SPEARFISH — To help make informed and targeted decisions regarding local economic development, the Spearfish City Council Monday voted to move forward with a retail leakage study by Buxton Company, a data research analytics firm specializing in consumer analytics.
Retail leakage occurs when local people spend a larger amount of money on goods than local businesses report in sales, usually due to people traveling to a neighboring town to buy goods.
City Administrator Mike Harmon explained that approximately four to six months ago at a Spearfish Economic Development Corporation (SEDC) board meeting, the board made a recommendation that the city consider a retail leakage study to look at how to improve existing business and how to recruit new businesses. That idea resulted in the city reaching out to Buxton to learn what the company provides.
Ben Hicks, director of sales of Buxton, out of Fort Worth, Texas, addressed the council Monday, describing that the benefits of partnering with Buxton include defining a proactive strategy for retail recruitment; supporting the city’s existing retail base; increasing the tax base by attracting sustainable retail; understanding how retailers view the market; and developing economic development strategy.
The proposal describes the “total marketing strategy that enables community leaders to understand the consumer profile of their residents and to identify specific retailers and restaurants who seek a market with household purchasing habits just like yours. This solution provides you with the ability to actively pursue identified retailers, making a compelling case for their expansion to Spearfish …”
Buxton defines Spearfish’s objectives on the proposal as understanding the current retail and restaurant economic condition; recruiting new retailers and restaurants; and retaining existing retailers and restaurants. The company would research the community, define and evaluate its trade area, profile the trade area’s residential customers, match retailers and restaurants to market potential, create marketing packages, and provide business retention tools.
The proposal lists three years of services and Buxton Analytics Platform access and other related software, with an annual fee of $50,000.
“I do think this would be a very useful tool to the council to make decisions when we’re looking at economic development and other companies, more to be proactive rather than reactive when things come to us … I think it’d be a very good tool to use,” Mayor Dana Boke said following the presentation.
Councilwoman Pam Jacobs made a motion to approve, which was seconded by Councilman Larry Klarenbeek. Boke then asked for further discussion.
Councilman Marty Clark voiced that yes, further discussion was warranted for consideration of a multi-year, $50,000 per year study.
“Sometimes I wish we had a study on the studies that we’ve done,” he said, adding that if the study has value, it should be done in partnership with private businesses. He apologized for having missed the committee meeting at which the study was first discussed and said that he would like to see the studies completed for other communities and hear feedback from them.
Harmon said that the city is looking at partnerships; SEDC has expressed interest, he said, as well as other private entities. He highlighted that Buxton has contacts and is an advocate for the city in negotiations with potential new businesses, so the payback could come in the form of more than just sales tax. Harmon said that Buxton would be able to tell the city whether a particular retailer wants to locate in Spearfish as much as Spearfish wants them, so the city may not have to provide as much in incentives “because we now have the data to show that that company wants to be in Spearfish, so there’s a variety of ways this can pay for itself,” he said.
Clark said he would like to table the request and get more information. He added that since SEDC receives funding from the city, he would like to see other partners emerge.
“What about real estate agents, and developers, and banks? If this really has a value to bring additional companies to town, why is that strictly on the city’s purview to do that?” he said, adding, “I just think it’s a lot of money for a report, and I don’t see the value … if there really is a value there, then some private enterprise, private industry should see a value in it as well and therefore help cover the cost.”
Hicks pointed out that the three-year timeline is showing what a typical roadmap looks like for municipalities who participate in studies.
“We are not a recruiting firm. We are an analytics group,” he clarified, describing that the information would allow the council to “lean on data” when making decisions related to retail.
Clark said that he didn’t feel the decision needed to be made that night and said that he would like to see reports from one or two other communities before moving forward.
Councilman Dan Hodgs said that he wanted an accurate approach to making decisions and being proactive versus reactive when addressing growth but voiced concern that the current funding source is identified as the third penny/hospitality tax and added his desire for partnerships to help with the study, as well.
Harmon said that the council could look at different funding sources or combinations from different funds. He added that the city of Mitchell recently completed a similar study and that the city paid for half of the study and relied on the community to come up with the other half, so there are options for the council to consider.
Clark asked for clarification of the motion. The item agenda was “Consideration of a retail leakage study conducted by Buxton Company,” so Clark wanted to know what approval of that meant.
Harmon said that it was up to the crafter of the motion.
Jacobs, who had previously “moved to approve,” said that the motion was to move forward, and if the city could find partnerships, she would like them to move forward with the partnerships.
Boke then asked if Jacobs meant to move forward with the currently proposed $50,000 annually from third penny, looking for partnerships, and Jacobs said yes.
The mayor then called for a vote, and the council voted to move forward 4-1, with Clark voting nay. Councilman Darick Eisenbraun was absent.
Kory Menken, SEDC executive director, clarified Tuesday that SEDC has not made a formal commitment to help fund the proposed study.
“However, we certainly see the value the data could provide to our existing Spearfish business owners, land developers, public officials and our very own organization,” he said. “In the dynamic and ever-changing arenas of business and economic development, knowledge-based and data-driven decision making is vital to success. SEDC is interested in working with our public and private partners on this proposed initiative.”
In 2013, the city council approved an allocation to fund a retail trade study by Retail Coach to determine where consumers who support local businesses in Spearfish currently lived, to understand the anticipated pattern of retail spending for the area and look at the unique characteristics Spearfish established that may affect the calculated spending pattern of area residents.
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