Competition from retail centers in Burlington, Mount Vernon and, possibly, a future site such as the Swinomish Reservation is the biggest challenge facing retail sales in Anacortes, and recapturing money headed to the malls and tourist dollars passing through town are among the biggest opportunities, according to a new study by consultants Berk & Associates.

But attracting big retailers to Anacortes will be difficult under existing conditions and doing so may hurt some existing businesses, the study concluded.

Few surprises are found in the retail market study, which was commissioned by the Anacortes City Council to gather information for its major update of development regulations.

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What Anacortes needs is a 24 hour restaurant like Denny’s. A place where locals and travelers can sit and eat in a pleasant setting that isn’t a bar and doesn’t close at 10PM.  How does bringing in big convention centers or mega-stores work when Anacortes can’t even come up with a Denny’s?

What Anacortes needs to do is open up the Hwy 20 corridor to retail and commercial uses. There is ample ground out there for sale, at very competitive prices as compared to Commercial Ave, with much higher traffic counts. The study indicates what everyone should already know; this will capture a significant portion of our sales tax leakage. With the residential building slowing down, and with build out approaching, those tax dollars from construction will diminish and we need to replace that income. We have very few opportunities locally to shop for clothing and other retail goods, let’s attract a Fred Meyer type store that will capture some of those dollars and keep them in the community. The argument that it competes for dollars in the CBD is a poor one, this county is built on competition and competition either makes a poorly run business go away, or a well run one stronger. Commercial on Hwy 20 will not be the end of our CBD, it will strengthen it. We have plenty of industrial land, more than enough. We also need to encourage development in the CBD and get residents living there and stay away from formula business bans; it’s a waste of time and runs interference on market forces and supply and demand.

The recently completed “phase 2” portion of the study didn’t offer much new.  It was basically a copy of the phase 1 report.  That’s probably because the scope of work was poorly written by the city and the city tried to do it on the cheap.

Phase 2 should have concentrated on various options and alternatives designed to make up the revenue shortfall which the first phase projected will begin around 2012....which is now 4 short years away and whose budget planning will start just about 3 years from now.

Meanwhile, some in the city are pinning hopes on an undetermined amount of new revenue from streamlined sales tax due to emerge later this year although everything about it is pure guesswork right now.

But, the study to date has ignored the effects of build-out on other revenue sources such as impact fees, utility hookup fees, and real estate excise taxes.  Trust me.  These will be heavily impacted too and will force the city to look elsewhere for funding to do capital projects on streets, parks, and utilities.

It is long past time for the city to get serious about this matter.  Four long years have now passed since the study was first proposed.

I agree, and am sad to see the City taking a wait-and-see approach rather than a pro-active approach. As you mentioned, we’ve been playing wait-and-see for too long. The City’s leadership seems unwilling or unable to make decisions that may be unpopular to some (Hwy 20 retail); part of leadership is making those tough decisions and seeing them through - we lack that here. I’ve been told by City leadership they won’t approve any use on Hwy 20 that competes with businesses in the CBD, wonder how well my business would be doing if they’d adapt that same stance for all current businesses in town? If they are going to protect a few via anti-trust-ish monopoly encouraging policies then shouldn’t they protect all? That of course would mean that we wouldn’t have Jack in the Box, Epicure, Read Me A Story, or other fantastic small businesses that compete for customers every day and those customers are better off for the competition.

>> But attracting big retailers to Anacortes...may hurt some existing businesses, the study concluded. <<

That isn’t something to just ignore. Look at the malls in Mt Vernon and Burlington. Their parking lots and many store fronts are empty. Anacortes can and does survive without Big Box stores.  (I’m not buying the underwear argument)

What the town does need is a nice, all-night restaurant...like Denny’s.

What Anacortes needs is to replace the fools steering the ship.

You want a Denny’s?  Well, just find a corner lot of at least 35,000 square feet, and then spend between a million and 1.8 million bucks to build and equip the building, buy inventory, etc.  This includes the $40,000 franchise fee.  You’ll be signing up to pay the parent company a 4% royalty for 20 years.  Let me know when you’re open for business.  I like Denny’s. 

As for the underwear argument, it’s ridiculous that a town this size has nothing but trinkets and beads for sale.  If we based things on zero impact to existing businesses, every town in America would have only a general store and a diner.

Now that gas prices are way up, I’ll bet a lot more people will be wishing we had a broader range of shopping here but the odds of ever getting it approach zero.  JMHO.

