Big boxes can be a big headache

Another week, another big box.

Last week, a Wal-Mart Supercenter opened in Falcon. Today, a SuperTarget opens in northern Colorado Springs at Powers and Union boulevards.

Although some Falcon residents cheered the longawaited Wal-Mart, it was hardly cause for celebration among Springs budget officials.

They’re wrestling with a $9.3 million budget shortfall for this year because of stagnant sales tax revenues. That’s blamed at least partly on the proliferation of big-box stores such as the Falcon Wal-Mart outside city limits and thus no help to Springs coffers.

Colorado Springs funds most of its services through sales tax collections. A big-box store can produce about $1 million in sales tax revenues a year, so new megastores within the city — such as the SuperTarget or a Costco coming to the east side of town — are welcome news to the city Finance Department.

But a new store doesn’t necessarily mean a boost to city coffers. It does if it draws new shoppers from outside the city or keeps locals from going to Denver or elsewhere to spend their money. But some new stores might simply draw business from other shops in town — in essence reshuffling sales tax collections.

That latter possibility concerns city officials, said Fred Crowley, senior economist

with the Southern Colorado Economic Forum. “They refer to it as cannibalization,” he said.

It depends on the store and whether the market for that business is underserved, said Fred Veitch, vice president of commercial development for Nor’wood Development Group. Nor’wood has been key in developing Powers Boulevard and sold the land to Costco for its Powers store opening late this year.

“I don’t think there’s any question Costco is going to draw hugely on a large regional basis,” Veitch said. “People today leave Colorado Springs to drive to Denver to go to Costco.”

The city is expecting Costco to generate increased revenue for the city, said Elena Nuñez, economic development director for Colorado Springs.

“For a number of the other big boxes opening up, we do anticipate that will just be more money circulating in the local economy,” she said. “It would be siphoning from one area to another.”

Even if a new big-box store doesn’t directly boost the city’s bottom line, there are benefits, Nuñez said.

“It’s an economic activity generator,” she said. “Other restaurants and stuff will pop up there, too. And the jobs, we want the opportunities for jobs in the community.”

And it’s certainly better for the city than if that big box decides to locate elsewhere, Crowley said.

“The real issue,” he said, “is what happens if the city doesn’t invite them in here, and they decide to open up in Monument. Then they lose all the activity.”

Just as someone saving for retirement benefits from a balanced portfolio of investments, a diverse portfolio of retailers is key to the city’s sales tax base, Crowley said.

In attracting stores, “I would like to see unique retail that we don’t already have right now,” Nuñez said, “something like a Trader Joe’s, just to add a little more variety for our shoppers here.”

Along Powers, Nor’wood officials watch closely to make sure the market isn’t becoming stretched too thin among competing retailers, Veitch said.

“We think that dining is close to the saturation point along the corridor currently,” he said. “That’s not to say that in the future there won’t be additional demand. I think we try to watch it closely because it’s in our best interest as well as our retailers to stay on top of that.”

POWERS DRAWS BIG BOXES

Powers Boulevard in eastern Colorado Springs continues to be a magnet for big-box stores:

- A nearly 174,000-square-foot SuperTarget, the city’s second, opens today in Briargate Crossing at Powers and Union boulevards. A grand opening celebration begins Sunday. Another SuperTarget is also on Powers, part of First & Main Town Center several miles to the south.

- A free-standing, 103,000-square-foot J.C. Penney store is set to open in early October near Powers and North Carefree Circle, part of First & Main Town Center. J.C. Penney also has stores at The Citadel and Chapel Hills malls.

- An early December opening is planned for the city’s first Costco, said Fred Veitch, vice president of commercial development for Nor’wood Development Group. The nearly 160,000-square-foot discount warehouse will be at the southeast corner of Powers and Barnes Road. An April 2009 opening is envisioned for a second Costco, which will be an anchor for the University Village shopping center planned for North Nevada Avenue, local developer Kevin Kratt said.