Riding retail growth
Greater Des Moines still waiting for retail recovery; cities see commercial’s share of property valuation shrinking
Friday, May 30, 2014 6:00 AM
This week, the Business Record focuses on measuring how well retail sales have recovered from the Great Recession. To do so, we used Iowa Department of Revenue statistics on taxable retail sales revenue for each city in the metro area and for the Greater Des Moines area as a whole. We also looked at Department of Management statistics, comparing how much commercial property valuation has grown in value over the six tax years since 2007, compared with cities’ total taxable valuation. Lastly, we used an analysis of per capita retail sales compiled by Liesl Eathington, a researcher with the Iowa State University department of economics.
Let’s face it. Greater Des Moines does a fine job of selling itself as a darn nice place to live, work and play, but the business of selling stuff has been another matter during the economic recovery.
Retail sales revenues in the metro area have become a smaller percentage of overall sales revenues in the five years since the Great Recession, shrinking from 40 percent of overall taxable sales revenues to a tad over 38 percent, according to Iowa Department of Revenue data.
Across the nation, retail sales took a major hit during the recession and have been slow to recover.
Still, given all of the accolades thrown our way in recent years, not to mention the development buzz coming from many Greater Des Moines cities, we wondered whether we’re above the national norm, especially in terms of per capita spending.
We noted that retailers large and small have opened shop here recently. Dick’s Sporting Goods has arrived in West Des Moines and a Nordstrom Rack is under construction. Whole Foods Market and Trader Joe’s opened, sending the message that Greater Des Moines has a special pizazz.
The Business Record set out to find out which metro cities were performing above grade in the sales category and why. And although we looked at taxable sales revenues as one measurement, it is important to remember that cities don’t receive a nickel of the sales tax revenue generated within their boundaries. All of that money, with the exception of some development incentive programs that direct sales tax rebates to developers, goes to the state. Having a busy, in-demand retailer within its city limits may benefit a city’s residents and may have some spillover economic benefits, but cities benefit from an increase in commercial property valuation that they can tax. And while commercial property values have gone up over the past six years, they haven’t kept pace with the valuations of other types of property, so commercial property represents a smaller share of cities’ taxable property.
Losing out on sales tax revenues can strike a nerve with some city officials, many of whom hoped the Iowa Legislature would approve a local option sales tax for cities in Polk County. That effort failed.
Jeff Fiegenschuh, city administrator of Windsor Heights, where retail sales revenues exceed what typically would be generated by the city’s population, said shoppers use city services that they don’t pay for. He’s not being greedy; he just would like a little more revenue to help pay for services in the landlocked city of 4,877 residents.
Windsor Heights is what economists consider an anomaly because the retail sales tax dollars collected there grew more than 100 percent since 2007.
Then there are cities like West Des Moines, Clive and Ankeny, retail powerhouses all, with about 50 percent of their total taxable sales revenue coming from traditional retail sources.
Some smaller cities are growing their retail revenues; Bondurant, Carlisle and Grimes each saw retail grow as a percentage of their total sales revenues from 2007 to 2013.
Only four cities saw retail sales grow on a per capita basis from 2007 to 2013: Windsor Heights, Norwalk, Altoona and Pleasant Hill.
Over the next few issues, the Business Record will focus on five cities where the data stand out like a blue light special. This week, the spotlight is on Altoona and Grimes. In coming issues, we take a look at Pleasant Hill, Norwalk and Windsor Heights.
Over the past two decades, Altoona has transformed from a retail desert to a regional retail oasis, largely because of the pull of a trio of attractions – Adventureland, Prairie Meadows Racetrack and Casino and Bass Pro Shops. Next year, a new phase of growth begins with a development city officials expect will be Altoona’s crown jewel of retail – The Shoppes at Prairie Crossing.
On the opposite side of the metro area, the large percentage increase in the amount of commercial activity in Grimes stems from development of the Highway 141 corridor, growing population numbers and new businesses opening in the city. Officials expect continued population and commercial growth moving forward.
Norwalk’s overall commercial sales revenues are much smaller than those of many Greater Des Moines cities, but the city is a testament to steady growth on nearly every front. Population growth is prompting developers to show more interest in Norwalk, increasing its retail tax base and commercial valuation.
And what about that anomaly in Windsor Heights? A Wal-Mart Supercenter - the busiest in the metro and second in sales among the state’s Wal-Marts - skews the city’s retail revenues. City Administrator Fiegenschuh said the Wal-Mart, nearby Sam’s Club and a Hy-Vee Inc. grocery store on University Avenue attract shoppers from all over Greater Des Moines. The city is hoping to see redevelopment occur on University Avenue and new development at its northern gateway at 63rd Street and Hickman Road.
Commercial real estate brokers, rarely a dour group, say there is a fair amount of buzz in the retail business, and developers are showing renewed interest in Greater Des Moines.
And you can’t fault cities for their efforts to attract commercial development. From Waukee to Windsor Heights to Pleasant Hill, cities are designing their development futures, and expanded retail opportunities factor into those plans.
Grimes saw the largest percentage increase in retail sales revenue from 2007 to 2013 – 347 percent. Even so, commercial sales haven’t matched its rapid population growth. In 2007, the city’s retail sales revenue was $23,592 per capita. In 2013, it had dropped to $19,411.
A Shopping Bin of Data
Altoona has the metro area’s highest taxable sales revenue per capita at $29,068. West Des Moines has the second largest, with $27,262 per capita sales revenue. However Altoona’s per capita revenue grew by 2.6 percent from 2007 to 2013, while West Des Moines’ dropped by almost 4 percent.
Metrowide sales revenues grew by just under 8 percent from 2007 to 2013, or an average of 1.2 percent a year.
Des Moines lagged significantly behind the metro average, dropping about 12 percent since 2007, or an average of about 2 percent a year.
Other cities in which retail sales dropped from 2007 to 2013 are Johnston, 6.6 percent; Urbandale, 1.3 percent; and Polk City, 1.2 percent.
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