Lessons learned from a failing local mall
strongtowns.org
strongtowns.org
The problem is that same public infrastructure subsidy program remains the principal model of “economic development” across the US.
The main case Strong Towns is trying to make is that the model does not produce returns (ie local tax income less infrastructure maintenance and public service liabilities) that justify the investment, and thus we need to stop using it.
"the model does not produce returns (ie local tax income less infrastructure maintenance and public service liabilities) that justify the investment"
It doesn't make this case at all. It alludes to it, as if decades of tax revenue and benefits were imaginary, but it doesn't make a credible case.
Resilience is just a simplification, online retail among other things is killing malls and that's ok. It's trying to fight that trend that's a losing strategy.
That's a very handwavey response to a serious question.
If it's true that dense cities are more efficient then it follows that dense cities should be cheaper, when all evidence points to the opposite effect. By the original reasoning Boise and Boulder should have very expensive tax burdens and New York should be nearly free.
Coming back from the military, I kept the same "look around at all times for threats" and it was absolutely exhausting.
"hyper-vigilance" I think is the term. Still have some of it but it's easier to live with in Norcal than the concrete jungles of the Los Angeles sprawl. Can focus on trees and the tweets of birds instead of innumerable pedestrians and cars and noise...
At the federal spending it's major metro areas that are funding much of the country. Delaware get's back 1/2 what it puts in and South Carolina get's back almost 8x what it puts in. Those are absolutely massive tax flows which fund things like rural hospitals. But also a lot of infrastructure like new roads.
Even within states if you look at Virginia the DC area provides most of the revenue which is then spread around the state.
But, this ends up far more complex than just the local property tax situation.
And really, your argument implies that people in Japan pay US taxes when they buy Coca Cola. At some point things are indirect enough it's a meaningless connection.
Some other forms of tax are much higher in the city, for example income taxes on higher earners, and some corporate taxes in the case of NYC, but there are also an incredible array of services provided.
Your premise that city taxes are "always higher" isn't something you can assert without offering evidence. The reality is that taxes in dense cities are usually different than in less dense areas, and reflect different priorities. Higher or lower depends a lot on who you are and what you're measuring.
What are "the suburbs" here? Westchester? Nassau? Which parts of Long Island? Which parts of New Jersey? Each has different characteristics. Likewise, NYC property taxes have characteristics all of their own.
NJ is known as a high property tax state. That's true but you need to understand why. Why is because so many NJ residents work in NYC and pay NYS income taxes rather than NJS income taxes.
As for the high-tax NY suburbs like Westchester... it's complicated but the tl;dr version is school spending, inefficiencies and state-mandated defined benefit pension plans [1].
As a general rule though, NY state single family home ("SFH") owners pay disproportionately low property tax rates compared to those in multi-dwelling units ("MDUs") ie apartments, which is NY state's (fortunately tamer) equivalent of CA's Prop 13. Upstate SFH dwellers have voted themselves tax breaks in the form of caps on property taxes. Apartment dwellers however have to property taxes based on Assessed Rental Value ("ARV").
A $3m brownstone in Prospect Park might have property taxes of ~$700/month. A $3m condo in Midtown Manhattan will likely pay $1300-2000/month in property taxes (so ignoring common charges). And that's AFTER the condo and coop tax abatement, which is a "temporary" decrease that's been continually passed by the NYS legislature every few years continually since 1996. Without that, those apartment rates would be up to 50% higher.
But it gets worse. Those who pay the lowest taxes of all (as a portion of their property values) are... foreign billionaires who buy ultra-luxury condos on 57th Street, CPW, Park Avenue and 5th Avenue.
I applaud your effort to correct the GP's misconceptions but you've also made some sweeping generalizations yourself.
[1] http://www.westchestermagazine.com/Westchester-Magazine/June...
Cities on the other hand have to pay for the upkeep on their existing infrastructure, as well as replacing that infrastructure.
Replacing infrastructure is much more expensive than building it out in the first place. A lot of suburbs will fail when it comes time to replace their infrastructure. It just hasn't happened yet because in the United States you can keep building out forever. Furthermore people move away from areas burdened by the costs of replacing infrastructure.
The entire rust belt is being brutalized by the fact that formerly suburban areas have collapsed. The urban areas were already brutalized in the 50s, 60s and 70s by white flight.
But — if you converted the wealth located in the suburbs, into high density, costs would go down, the revenue base is the same, so taxes could fall.
To me the argument seems backwards, people live where they want, they incur certain relative higher or lower costs due to it, but so what. The amount of money we are talking about here is relatively benign, if you were upfront with people about the choices being made with tax revenue, you could easily finance (with people’s own existing tax revenue) their own decisions on where to live. Where’s the fire.
Cities tend to build and replace infrastructure bit by bit; when first built out, they built infrastructure piecemeal, and as they upgrade to cope with higher populations they also do it piece by piece. So they have to replace things often, but usually only small amounts of infrastructure. To reflect this, tax rates stay at a slightly higher rate.
Suburbs, on the other hand, generally explosively grow in spurts, and put in all the infrastructure in spurts. So for 30 years they don't have to worry about replacing things and have low tax rates, but when you start getting to EOL people start getting higher and higher assessments to pay to replace all this high-quality infrastructure at the same time. This causes people to leave for that newer suburb that hasn't reached that point, which shrinks the tax base of the older suburb, which then has to raise assessments higher, which starts off a deadly tax spiral. On top of that they are often raising taxes to replace infrastructure on a much smaller tax base to begin with since their density is so low.
As a case in point, Nassau County in Long Island had the original suburbs, but now the taxes are so expensive because of all this infrastructure replacement that everybody is leaving. You are starting to see this in a lot of the first-generation suburbs; not only in Long Island, but also in New Jersey, and other infamous examples include places like Ferguson, MO.
