Councilwoman questions if Lowes deal can be broken

By Traci Chapman
Published on June 19, 2008

As Lowes Home Improvement celebrated their grand opening last week, one city official questioned whether the incentive deal struck with the retailer was “set in stone.”

Ward 5 Councilwoman Linda Hagan said she was “very upset” by the agreement negotiated by city officials — and approved by City Council — in June 2007. During a June 3 city budget hearing, Hagan said she had asked the city attorney if the contract could be broken.

City Attorney Jonathan Miller told Hagan the contract could not now be severed.

“I wasn’t on the Council that agreed to seek and give incentives to Lowes. Lowes will be well used and will be a big benefit to us, but I think it was a terrible, terrible thing to do,” she said. “We are stuck with five years in giving $352,000 every year to Lowes if they meet their obligation, but that’s still money coming out of our general fund that we can’t do so many things. I’m extremely upset by it.”

Finance Director Brenda Wright said in budget sessions last month the incentive will be paid on the one-year anniversary of the store’s opening if it hits certain performance standards. Those standards include maintaining a $2 million payroll and generating gross annual sales of at least $15 million.

“It’s also a reimbursement for a big investment Lowes has made in infrastructure — like lights — that benefits the city overall,” Wright said.

Those investments, said Community Development Director Richard Rolison, include a new signal in front of the store’s main entrance and revamping the intersection of Sara Road and state Highway 152 with new lights and pedestrian signals, widening the intersection and striping. The retailer also extended sewer lines more than 300 feet, upgraded a lift station and added an emergency generator, he said.

The price tag for those improvements — all paid by Lowes — was more than $1.5 million, Ward 1 Councilman Jay Adams said.

That doesn’t take into consideration the businesses that are following Lowes into Mustang, he said, such as the Applebees restaurant that recently announced it was purchasing land directly in front of the store.

“As for the incentive, it was very simple — if we had not paid it, they could not have come to Mustang,” he said. “They could have gone one mile up the road, and gotten all of the business they will get here, but Mustang wouldn’t have seen a dime of sales tax. With the improvements they financed — that would have been a burden for the city — it’s almost paid for itself already.”

Ward 3 Councilman Scott Gibson said he fully supported the measure at the time, and questioning it now is a “bad signal” to businesses thinking of moving to the city.
“It’s a good way to send a signal to business that we don’t want you around when we start reneging on agreements or even acting like we’re reneging on agreements. If they see we don’t want to honor the agreements we’ve entered into, we’re lost,” he said. “We’re also looking at significant increases in sales tax income that will start coming in now, and that is due to Lowes.”

Wright said sales tax revenue is expected to increase by almost $1.5 million, a 22.5-percent increase over 2008 sales tax collections.

Hagan said she understood the agreement is a “done deal,” but she still doesn’t like it.

“I still believe it was a bad idea, especially when we can’t fund other things we need,” she said. “I think we should have told them if they wanted to come in, they were welcome, but we weren’t going to pay any kind of incentive for them to do it.”

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