Danville seeks new stores to shore up against 'retail leakage'
DANVILLE — Local officials attribute the recent flurry of activity in retail development in Danville to aggressive recruitment efforts that began years ago as well as more recent shifts in the retail landscape.
It has been several years since Danville had significant retail growth. But in the past year that has changed as plans move forward for the development of more than 30 acres at 3707 N. Vermilion St. that will include three stores — Kohl's, T.J. Maxx and Meijer — and plans for a restaurant or other retail. And local officials say there are other projects in the works and other retailers are taking a closer look at Danville.
Vicki Haugen, president of the local economic development organization, Vermilion Advantage, said a variety of things have played into the development on North Vermilion Street. She said her office saw a lot of momentum in retail prior to the recession, but that's when it "all shut off, even nationally."
Haugen and other local officials continued aggressive efforts they had started before the economic downturn.
Through the recession, said Mayor Scott Eisenhauer, the city has continued to spend money on infrastructure improvements, which makes the community more appealing to retailers.
"We wanted to make sure that as the recession began to come to an end or turnaround, we would be in a position to attract some of those retailers wanting to expand into other markets," he said.
The city has been very aggressive the last several years about recruiting retail, he said. And their efforts are partly driven by retail industry data, illustrating how much retail spending Danville-area residents do elsewhere.
Haugen said they've concentrated on attracting retail in the areas where there's the most "leakage" — retail sales outside the market area. Haugen said based on a 25-mile radius with the Village Mall as the center, this market experiences the most leakage in the areas of furniture and home furnishings, electronics and appliances, clothing and apparel, jewelry, luggage and leather goods, and books. Sporting goods was another area that showed significant leakage prior to Dunham's opening.
Leakage means a loss to the city in sales tax dollars, which is its largest source of income, more than half of all revenue.
Of the $18.2 million in general fund revenue the city received in 2010-2011, about 63 percent came from sales taxes. About $5.1 million came from state sales tax and another $6.5 million from the local home rule sales tax. The local home rule tax is the single largest source of revenue for the general fund. That year, the city's property tax generated $5.6 million, but none of that goes to the general fund, instead paying for pensions and other benefits and bond and interest payments.
But recruiting new retail to the community is also important for quality of life, Eisenhauer said.
"Having viable retail and restaurant opportunities to use in your own community goes a long way toward improving the quality of life and makes the community overall very attractive to recruiting individuals and families in moving into or back to the community," he said.
Taking the risk of buying the property on North Vermilion Street for $1.4 million and spending additional city dollars to demolish the former K's Merchandise store on the site is an example of the city's aggressive approach, according to Eisenhauer. The city later conveyed the property to the development firm, Continental, for $1, and Continental is developing the site to lease to the retailers.
"Not that that site hadn't been looked at by multiple developers in the past, but the price of the property plus the amount of work that had to be done were all detriments to someone purchasing that property," Eisenhauer said. "Taking the steps of buying, then doing the demo, really opened up the opportunity for this development to occur."
While local officials have continued their proactive strategies, Haugen said, changes in the retail industry have played a part in Danville's having more opportunities.
Consumers don't get in the car and drive longer distances to a mall for entertainment and shopping as much anymore, because they don't have as much discretionary time, she said. Higher fuel prices affect people's decisions, too, and they are more conservative about where they drive and why, she added. And in this part of the Midwest especially, it's an aging population that's not as inclined to go long distances for consumer goods, Haugen said, so retailers must decide how much distance they want between their store locations.
"It's a combination of things evolving over the last decade that have put us on the radar screen again from a retail perspective," she said.
And once a national chain makes a move, others follow suit, according to Haugen.
"It may even precipitate them to move a community up on a list," she said, adding that a community also has to be on a retailer's radar screen. "If you call and say 'We want you here,' if you're not factored into their formula, it's not going to happen."
Even if a community is on the radar, Eisenhauer said, many factors play into putting together a development deal like the one on North Vermilion Street.
