Pacheco Pass shopping center (where Wal-Mart is considering moving to) being given ONE CENT of taxpayer money.
The truth is this: NOT ONE CENT HAS EVER BEEN PAID TO ANY DEVELOPER AS AN ECONOMIC INCENTIVE. No developer has EVER been given ONE CENT by the City of Gilroy under our Economic Incentive Policy. EVER. I know that some spread this lie to serve their own purposes; others probably do so out of ignorance because they have been told this lie and it’s easy to believe a lie and harder to believe the truth.
Don’t take my word for it; call City Administrator Jay Baksa, City Attorney, Linda Callon, or City Treasurer, Mike Dorn and ask them. They will tell you this fact. If anyone wants, I’ll put it in writing, under oath, under penalty of perjury.
So that there is no confusion, let me explain very briefly what Gilroy’s Economic Incentive Policy is about and why we have it.
In Gilroy, we require all new development, whether it is commercial, industrial or residential, to pay for it’s impacts through what are called “Impact Fees,” and by directly building the new roadways, sewer lines and water pipes that serve their properties. We assess impact fees from ALL development to pay for the improvements that are needed beyond the property being developed (off-site improvements). This means that any development that has a future impact on traffic elsewhere in the city pays to help alleviate that impact (i.e., future roadway improvements). Same is true for new sewer capacity and for water system expansion and for fire and police facilities. Gilroy is not alone in this; other communities do the same, although some may not do it to the full extent that Gilroy does.
However, many other cities in turn use redevelopment agency money to build new roads or to pay for impact fees for new development. Redevelopment money is simply the additional property taxes that are collected on improved property in the redevelopment area, property taxes that do NOT go to the city’s General Fund to pay for operational services such as police and fire, etc. If anything could be considered as using “taxpayer” money to pay for things, redevelopment money is certainly one of them. But Gilroy does not have redevelopment.
Instead, what Gilroy does is to follow a policy that for commercial development that will bring SIGNIFICANT NEW sales tax dollars to our community, the payment of the impact fees will be done by using a portion of this future sales tax dollars. Some want to argue that this is “giving away” taxpayer’s money. How can you “give away” what you do NOT have today? (If they wanted to restate this as “saving the developer money,” they at least would be correctly using the English language.)
The other aspect of this is that the payment from the future sales tax, controlled by the city, goes to … THE CITY! In some ways, it’s the same as moving money from your checking account to your savings account.
Why does Gilroy have this Economic Incentive Policy? Because when a SIGNIFICANT NEW sales tax generating business is looking to come to our area, and one of the deciding factors in whether they choose to come to Gilroy or to another location (Morgan Hill, or Hollister, for example) is how much it will cost them to develop, they can REQUEST an economic incentive be granted to offset their costs due to impact fees, by allowing the impact fees to be paid from their future sales taxes produced for the city.
This allows Gilroy to compete with RDA money that can be offered by other communities to assist these business if they were to locate there. We have this policy because if these businesses don’t locate in Gilroy we don’t get the needed sales tax revenues that help pay for our police, fire and paramedic services. Without these additional sales taxes, the cost of these services would fall back on the citizens of Gilroy, through, potentially, new parcel taxes as was the base for the 2000 Measure M that the voters rejected. (That measure looked for a parcel tax of about $57; if such a parcel tax had to be pursued now to pay for the increased police, fire and paramedic costs in Gilroy, my guess is that it probably would have to be double or triple the Measure M amount.)
Hence we push expanding our sales tax base in order to keep from increasing the property tax burden on the residents. And we use the Economic Incentive Policy to help attract SIGNIFICANT NEW sales tax generating businesses to our city.
The key word is SIGNIFICANT. To qualify for an economic Incentive, there must be SIGNIFICANT NEW sales tax money coming into the City from that development. One measure of SIGNIFICANT is the amount of this new sales tax EACH YEAR. Another is the amount of impact fee credit. If the NEW sales tax is not greater that the impact fees to be credited, no incentive is possible, as it would be a loss to the city. That’s also why relocating businesses are generally not eligible for an economic incentive; they rarely would bring SIGNIFICANT NEW sales taxes into Gilroy.
It keeps being said that the economic incentive that Newman is getting is $5.4 million; that is NOT true. The incentive agreement says that Newman is ELIGIBLE for UP TO $5.4 million in credit, simply because this is the total impact fee amount their development would have to pay; they can receive this full credit ONLY if they bring in NEW sales taxes that would exceed this amount.
If any business goes onto a parcel and wouldn’t generate SIGNIFICANT new sales taxes that would exceed the impact fees for that parcel, those fees would not be credited (the $5.4 million is therefore reduced by that amount), and the fees would have to be paid by Newman (or the business) before the business could open. Whether they will receive anything near this potential credit is a real unknown; frankly, it would take some major NEW sales tax generators coming to Gilroy to be able to come close to ever actually receiving such a credit (and if those sales tax generators DID come, we probably wouldn’t be faced with city budget woes).
Anyone that looks at the Newman plans and the lot sizes should be able very quickly to apply their own practical guess as to whether it is even physically possible to bring in such new businesses to come anywhere close to this $5.4 million amount. (A complete list of every parcel and it’s associated impact fees is part of the economic incentive for Newman and is available on request to ANYONE who wants it.) The burden is on Newman to bring in SIGNIFICANT new sales tax generators before ANY credit is given.
As for Wal-Mart, not only are they NOT being given ONE CENT of money to relocate and expand, but if they DO relocate to the Newman Development site then $2.2 million in impact fees WILL HAVE TO BE PAID to the city before Wal-Mart could open their doors. Hence if Wal-Mart does go through with their plan to relocate, Newman could not receive more than a maximum of $3.2 million in credits under the most optimum circumstances. Given the size the businesses would need to be to produce this amount of sales taxes and the size of the remaining physical space left after Wal-Mart would be built, one only has to use common sense to understand the reality of the situation.
Finally, the word NEW is important in the phrase “SIGNIFICANT NEW sales tax.” It means that we look at the DIFFERENCE in sales tax a new business will generate AFTER considering what impact it might have on existing sales tax generating businesses in Gilroy.
It is not simply what sales tax the business will provide, it is what the NEW (or difference in) sales tax to the city will be after considering any negative affect on existing sale taxes will be.
Tom Springer, Mayor, City of Gilroy
Thursday, May 1 to ed****@****ic.com
