closing of Charly’s prompts questions about economic development incentives
Since the creation of the Phoenix Park neighborhood began nearly a decade ago, the Camelot of downtown development has been a grocery store: a mythical, mystic locale spoken of in hushed tones by starry-eyed dreamers.
In June, the dream became a reality with the opening of Charly’s Market, which featured groceries and spirits, as well as a deli and ice cream, at 225 E. Madison St.
But, like the fabled Camelot, Charly’s lasted for only a brief, shining moment: The grocery store abruptly closed in early January, leaving an empty storefront, an unfilled market niche, and plenty of criticism about the public money used to incentivize the ill-fated private business.
“We went into it with our eyes open. We knew neighborhood grocery stores have had a hard time making it in the past." – Mike Schatz, city economic development director, on the closing of Charly’s Market
Specifically, the Eau Claire Redevelopment Authority, the city entity tasked with revitalizing the city’s urban core, had offered developer Geoff Moeding a $200,000 incentive to bring a grocery store downtown. To many members of the public, including numerous commenters on Volume One’s Facebook page, the failure of Charly’s Market amounts to a waste of taxpayer dollars and an example of why public money shouldn’t be given to private businesses.
The truth, however, isn’t that simple, say those involved in downtown development.
Trying to bring a grocery store downtown was a gamble, but a necessary one, said Mike Schatz, the city’s economic development director and executive director of the RDA.
“We are disappointed,” Schatz said of the loss of Charly’s. “We went into it with our eyes open. We knew neighborhood grocery stores have had a hard time making it in the past. .... But we also felt strongly that if you’re going to create an urban neighborhood with a lot of residential (units), you need a grocery store component.”
Charly’s Market, which was owned by Carolyn Miller, faced problems from the beginning. In July 2011, the RDA announced the store would open in October 2011. However, the launch was delayed nine months until last June. Once it opened, the store struggled to try to meet the needs of both the residents of the adjacent new apartments and people living in the less affluent neighborhood north of Madison Street. The store also was burdened by the lackluster economy and wasn’t as well-funded as its owners wanted, Schatz said.
“Business just wasn’t here,” Miller told the Leader-Telegram the weekend the store closed. (She couldn’t be reached for comment for this story.) “There just wasn’t the volume.”
And, Miller noted to the newspaper, the store couldn’t match the prices of its larger competitors.
“They’re taking a loss to get people in the door,” Miller said of other supermarkets. “We can’t afford that.”
Eau Claire developer Geoff Moeding said building a grocery store was part of the downtown development conversation since he began working on plans for the neighborhood in 2005.
When Moeding struck an agreement with the RDA to begin developing in the neighborhood, he was required to meet certain criteria, most notably building $9.7 million worth of taxable property – and in exchange the RDA offered several trade-offs, including the $200,000 incentive.
Moeding notes that the four properties he’s been involved in building are now assessed at $12 million – more than originally required – netting him a property tax bill last year of $267,000.
“That’s what the public doesn’t understand,” Moeding explained, adding that the neighborhood previously generated very little property tax revenue. (Currently, the new tax revenue goes toward the costs of infrastructure improvements as part of a Tax Incremental Financing district; once those costs are paid off – the TIF could exist until 2028 – the taxes will go directly to the city, county and school district.)
Furthermore, not all of the $200,000 incentive was used. The first $50,000 was given to Moeding after the RDA received an acceptable business plan for a grocery store, Schatz said, and another $100,000 came after the store was open 30 days. A final $50,000 would have been available if the business had stayed open for three years, so it was never spent, he added.
Of the $150,000 Moeding’s company received, about $50,000 was passed on to Charly’s Market for its operations, Moeding said. The other $100,000, he said, went toward turning the 4,200-square-foot space into a grocery store by installing freezers and other equipment. This infrastructure could make Charly’s old location attractive to another grocer, as could the fact that there is vacant 3,000-square-foot space next door that a grocer could expand into if needed, Schatz noted.
As for the claim that such incentives are a waste of taxpayer dollars, it’s worth noting that the RDA’s funding comes from both taxpayers and other sources, notably the sale of property. In addition, Schatz pointed out that incentives have been used successfully in the past in Eau Claire, helping to lure Hutchinson Technology Inc. to the city in the 1990s.
“There’s never going to be 100 percent consensus on should you try it or should you not try it,” he said of offering incentives to private developers. “I think it was worth the risk to try it. Hopefully the end result will be if we get another operator in they will be stronger.”
But until another entrepreneur takes a risk, a downtown grocery will return to the realm of myth.
As Miller told the Leader-Telegram, “I think it’s more of a nostalgic idea than a reality for Eau Claire.”