December 1st 2017
Economic & Community Development Commission
First Floor Retail Tax Incentive Proposal
Over the past ten years, the village has evolved to an ever decreasing percentage of retail merchants populating first floor space in Ridgefield. The ratio of service to retail merchants has increased to such an alarming rate that the ECDC concluded this trend would continue if changes were not enacted quickly.
An informal survey in 2017 of 48 buildings (strictly on Main Street) reflected a vacancy rate of 14%, as well as a Non-Retail rate of 30%. It is well understood that this trend has recently worsened with 3 of the existing vacancies soon to be filled with a Barber Shop, Hair Salon and Fitness Center respectively.
During a well-attended P & Z meeting back in February 2017, concern for this trend was discussed resulting in the formation of a task force representing all of the Ridgefield stakeholders involved to include the ECDC, Merchants, Landlords, Residents and Town officials.
Other meetings were held with these stakeholders to discuss details of the First Floor Retail issue. Without question the overall judgment of all participants was a need for a higher percentage of First Floor boutique retail establishments in the Village District. However, solutions to the problem were not easily amenable. Eventually it was determined that before pursuing a permanent zoning change, we should attempt to develop incentives that would spur landlords to give marketing priority to retail merchants.
Generally speaking, the ECDC is proposing that a three point First Floor Retail incentive package be established that would include:
- Creating a $24,000 fund that would be used to provide Real Estate Tax incentives to landlords / new first floor retail merchants for a maximum three years based on Sq. Footage. (More detail below)***
- A three-year Personal Property Tax waiver.
- New Application Planning Fees Waiver.
Further details of this proposal:
Leases to non-retail tenants are ineligible for all incentives. Non-retail is described as a service industry business such as insurance, real estate, salons, barber shops or other professional services. Professional service businesses that also sell products as a secondary component of their business (eg. personal grooming products) do not qualify.
The current real estate tax equates on average to $2.50 to $4.00 per square foot. The average square footage of a typical retail storefront in the Village District is approximately1,000 sq. ft.
Using the highest tax rate of $4.00 x 1,000 sq. ft. equates to $4,000 per year per average storefront. Forecasting six new retail storefront leases in any given year conservatively equates to a town revenue decrease of only $24,000.
- To qualify for the incentive package, landlords must lease their vacant first floor space to a retail tenant regardless of the vacancy time involved.
- Term of all leases must be three years minimum.
- The incentive applies only to the first three years of a lease and is capped at 1,000 sq. ft. per new rental unit
- The incentive would also apply to any existing business that expands into additional or new space. (Only the additional or new space would be available for the incentive not existing space).
- There is no requirement that the incentive be spent on improvements, but all new leases must comply with Town and building codes.
- The incentive would be earned annually for a period of three years under the terms of the current lease with no change of use.
- 100% of the property tax incentive must be credited to the retail tenant and included in the terms of the lease. Leases structured in which the landlord receives the incentive would require that the landlord pass the incentive to the tenant on an annual basis. Leases in which the tenants are responsible for paying the taxes would result in the town rebating the taxes directly to the tenant from the fund.
- All applications for the real estate and personal property tax incentive must apply to and be approved by the ECDC. All applications will be reviewed by the Tax Assessors office.
- This incentive is available on a first come, first serve basis. Once the $24,000 fund is expended for a given year, they are no longer available.
- Leases to be considered for this incentive must be signed 30 days after enactment of this program.
***In order to be able to implement the program in 2018. The ECDC will seek at least a commitment of $12,000 for the balance of the fiscal year ending June 30th 2018 and then the full amount of $24,000 for FY2018-19.
Considering the trend of ever increasing service oriented businesses populating our village, the ECDC believes that time is now of the essence. Lacking a compelling package of financial incentives such as this that would encourage landlords to view first floor retail as a good business decision for themselves and for the local economy, our only alternative would be to approach P & Z with a proposal to create strict First Floor retail zoning.
BOS approval of this incentive should provide landlords a magnet to attract retailers to downtown Ridgefield.