March 11, 2008
Commercial recruitment and development is a long hard road for Arab, Sammy Waldrop said in an interview early this week.

Waldrop, the  Economic Development Director for the City of Arab, has been involved in a long list of recruitment efforts during his tenure.  Cracker Barrel, Ruby Tuesday, O'Byan's Steakhouse, Walgreens, Goody's, Publix and Food World are just a few of the retailers who have looked at locating in Arab over the past few years and that he is at Liberty to discuss.  Others are still being courted and cannot be discussed at this time.

Although none of the recruitment efforts listed have come to completion, none is more disappointing to Waldrop than the recent QRC/Applebee's deal.

The project, if not completely dead, has been seriously wounded by opposition from some local restaurant and retail business owners because of proposed incentives for the project.  QRC decided to pull their proposal due to the opposition.  The proposal, and resulting controversy has sparked a firestorm of verbal jibes between QRC representative Mark Wassweiller and some members of the Arab City Council.  "Mark took a lot of heat, but he is the only reason Applebee's would even consider Arab.  Since he is from Arab, he really pushed it." Waldrop said.

Waldrop hasn't given up on the project and says that he is still communicating with Wassweiller and QRC, trying to reach a solution.  Waldrop discussed the history and events of the QRC/Applebee's project in a recent letter to the editor.

The possibility of the country moving into a period of recession also worries Waldrop.  "We worked three years to get a Goody's to commit to coming to Arab and then they backed out here and several other cities because of a downturn in their overall business."

Despite the recent setbacks, Waldrop said the quest to bring new retail into the City continues. He and other City representatives headed to Prattville Tuesday afternoon to attend a course on recruitment strategy sponsored by Auburn University and the International Council of Shopping Centers (ICSC).  The course is supposed to update the participants on the latest strategies and legal limitations of recruitment efforts.

Waldrop said that Arab is fighting an uphill battle with retail recruitment efforts.  "As a small community, Arab has little to attract the attention of large retailers," Waldrop said.  "We have no major types of transportation or entertainment venues to draw traffic to our area."  Traffic is a key factor that all major retailers use in their business expansion decisions.

According to traffic count figures used by Arab in its economic development package provided to prospective businesses, the Brindlee Mountain Parkway and 12th Ave intersection is the "center of the universe" for traffic and commerce in Arab.  The report, prepared for the Arab by Claritas, Inc,* indicates the average daily traffic count at or near the intersection is just under 21,000 vehicles per day.  The traffic counts fall off in either direction from that point.  A count taken at U.S. Hwy 231 and Matt Morrow Road averaged 14,500 while a count near Brindlee Mountain Parkway and 8th Ave averages about 9, 300 per day.  Waldrop says that compares with more than 50,000 per day on the stretch of U.S. Hwy 431 between Guntersville, Albertville and Boaz.

Claritas, Inc    Click photo to Enlarge

* Claritas, Inc is a national marketing research firm which provides a variety of marketing and demographic data to businesses and organizations across the United States.

Despite the shortfall in traffic count, Waldrop says that Arab has other demographic data that should be compelling to restaurant retailers.  According to the latest Claritas, Inc. report, completed for the City in September 2007, there is an estimated $14.5 million gap (excludes liquor sales) between the consumer demand and the retail supply for "Full Service" restaurants within a 10 mile radius of the Brindlee Mountain Parkway and 12th Ave intersection. 

For "Limited Service" restaurants the gap is estimated at just over $1.5 million.  Special Foodservices (undefined) has a $1 million gap.  The study lists a $2.1 million gap in demand for alcohol vs. supply.

Claritas, Inc.   Click photo to Enlarge

Waldrop says much of that money is being spent outside the Arab trade area.  Applebee's was projecting about $2 million in annual sales according to Waldrop.  "That leaves $12.5 million," he added.

An estimated 14,000 households and 33,000 people were within the 10 mile trade area in 2007.  The estimated average income of people in the trade area was $54,300.

Claritas, Inc.   Click to Enlarge

Claritas, Inc.  Click to Enlarge

Claritas, Inc    Click photo to Enlarge

Waldrop disputes some of the assumptions that he has heard regarding lost tax revenues associated with the QRC/Applebee's proposal.  "If those numbers were true I would never support the proposal." he said.

 Waldrop said that after subtracting the cost of the property, the estimated cost of building construction was expected to be $1.2 million.  Of that figure he estimates that roughly $600,000 of that cost would be in labor which is not taxable.  Of the remaining $600,000 for materials, Waldrop said concrete is about the only material that could be purchased locally.  The equipment and furnishings would not be available locally and would be purchased out of town.  Given that the sale of land is not taxable, Waldrop estimates that Arab would "at most lose $1,000 in sales tax."

