MOBILE, Ala. (WALA) – County and city leaders appear poised to spend $2.5 million in taxpayer money to lure a Topgolf outlet to the Port City, but other cities have gotten the entertainment venue without spending a dime.
The use of government-backed incentives to boost economic development has become increasingly common – and controversial.
The usual justification for spending tax money on private development is that it is a necessary cost of jolting economic development. Timothy Bartik, an economist at the Michigan-based WE Upjohn Institute for Employment Research, said state and local governments nationwide spend about $50 billion a year on economic incentives.
“It’s not a trivial amount of money,” he said.
And the public benefit is far from clear, Bartik told FOX10 News.
“That’s the question that needs to be asked: Will this really bring in new additional jobs?” he said.
Topgolf, a rapidly growing enterprise acquired last year by Callaway Golf for $2.66 billion, generated $1.2 billion in revenue in fiscal year 2021. It features a multi-story building where players rent covered, climate-controlled driving bays and aim for targets in the outfield. . A project agreement indicates that the $22 million facility in Mobile will have 60 driving bays, along with an outdoor patio area and a golf course. It will also have a restaurant and bar.
Realtylink, which plans to tear down the former Hollywood Stadium 18 movie theater in McGowin Park off of Interstate 65 to make way for Topgolf, has asked the city and county governments to split the $2.5 million cost. The Mobile County Commission is set to vote on Monday, and it is on the Mobile City Council agenda for Tuesday.
County Commissioner Connie Hudson described the taxpayer support as typical in Topgolf deals.
“My understanding is yes,” she said after a commission work session Thursday. “And it’s probably relative, you know, with the size of the community it’s going to, how much is involved in the incentive package.”
Some cities got Topgolf with no incentives
Not every city has offered incentives, though. Kansas City, Oklahoma City and Charlotte all have Topgolf outlets despite not contributing any incentives. Closter to home, neither Huntsville nor Madison County gave any direct incentives to a Topgolf that opened in December 2017.
Huntsville city spokeswoman Kelly Schrimsher told FOX10 News that the only expense to the city was road improvements that were part of a massive redevelopment of an abandoned mall where Topgolf is located. The project, MidCity District, covers 140 acres of retail, office and residential space.
“We did not recruit Topgolf,” she said. “The developer recruited Topgolf..”
Schimsher said the city did go after Whole Foods and Trader Joe’s because they tend to pull other businesses with them.
“Our dollars are typically restricted to infrastructure,” she said.
Birmingham did offer incentives – up to $1.5 million – but never paid the money when Topgolf failed to come close to a commitment that 30 percent of the construction funds go to minority- and women-owned businesses. There is no similar provision in the Mobile project agreement.
Incentives offered by other cities cover a wide range. On the low end, Augusta, Georgia, agreed in 2019 to spend $250,000 to extend a sewer line to the property. Others are comparable to the Mobile incentives package. In 2018, the city of Albuquerque, New Mexico, agreed to spend $2.6 million, and Bernalillo County chipped in another $1.75 million. El Paso, Texas, agreed to $5.2 million in 2016.
Other cities have contributed a much larger chunk of money. Thornton, Colorado, offered up to $7.5 million over 10 years. And Wichita, Kansas, agreed last year to use $10.2 million in future sales tax revenue to pay off bonds issued to help pay the $25.8 million construction cost.
But Bartik said research suggests 75 percent of incentives produce no new net jobs.
“Either the company would have located there anyway, or if that company hadn’t been located there, some other similar company would have chosen that site,” he said.
$25,000 per job?
Bartik said governments need to consider the quality of the jobs that incentives create. Topgolf has not revealed salary and wage projections for the Mobile site, but he noted that entertainment venues tend to produce lower-wage service jobs. He said if the 150 full- and part-time positions amount to the equivalent of 100 full-time jobs, the cost to taxpayers would be $25,000 for each new job.
What’s more, Bartik said, it is not clear how much of an economic and jobs impact Topgolf will actually have. He said it may marginally boost tourism, but he added most of the customers will likely be local residents, which means people will go to Topgolf instead of other area businesses. The same is true for the jobs, he says. An employee there likely would have been working somewhere else.
“The net increase in jobs in the area might only be 10, or five, or maybe it’s zero,” he said. “I mean, maybe all these jobs, all we’re doing is redistributing jobs from other restaurants in the Mobile area to the restaurant at this facility.”
Another factor to consider, Bartik said, is that subsidizing one business could harm already-established competitors. He offered a hypothetical example of taxpayer support to incentivize a McDonald’s.
“Let’s say, in fact, the subsidy did cause the McDonald’s to expand or to locate there,” he said. “Well, the Burger King down the street might get driven out of business. So what have you accomplished?”
But Commissioner Randall Dueitt said it is about more than jobs.
“What it means to Mobile to me, is again, the quality of life and also the growth of Mobile,” he said. “You know, I don’t want to be just the town where people go to get work. You know, I want people to live and thrive in our community.”
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