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Big Box Stores Drain City Revenue, Study Finds

| Written by Stacy Mitchell | No Comments | Updated on Feb 1, 2003 The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/big-box-stores-drain-city-revenue-study-finds/

Big box retail, shopping centers, and fast-food restaurants cost taxpayers more than they produce in revenue, according to a fiscal impact analysis in Barnstable, Massachusetts.

The study, conducted by Tischler & Associates, compares the tax revenue generated by different kinds of residential and commercial development with the actual cost of providing public services for each land use. Barnstable is a community of 48,000 people on Cape Cod.

The study found that big box retail generates a net annual deficit of $468 per 1,000 square feet. Shopping centers likewise produce an annual drain of $314 per 1,000 square feet. By far the most costly type of development, according to the study, are fast-food restaurants, which have a net annual cost of $5,168 per 1,000 square feet.

In contrast, specialty retail, a category that includes small-scale Main Street businesses, has a positive impact on pubic revenue (i.e., it generates more tax revenue than it costs to service). Specialty retail produces a net annual return of $326 per 1,000 square feet. Other commercial land uses that are revenue winners include business parks, offices, and hotels.

“This study shatters the common misperception that any sort of growth creates revenue,” says Christopher Cullinan of Tischler & Associates, a fiscal, economic, and planning consulting firm. “Communities often talk about development in terms of the new revenue it will bring, but they rarely give serious considerations to the on-going costs of servicing that development.”

The two main factors behind the higher costs for big box stores, shopping centers, and fast-food outlets, compared to specialty retail shops, are higher road maintenance costs (due to a much greater number of car trips per 1,000 square feet) and greater demand for public safety services.

  • Download the study, “Fiscal Impact Analysis of Residential and Nonresidential Land Use Prototypes,” from our Economic Impact Studies page

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About Stacy Mitchell

Stacy Mitchell is a senior researcher with the Institute for Local Self-Reliance, where she directs initiatives on independent business and community banking. She is the author of Big-Box Swindle and also produces a popular monthly newsletter, the Hometown Advantage Bulletin.  Connect with her on twitter and catch her recent TEDx Talk: Why We Can’t Shop Our Way to a Better Economy. More

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