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Thread: Sears and the incentive game

  1. #26
    Forums Administrator & Gallery Moderator NHPlanner's avatar
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    Anytime I read threads like this, I feel obligated to say that despite the fact that it keeps us out of the running for these big projects, I love the fact that we don't have any authority in NH to offer incentives to lure projects. It keeps me sane knowing that I don't have to get into competition in these kind of bidding wars.

    NH's economic development "incentives" are really limited...other than TIF's, there really isn't much that we can offer at the local level. The state only offers limited incentives (see: http://www.nheconomy.com/business-se...ncentives.aspx).

    What we do have to offer is a low tax burden (on the whole), as well as quality of life and a good workforce. IMHO, that keeps the type of economic development we do attract more stable, and more scale appropriate to a state of our size.
    "Growth is inevitable and desirable, but destruction of community character is not. The question is not whether your part of the world is going to change. The question is how." -- Edward T. McMahon, The Conservation Fund

  2. #27
    Cyburbian
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    Bless you, New Hampshire. TIF can be bad enough in its application; there's certainly no need to add state level incentives to the mix!

    Yes, let's have genuine competition for company locations. I know that Sears was important to Chicago's identity and all, but Sears didn't reward Chicago with loyalty, did it?

    There are occasions for state-led economic development when something is genuinely too big for a small town to handle, or if a city is totally flat on its back like New Orleans after Katrina. Mostly though I think state economic development should focus its direct business attraction efforts on smaller places, and stir up innovation and mediate in the big cities if there is unhealthy intra-regional competition. Chicago could and should take care of itself. Sears took advantage of state incentives simply because the incentives existed and Sears thought they squeeze more money out of the deal by tapping the state as well as the city. They were right.

  3. #28
    Cyburbian Cardinal's avatar
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    Quote Originally posted by urban2rural View post
    ...Mostly though I think state economic development should focus its direct business attraction efforts on smaller places, and stir up innovation and mediate in the big cities if there is unhealthy intra-regional competition....
    More than that, we should create the kind of environment where the businesses we desire will choose to locate, without having to provide incentives. The playing field is already tipped against small businesses in favor of a handful of larger ones. There is no need for governments to further disadvantage the majority in favor of a minority. Attraction should be the smallest part of economic development, if it is practiced at all.

    On innovation, I would say that it is not limited to larger cities. There is an enormous amount of innovation coming from small towns and rural places, and often, the majority of job growth in these areas is coming from self-employment.
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  4. #29
    Cyburbian TerraSapient's avatar
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    And the plot thickens.
    http://news.businessweek.com/article...OLMC5V2OAIN42V

    Sure seems that Chicago residents will be subsidizing Sears keeping its doors open.
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  5. #30
    Cyburbian Cardinal's avatar
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    No surprise, really. After an initial strategy to focus on real estate instead of retail, K-Sears has tried many things to right itself. It was a company with problems even before the merger. The "soft side" campaign flopped, for instance, because marketing was not in synch with merchandising. Sears tried, but could not be Kohl's or Penney's. Some of the good things started before the acquisition, such as Sears Grand, were horribly executed once Lampert took over. The original few stores we all new and had a presentation that could compete with Target for the "upscale" discount shopper. Lampert slapped red paint and a new sign of old buildings and wondered why nobody entered them. Now they are at the point where they are struggling to survive. The economy is bad, but nobody else has had 18 losing quarters. The stock that used to trade around $100 per share is at $38 despite numerous buy-backs as a means of inflating value. Licensing merchandise to others will cannibalize its store sales as people will choose to shop elsewhere for Kenmore and Craftsman, as competitor stores are nicer and they have better policies, such as on returns. Look closely at the Sears brands, though, and you will find that they are made by others. There is no difference between some Ryobi and Craftsman products except the name and price.

    Five years from now - and likely sooner - there will be no Sears as we know it. Some of the brands will live on, at least for a time. The Hometown stores, which are franchised and fill a role as a small town appliance store, may survive. The department stores will be gone. The headquarters operation will be a quarter of its present size. Illinois will look foolish for caving in to their incentive extortion.
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  6. #31
    Cyburbian WSU MUP Student's avatar
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    Quote Originally posted by Cardinal View post
    More than that, we should create the kind of environment where the businesses we desire will choose to locate, without having to provide incentives. The playing field is already tipped against small businesses in favor of a handful of larger ones. There is no need for governments to further disadvantage the majority in favor of a minority. Attraction should be the smallest part of economic development, if it is practiced at all.
    I agree 100%

    I would love to see all the municipalities in a large metro region (or even an entire state) agree among themselves to stop offering income and property tax breaks and other incentives to specific companies to locate/remain within their borders and instead put that money into improving infrastructure, education, quality of life, public services, lowering the overall tax burden for everybody, etc. This would improve situations for every business and every resident in the area, not just a few selected winners and in the long run this would do so much more to attract a desirable workforce, stable employers, and responsible corporate citizens than any short-sighted package of tax breaks ever would.