More over, people living in a suburb only pay for a part of the roads they use in their daily commute. My (dense) borough actually did a study that showed 80% of the traffic going through our streets were people who would not stop there, for example because they are commuting between a suburb and the city center nearby. So city dwellers pay for roads that are mostly used by other people. And since the traffic we get this way is quite intense, there's a good amount of road repair each year.
Regarding public transportation, I wish this was an issue that more people understood. Yes, it takes higher taxes to build public transportation infrastructure (although buses have pretty low upfront costs), but that public transportation could replace your need for a car, saving you a lot of money. Even if you personally don't use public transportation, it has a lot of external benefits: less traffic, less air pollution, brings in workers who may have been priced out of working in a certain area.
So a person who lives in the suburb but works and shops in the city will be paying most of their property taxes in the city, via their employer and the shopkeepers.
It's taxation without representation. Perhaps they should also get a pro-rated vote. :-) It could be based on time spent in each location, or economic activity in each location, or simply 1 part for each kind of activity spent in each place.
PS: They also do vote based on who they work for and what shops they do business with.
The sales tax is floored by the state sales tax which makes up more than half of the total.
The Cook County minimum sales tax is 8% with lots of localities matching Chicago’s 11%.
All told I imagine tax rate in the Chicagoland area largely depends on a whole equation of property value/tax & consumption. But I’d be shocked if Chicago was universally more expensive than its suburbs.
Property taxes in the northeast US are absolutely insane.
Map: https://www.telegraph.co.uk/finance/personalfinance/tax/1206...
So suburban cities are living off depreciation of those long term public assets.
One of my observations living in SF. And having watched northern California sprawl for 50 years is this.
There are real downsides to living in a dense city. Probably 20,000 people per square mile. That is made far far worse by the surrounding sprawl. And the people living in the low density suburbs aren't having it that much better. Oh you can go from place to place fast, but the places are farther away. And it it cancels unless you're on the edge.
The figures are presented: even now, post dis-investment, the downtown generates $344k tax and the mall $120k tax, and the latter (1) required the city to pay for all the aforementioned services; (2) reduced the taxes produced by the core. The mall probably couldn't have been built without the subsidies from the town, and they never made sense. Good subsidies have a return greater than one; mall subsidies have a return less than one plus make you dependent on retailers that can disappear overnight even if they have an operating profit.
The "mall" in question is in the middle of a suburb. The "subsidy" of infrastructure that was required regardless seems spurious. Further, both areas "required the city to pay for all the aforementioned services". For that matter, maintaining roads and water/sewage in dense areas is dramatically more expensive than less dense areas.
"even now, post dis-investment, the downtown generates $344k tax and the mall $120k tax"
The article quotes current, failed mall taxes. After most tenants have moved out and the mall is in disarray. Secondly, saying that a 9 block area of mixed retail/commerce pays more taxes than a single mall seems outrageously laughable.
The word "subsidy" almost always appears in articles fomenting nonsense to pander to prejudices. The correlation between it and articles of little actual value is about 1.0.
It does not: "... produce 287% more property tax than the entire mall property. And that's before the Herberger's goes away"
> Secondly, saying that a 9 block area of mixed retail/commerce pays more taxes than a single mall seems outrageously laughable.
Not if that single mall takes up more space than those 9 blocks (which it does)
https://www.cnbc.com/2018/02/22/koch-group-big-tax-breaks-to...
It is against the big box national retailer model. It is in favor of smaller businesses with local interconnections in denser areas, which creates are more resilient economy (which is where the "nostalgia" comes in). It's not against public investment, it just thinks it should be spent on a different model. Money quote:
> In the pursuit of the shiny and new, the efficient and the low-priced, we turned our backs on decades of small business wealth creation. We walked away from all of these stores — all these families and their local bank deposits, local newspaper ads, local insurance brokers, local accountants, softball team sponsorships, Fourth of July floats, Crazy Day sales and after school jobs — and, as the old saying goes, put all our eggs into one basket.
The unfortunate truth is that free trade naturally results in income/wealth inequality, on individual and geographic levels, because it highly incentivizes economies of scale. Rather than 30 different widget makers selling widgets at $5 each, you get one widget maker selling widgets at $4.80 each, because it's more efficient (less overhead per widget). Everybody gets more/cheaper widgets, but the communities containing those other 29 widget makers may lose significant portions of the money coming into their communities - while the community with the remaining widget maker becomes wealthier than ever. And instead of 30 small business owners becoming wealthy, you may get one extremely wealthy widget business owner along with slightly wealthier stockholders.
When this happens to all industries all at once, it increases mean economic wellbeing, but decreases median economic wellbeing - and because goods become more efficient to produce due to economies of scale, it also puts downward pressure on wage labor, increases public spending on social assistance, etc.
That mostly applies to industry as opposed to retail, but to me that's the other half of the story: most communities aren't able to keep bringing as much into their community because of the consolidation/outsourcing of industry. And then the corporate retailer model increases the rate at which money leaves the community too.
I know someone who took a couple introductory economics courses will want to chime in "but trade makes everybody better off on average, because it allows economic participants to specialize at what they're already good at". But in the real world, when someone loses their job or small business due to big-industry consolidation/competition, they may no longer be able to get a job doing what they used to do, because now less people are needed to do that job, as it was made more efficient. So now they need retraining, or they go on social assistance - and the cost of that retraining or social assistance may not outweigh the economic benefits of consolidation.
Perhaps the solution to an individual is to move, but that can cause a community to enter a death spiral if enough people leave and the cost-per-person of public services increase. The community needs investment so that a new industry can bring in money, but if all the small businesses died, there may not be local investors with capital to invest, and bigger investors may not see investment in a new industry in small community as optimal because there aren't enough people able to work in that industry - a chicken/egg problem.