Once again, I’m going to agree with you retnfo; I’ll take underwear over cheesy deep fried food any day. I can get you that lot to build a Denny’s on, it’ll cost you 1.6 million, and only have 17k cars per day driving in front of it; both are way out of Denny’s site requirements.  We aren’t going to get a Denny’s anytime soon, and we are better off for it. If that’s food at 3 AM is what people want, talk to the bowling alley or the cafe downtown and convince them to stay open, doubt it’s feasible, but I’d rather eat there than have moons over mihammy. The other part of this argument is that I’m guessing 4% or less of Anacortes wants all you can eat pancakes pumped full of berries and whipped cream at 2:15 AM when the bars close and somewhere in the 60% range wants to buy socks on Sunday afternoon without dodging 26k cars on Burlington BLVD.

And Irtnog, they are far from fools - they are actually bright civic minded guys. However i do completely agree, it is time for a new captain.

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Rite Aid and Walgreens and Safeways and the Food Pavillion have socks.

Next.

They have socks...at 7.00 a pair. We need to get a store for something other than groceries that doesnt cost an arm and leg!

If you are able to post on a forum on the internet, surely you can go to any number of retailers online and order socks and underwear and have them delivered right to your door!  And guess what, Anacortes will now get the sales tax if delivered here no matter where it’s purchased from online.  It will help cut down on the increased traffic into, around, and out of town.  It’s a win/win for everyone. 

Not sure if I agree with this study being done on the cheap.  If I remember right, the cost was to be around $20,000 dollars.  Not what I’d call cheap and in hindsight, there are better things we could have done with that money that would have been positive for our community. 

I think many people forget or don’t understand that a free market is directed by supply and demand.  If Denny’s or Anthony’s thought Anacortes would be great site for their business model, they would be here.  In contrast, there are three Starbucks stores in town, so Anacortes is not completely undiscovered to corporate America nor is the city government responsible because you don’t have dining at 3 a.m. or can buy the cheapest socks available at 8 p.m.  Anacortes is too small a market to offer the wide variety of consumables and durable goods that Burlington can offer.  If Fred Meyer were to open up, you’d still be limited to their clothing choices while having three grocery stores.  My guess is the more affluent will still go to Macy’s and the outlet malls for name brands, the Navy personnel will still shop at the Exchange on base, and the larger families will still shop at Costco. 

Personally, I live here because of the lifestyle.  If I wanted “easy” access to big box stores, I’d live closer to Burlington.  Although I don’t think the 17 miles to Burlington is difficult.  And don’t forget, your tax dollars are hard at work making access to Burlington and increased shopping choices easier and quicker on Highway 20. 

Or open a new window in your web browser and go shopping to your hearts content knowing Anacortes will now get the sales tax and never put a mile on your vehicle.

Charlie,

While there are three Starbucks, only one is owned by Starbucks so don’t get the impression that Starbucks is enamored with Anacortes. And I don’t think we need a Fred Meyer or any other clothing retailer for the affluent; they will still drive to Nordstroms and not blink an eye at the gas prices. Anacortes needs some choices for those who don’t have the discretionary spending dollars.

You are absolutely right that any development will be driven by supply and demand, not by our City’s wants and needs. You are also preaching to the choir in that I’m guessing we all live here because of the lifestyle; however there is no reason the ability to buy some basics locally will affect that amazing lifestyle negatively. Further, buying socks is ok online, but not pants, shirts, shoes and those things you actually have to try on.

Don’t bet the ranch yet on streamlined sales tax.  Not all states have signed up to participate and no one has any idea at all whether we will see a net gain or loss from it...despite what they’re telling you.  And we have no idea what it will cost to administer that nightmare either.  Just remember, it’s a two-way street.  Furniture and appliances sold in downtown Anacortes and delivered to homes in “The Pointe”, for instance, will result in the sales tax going to the County instead of the City even though The Pointe has an Anacortes address and Zip Code.  And remember, the city only gets 84/100ths of a penny from the 8 cents of sales tax on a dollar spent.  The state gets 7 cents of it.  Meanwhile, the city still has to provide support and services for the businesses in town that made the sale.

And, if you want to get hung up on sox, that’s okay but the study the City commissioned was to evaluate its long-range financial situation as pertains to build-out.  The news from phase 1 of that study wasn’t good.  Phase 2 should have been a looksee at various options to increase revenues.  But that’s not what we got.

