Placentia OKs Tax Breaks to Lure Business

A decision to provide as much as $700,000 in financial assistance to a retail office supply warehouse could result in 30 new jobs and an annual sales tax revenue increase of about $13,000 for the city, officials say.

The City Council, acting as the city’s redevelopment agency, on Tuesday unanimously approved an agreement with Office Depot Inc., which is building a 22,800-square-foot facility on Placentia Avenue.

The agreement, called an owner-participation agreement, calls for the city to rebate to Office Depot a significant percentage of the sales-tax revenue generated by the company.

According to City Administrator Robert D’Amato, the agreement is a win-win situation for the city.

“The owner-participation agreement allows the city to attract both sales-tax revenue and local jobs,” D’Amato said. “It stops sales-tax revenues from leaving the city.”

Office Depot has no competition in the city, D’Amato said. Its primary competition will come from a warehouse store across the street but in the city of Fullerton.

The city will give Office Depot 81.34% of the difference between the sales-tax collected and a pre-determined base sum. The base sum, which escalates annually, represents the sales-tax revenue generated by several small light industrial businesses previously at the site.

The city estimated that sales-tax revenue could reach $84,700 by the third year of the agreement. After subtracting the base revenue of $16,224 and rebating Office Depot’s portion, the city would be left with $29,002 that year, an increase of $12,778.

The agreement has a cap of $700,000 in total rebate payments, or 10 years, whichever comes first.

The Office Depot site is in the city’s redevelopment area. The redevelopment agency has the authority to offer financial assistance to businesses wishing to either improve or expand an existing facility or build a new facility in the redevelopment area. The agreement with Office Depot is the city’s first project involving a new business.

“We have a real small redevelopment agency,” D’Amato said. “Our funding is small, and we aren’t able to bring in major retailers. This project fits in well with our ability to offer redevelopment assistance.”

D’Amato said there has been no opposition to the agreement.

Construction on the facility is expected to be completed by the beginning of next year.