I'm not arguing that trade itself is bad, but it's not the unequivocal good that many perceive it to be. There are externalized costs and negative butterfly effects that can come from the type of consolidation that free trade enables - and those are harshest at the local level. Sure, widgets may be cheaper, and on average (mean) the economy improves (assuming the externalized costs are less than the improvement in efficiency - which they may not be). But that improvement means little if the resulting wealth/income go to a small number of people, with many more people losing their smaller amounts of wealth/income, all so people could save $0.20 on a widget.
The key political question could perhaps be stated as, how do you balance the median vs. the mean? A society which focuses on maximum efficiency will almost certainly have higher inequality, but also higher average wealth.
I think it's up to each region/nation to navigate this tradeoff. I do worry that the current political climate in the US really underweights the gains from trade, though. We've had 30-40 years of the most open trade regime in human history and it's raised the US standard of living immensely. I hear people all the time saying, well the median income isn't going up, but that ignores (a) how many things are free today (e.g. Gmail) and (b) how much healthcare prices have escalated (which is paid by firms, absorbing cash that might otherwise flow directly to employees as wages). I think people today actually have it quite good. I'm afraid we might take for granted what got us here and shoot ourselves in the foot with all this protectionist sentiment.
I do wonder if the disconnect between policy and many of the negative effects I outlined in my previous post is due to the fact that decision/policy makers are disproportionately likely to be the ones benefitting from this trend. And for us as developers, especially so in the US, we're the ones directly benefitting from an industry that naturally lends itself to extreme consolidation in certain cases (e.g. a team making software for thousands of people may not need to expand that much to serve millions or even billions of people. See: whatsapp) and living in the countries with a competitive advantage in this industry. And we also mostly live in large cities with multinational corporation headquarters, so we're insulated or even benefitting from what's happening to smaller communities.
I grew up in a non-coastal city that is neither doing well nor poorly. It doesn't have a lot of wealthy people to "bootstrap" itself into success by means of capital, nor is it an attractive enough investment opportunity for outside investors (low education with brain-drain chicken/egg problem), but it has a few competitive industries and is somewhat of a local resource and business hub. But once you go into the smaller communities in the region around the city, you really see the phenomenon I'm talking about. A big way money enters most of these communities is through farming or other resource extraction (if they're fortunate enough to have these), but the main way is through social security payments. These places would be perfect for low-medium cost manufacturing because they have large numbers of unemployed, working class people who are down to earth enough to take pride in that kind of work.
Those communities are often forgotten when it comes to policy, likely because they are individually small, not culturally important, have some opinions we would consider backwards, and most importantly because they have no wealthy/powerful people to vouch for them. But outside of big cities and regional hubs, where decision makers do reside, this is what a pretty large portion of America consists of.
This is a totally false history. The Reagan administration "granted more import relief to U.S. industry than any of his predecessors in more than half a century" (Secretary of the Treasury James Baker), with non-tarrif barriers (NTBs) that were "three times those of other leading countries."[1][2]
[1] https://chomsky.info/199705__/
[2] See also Chomsky, Noam. "Industrial Policy for the Nineties." World Orders, Old and New. New York: Columbia University Press, 1994. 106-119. https://www.amazon.com/World-Orders-Old-Noam-Chomsky/dp/0231...
We need the biz owners to have skin in the game, and benefit from growth, not from strip-mining the wealth from an over-financialized model.
The owners of big box development put 5% or less down on the property, and the sustainability of the property is mostly based on arcane tax and accounting rules. That’s why these developments rise and fall so quickly — after 15 years, the write offs for interest payments and depreciation are less valuable.
Additionally, in most cases the locality eats significant capital costs and indirect costs from storm water management, to water and sewer, to roads and traffic signals. Larger infrastructure costs like highway ramps, etc are paid for by the Federal government. There’s a vicious cycle as the big box development gets less valuable (and tends to fail) just in time for the maintence expenses associated with the infrastructure to start spiking.
That development model only works for large enterprises. Your small retail chain has to tie down real capital to lease or build, and has to pay higher taxes because they need the clustering effect of a business district to function. But they don’t get the subsidies — Congress isn’t building an access road to a small company parking lot.
Because govts subsidize building roads, but not maintaining roads, this gives a big advantage to new malls, which get built more cheaply than they should be. To the disadvantage of existing downtowns, which have high maintenance costs which the government does not subsidize.
So a core of the Strong Towns argument is a real economic argument. It's just a more complex economic argument than merely calling for a totally unregulated market. It's an economic argument that takes into account externalities, distortion through road building policies, and societal-level timescales (3 decades, not 3 years.)
what do you mean that "governments subsidize building, but not mainteenance"?
who pays for maintenance?
In the failure case, no one.
That is, government funds get assigned to building new roads in preference to maintaining existing ones.
If anyone wants to learn more about why economists almost universally, on both the right and the left, oppose barriers to trade, I'd recommend two things:
1) Learn how to calculate the deadweight loss due to trade barriers. There are a dozen good videos on YouTube explaining this. It's an elegant proof, but may take a few times through to really get: https://www.youtube.com/watch?v=zhD--UeRiOI
The distributional effects are generally acknowledged in any class discussing this, often including seques into trade assistance programs and how those work. In general though, focusing on local job losses tends to skew our intuitions, which are naturally bad at realizing the sheer magnitude of potential benefits. One way to grasp that is (2)...
2) Read a few of the countless studies on the cost per job saved of protectionist measures. Usually we ask consumers to spend hundreds of thousands more, sometimes millions more, for each job earning $30-60k per year.
Here's a table listing some of them: https://www.forbes.com/sites/timworstall/2017/01/24/sure-pro...
Textiles, tires, there are a bunch of great studies that transparently lay out their methodologies, written by people who have taken more than just a couple econ classes.
