One of the bright spots in Mayor Sharon Weston Broome’s proposed budget for 2019 is a tiny revenue increase in the $322 million general fund of some $3.5 million, half of which is expected to come from the expiration of a tax incentive that was approved in 2013 to lure Costco to the market.
The Dawnadele Economic Development District, as the incentive is known, was highly controversial at the time of its approval by the Metro Council. Critics said subsidizing a retailer to come into the market amounted to corporate welfare and predicted Costco’s entry into the market would not do anything to grow the local sales tax base.
Ultimately, however, the council approved the measure, which promised to rebate $7.8 million in sales taxes to Costco over several years to help the wholesale developer recoup the costs of road and infrastructure improvements at the old Coca-Cola bottling plant on Airline Highway and Interstate 12.
By Feb. 1, the city-parish will have rebated all $7.8 million to Costco and the economic development district will expire, meaning the city-parish will collect an additional $1.88 million or so in sales taxes next year. Since 2015, the first full year the incentive program was in effect, Costco’s net sales tax revenues ranged from $1.4 million to more than $1.9 million.
Chief Administrative Office Darryl Gissel says despite the criticism several years ago, the incentive proved successful and underscores the need for more such incentives.
“It explains why you do some of these incentives,” he says. “We got the road improvements and we got a successful business operation, and long-term you do grow sales tax revenue.”
Some 59% of the general fund budget comes from sales taxes. More than 30% of the $926 million total budget comes from sales taxes.