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Shopko to return to Estherville

By Staff | Feb 3, 2016

The item on the Estherville City Council meeting seemed routine: The Council will consider a resolution setting a date for a public hearing on an amendment to the urban renewal plan. A public hearing is set for Mar. 7 at 5 p.m. in the city council chambers.

Economic development director Lyle Hevern stepped up to the podium and said, “”Shopko now says they will open a new store in Estherville this year.”

Hevern, Estherville Chamber of Commerce director Lexie Hash, Kiley Miller of Iowa Lakes Corridor of Opportunity, along with city administrator Penny Clayton and leaders at Bomgaars worked together to make it possible, Hevern said.

Through research, “we were unable to find a chain other than Shopko that was opening new stores,” Hevern said. The EIDC had reached out to Shopko numerous times, to be met with rejection each time. Meanwhile Emmetsburg and Cherokee were opening new stores. The difference was money. Emmetsburg and Cherokee offered financial incentives for Shopko to locate new Hometown stores in their cities.

Hevern laid out six points to justify the expenditure of taxpayer funds to bring in a new general merchandise store:

The absence of a general merchandise store has resulted in a loss of $40,000 in local option sales tax this year to the City.

Clayton said, “We don’t receive data about how much sales tax each business in Estherville pays; that’s confidential business data.” Clayton said these payments declined since fiscal year 2014 to the tune of a $40,000 loss to the city due to decreased sales tax payments from businesses.

Other retailers have reported a loss of sales because people do not come from surrounding areas to shop in Estherville, and city residents shop elsewhere, not only for discount store merchandise, but for other items, too, because Estherville is no longer a shopping destination.

Hevern said 25-30 new jobs will be returned to the city with the opening of Shopko.

The other three points are related. Hevern said “A community of our size should have quick access to general household needs.”

The loss of retail in Estherville has had a negative effect on the quality of life, and some Estherville residents have said it’s a sign of a dying city.

Emmetsburg and Cherokee each offered financial incentive packages in the neighborhood of $570,000, which included the construction of a new building. The Shopko Hometown store in Estherville will go into the old Alco building, leased from Bomgaars. “We are able to offer a cash incentive,” Hevern said.

The cash incentive includes:

Minimum 5 year lease with Bomgaars, the owner of the building.

First 12 months free rent ($73,111 value) with Bomgaars providing half.

Apply the incentive offered to all businesses under the city’s Urban Revitalization program, which provides 100 percent abatement of property tax increase due to improvements made on an existing commercial structure. The abatement lasts three years.

An up-front forgivable loan to assist with opening cost, forgiven at a rate of $20,000 per year.

A cash incentive payment of $400,000 to Shopko, paid in the amount of $80,000 at the end of each year for 5 years.

The total incentive is $536,855.50 paid through tax increment financing.

Shopko will not get this free and clear, Hevern said. The committee who developed the agreement with Shopko included the stipulations that Shopko would put as much effort into store operations at the local store as they do at the new stores in St. James, Minn., Humboldt, Sheldon and other cities. Shopko also will be an active community participant and good corporate citizen. Shopko will also pay property taxes on the store location.

Clayton said, “In my opinion, the benefits, both tangible and intangible, of this proposal outweigh the costs associated with it. We need to keep the retail climate of Estherville strong and as time and circumstances change, so must the solutions.”

“Folks got down after all those stores closed,” Hevern said. “This new Hometown store can enhance our community pride. We took a ‘no’ and turned it into a ‘yes’.”

Hevern also pointed out that local option sales tax revenues fund most of the quality of life projects in Estherville. Lower revenue has meant fewer quality of life projects.

Prior to entering into talks with Shopko that included financial incentives, Hevern and others looked around the Midwest to find a different company to open a general merchandise store in Estherville. “Surprisingly,” Hevern said, “we could not find one.”

They considered contracting with a search firm to help identify a company to open a store, but that involved tens of thousands of dollars up front with no guarantees.

They also explored the possibility of starting a community-owned store as a last resort. But starting from scratch, achieving the financial backing of community member-shareholders, and hiring a seasoned retail professional to guide the process of stocking, staffing, and designing the store would be very expensive and also bring no guarantees.

“It won’t be like before,” Hevern said. The new Shopko Hometown store will be like those located in Humboldt, Sheldon and St. James.

According to Shopko Hometown, Shopko Hometown stores carry a wide range of brands including Shopko private label brands as well as national brands. They offer apparel, home furnishings, toys, electronics, seasonal items, and more. “The Hometown format is a smaller format than a regular Shopko, but what you can’t find in the store, you can get online. The ads can be used between Shopko stores, but please note that some of the items shown in our larger store ads may not be offered at our Hometown stores,” an official at the corporate office said.

There is no specific timetable for the new store’s opening, other than “by the end of 2016,” according to Clayton.