Again, completely agree that there are distributional impacts within a country (although it's important to note that, taken globally, trade generally reduces inequality, transferring capital to poorer countries). But of the distributional impacts within a country, if you just taxed the category of good half of the savings to consumers, you would generally be able to pay everyone in the affected industry a lifetime severance equal to their salary (often double it), and still raise the purchasing power of everyone in the country. That would make literally everyone better off while hurting no one, if we just had the stomach for it.
The economic argument in this case is: when the market selects for the lowest price at the present time, without taking into account long term trends, you get big box stores which are more sensitive to boom and bust economic cycles than locally owned small businesses are.
So we must look at a longer time horizon than most financial firms or public companies do. Because society works on longer time horizons than public companies. We as a society should decide we want many retail and restaurants that keep an area strong over decades, rather than a few big box stores that can go out of business as the business cycle changes (in part because they are more dependent on high debt loads and low margins). If that's what a society wants, it cannot depend on a totally unregulated market, which in practice has a short-term view - a negative externality of not considering long time horizons.
Strong Towns is saying 10% lower prices today in exchange for higher uncertainty and stability in the medium and long run is not what society should want. It's also saying society should not subsidize big box stores and malls by paying upfront costs for roads and utilities to those malls, because maintenance costs are much higher than for dense downtowns.
Those are all good economic arguments.
There's cursory evidence in either direction.
That's not the argument. The argument is that more smaller businesses might reduce existential risk for the town even if the risk of individual business failure is larger.
To give a concrete example, let's say you have the choice between 10 small businesses and 1 large business. Let's assume that during a recession the large business has a 10% chance of failing and small businesses have a 20% chance of failing.
Now say you go through 20 recessions. With the 10 small businesses, 2 fail during every recession; new ones come in to replace them during the intervening expansions. During the recessions, you have to deal with the reduced tax revenue and the somewhat higher unemployment.
With one large business, there's an 88% chance that it will fail during one of those 20 recessions. And if it does, you (as in the town the business is based on) have nothing to fall back on to tide you over until the following expansion. As a town you trade off being pretty sure that your revenue will drop by 20% during a recession and just planning for that to having it not drop at all sometimes and drop to 0 other times. If the latter happens, your town dies.
All of this, of course, is a matter of what scale you look at things at. Maybe we should be OK with some towns dying and their residents moving to other towns. But in that case we need to actually plan for that instead of being all surprised when it happens.
Over the last half-century (probably more) we've seen a big part of the economic base for these small cities and downs either disappear or move away. Agriculture used to play a much bigger role in the economy as a whole, and a particularly large role in the economy of many small towns. And manufacturing used but much more distributed across the country in smaller cities and towns. But a lot of those factories have closed down.
As a consequence the tax base in may of these towns and cities didn't go away simply because retail businesses moved out of the city limits. They may have gone away because the entire GDP of the surrounding area dropped.
For reference: https://commons.wikimedia.org/wiki/File:Sectors_of_US_Econom...
^ very much /s
I'd like for my kids to have something like that.
The closest approximation I can find seems to be a city with a population in excess of 1 million.
Or at least, that's where the sidewalks and community playgrounds are.
The alternative is finding a struggling city with good bones that is willing to take a chance, but that can introduce all sorts of hostilities.
The main disadvantage is that property prices are high, largely caused by the real commuters rather than the telecommuters (we have a mainline railway station); and that's meant a slow decline in the number of local shops simply because conversion to residential use is much more lucrative. But we've pretty much stabilised now.
This is in the UK, and it's not rare over here - there's quite a niche for slightly boho, close-knit small towns. Hebden Bridge, Stroud and Frome are the best known (populations 4.5k, 12k, 26k respectively) but there are plenty more.
Hebden Bridge I always got the impression was a bit touristy (as well as being the lesbian capital of the country). A bit further south to Marsden, also on a rail line into Manchester and Leeds, is remarkably cheap
Part of what kills small towns is all the money draining out. Big box stores accelerated that because nothing but the retail labor and utilities are local.
You must not have put much effort into the search. I have been in many small towns that have had thriving downtowns and vibrant communities. But I've also been in many dead ones, where the local economy was decimated with the demise of a major employer. Maybe that's more the rule than the exception where you're from.
It's not very hard to make breakfast or lunch, and any issue that would need a parent to solve is probably something they would have to call 911 or bring us to the hospital for anyways.
Actual text of the law implies a lot worse neglect than the website interprets. In fact if you turn it around it seems shocking. A guardian can leave a 15 year old without regard to their health & well being.
Utah recently had to redo some similar laws to prevent them from being abused.
I wonder why this changed. Is it that people have become more aware of dangers? Or perhaps parents are having fewer children and being more protective?
So why would you keep him from exploring and learning how to take care of himself alone and with friends?
I know that my hometown has a LOT more cars than it did when I was growing up in spite of the fact that the population has actually declined.
And car accidents is probably one of the statistics that hasn't declined.
And it seems like many communities have quietly lost pedestrians (it seems like baby boomers are atypically car-dependent compared to the generations before and after them but they're a huge generation and the biggest one in many places).
As long as you stay out of Palo Alto, you can even find housing for merely crazy prices instead of ludicrous prices.
New England has lots of little gems, too.
> real downtowns are often hidden
You're not kidding. This is part of why I explore around an area, often on foot. There is no counting how many times I've found That Awesome Place Literally Around The Corner by just walking around that corner that's been "off my radar" for however long it's been and then lamenting that I didn't do that sooner due to the auto-pilot many of us use.
You conveniently left off Sunnyvale. ;)
When I read the article I thought it was describing Sunnyvale — with a once-large downtown, replaced by a mall (now failing) while the sliver of a downtown remaining is a popular spot for evening meals, walks.
I haven't been in the area recently but I believe they were planning on razing the mall and putting back a downtown.
A bit like Venice, which has 20 million tourists a year for a population of 200k. Portorož probably isn't far off from this population to tourist ratio, but with a population that's 100x smaller.