Some of the factors include traffic count, accessibility, the number of landowners, interstate access and rooftop accessibility, meaning the number of houses near the site.
Developers look at the total cost of the project and at the end of the day, there's a number that they can spend that makes the project worthwhile, he said, so anything the city can do to offset that helps get the deal done. That's where incentives play a part.
City officials and aldermen have received criticism for approving incentives; some have called the expenditures a waste of taxpayer dollars.
Aldermen Rickey Williams Jr., Ward 1, and Bill Black, Ward 7, addressed such concerns at a recent city council meeting when aldermen finalized an additional incentive for Continental, the development firm bringing in Kohl's and T.J. Maxx.
Black said some people don't like incentives, but if Danville doesn't offer them, some other city will. He referenced competitions for major companies the Danville area has lost in the past to Indiana, which offered more. In regard to the incentives for Continental, Black said, there's some upfront risk, but it's been mitigated with protections written into the city's agreement with the developer.
Eisenhauer said city administration won't "get crazy" and give away more than it could get in return in such deals.
"What we look for are incentive packages that provide for a return on investments," he said. That's why, Eisenhauer said, he likes the five-year deals that give 50 percent of sales tax back, and a little more if local labor is used, knowing that at the end of the time period, the city will get a return on that investment that's far more than what was given.
"So, it just makes sense to use those tools," he said.
The city also has provided incentives to the Dallas-based Tabani Group, the owners of the Village Mall, 2917 N. Vermilion St., another example of the city's aggressive approach, according to Eisenhauer. In that deal, the city pledged to give Tabani between $421,875 and $632,812 in assistance upfront as new owners of the mall with deals in the works for two new anchors. One was Dunham Sports, which is now open, and the second to be named soon, according to Eisenhauer.
"One of the things I have heard for years is when will things start happening at the mall? When will they get more stores? That's a private entity, and the city doesn't have much involvement, but when we began our aggressive campaign is when we recognized, How can we help the new ownership group bring stores to the community? ... It was a step we never really had taken before," he said. "And now we are starting to see that pay off."
Eisenhauer said the city will continue to be aggressive.
"Certainly we recognize there will always be interest in the space between the mall and Walmart, but there are other areas as well. The east end has some prime opportunity for development and along South Gilbert Street, there are some opportunities there, so we need to identify what space is available and determine how we go about putting together tracts of land that would be attractive to developers," he said.
Danville area retail gaps
The following shows "gaps" or "surpluses" in certain areas of the Danville area retail market, which for the numbers below is defined as a 25-mile radius from the Village Mall in Danville. Local city and economic development officials have tried to focus retail recruiting efforts on areas with a "leakage factor" above 50.
"Supply," which is retail sales, includes sales to consumers, not businesses. "Demand," which is retail potential, is the expected amount spent by consumers at retail establishments. The "leakage/surplus factor" is a measure of the relationship between supply and demand that ranges from +100 (total leakage) to -100 (total surplus). A positive value represents "leakage" of retail opportunity outside the trade area. A negative value represents a surplus of retail sales, a market where customers are drawn in from outside the trade area. The "retail gap" represents the difference between "retail potential" and "retail sales." The source of the retail data is the Business Analyst Online division of Esri, a GIS software company, and Infogroup, a global provider of business information.
Industry GroupDemand (Retail Potential) Supply (Retail Sales)Retail GapLeakage/Surplus FactorAutomobile dealers$182 million$114 million$68 million23Auto Parts, Accessories, Tire Stores$16 million$26 million-$10 million-23Furniture and Home Furnishings$20 million$5 million$15 million57Electronics and Appliance Stores$23 million$5 million$18 million49Grocery Stores$158 million$118 million$40 million14Gasoline Stations$179 million$204 million-$25 million-6Clothing and Clothing Accessories$24 million$6 million$18 million57Book, Periodical and Music Stores$4 million$1 million$3 million58
This story appeared in print on April 1.