Thursday, November 22, 2001

Saks to get $6.6M subsidy

By Gregory Korte
The Cincinnati Enquirer

        Cost of new designer furnishings for Saks Fifth Avenue: $6.6 million.

        Preventing a mass exodus of retail from downtown Cincinnati: priceless.

        That was the reasoning behind Cincinnati City Council's 5-3 vote Wednesday to subsidize the upscale department store, keeping it downtown for at least another five years.

[photo] Councilwoman Alicia Reece (left) questions City Manager John Shirey before Wednesday's vote to give $6.6 million to retailer Saks Fifth Avenue.
(Steven M. Herppich photo)
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        Supporters of the plan said the vote was essential to keep Saks — and with it, the rest of downtown's fragile retail base. The lease for Lazarus is directly tied to Saks' presence next door, and stores like Closson's also have let it be known that their position downtown would be tenuous if Saks pulled out.

        Wednesday's vote came one year to the day after Nordstrom's board of directors decided not to pursue a downtown Cincinnati store despite $49 million in incentives offered by the city.

        This time, it was Saks asking for a new deal that would extend its lease at Fifth and Race streets for another 15 years. To do that, Saks said, it would need $6.6 million to give the 17-year-old store a face lift and bring it up to par with the chain's 61 other stores.

        In exchange, Saks will agree not to open another store within 30 miles for at least seven years. Otherwise, Saks said it would look for a new home in the suburbs.

        The deal brought to City Council Wednesday was about a year in the making, and the council faction that supported it crossed political lines, including three Democrats, a Republican and a Charterite.

        It was clear that Mayor Charlie Luken, who championed the proposal, was in a hurry to get the deal passed while he still had the votes.

        Eager to get on a plane to New York for the holiday weekend, Mr. Luken called for a vote at least three times. But council members questioned the city manager and debated the deal for 30 minutes.

        Councilwoman Alicia Reece, for example, questioned the five-year opt-out provision, which gives Saks the right to pull out after five years by repaying less than $4 million back to the city.

        Ms. Reece said her vote was not a vote against Saks, but against the deal that Saks and the city manager brought to City Council.

        “I met with the Saks people and was somewhat disappointed in their unwillingness to give us at least a 10-year commitment,” she said.

        Ms. Reece joined with John Cranley and Pat DeWine in voting no.

        But the majority of City Council said the payment was justified as part of a bigger downtown strategy.

        The $6.6 million comes not from the general fund, but from a development fund paid by other developers in lieu of property taxes, they said.

        “Over the last couple of years, we are constantly reminded of the progress that cities like Indianapolis and Columbus have made,” Mr. Luken said. The subsidies Cincinnati has offered downtown businesses are “not even in the same ballpark” as those offered in other cities, he said.

        “To me, the issue is not just what we're giving to Saks, but what Saks is giving to the city,” said Councilman Chris Monzel.

        He said Saks pays back $178,000 in property taxes and $67,000 in payroll taxes a year, plus $1.5 million in sales tax for the county.

        “Let's talk about what happens if Saks goes away,” said Councilwoman Minette Cooper. “We'll lose some other pieces around there, and then we'll be begging for a Saks or a Nordstrom's to come back and fill that hole.”

- Saks to get $6.6M subsidy
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