That having been said, it's true that Europe has many walkable cities and they don't even have to be small villages.
And yet, if either my hometown (population 6,000 when I left), or the small town where I went to college (35,000) had retained their downtowns and their walkability, I might still live in them. I don't farm, I don't work in a factory. But I do telecommute, so I can set up shop pretty much anywhere
Yeah, but really sucks to have to run up frequent flyer miles for interviews.
Cupertino is my hometown. Despite rising incomes and tax receipts, the city has repeatedly failed to cultivate a downtown. Every 10 years, a City Council member decides the reason downtown Cupertino isn't a thing is because it's in the wrong place.
So they proceed to open, to great fanfare (and profits, for their buddies in development), a new one. Always disconnected from the old ones. It is a darling for a few years. But then the lack of density kicks in and we end up with another strip mall.
In our go-go tech economy, these disparate "downtowns" can inch along. The true pains of this political incompetence won't be felt until the next downturn. By that time, unfortunately, the offending politicians will be in a new job and developers retiring.
Local political incompetence has a big part to play in the downfall of America's small towns and small businesses.
Anyone can build 'fake' downtowns. They sort of work too. That's not the issue here at all, though. Cupertino had no commercial core that was left to decline.
You need only look to Vallco to see what an abandoned mall is like. It’s really dystopian in a way.
One limiting factor is that political downtown (City Hall and the library) is off on its own in what was traditionally a business office complex neighborhood, with no nearby commerce per se.
The Orchard shopping center at Bollinger and Blaney was, unsurprisingly, an orchard I played in as a kid.
"Developer owned" malls are mostly failing.
Companies like WalMart, Target, CostCo, etc. discovered the same thing that McDonald's did--own the real estate under the building for maximum economic leverage. That will never happen in a downtown, so the big companies are simply not going to go there unless the economics really work out.
I'd also personally suggest a recurring donation, even if it's small. (I donate monthly but have no other affiliation with StrongTowns). It's an apolitical movement founded by a civil engineer with the intention of developing stronger communities and fiscally sound towns and cities across the country. It's not solely about urban issues - they actually focus on small towns, though cities play a prominent role. It is also not against suburbs or urban sprawl, though they do describe the issues that those methodologies are hampered by.
I think if anything will bring Americans back together, it will be a focus on building stronger, fiscally stable communities under a visionary movement that appeals to any political viewpoint. StrongTowns is a strong contender for that role. For that reason I believe they are worth contributing to.
I like spread-out malls/stores a lot better. I hope they find a way to reverse the trend. Besides simply economic concerns, I think the human factor has to be considered. Malls/mini-malls and countrysides/suburb-like environments are a lot nicer for many (I'd guess most) people. I don't think the fact that the budget balances better on a spreadsheet with more density means it's worth it. Preserving a better way of life is an appropriate case for subsidies.
At least drive-thrus probably aren't going anywhere for a while.
I would say that in a "real" downtown area, you're not supposed to use a car at all. Not having to allocate land for parking essentially allows businesses to be clustered closer together and be more accessible to everyone, without everyone having to own their own car to get anywhere.
To quote Jane Jacobs:
> The point of cities is multiplicity of choice. It is impossible to take advantage of multiplicity of choice without being able to get around easily.
Thriving local commerces are service oriented: restaurants, pharmacies, grocery stores, hardware stores and dollar stores. Dying stores are product oriented mostly because of online shopping and big retail.
I do long for small local retail stores with good prices and products. The only way this could work is for specific verticals. I.e. men’s clothing. I imagine the store would need to be online first with a global recognized brand. The brick and mortor stores in local communities would become presence (a marketing cost, not a profit center). Frank ‘n Oak is an example of that. I would like to see more across more neighborhoods and verticals.
In my mind we are going through a shift in purchasing habits just like mail order retailers provided in the early 20th century. Set aside the subsidies to malls.
People actually prefer to purchase products online. Selection is better, pricing is better, it is easier to comparison shop, and it is delivered to your home. What's not to like (for many types of products)?
If you are in retail, selling the experience and other aspects of an in person interaction that can't be provided by an online retailer is the way to win. Some aspects include:
Community involvement
Interaction with experts
Immediacy
Hands on education
Cross selling consumables
Don't fight the battles of the past, and recognize that this is just one more evolution that the customer wants.
But.
It's a drop in the bucket compared to the debt load killing box stores from all the leveraged buyouts, and that has nothing to do with consumer demands. It might have something more to do with corporate raiders running out of factories to raze.
The author also focused on clothing stores though — something I at least am very unlikely to purchase online (pants being the exception — and only after having purchased a brand/size I like from brick and mortar).
Add restaurants to that and you have a good deal of retail that can coexist with online. But yes, book stores are perhaps dead.
Not going to happen. Typical markup at a small retail store: 50-100%. Markup at Costco: 15%.
Then, the downtown's vibrant selection disappeared for the same reason the malls are now closing up - we no longer need or want to do that. In concert, margins have been getting ever lower while competition has become even more cut throat - eg the modern ability to go into a store to physically browse, and then purchase from somewhere else online before having even left that (money losing) store! So even those who want to browse in person are paying progressively more and more to do so.
And keep in mind, all of this local retail wasn't/isn't actually bringing money in to the area! (unless it's the biggest town around, in which case draw your boundary conditions larger)
I do personally respect the need for a local economy, and recognize that the dream of efficiency hasn't delivered on its promise [0]. But reminiscing about the time when the consumer-stuff-delivery industry was effectively in its startup phase isn't going to help.
[0] I argue it's due to monetary policy that has an explicit goal of nullifying any savings by consumers, but I digress.
The issue is that some of the "stuff" Americans wanted was cars and big houses. The country bet big (again to the tune of trillions) buying a crap ton of cars, building endless roads, and building big houses out in the middle of nowhere. It's this model that drove the creation of the uniquely suburban mall. And this was a deliberate choice driven by the government at every level. The history of post-war America is the history of government-subsidized urban sprawl.