    But until we get local politicians who are actually more concerned about the residents they represent than getting their photo taken at a groundbreaking ceremony, I don't see this happening any time soon.
    "Where free unions and collective bargaining are forbidden, freedom is lost." - 1980 Republican presidential candidate Ronald Reagan

  7. #32
    Cyburbian Brocktoon's avatar
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    It seems that most people think of incentives as little more than tax breaks and abatements Jobs, investment, increased tax revenue and creating a vibrant economy are usually the public benefit of using an incentive. When I talk incentives with a prospective company tax credits are only part of the discussion. What constitutes an incentive and are there "good" incentives and "bad" incentives? Here are some programs that I would consider incentives that I have used in lieu of and/or addition to tax credits in the name of job creation. If someone waved a magic wand and did away with all incentives should the following programs disappear as well? Why or why not?


    Business incubators- They definitely pick "winners" are subsidized by tax payers and only few companies benefit. Most incubators offer subsidized rents, business services and only certain types of businesses can even apply for entry. Is a local government back incubator an incentive and thus should not funded?

    Public infrastructure improvements- A company needs water and sewer lines extended to a site, or a left hand turn lane, or traffic signal for their site. In most of the these cases the public gets little benefit of these types of infrastructure but they can make or break a deal?

    Workforce Development- paying tax dollars to train workers at the community college or technical school new skills for a company coming into the area. Often time a company that is looking in an area needs a specific skill set. It has been very common to pay to train people and develop training programs so the company has the skilled workforce they need. Many Southern states have done this when attracting car companies since they did not have many workers with the necessary skill set.

    Facade improvements for downtown buildings- These programs are often used to enhance the appearance of a downtown in hopes of making it a more attractive place to shop and do business. Again, only select businesses benefit from these programs and they are tied to a specific geographic area. Often businesses on one side of the street get the inducement where a business 100 ft away cannot qualify.
    "If you don't like change, you're going to like irrelevance even less" General Eric Shinseki

  8. #33
    Cyburbian ColoGI's avatar
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    Quote Originally posted by Brocktoon View post
    It seems that most people think of incentives as little more than tax breaks and abatements. Jobs, investment, increased tax revenue and creating a vibrant economy are usually the public benefit of using an incentive. When I talk incentives with a prospective company tax credits are only part of the discussion. What constitutes an incentive and are there "good" incentives and "bad" incentives? Here are some programs that I would consider incentives that I have used in lieu of and/or addition to tax credits in the name of job creation. If someone waved a magic wand and did away with all incentives should the following programs disappear as well? Why or why not?
    Good points.

    IMHO there are two main negative issues here: market distortions and political fodder. Not to mention the taxation problem or redistribution, but we can't talk about those things in this country...

    If I were to follow in my dad's footsteps and manage campaigns, I'd make much hay out of this - you can't bash Solyndra in the morning and waddle up to the trough for lunch.
    -------
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  9. #34
    Cyburbian Cardinal's avatar
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    Well, it took Sears a decade, but they accomplished an amazing feat.

    In 2004 Sears was the #9 retailer with sales of $36.10 billion, when it combined with Kmart, which was ranked #14 with $19.70 billion in sales. That's a total of $55.80 billion in the combined company. The combined company ranked as the fourth largest retailer.

    Stores Magazine published its list of the top 100 retailers of 2013.

    Sears is now the 13th largest retailer. Over the last decade its sales have steadily dropped, every year, to $36.10 billion. That is a loss of $19.70 billion in sales. It is as if they obliterated all sales from Kmart, a point driven home by the coincidence of the numbers being so exact.

    The Kmart-Sears saga is an amazing story and one that should be taught to every business student. How can a once powerful company go on for decades without making a single improvement? Coming back to the original topic of this thread, I still wonder if Illinois did the right thing by providing continued incentives to keep Sears. Would it have really moved its headquarters? When Sears does finally go under, will the state regret its decision? Might some other business occupiying a vacated Sears office have made a better contribution to the state's economy?
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  10. #35
    Cyburbian mgk920's avatar
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    ^^
    Not only that, but if/when Sears goes kaput, and harking to another active thread in this subforvm, how many teetering malls will that kill off?

    Mike

  11. #36
    Cyburbian Faust_Motel's avatar
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    Quote Originally posted by Cardinal View post

    The Kmart-Sears saga is an amazing story and one that should be taught to every business student. How can a once powerful company go on for decades without making a single improvement?
    This article has a lot of insight into what's been going on at Sears/Kmart. Seems even John Galt couldn't save them.

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