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DENVER-The Front Range Economic Strategy Center, in a 29-page report, finds three of the largest retail developments in the city receiving tax increment finance subsidies are largely populated by national tenants. These developments are the Denver Pavilions in Downtown, Quebec Square at Stapleton, and the Broadway Marketplace at Interstate 25 and Broadway.

However, the multiplier effect of local tenants is much greater than national tenants, according to the report by University of Colorado political science professor Tony Robinson and Chris Nevitt, executive director of FRESC. Both hold PhDs.

“The mechanism behind the ‘hometown advantage’ is intuitively straightforward,” according to the authors. “A Denver-based local business, for example, is likely to keep its payroll and banking in Denver, to patronize local vendors for supplies and services, and to spend its profits in the Denver metro area. A national chain store, by contrast, will remit profits back to its headquarters city and is more likely to depend on a national supply, distribution, and services system determined by corporate headquarters. Even locally owned franchises of national chains are likely to be substantially less integrated into the local economy, and have a lower local economic profile, than a business that is independently owned and operated in Denver.”

While quantifying the “hometown advantage” is difficult, studies outside of Denver back up their premise, according to the report. The report says in Santa Fe, NM found that the multiplier effect for locally owned business is at least twice that of nationally owned chains. And a study in mid-coast Maine found every $100 spent a big -box stores generated $14 in additional local economic activity, while $100 spent at a locally owned store generated $45 in local activity. A study in Austin found national chain stores generated a 13% multiplier of additional local spending, while local businesses generated a 45% multiplier.

Tracy Huggins, executive director of the Denver Urban Renewal Authority, says she doesn’t disagree that when possible, it is great to have local tenants. But she says she is frustrated by the study in some respects.

For example, the Denver Pavilions is a regional entertainment and restaurant center, so of course it will favor national tenants. She notes that some projects, such as Mercantile Square, with the Tattered Cover bookstore and Dixon’s restaurants, is 100% local.

Nevitt, for his part, says he realizes the city needs to have national tenants in some developments. He says it would be unreasonable and unrealistic to expect projects with help from DURA would only have local tenants. But, just as the city encourages construction companies to hire women- and minority subcontractors, it could also encourage local tenants. He also called upon DURA to release the number of local businesses in all of the projects it subsidized with TIFs.

One thing Nevitt and Huggins agreed upon, was this report was much less confrontational than the first one, released in January. Nevitt tells GlobeSt.com he hopes FRESC and DURA can forge a better relationship. Ultimately, the taxpayers will be the winner, he says.

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