It was a big mistake and one that the country will be paying for, for the next century. It's simply not sustainable. The economic forces at work here are a consequence of the laws of physics. Big houses and big cars far from the "noisy, dirty" city are expensive. Everything gets cheaper as density goes up. At some point some critical services become practically free due to market volume and competition. (In highly dense Asian cities it's possible to eat decently for $5/day. That's breakfast, lunch and dinner.)
The other side of this equation is that American wages have collapsed. Forget growth, forget stagnation, wages are going down and the coming generations will be poorer than their forbearers. So while it was possible for the average Joe in 1965 to afford a big car and a big house far outside the city, 2020 Joe will not be able to do that and eat and have health insurance. And this is where physics kicks in: Americans can no longer afford the entire "exurb lifestyle" that they love so much. Economic success now lies in the city.
The lessons to be learned here are not new. They are as old as human civilization. Prosperous empires over-expand and over-build and eventually collapse due to endless war, internal conflicts and better competition. Density wins because it is much, much more efficient (especially in a highly competitive and dynamic globalized economy). And, most importantly, sustainability matters. A lot. Sustainability may be all that matters. Human laws aren't laws at all -- the right lawyer, the right judge, the right bribes can turn most laws into minor obstacles. Every (human) thing can be negotiated. The only laws that can't be broken or subverted, that can't be negotiated or changed, are indeed the laws of physics and biology.
> Yeah, stuff was never scarce. I don't know where on earth you got that idea. After World War 2 the US stumbled upon the greatest wealth creation machine the planet has ever known
So how does this mean stuff was not scarce before WWII?
> Big houses and big cars far from the "noisy, dirty" city are expensive
So, given that they'd already been afforded at one point, the real problem is declining income to cover their carrying cost. So let's focus on that rather than a red herring of one symptom. If it's a given that wages will go down forever, then why even worry about regrouping in the cities when that would only stave off the trend for a few decades? Better to focus on the reason real wages are going down!
> Prosperous empires over-expand and over-build and eventually collapse due to endless war, internal conflicts and better competition. Density wins because it is much, much more efficient
These two bits do not follow. If empires collapse due to being trapped into being too spread out, then that implies it is impossible for them to naturally shrink back down and grow denser! Still I would posit this applies in the much more general sense of spread out in the world rather than a single defensible landmass. I'd venture to say those foreign military bases in all of the colonies use a lot more resources (including the wars they encourage!) than people commuting from suburbs, my own love for walkability notwithstanding.
PS You can't bounce back and forth between the economic paradigms of resources and financials. While better competition makes prices lower, that doesn't affect resource usage in a major way - compared to say economies of scale. Don't conflate the two.
Isn't this part of the premise of "locally sourced" food etc? Pay a little bit higher prices to ensure the areas workforce is sustained.
I'd say actually the "lower prices" don't make up for lost jobs much sooner than when you start to see multi-national replacements struggle. Many previously employed depend on government assistance so there is an immediate cost, as well as current epidemic levels of opiate addiction and death, partially explained by economic hopelessness.
I believe the story of Bon-Ton and Herberger's being over-leveraged. It's happened to a lot of retailers lately (Toys R Us for example). And I'm sympathetic to his claim that they "had a fragile business model, one that was far too responsive to investors far beyond our little city limits."
But a few things undermine his argument:
1. He makes a passing reference to Herberger's having "cheaper clothes" compared to the downtown stores, but that's not really doing justice to the fact that the downtown stores went out of business because the local people preferred the prices and products at Herberger's. No one issued an edict saying "there shall be no more mom and pop stores downtown."
2. He complains about Walmart, Target, etc. being "in the neighboring city". But if you look on Google maps, the distance from downtown Brainerd to Walmart is 3 miles. A 7 minute drive. That is not a major inconvenience for residents. It sounds more like sour grapes from a city planner who resents the commercial taxes going to Baxter instead of Brainerd.
3. He mentions the sewer, water, and roads that were built to support the mall location, without identifying who paid for them. Was it the town, or the developer? I'm worried he's trying to puff up his argument by being vague about this.
[0] https://www.strongtowns.org/journal/2012/1/2/the-cost-of-aut...
In our case, here in Bloomington, IN, that's precisely what happened. The owners (primarily Indiana University Foundation) raised rents on the city square. They tripled rents.
It's knocked 2 businesses right out. They couldn't relocate, because the previous locations were destroyed for "affordable housing for rich foreign students". Read that as rents hovering around $1500/mo. So what did those businesses do? They went out of business. Gone. But hey, we'll get more overly-expensive housing!
> It sounds more like sour grapes from a city planner who resents the commercial taxes going to Baxter instead of Brainerd.
Unfortunately, there's one main topic that dismisses this reasoning. 10 year abatements. I've seen the abatements come up again and again. It's a form of corporate welfare. Where's MY abatements? Where's the small business abatements? Where's the 'small guy' relief?
Well, to put it bluntly, "We don't get no relief". Big business has this hand-wavey ambience that we somehow absolutely want them here, for perceived benefits. But what it amounts to is a shell game with corporate welfare, money exfiltrated out of the community, and a worthless husk in a few decades.
> He mentions the sewer, water, and roads that were built to support the mall location
It's regardless who initially paid for them. Those pipes are there, and will require significant upkeep to keep them in any sort of standard. And those business again, with abatements, aren't paying. And nobody's paying if the malls are dead and shuttered. Those pipes are what I would call a "Toxic Asset". And that's before discussing massive water quality issues we're seeing in small and midrange communities around the country. Flint's the worst, but happening in hundreds of areas.