CitizenSkagit,

The ownership of the Starbuck’s stores is irrelevant.  The fact is there are still three points of sale for their product that fit their business model which means they like it here.  About your comment regarding clothing, while the affluent will still leave town to shop, they also account for the largest growth segment in the Anacortes population.  This will make it even harder for someone to come in and target those with less discretionary dollars and make a profit.  JC Penney, the Islander, and the shoe store (can’t remember the name) all tried and couldn’t compete.  I do agree that it wouldn’t impact Anacortes negatively and think it would be a welcome addition.  However I don’t believe the numbers add up or we wouldn’t be having this discussion.

Buying clothes online simply comes down to consumer attitudes and reconciling them with a different way of shopping. Buying clothes online is no different than buying clothes at Costco in that you can’t try them before you buy and it works.  Online retailers have good return policies.  Once people get their head around a different way of shopping and understand that it’s okay to wait a few days to get your clothes and that you might have to send some clothes back now and then, it may be a better choice in the long run for those who don’t want to drive 17 miles or more to shop.  I think our “gotta have it now” mindset along with a medium that some may not be comfortable with is a barrier.  I’ve shopped this way and have had nothing but positive experiences with it, even when I’ve had to return products.

retnfo,

I don’t think anyone’s betting the farm on the streamlined sales tax.  In addition there’s obviously going to be some details to work out as there are with any significant change to a system that has seen a significant shift in consumer spending. This is a matter of course.  The point of my comment was to address the retail leakage out of Anacortes and use the old example of “socks” to show how we as consumers can quit whining and change how we shop to provide some benefit to ourselves and Anacortes since big box stores aren’t coming anytime soon, if ever.  Better some revenue than none right? 

I’m ok with the two way street in your example.  I would bet that the tax revenue generated from those inside the city limits shopping outside with local delivery would more than offset the revenue loss from the Pointe or all of South Fidalgo for that matter, buying inside and delivering out. Also, the business in Anacortes is earning profit and paying wages.  This is money that helps Anacortes in other ways. 

Also, I don’t believe you are entirely correct on the scope phase 2 of the study.  While it was designed to address alternative revenue sources to offset revenue loss from “build-out” it was to solely focus on the retail and commercial aspect and is only one component to addressing the “build-out” described in phase 1.  Industry/Manufacturing components had been proposed for further studies/phases.  If I remember correctly, the Mayor was not in favor of phase 2 and was instead in favor of data mining using hard numbers from credit card purchases in Burlington and Skagit County of purchases from addresses in our zip.  However, the council voted otherwise and chose to move forward with phase 2.  In hindsight, the hard numbers from data mining would have been more useful to the city in looking to see exactly where the retail leakage is and work to provide those options here.  Also, a study is just that, a study to help guide and give insight, but it’s not economic law.

Charlie 42

The study was originally proposed in October of 2004.  The Phase 1 report indicated there would be revenue shortfalls beginning around 2012. The study, to date, has not evaluated the possible additional effects of build-out on revenue from utility hook-up fees, real estate excise taxes, and impact fees. 

It is a simple matter to determine the areas where retail leakage is occurring; simply look around town to see what is missing in our business community.  It is also a simple matter to do a comparison of sales tax revenues between cities of similar size as the information is readily available, although you have to be a bit careful about remembering to allow for variables such as proximity to major highways, etc.

The real question yet to be decided and perhaps answered is whether or not we believe the results of Phase 1 and, if so, what we’re going to do about it.  I personally have the time, ability, and funds to permit frequent trips to wherever I need to go to buy what I need.  Others don’t.  As I sit here and write this, I can look around and see many fairly costly things which had to be purchased elsewhere because they can’t be purchased in Anacortes, or there’s no selection, or the prices locally are high enough to justify a trip.  I’m not advocating big-box stores.  There’s other options and Anacortes rejected its opportunity to attract big-boxes years ago.  But that’s not to say some expanded retail opportunities aren’t needed here.  But the real discussion shouldn’t center on retail.  It should be about revenue, period.

An interesting sidelight of SST is that most Ebay sellers have already figured out ways to beat taxes.  They just price their goods at a few pennies on the dollar and then charge huge shipping and handling fees which aren’t taxed.  The major online retailers won’t do this but it’s an interesting concept.

I guess the real question is whether or not there’s cause for concern.  I believe there is.  At the very least, some effort should be made to decide whether or not we need to do anything and if so, what.  Three short years from right now, the city’s budget planning for 2012 will be in full swing.

retnfo,

If the issue of determining retail leakage was as simple as you say, then the gaps would have already been filled.  Other than investment, there isn’t any barriers to doing business in Anacortes.  Comparing Anacortes to other cities the same size on the basis of tax revenue is also not easy for exactly the reason you mentioned. 

