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Why Does the Richards Group Need a $1.8 Million Tax Break to Build a New Headquarters in Uptown?


View Larger Map of where the Richards Group wants to build.

I once wrote in D CEO that Stan Richards seems like someone I’d want to work for (if I didn’t already have this nice gig.) His advertising agency, the Richards Group, is the sort of home-grown firm that’s done Dallas proud by establishing a national reputation in its industry. The city should be rooting for companies like that.

But when I read today that the Richards Group is looking for a 10-year, 50-percent real property tax abatement in order to build a new $45 million corporate headquarters on a patch of land next to the West Village, along Central Expressway at Blackburn Street, I was confused. I don’t begrudge Richards trying to make the best possible deal that it can for its own business interests. They are far from unique in doing so. It’s just that the spot they want to build on, in a thriving area of Uptown, along one of the city’s major highways with great access to downtown and to North Dallas, would seem to be about as prime a parcel of land as there is.

Why must the city sacrifice almost $1.8 million in revenue as an incentive? Wouldn’t Richards, or any number of other companies, be lucky to set up shop there? So I called assistant city manager Ryan Evans to ask.

Evans didn’t personally negotiate this deal, but he says that we’ve got to remember that Dallas is always competing with the suburbs when it comes to deals like this one, and that the cost of land in the city itself is often significantly higher, making prime locations like these both an asset and an obstacle to recruiting companies.

Worse yet, there’s information asymmetry in negotiations for projects like these, an asymmetry that’s disadvantageous to the city. Dallas won’t know who it’s competing against, or what other offers are on the table. Sometimes they won’t even know what company is involved (because they’re dealing only with a broker) or where the land is located (Evans didn’t know whether that was the case in the Richards Group negotiations). The risk of losing a big company and all the economic activity such an organization fosters — he mentioned high-profile losses of years past, like TXU and Perot Systems — looms over all talks like these.

So it’s like playing a hand of poker. The city doesn’t know for sure that the Richards Group won’t make this move without the tax break. It might even have what it considers a fairly strong hand to play — better location, access to talent and transportation, amenities, etc. — but it can’t help but factor in the other players that it’s got to believe are also sitting at the table.

“All these are calculated risks,” Evans says. “Consider what potentially you are gaining, what potentially you are losing, and decide how much to ante up.”

The Council’s being asked to ante up that $1.8 million in exchange for the promise of an expected net fiscal impact of $4.3 million, and the Richards Group will be obligated to add 50 more employees to its existing 600 within two years in exchange. The city staff thinks that’s a gamble worth taking.

The Council is set to vote on it June 26.

12 comments on “Why Does the Richards Group Need a $1.8 Million Tax Break to Build a New Headquarters in Uptown?

  1. Look into the famous Richards Group morning clock-punching policy before you say you want to work there. (Full disclosure: my wife worked there years ago, and the Richards Group did a big brand study for D Magazine awhile back.) I just wish we could have continued to use that driving range until construction actually begins.

  2. @timmy It’s not that bad. I hit 8:29:46 today. 13 seconds to spare. And I love the fact that you are a walking disclaimer.

  3. The Richards Group wants the 50 percent tax abatement because Hillwood got it for Victory-less Park.
    If this vote was put before the Dallas voters do you really believe they would get the tax abatement?
    If the city council votes no for the tax abatement do you really believe the Richards Group will build a building in Irving, Richardson,Garland, Seagoville, or Lancaster?
    If the city coincil votes in favor of this tax abatement I see it as a property tax increase for my residence for the next ten years.
    How about giving the Richards Group a 25 % tax abatement in years 10 thru 20 after the building is built and another 25% tax abatement in years 20 thru 30 after the building is built?

  4. I have never worked for nor met Stan but I have a hard time believing he would have placed Plano on his letterhead. However, I would think $1.8 million is chump change on an insurance policy to keep an energetic, pro-Dallas company safely within the city limits for the long term.

  5. Anyone who thinks The Richards Group would move out of Dallas is insane. If that “threat” was part of the negotiations, then the city needs better negotiators. Advertising agencies need creatives, and creatives don’t want to live in Frisco… at least not the young ones.

    Of course, Dallas also fell for Hunt’s “I’ve already broken ground in Irving” threats, so I’m not surprised at this.

  6. The property tax break will come back to them in increased sales tax revenue per the West Village retail, bar and food of employees.

  7. The property tax break will come back to them in increased sales tax revenue per the West Village retail, bar and food. Does anyone know what the number may be?

  8. Well, the city’s estimate is that the development will have a net fiscal impact of $4.3 million for them over that 10 years of having granted the $1.8 million tax break. I really have no reason to doubt either of those figures.

    But what I’m calling into question is whether the $1.8 million break is truly the ONLY way the city is going to get that land — which has about as prime a location as there is — developed so well.