It’d be nice to make these old malls with well connected roads into places where digital nomads can hang out, live and commune with one another. Add some tiny homes and maker spaces, fiber optic broadband and fast wireless. Put up some solar panels on the roof and by all means, listen for what is coming with the next generation.
Where's the intelligentsia for those of us who don't want to live in small boxes, on top of each other, and don't want to live next door to businesses?
What are the others?
>Where's the intelligentsia for those of us who don't want to live in small boxes
It's not there because most experienced people in this domain know is a pretty poor way for people to live and architect cities. It needs to be subsidized and take away from the economic productivity of the city centers.
As someone who lives in a "small box", I will most likely never leave the city again unless I intend to farm in some way. I spend less material resources living here, all my neighbors are friends and feel like we actually have a community, events are only 10-15 minutes on foot, etc.
But I can assure you that high crime rates, poor schools and SF style feces/needle filled streets are not inevitable characteristics of dense cities. And as someone currently living in a small town with a lot of farm machinery, I can also assure you that noise pollution is unfortunately not exclusive to cities.
City centers shouldn't be expected to subsidize other people's ideal life styles. Crime rates and poor schools wouldn't be a problem if we took a fraction of the money we spend on infrastructure of suburbs and pointed it towards maintaining and improving city centers.
>or SF style feces/needle filled streets.
I'm sorry, what was that about patronizing? None of the characteristics you mentioned are inherit or even a common quality of city centers.
Mega-businesses, like JC_Penny, Walmart, Nordstroms, and similar do open up in an area, but all profit gets siphoned elsewhere. It makes wherever $BigCo's Headquarters much richer at the expense of every community they go into.
Whereas, the little one and two store local business takes money from local people, and its turned right around and reinvested in that very community.
One drains a community of its wealth, while the other bolsters it.
Politicians have always (in recent years) accepted that $BigCo moving in is an absolute boon. And the politicians award the business with abatements, tax writeoffs, and other vehicles to "sweeten the deal". But none of the small businesses have these connections. Nor can they request abatements, or low to 0 interest loans.
But as we see, once a chain starts haemorrhaging, every community with one of these carcasses ends up rotting the whole area at its core.
It's a common one, but I don't really buy this argument. Small local businesses don't usually hire more people than large chains and they don't pay their employees more. Small shops are notorious for low pay and no benefits.
In the case of a discounter like Walmart the profits don't get siphoned elsewhere as much as never spent in the first place. There may not be a local shop owner anymore, but everyone else in the community has spent less money.
The Waltons are not rich because each WalMart vacuums money out of a community. The Waltons are rich because there is a metric shit-ton of stores that do a high volume of business, and they get their 2-3% slice of it.
When Walmart Comes to Town https://economics.mit.edu/files/7575
Bloomberg https://www.bloomberg.com/news/articles/2016-01-25/wal-mart-...
An early Snapper Mower take on walmarts practices: https://www.fastcompany.com/54763/man-who-said-no-wal-mart
As others have pointed out, there aren't any, at least of the non-rental variety.
Cheer up though - you've gotten the better part of a century of subsidization of your lifestyle in a wide variety of ways.
It's hardly something you'd call sustainable, but there's many metros that have yet to be built out -- there's always another Boise [2].
[1] https://en.wikipedia.org/wiki/Streetcar_suburb#History [2] https://news.ycombinator.com/item?id=16898200
When you think of urbanization, think barcelona or berlin, don't think of 1970s new york.
https://www.google.com/maps/@41.406821,2.1665481,3a,75y,191....
Certainly, it will be hard to get developers with their control of most city councils to buy into a reinvigorated well policed downtown until it really falls down. They make their money buying cheap, getting sweetheart infrastructure/tax deals and building "upscale" housing/retail on the edges... or the core once it's already gentrifying.
But economic activity has always chased the faster, newer and cheaper. Asking it to go the other way is a tall task, always has been, always will be. The point of the matter is, we need a lot of stuff. Scaling is still very much something America and the world needs, much more so than nicely landscaped downtowns.
I read that article about diapers and just how sophisticated they really are, just how much R&D goes into them and how thin the profit margins are on them. Wanting cheaper diapers won't magically make it so.
Americans choose what they want, and asking people to want different things is ultimately saying you're smarter than them. You might want a JC Penney's, but the struggling housewife next door wants a Dollar General if she can't get a Wal-Mart.
https://www.planetizen.com/node/53922
Google will find you lots more.
http://archive.wilsonquarterly.com/in-essence/why-america-go...
An investor making a profit from rental of a new building usually avoided all taxes on that income, since the ‘loss’ from depreciation canceled it out. And when the depreciation exceeded profits from the building itself—as it virtually always did in early years—the investor could use the excess ‘loss’ to cut other income taxes." With realestate values going up during the 1950s and ’60s, savvy investors "could build a structure, claim ‘losses’ for several years while enjoying tax-free income, then sell the project for more than they had originally invested."
You don't pay cash for the real estate - you take advantage of leverage and at the most pay 20% out of pocket.
While you own the building, the income you make isn't taxed because you can claim depreciation against your income. If you take into account the time value of money, if you take the tax free money and invest that in another long term asset and sell it, then you pay the much lower capital gains tax.
You'll have zero basis on xx million of real estate if you do this correctly, and have paid little income tax along the way from the rents. My old commercial landlord did this and probably owns like 30 mid-size buildings in Oakland.
It's similar to the corner of 85&ElCamino where the dead Emproium mall sat for 20 years because the landowner paid effectively no taxes on the property while borrowing on the appreciated value. I don't know if it's true that they only sold to Sutter Health because of bad investments during the dot-com boom, but that was the rumor in 2003-4 when it traded hands.
Source?
In fact, Home Depot had already leased that site for a new, modern store to go in immediately, but the City Council thought it should be reserved for "upscale" retail -- a ludicrous concept that, of course, never happened. Read about the 2000 Measure N controversy. Home Depot stayed in Sunnyvale and expanded to EPA instead.
