Tax revenues and expenses drive local economies. Local tax bases must be regularly assessed, especially in growing cities like Rapid City. But recent data found some underwhelming tradeoffs for large-scale retail developments.
The Legal and Finance committee of the Rapid City council received the report from Urban3, a North Carolina-based tax system analysis firm.
Heather Worthington, the group’s COO, said in her presentation that revenues from big box stores and shopping malls may disappoint.
“Another really interesting part of your model was this mall, which sits on 61 acres," Worthington said. "The mall itself, the buildings, take up about 19 acres. The overall value of this parcel is $.2 million per acre. So, significantly less than any of your other commercial uses and with the mall about the same as your Walmarts.”
For example, Rapid City’s Walmart locations bring in $.6 million per acre yearly. Compare that to a single prominent downtown Rapid City business.
“When we compare that big box with, again, Prairies Edge [sic] and your really productive downtown model, here you’re seeing again higher property tax per acre, the Prairies Edge [sic] has higher sales tax per acre, but the big box is sitting on a much larger parcel of land," Worthington said. "It’s kind of interesting when you think about how productive that Main Street use is compared to your big box.”
Worthington adds that’s also reflected in valuations, especially in the downtown district.
“Most of these are buildings that have been in Rapid City for over 75 years. Some of them closer to the time period you were founded," Worthington said. "These are very valuable buildings for you. The Haines Building at $7.2 million per acre. The Rushmore [Hotel] – a little newer project – at $7.6. I’m guessing that’s from the 1970s. If you look at this peak parcel, and that’s again the Hotel Alex Johnson, you can see that’s a whopping $35.4 million per acre.”
Urban3 data orders land use values with big box stores at the bottom, then local malls and strip malls, then the Main Street and Downtown commercial district, with downtown high rises like the Alex Johnson and Block 5 projects at the top. City leadership will use this report to inform their development decisions looking to the future.
