Corporate welfare and Red Lobster for Bristol VA
by Lewis LoflinTweet
The 230-seat Red Lobster restaurant at 3167 Linden Drive, near Interstate 81's Exit 7, opened three years ago. It was supposed to hire 130 people. What makes this controversial was the $225,000 in corporate welfare that by the admission of Bristol Virginia officials was never offered to other businesses offering similar services. The Bristol Herald Courier (Sept. 24, 2005) noted the following comments from some Bristol officials on this questionable taxpayer investment:
At a recent financial planning meeting with local school officials, City Councilman Farnham Jarrard said the Exit 7 area has so many restaurants that another one might not mean big cash for city coffers. "In the past, every new restaurant meant new revenue for the city," he said. "Now when we add a new restaurant at Exit 7 it's taking business away from another restaurant at Exit 7. It just isn't going to mean more money, it means that the money that's out there is getting spread around more."
And to quote former Mayor Jerry Wolfe. "I guarantee you there is not a restaurant from here forth that will not ask for an economic incentive package."A local developer, Tim Carter, was behind the deal and also got $2.5 million from the City in 2003 for another nearby retail/restaurant development that has produced only a single restaurant. To quote the local press (May 13, 2004):
The deal involves local developer Tim Carter, who was at the center of another controversial deal last year when the city purchased land on his behalf in another Exit 7 location. The city shouldered $2.5 million in debt in that deal and must wait until Carter successfully sells the first lots to recoup its investment. Both situations raise troubling questions about the use of public money to fund speculative private business ventures.
I was there when the decision was made and it was not unanimous and shrouded in secrecy. I finally got copies of the agreements three years later. I'll consult with city officials and will hold comment on that until clarified. In the case of the Red Lobster deal, Bristol porked-out $175,000 in economic development funds and $50,000 from Bristol Virginia Utilities Board for a transformer.
The argument is retail create lousy jobs, but fills City tax coffers where they got criticized for boosting the local meals tax in 2005. The only problem is the City has been in trouble since then because tax collections haven't kept up with their $120 million in debt. See Nicewonder property fiasco in 2008: $3 million wasted
Bryan Arnold, of Arnold & Associates, Inc. of Bristol, Va. had this to say May 21, 2004 to the local press:
Your May 13 editorial concerning Bristol Virginia City Council buying a Red Lobster with economic development funds brought up several important facts that should concern all city residents.
Councilman Doug Weberling defends City Council's action by claiming that, with the high meal tax City Council has levied on residents, the investment will be recouped within a year. This is only partially true at best, considering a lot of Red Lobster's business will be at the expense of the other restaurants already located at Exit 7.
City Council is using very limited economic development funds to take business from the other restaurants and shift it to Red Lobster. This is a very clever use of smoke and mirrors by a very polished and skillful politician to defend a very bad decision.
Another very troubling fact with this whole decision is that it was made exactly one week after the election of two seats on City Council. One has to wonder if the voters had been informed before the election that this was going to be considered, if it would have changed the outcome.
One also has to wonder what the motives of the entire City Council were by waiting until after the election to bring this to light. I would like to remind Bristol Virginia residents of the letter to the editor from Weberling which appeared in the paper just prior to the election disputing charges of "backroom politics" on City Council. More smoke and mirrors from Weberling? A different matter is the decision City Council made to raise cable rates at the same meeting. Is it just another coincidence that this issue came up just after the election?
It is starting to look like the most important concern of the members of City Council is to make sure they are re-elected. Honesty and openness seem to run a very distant second at best.
Tim Carter of Starwood Properties, Inc. responded on May 29, 2004:
Give a man a fish and he eats for a day. Teach a man to fish and he eats for a lifetime. Build that same man a seafood restaurant, and he eats for a lifetime and contributes significantly to the city's tax revenues.
Therein lies the importance of luring national chain restaurants, like Red Lobster, to Bristol. Even if it takes an economic incentive package to reel in the big ones.
Bristol Virginia will pay $175,000 in economic development funds to persuade Red Lobster that Bristol is not only a "good place to live," but also a good place to do business.
In return, over the span of 20 years, Red Lobster will pay $4.9 million in total taxes. That's a phenomenal return on investment. Perhaps it's time we redefined the term economic development.
In the past, incentives have been offered for industrial recruitment. However, the manufacturing sector continues to downsize and eliminating jobs and closing plants.
An East Tennessee State University report states the region added nearly 1,300 jobs in the first quarter of 2004, not in industry, but in construction, retail and hospitality.
The city isn't the only entity with a vested interest in the success of Red Lobster. At the city's request, I discounted $100,000 off the price of the land, because it was important to the city to attract this particular restaurant chain.
How can similar economic efforts on one side of the state line be applauded, while efforts on the other side are open to public scrutiny? What is good for one Bristol is surely good for the other. And what is good for both Bristols is good for the region.
The leaders of Bristol Virginia are to be commended for being forward thinkers and offering incentives to any business wishing to come to town. Without such action, I fear that Bristol will be left reminiscing about "the big one that got away."
On the web: www.starwoodproperties.info is down.
Also see Nicewonder Fiasco of 2003 Again, if it's such a great deal why is the developer not paying for it? Why the secrecy?
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