What Would Happen if Kohl's Left Falls?

In 1962, Kohl’s Corp. opened its first retail store in Brookfield. In 48 years, the company has expanded rapidly and is now a major national retailer with 1,067 stores in 49 states.

And for decades, it has been a mark of pride in the village that Kohl’s, a company that reported $17.1 billion in sales in 2009, calls Menomonee Falls home. However, the company’s future presence in the village is far from certain.

Last week, Kohl’s CEO Kevin Mansell said the all its options for a new location – including moving out of state. Recent reports indicate that Milwaukee Mayor Tom Barrett and Muskego may also be lining up to court Kohl’s.

Kohl's a big player in the village

For Menomonee Falls leaders, the stakes are high to keep Kohl’s headquarters right here in the village. Kohl’s is the village’s top property tax contributor, and paid a $1.6 million tax bill in 2010. That’s roughly 8 percent of all property tax revenue in the village. Of that $1.6 million, $1 million was generated solely from the headquarters building.

If Kohl’s were to pack up and leave Menomonee Falls, it would leave behind a sprawling headquarters complex. The village would lose a significant portion of property tax revenue that would be shifted onto others. However, the value of the buildings themselves could remain stable depending on what the future use for the site would be.

“In the end, arguably, the properties would maintain the same sense of value as they would before,” said Mark Eppli, a finance professor and commercial real estate expert at Marquette University. “Whether Kohl’s is there or not shouldn’t dictate the underlying value of the property.”

However, more than 5,000 employees, or daily visitors to Menomonee Falls, would leave with Kohl’s. The income they bring into the village is important for the coffers of local businesses.

“There would be a huge impact if Kohl’s left," said Sal Zizzo, a longtime Menomonee Falls resident and owner of . "They bring a lot of people from outside the area into the village. And those people spend money at the local businesses when they are here.

“My theory is that a person spends half the money that they earn in the area they live in, and the other half in the communities that they work in," he added.

In addition to the money from taxes and employees, Kohl’s also donates significantly to the local community. Kohl’s purchased a new command vehicle for the Menomonee Falls Fire Department, and helped launch the Police Department's K-9 Unit.

“Kohl’s is a tremendous asset for the community. They have been very good for the community, and I am hoping they will continue to be part of the community,” said village Trustee Dennis Farrell.

The multimillion-dollar question: To stay, or to go?

Mansell said he is looking out for the of Kohl’s shareholders by considering all options and that he wants to build a new headquarters that will fulfill the growing corporation's needs for the next 10 or 20 years.

But is Menomonee Falls, Milwaukee, Muskego – or even Wisconsin – the place for that future growth?

Eppli, the Marquette professor, said attracting the best and brightest new professionals is a major factor for national companies in determining a location for their headquarters. Eppli said bringing talent to a company at an efficient cost is second in importance only to wages and health benefits.

“It is somewhat difficult to bring talent to Milwaukee, and to keep and retain those employees. The new workforce fresh out of undergrad programs are looking for areas they can live work and play in,” Eppli said. “It really goes back to if I can get the best talent at the best price. That’s key. Does it adequately serve Kohl’s in that perspective to stay in Menomonee Falls, Milwaukee or move out of state?”

Menomonee Falls may not have amenities of a metropolitan city, but a suburban location can offer lower real estate costs, property tax rates and other incentives to maintain value for the company. Eppli said municipalities can leverage tax increment financing, municipal loans and other monetary incentives.

Menomonee Falls is in a good position to offer incentives to keep Kohl’s in the village. State law limits the total portion of the municipal tax base comprised of TIF district value to 12 percent. Currently Menomonee Falls TIF districts account for 4.69 percent of the total tax base, which leaves plenty of room to use this incentive.

In Milwaukee, that ratio is at 3.55 percent, and the city has about $25 billion more in property tax revenue to leverage.

Village Manager Mark Fitzgerald has said he and staff are working with Kohl’s on a daily basis to ensure they stay in the village. Village officials won't comment on what they are specifically doing to keep Kohl’s here.

“I think the village is doing a good job. We are working on it day in and day out and I’m very happy with their work,” Farrell said.

Kohl’s is targeting the Woodland Prime office park, which falls in TIF District No. 4, for a potential new location in the village. Village staff has met with Kohl’s leaders in closed session several times, and most recently met on Monday.

Earlier this month, it was reported that a were terminated. It was rumored that the village wanted to purchase North Hills, which is adjacent to Woodland Prime, to make room for Kohl’s headquarters.

“In my heart, I really hope that the powers that be find a way to make sure that Kohl’s stays in Menomonee Falls. I hope we can work it out, and find a place that is suitable for them to build their new headquarters,” Zizzo said. “I actually hope the North Hills Country Club people reconsider their decision, and help Kohl’s stay here.”