Waldrop said that the current property Ad valorem taxes for commercial property is appraised at roughly 1/3 of the market value.  "Even if you assume that the property costs were $1 million, the property would be assessed at $300,000 and since property within the city limits is assessed at 7 mills the potential loss of property tax would be about $2,000 per year, far less than other estimates that I have read or heard." Waldrop said.  "School Ad valorem taxes are assessed at 10 mills which, by law, cannot be abated.  That means the schools would receive approximately $3,000 per year in property tax revenue." he added.

When it comes to sales tax, Waldrop said the worst case scenario which would mean that Arab contributes 2 cents of the 4 cent sale tax on a dollar to the QRC lease, would still result in a $36,000 annual increase in sales tax.  "If they did as good as we think they would, the City would not have to contribute anything which would result in an estimated $100,000 in increased sales tax revenue."

Waldrop said the projected payroll for the restaurant would be about $1million. "If the employees spent only 50% of their earnings in Arab that would generate another $20,000 in sales tax."  He said that studies show that each dollar spent in a community turns over an average of four times.  Doing the math, Waldrop said, "Even if the City had to give up two cents of the four cent tax for a year, which we don't think would happen, the total sales tax [initial sales plus employee salary spending] could increase by $56,000.  We would give up $36,000 to get $56,000."

Waldrop admits that the numbers are not set in concrete and are estimates based on the best information that they have available but he said they have been gone over and over by the CDA and by people who are experts in business and finance.

When asked about the possibility that local restaurants would be hurt by the increased competition, Waldrop said he does not believe it will hurt local businesses.  "The intent is to make Arab a growing, prosperous community and a better place to live."  Waldrop said.  "There is plenty of restaurant business going out of town.  We want to try and capture a portion of those dollars by trying to recruit businesses that the community as a whole want."

He went on to say that a restaurant such as Applebee's would not compete directly with fast food restaurants since their menu selections are not comparable.  Likewise he believes that local restaurants serving plate lunches and breakfast would see a lot of competition since Applebee's does not server breakfast or offer a "plate lunch" on their menu.  He said that specialty restaurants like Mexican or Chinese should see little competition also.  He added that most  retailers, especially restaurants,  want to be located close to together even if they are competitors because it results in increased traffic and the spill over is good for all of the businesses.

Waldrop said that he would never intentionally do anything to harm a local business. "I love Arab. It is my home and it is the reason I came home to live here.  I am never going to try to hurt my hometown. If I thought it would harm local business or cost the City money then I would never support it."

Waldrop said that any existing local business wanting to expand or build a new building can take advantage of the CDA program if they are willing to make the same commitment and can meet the financial requirements.

The Commercial Development Authority (CDA) was created about two years ago and its goal is to develop commercial growth of all types.  The laws allowing formation of Commercial Development Authorities was passed in the mid 1990's according to Waldrop.  Arab is one of the few cities in North Alabama which has created a local CDA Waldrop said.

Waldrop said that the CDA was formed after all of the existing restaurants were already established.  "There is never a perfect time to start because there will always be someone who didn't get to take advantage of the program but you have to start sometime." Waldrop said.

The CDA will eventually replace the old Industrial Development Board which has been in existence in Arab for many years.  The IDB is strictly limited to recruitment of manufacturing while the CDA can do all the things that the IDB can do plus help develop retail, commercial and research businesses.  Once some existing leases and bond issues are completed Waldrop expects the IDB to be dissolved.

According to Waldrop, the CDA is still looking for property to develop into a commercial business park.  The CDA had proposed developing a commercial park on the former Ryder International property which is now owned by the Arab City School System.  That project failed when the CDA and school board could not reach an agreement on the terms according to Waldrop.

Waldrop and the CDA are still trying to bring new businesses to town.  In addition to restaurants they are actively seeking clothing and electronics businesses. The Goody's pullout was a huge and unexpected setback in their efforts to recruit clothing retailers.  While he would not name a specific electronic retailer, Waldrop said that the big markets are becoming saturated and retailers such as Best Buy, Circuit City and other major electronics businesses are downsizing some of their stores in order to move into smaller markets.

Walgreen Drugs recently notified the CDA that they are delaying plans to open in Arab.  "They want to, but say they just can't do it right now."  Waldrop said.

It isn't all bad news.  Waldrop thinks there is a 50/50 chance that Food World will return to the Arab market in the not too distant future.  While not 100% certain, the Jack's Hamburger restaurant chain is also looking to build a new restaurant.  Jack's left Arab several years ago.  At the time they were located where Taco Bell is today.