Atwater considers economic incentive program touted by similar city

Sanger Mayor Joshua Mitchell drove nearly 80 miles to Atwater to speak to the City Council about a plan he says saved his city from economic collapse, a program he believes can help Atwater.

Mitchell said Sanger was facing 32 percent unemployment and the worst credit rating of any municipality in the country. He said an incentive program that gives 50 percent of the city’s portion of sales tax revenue back to new or expanded businesses turned things around for Sanger.

Sanger is a city in rural southeast Fresno County with demographics similar to Atwater.

The program was one of many incentives Sanger offered businesses, but Mitchell said it was responsible for filling vacant buildings that had sat empty for years. A shuttered Save Mart building was idle for three years, becoming the target of vandalism and theft, before the incentive program enticed a businessman, Mufid Alamsi, to open State Foods Supermarket.

Councilman Brian Raymond brought the idea to Atwater, inviting Sanger’s mayor to the council meeting Monday.

“What’s worked there could work here. We have the same demographics,” Raymond said in an interview Tuesday. “But we also have the benefit of having Highway 99 run through our town. Every cost-saving measure we’ve done has not created a single job. Here’s an opportunity to create jobs and turn Atwater around.”

The City Council seemed excited about the idea, but wanted to clarify the details of the program: How long a building should be vacant to qualify, the definition of a new or expanded business, and how long the incentive program should be in place. The majority of council members voiced support for having it run for 18 months.

The incentive program also can require businesses to hire local workers. In Sanger, the businesses that take advantage of the incentive must hire at least 35 percent of their employees locally. Atwater council members didn’t decide Monday what percent should be hired locally, but expressed interest in setting a requirement.

A resolution will be brought back to the City Council next month.

Mitchell said his city began the program in 2011 and has extended it twice. The 33-year-old mayor said the city won’t renew it again in June because it no longer needs the incentives. He said Sanger has $3 million to $4 million in its reserves thanks to the program.

There was some opposition as the city’s finances improved, Mitchell said, but he explained that having 50 percent of something is better than 100 percent of nothing.

“They’ll say, ‘Look at all that lost revenue,’ but you have to look at why these businesses came in the first place – because of the incentive,” Mitchell said.

Mayor Jim Price said Monday that the “outside-the-box” thinking is what the city needs to climb out of the hole. Earlier in the meeting, the city’s treasurer told the council the city has a $1.9 million deficit in its general fund.

An economist said the program could attract commercial growth, but said the city has to be careful not to hurt existing businesses.

“Without a doubt, the intention is a positive one, but the question is how effective it will be and if it’s fair to existing businesses in the community,” said Jeff Michael, director of the Center for Business and Policy Research at the University of the Pacific.

“There’s nothing wrong with competition, but if you’re redistributing sales tax from one business to another, then you are costing sales tax revenue and being unfair to some businesses,” he said. “You don’t want to harm the local businesses that have been there and reduce total revenue to the city.”

Raymond said he believes the program will be a success in Atwater, as long as the city spreads the word about it.

“The success or failure of this program relies solely on the marketing of the incentive that we offer,” he said. “We (Atwater) need to reach out to anybody and everybody and tell them we’re here.”

This story was originally published April 14, 2015 at 6:34 PM with the headline "Atwater considers economic incentive program touted by similar city."