City hopes to regain lost sales tax revenue
“What you saw in the last several decades was a trend in retail nationally to create investment in suburbs. And so there wasn’t as much opportunity in the city core.” aimee quirk, economic development adviser to Mayor Mitch Landrieu
New Orleans residents know the routine all too well. Need to grab a bag of specialty dog food, a 24-pack of toilet paper and a shower curtain? Hop on Interstate 10 and pop into Petco, Target and Bed, Bath & Beyond, all conveniently located along Veterans Memorial Boulevard.
“Any of us who grew up here know that we have spent our lives going to Jefferson for a lot of our shopping,” Councilwoman Susan Guidry said. “It is very exciting to think of the people from the suburban parishes coming into New Orleans.”
Guidry, whose district includes the Costco Wholesale store opening Saturday on South Carrollton Avenue, is among scores of New Orleans officials who are hopeful that the superstore will help to stem the steady flow of sales tax dollars that have been pouring out of the city for years.
Costco is part of a string of big-box style retailers and chain stores that have either opened, announced plans to move in or are under construction in New Orleans. Wal-Mart is building two stores, one in Gentilly and another in New Orleans East. A Whole Foods Market is nearing completion on North Broad Street. A mile away, the new Mid-City Market houses a Winn-Dixie. In Algiers next year, a Petco, Ross clothing store and Mattress Firm will open in Algiers Center.
All told, the major retail projects expected to be completed by the end of 2014 add up to 1.5 million square-feet of new development, according to the New Orleans Business Alliance.
City officials believe those additions and others will pump long-lost sales tax revenue into New Orleans. Costco, some think, could also send a good number of suburban shoppers back into the city looking for deals, as it is the retailer’s first store in the region.
Sales tax collections in Jefferson Parish have long surpassed those in New Orleans.
Last year, for example, Jefferson generated $310.7 million in sales taxes, excluding taxes generated from the sale of food and drugs, automobiles and hotel and motel rooms in the parish. Orleans Parish brought in just $162.9 million, but that includes every category, meaning the gap between the two parishes is even greater.
Over the five-year period from 2008 to 2012, Jefferson’s haul was nearly double that of New Orleans in comparing the same two figures.
But New Orleans is not unique in its shabby performance. Big-box retailers and chains have historically set up shop on the outskirts of city centers, where large parcels of land are in long supply.
“What you saw in the last several decades was a trend in retail nationally to create investment in suburbs,” said Aimee Quirk, an adviser to Mayor Mitch Landrieu on economic development. “And so there wasn’t as much opportunity in the city core.”
Finding sites large enough to accommodate a store like Costco within the city has been all but impossible over the years, because it required cobbling together various pieces of land, said Louis Lauricella, director of development for Lauricella Land Co., which developed the thriving Elmwood Shopping Center in Harahan.
And shoppers have followed retailers as they’ve set up shop in the suburbs.
According to a study commissioned by the New Orleans Business Alliance, New Orleans residents spent about $1.9 billion on retail goods outside of Orleans Parish in 2012. That figure, generated by demographic research firm ESRI, excludes the sale of food and beverage but includes sales of automobiles. It also counts all spending outside of New Orleans, including in other states. New Orleans residents spent less at home, about $1.5 billion dollars, on retail goods last year, according to the ESRI. The findings were included in the Business Alliance’s 2013 Retail Report, released this week.
The Business Alliance proposes that if city residents had access to more stores, they’d spend money closer to home.
“A lot of that has just been because those goods and services are not available in Orleans Parish,” said Brenda Canada, director of retail attraction for the Business Alliance. The Business Alliance’s charge of increasing shopping options in New Orleans is a key component of the city’s overall economic development strategy. The group is credited with wooing national brands like H&M to town.
Although still behind Jefferson, revenue generated from sales taxes is climbing in Orleans Parish. The parish bested its pre-Katrina sales tax revenue collection in both 2011 and 2012 and is projected to do so again in 2013. Sales tax revenue was $153.8 million in 2011 and $162.9 million in 2012. It is expected to jump to $163.4 million this year. In 2004, the city recorded sales tax revenue of $150 million.
City leaders are eager to see the figure climb higher. Sales tax dollars go directly into the city’s general fund to pay for services like infrastructure upkeep and police and fire services.
“Look around at all the things we need, be it road repair, a light fixture fixed, maintenance of the buildings that we already have. All of that is paid for with tax dollars,” Councilman James Gray said. “(New retail) is a direct benefit to the people of New Orleans.”
It is against that backdrop of high expectations that Costco will open on Saturday. Using “conservative” sales projections estimates, the city of New Orleans estimates that the store will generate $1 million in sales taxes each year in its first five years of operation, and about $2.2 million in every year following, Quirk said.
“It’s an incredible move,” Lauricella said. “And I trust that Costco is going to have a lot of success in that location.”
Lauricella pointed to the wholesaler’s proximity to the interstate and its central location in New Orleans as likely to help it draw people from around the metro area.
“I’m sure Costco is going to have an affect on things in (Metairie),” Jefferson Parish Councilwoman Cynthia Lee-Sheng said. “How big of an effect, we don’t know.”
But Lee-Sheng said the addition of Costco, while it may keep some New Orleans residents from traveling to Jefferson for certain purchases, will ultimately help its neighbor.
“Certainly there is competition among the parishes, but the bigger picture is how do we grow the pie,” Lee-Sheng said. “It’s a good thing because it’s not like we’re not growing as well.”
Revenue generated from sales taxes in Jefferson Parish was down slightly, 0.8 percent, from 2011 to 2012. But the numbers were better in the first six months of 2013, compared with both years.
That gives Councilman E. “Ben” Zahn confidence that Jefferson Parish will hold its own even as New Orleans brings in new stores.
“What you might lose are those New Orleans residents coming into Jefferson Parish,” Zahn said. “I think your Jefferson Parish residents will stay in Jefferson. I don’t think there’s a fear we would lose sales tax.”