Occasionally I like to try to solve a problem that doesn’t exist, just to see what happens. Often the solution to the nonexistent problem can be applied to problems that are quite real, but you wouldn’t have so easily gotten there from here.
Last week, I was running errands. Post office, bank, a meeting over coffee, a library return, and picking up a simple light switch. All of my tasks kept me in or near downtown, except one. And so, in my idle commuting time, I wondered how we could get Bi-Mart to locate a store in downtown Eugene.
I understand this is not a real problem. There are Bi-Marts southwest (1.9 miles), northeast (2.9 miles), and northwest (4.7 miles and 5.3 miles) of downtown Eugene. Bi-Mart prefers suburban or rural locations. (They have no stores in central Portland.) Their business model favors smaller towns.
What would entice Bi-Mart to open a store in downtown Eugene?
The city of Eugene doesn’t have extra money in its coffers to lure Bi-Mart downtown, but what does it have in abundance that might make the proposition attractive?
The city owns plenty of downtown retail space that’s being underutilized, much of it on the first floor of its parking garages. The city’s printing press is in a space that could be used for retail. So is the exercise facility for city employees. The city’s planning and development department fills half of the Atrium Building, where retail once thrived.
Altogether, the city owns about 130,000 square feet downtown that could be used for retail purposes, if demand warranted it. A typical Bi-Mart store uses about 30,000 square feet.
The city obviously can’t go around giving away free use of 30,000 square feet of retail space. But what if it wasn’t a gift, but a reward? What business profile describes Bi-Mart that we’d like to encourage others to emulate? This is where the solution to an imaginary problem can be applied to the real world.
Economists separate businesses into two categories, or sectors. Traded Sector businesses rely on importing and exporting goods outside their immediate region. Businesses in the Non-Traded Sector do not. Restaurants, for example, mostly move money around inside the region, so they are in the latter category. Since it’s local money changing local hands, it doesn’t create for the community any net financial gain — otherwise known as “wealth.”
Bi-Mart has its corporate headquarters in Eugene. It employs hundreds in Lane County, but most of its $720 million annual revenue comes from outside our area. Because Bi-Mart is in the Traded Sector, a salary paid in Eugene is subsidized by the profit from selling woolen socks in Yakima, Washington.
We want more businesses in the Traded Sector to locate their headquarters in Eugene, because they bring jobs and increase the wealth of our region. Continuing with easy math and the same model, Bi-Mart estimates its Lane County payroll (including headquarters) at $35 million annually.
Now we just use these numbers to reverse-engineer the incentive. We want to attract and reward businesses with at least 50 employees in Lane County, with at least 50 percent of its revenue coming from outside Lane County, and with its corporate headquarters located here in Eugene. The city could offer those businesses a thousand square feet of free downtown retail space for every million dollars it spends annually on payroll in Lane County.
Some would take the city’s offer. Some would not. But everyone would understand what the city wants from its business community and for its downtown.
We want businesses that provide local jobs and bring wealth into our community. And we want a downtown that bustles again.
Downtown shoppers would be surprised at the businesses represented in the subsidized storefronts. Concentric Sky could have a kiosk showing off its iPhone apps. Hummingbird Wholesale might show customers how to cook with organics. Lanz Cabinets would have a convenient showroom.
We’d all see more clearly what businesses are exporting from Eugene every day, as if a light switch came on — which we could buy without leaving downtown.
Don Kahle (email@example.com) writes a weekly column for The Register-Guard and blogs.