Correct me if I’m wrong, but the crux of your concern seems to be the inaction of the city to address the issues of the changing revenue stream once build out occurs.  To carry this further, one has to acknowledge that the study is correct and that the operational shortfall will occur (2012) followed by the general fund deficit (2019) assuming conditions stay the same., i.e the same rate of development and no change in city policies and zoning.  Several things have occurred since the study was released.  1.) The building rate and Real Estate sales have slowed significantly thereby pushing back the date of build out.  2.) I-747 capping the 1% increase in property tax revenue was overturned which leaves the option of raising property taxes to cover shortfalls for services. (This will have to be one tough Mayor).

Successful and tight fiscal stewardship was one of the “must haves” according to the phase 1 study.  We’ve had this with the current administration and I would hope that whomever is our next Mayor, if there is a change, has the same fiscal stewardship that we’ve had.  Other than good tight fiscal governance, what more should the city be doing exactly?

Charlie 42, I’ll address your last points in order:

The gaps are not filled because Anacortes doesn’t have the properly zoned land in the necessary size parcels to allow for development if we’re talking about retail, assuming we want something besides more little mom & pop outfits.  In our Commercial zone, there are only a few parcels of the size needed for a medium size retail operation of around 30,000 square feet, which is somewhat smaller than the old JC Penney’s and about the same as the Islander was.  Those parcels are presently home to Safeway, Frontier Industries, the bowling alley, Walgreen’s, and the Food Pavillion complex.  There are no adequate parcels in our Central Business District.  So, lack of suitable land is certainly a barrier.

Historically, lots of the townfolk have loudly complained when rezoning more land for retail was mentioned.  Small, niche businesses tend to fear larger stores coming here and there are some who still harbor a belief that industry is poised to return any day now. 

Comparing cities on tax revenue is actually easier than you think.  I did it several years ago and made it public.  It does take a little research and application of common sense, but it’s far from impossible or even difficult.

The “crux of my concern” is that growth slowdown is an absolute given.  Anacortes will experience it....if not by 2012, then some number of years later.  It really isn’t so much “when” it happens but what the effects will be.  So what if the market and building has slowed down for awhile?  It’s done it before and then come back with a vengence.  Sooner or later, Anacortes will be built out or darn close to it and then the financial impacts I’ve outlined will indeed take place.  The closer we get to build-out, the more the financial impact will be evident and felt.  The only three ways to deal with the impact are: (1) find ways to increase revenues; (2) annex more land into the city to increase the tax base; (3) cut services.

Don’t give all the credit for tight fiscal stewardship to the “current administration”.  The mandatory reserve funds were envisioned and installed by the City Council and the Council has exercised very close scrutiny over spending and budgets for many years now. Everyone has worked very hard to run Anacortes and spend the people’s money in a very responsible way.  As for I-747, I believe the Legislature re-instated it on November 29, 2007.  But, the people can vote to lift the tax levy lid to more than 1%.  I doubt they’d do it.  Any Mayor suggesting the 1% cap on the property tax levy be lifted would have to convince the City Council to vote for it to be placed on the ballot.  Neither Mayors (nor Governors nor Presidents) get to just raise (or lower) taxes on their own despite what the candidates spout continuously.

What more should the city be doing?  It should be taking this matter a lot more seriously.  It should be trying to determine why we’re not attracting more commercial development.  I’ve already explained why we aren’t.  It should then look at rezoning some more land to meet that need but I don’t expect to see that happen.  Finally, people need to realize we have a fairly unique situation here.  We’re an island and we can only grow so much and there are only so many sources of revenue.  Ultimately, growth will stop but expenses will probably begin to grow faster than revenue streams.  It just makes sense to me to do what we can now to plan for that eventuality.

There are a few good sized parcels available on Commercial Ave, but the price is way to high for retail to make sense. The last parcel sold was at $58.00 a square foot to Banner Bank and they still had to tear down the building, remove 5 fuel tanks and clean up any contaminated soil bringing the real price well over $60.00 a foot. For the same type of commercially zoned land, with greater traffic counts in Burlington and Mount Vernon you will pay less than half that price. So until we zone more land on high traffic count streets Commercial, the price will be out of whack and good retail will not locate here. Highwya 20 should be zoned Commercial, and if we are afraid of big box stores we can limit building size, and dicate how buildings look so who ever decides to buy and build out there does a nice attractive job. Better than more mini-storage and brings us much needed sales tax revenue.