New jobs and taxes possible, but will national cosmetics firm choose Fresno?

The Fresno City Council has authorized an economic package of up to $18 million in tax rebates and other incentives to entice Ulta Inc., a major retailer of cosmetics and fragrances, to build an e-commerce and distribution center in the city and hire hundreds of new employees.

Fresno has been identified by the company as its preferred site from among three locations under consideration in the western U.S., said Larry Westerlund, the city’s economic development director. The site under consideration is a 38-acre parcel at the northwest corner of Central and East avenues, in an industrial area at the south end of Fresno.

The 30-year incentive package represents the city’s ante to sweeten the pot for Ulta because of the prospect of even greater gains in taxes that the company will pay on the value of the improved property and sales of goods through the center, as well as the hiring of more than 600 full-time employees to work at the site when its operations are ramped up.

A staff report by Westerlund to the City Council said the company is planning to build a $110 million, 670,000-square-foot distribution center that could employ as many as 1,200 workers to fulfill internet sales orders throughout the West.

The company said it’s uncertain when it will make a decision or when its distribution center would become operational. “We are in the process of completing the final phase of our search for a new distribution center location,” Ulta said in a written statement following the vote. “Fresno is a top contender among the locations under consideration. Negotiations continue, but we hope to confirm a location in the coming weeks.”

City Council members said they’re eager for Fresno to reap the benefits if Ulta chooses to build here. “This is the future of Fresno,” Councilman Lee Brand said. He added that the maximum $18 million tax rebates would come from new taxes that the company would pay, and not from the city’s current treasury. “These are net new tax dollars, and net new jobs,” he said.

Mayor Ashley Swearengin thanked the City Council for approving the incentives at its meeting Thursday. “This important project will create a minimum of 640 full-time, permanent jobs for our residents, with the potential to expand to over 1,200 jobs,” she said.

The project may also benefit from about $8 million in state tax credits from the Governor’s Office of Business and Economic Development. Swearengin said the governor’s California Competes committee approved those tax credits at a meeting Thursday in Sacramento. “We’re grateful for the support from California Competes helping our city attract this badly needed job generator to Fresno,” she said.

An economic analysis of the project commissioned by the city estimated that at 500 employees – the minimum number of jobs for the company to qualify for the incentives – the net tax revenues paid to the city by Ulta would amount to about $26 million, even after allowing for the rebates.

The agreement calls for the city to be able to “claw back” rebates from the company if jobs are not maintained for at least three years.

Councilman Oliver Baines asked Ulta’s supply chain vice president, Elliott Rodgers, how many jobs at the center would be filled by local residents rather than transfers from other Ulta locations.

Rodgers was noncommittal on a precise percentage. “For an operation of this size and complexity, there is some internal expertise that gets operation up and running,” he said, “but in my experience, the vast majority of the jobs come from the local area.”

He added that Ulta’s business sees several seasonal peaks throughout the year, including the winter holidays, Mother’s Day and Valentine’s Day – times when additional seasonal or part-time workers are hired.

Ulta Salon, Cosmetics and Fragrance Inc. is the largest beauty retailer in the nation with more than 900 stores in 48 states. The company’s stock is publicly traded on Nasdaq under the stock symbol ULTA. Its net sales through the first six months of 2016 were more than $2.1 billion, a 22.8 percent increase from 2015’s first half. Ulta operates distribution centers in Illinois, Arizona, Pennsylvania, Indiana and Texas. Its net profit for the first half of 2016 was $181.9 million, compared to $141.1 million in the first half of 2015.

Ulta Inc. is the division of the company that deals with e-commerce and distribution centers.

This story was originally published November 17, 2016 at 7:13 PM with the headline "New jobs and taxes possible, but will national cosmetics firm choose Fresno?."