Cities tout tax revenue

Posted: Friday, May 24, 2002

As they consider how to handle the advent of a large commercial complex in Homer, city officials there might do well to draw on the experience of their neighbors to the north.

Since opening its doors in Soldotna in 1994, the Fred Meyer store has turned Soldotna into a regional shopping center and become the major contributor to the city's tax base, City Manager Tom Boedeker said recently.

"They're a big impact," he said.

Along with the city's other large commercial store, Safeway, grocery sales alone at the two stores account for roughly $980,000 a year in sales taxes. Fred Meyer by itself contributes more than $1 million in sales taxes -- roughly a fifth of all Soldotna sales tax revenue -- when its entire inventory is considered, Boedeker said.

The stores lure consumers from all over the Kenai Peninsula, including the Homer area. In Kenai, Big Kmart and the Carrs Quality Center next to it have corresponding impacts on city finances and the local economy. They also draw from a peninsulawide customer base.

"For the economy of the city, it's been an absolute must," Kenai Mayor John Williams said. "In the first year (1993), sales tax revenue was more then $300,000 over what we anticipated. We'd anticipated in the neighborhood of $300,000 or so.

"It was so much more, I paid cash for a fire truck."

A state grant also helped, but the unexpected sales tax revenue covered more than half the truck's cost, he said.

"Forty-eight percent of our budget comes from sales taxes," Williams said.

"Of $8 million in revenue, that's about $3.85 million. A huge chunk comes from the Carrs-Kmart complex."

All in all, Soldotna's experience with the big box store has been positive, though Boedeker acknowledged there have been problems, such as RV campers treating the Fred Meyer parking lot like a campsite, and the huge parking plaza has turned out to be a convenient place, it seems, for people to abandon dogs and cats in relative anonymity.

Early on, there were concerns, since addressed, that drainage might impact Soldotna Creek. Beyond those issues, however, Fred Meyer has proved a good corporate neighbor, Boedeker said.

Kenai once owned the 20 acres on which the Kmart complex now sits and once was negotiating with Fred Meyer, Williams said. Eventually, a developer bought the property, built the Kmart store and a new store for Carrs.

Peripheral businesses such as restaurants, a video store and an auto repair facility also were built on the site.

"The sales tax revenue keeps rolling in," Williams said. "That's the upside."

The downside was the failure of many small businesses in the wake of Kmart's opening. A major sporting goods outlet eventually left. The mall that once surrounded the old Carrs store has not been full for most of the 10 years since, Williams said.

"It devastated a lot of small mom-and-pop operations," he said. "We haven't had a mom-and-pop store (offering related product lines) open since."

The arrival of Fred Meyer with its extensive and varied inventory likely hurt small businesses in Soldotna, too, Boedeker said. But other companies adjusted, filled niche markets and survived, even prospered.

Whether those stores would have done better without Fred Meyer, Boedeker couldn't say, but he said he believes many benefited by the added traffic the large store brought to town.

Even where Fred Meyer competes directly with a smaller business, many have remained strong. Auto supplies and services sold by Fred Meyer haven't deterred several other thriving auto supply and repair firms, some of them major chains.

In Kenai, the Country Foods store on Willow Street, which competes directly with the much larger Carrs, is prospering, Williams said.

Lately, there have been encouraging signs of small business growth in Kenai, he said. Alaska Industrial Hardware Inc. recently built a new 27,000-square-foot building, tripling the size of its operation. A new strip mall being considered near Kmart by the same developer who built the Kmart complex, Allan Norville, will have room for several small stores, he said.

Some Kenai residents and business owners were fearful of Kmart's impact when the store was first proposed, and history has proved some of that concern justified, Williams said. But it's been 10 years, and times have changed. People have become accustomed to the existence of the big box store in their midst, he said.

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