I lived literally a block away at the time.
Edit: If anyone would like a longer reading of the Home Depot kerfuffle-
https://www.mv-voice.com/morgue/2002/2002_02_22.hdtimeline.h...
people were most worried about awful traffic immediately next to the highway
The Sunnyvale Home Depot has no such traffic issues, and it is only accessible from Kifer... which is not a big road. The whole "traffic!" issue was a crock instituted to chase a dream of a "Santana Row West" which never had a chance. The subsequent new huge Safeway Marketplaces at Hacienda and Bernardo/ECR create far more traffic, both in car trips and truck deliveries, yet they engendered no complaints.
The result: the property became a medical center that generates essentially zero sales tax revenue for the city; that lost half-million a year goes to Sunnyvale's Home Depot and Lowe's instead.
Does anyone have some counterpoint to what is discussed?
The ruthless answer is, 'There will always be someone cheaper and better than you. Just give it time.' Do not forget that capitalism attempts to seek the bottom at all times.
Right now, Aliexpress is cheaper than Amazon by a long shot. Ebay is cheaper on certain goods. Other area-specific upstarts are challenging Amazon in their own ways. And Amazon has significant problems with counterfeits everywhere in their supply chain due to gross mismanagement.
I would much rather go to a local business, and pay a bit more, than to deal with some of the online businesses. But the deal city and state governments make is to value the $BigCo, and not the small business.
More and more Amazon Distribution centers are being opened up. I know of 2 offhand from my location within an hour each direction. I don't know exactly how big the facilities are, but I do know they're massive.
I also know that they 'process' workers horrendously. Timed bathroom breaks, quick firing over trivial matters. In essence, they make walmart look like a saint with regards to employer practices.
Worse yet, the communities fight crazily over getting that Amazon warehouse. 10 year tax abatements are only the beginning of the 'bargains' made on the taxpayers' backs. Donated land is another gimmie, as is subsidy of city-related services. All this is on the hopes that workers will pay tax. And it amounts to a bad deal for everyone, well, except for Amazon.
But what the Walmarts and warehouses and these kinds of businesses do, is destroy the local businesses. And when the walmarts shutter or move away, or when the factories close, what are we left with?
We're left with few local businesses, higher unemployment, and a dying community.
Since volume tends to rule in the commodity space I think that usually means finding a way not to be a commodity. Specialty bookstores are an example because some are doing quite well because they have top-notch staffing; others followed Barnes & Nobles’ attempts to use cheaper staffing and have largely failed. I don't know about other speciality clothing stores but the places selling hiking, biking, etc. gear seem to be doing well around here because people like advice & the ability to try something on before dropping a fairly large amount of cash.
Then they built another mall didn't put a roof over it and called it a shopping destination...
This was on HN not too long ago:
Sure, cities are more "efficient". They're also more dysfunctional. What you gain in infrastructure use intensity, you give right back to machine politics, failing school systems, outright embezzlement/theft of funds, huge pension problems, entrenched big-city unions, and bad policing. Just watch The Wire if you want to see what it's like. I live in Oakland, CA, which has had, I think 3 or 4 police chiefs, in the past 3 years.
Perhaps there's some kind of middle ground. A place that's not some spread-out suburbia where "going into town" is a thing, but not quite SF/NYC-level government problems where building a subway comes at a price of 3.5 BILLION DOLLARS PER MILE. [1] Maybe a city of 1 million is about the right size.
[1] https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-...
When you collapse the entire flow locally so a local factory/tailor making clothes being sold by a local merchant. Then there is a more immediate return of the economic product. Customer buys a suit, that was sold by a store that bought it from a manufacturer, that bought the fabric from a local textile mill, all of which use machines and staff and other factories and tool shops.
I am not sure how you balance this sort of thing out.
As we have spent less of our income on things like food, clothing, etc, and increased our household income dramatically.
In 1971 median household income was c. £270/week. In 2001 £420/week, in 2011 £460/week. (figures adjusted for inflation to 2013 levels) In 1971 housing costs were £20/week, in 2001 is was £90 a week, in 2011 £120 a week.
Half of that extra money went in housing costs.
The big changes in income (especially in normalisation of a second income) from the 70s onwards were swept up in housing. Increase everyone's wages, and we just spend it on the same houses we had before. On the flip side, decrease everyone's wages and the amount we spend on houses will reduce. That benefits everyone apart from wealthy landowners.
The "downtown" is essentially a mall, but exposed to the elements. No normal mall manager has ever thought "What I really need here is snow, mosquitoes, panhandlers, diesel smoke, traffic jams, or 90-degree weather with 90% humidity."
A mall is like downtown, but without those problems. Malls are dying for reasons that are also hurting downtown areas. Online shopping has been mentioned. Another issue is that malls have lost their value as a social meeting place. People used to go to the mall to meet each other. Teens especially did this, causing them to buy things and to bring in parents with the serious money. Now people spend time at home poking at their cell phones; this is how people connect.
https://www.youtube.com/watch?v=G2BlyvN6EeI
On the one hand, the confident forecasting seems silly in hindsight. You had malls for a hot moment and you decided they would last forever?
On the other hand, that hindsight is humbling. Things change. What do we know even now? Society changes. Maybe malls will make a stunning comeback in a few decades. I can't imagine how. Vastly cheaper land or package shipping becoming somehow unsustainable, or just the industry cleans house and survives through attrition.
Or maybe online retail will be forever. Or maybe it will be displaced by something unthinkable in thirty years. For all I know some AI concierge service will be a strict dictator over all my finances and purchases, and I'll never touch money, I'll just receive a box of things the machine thinks I need each week. Who knows.
We had a thirty year trend that some people thought was forever. It ended, now we all feel smug, think we learned some deeper truth about society.
StrongTowns is convinced we should (albeit modestly) reinvest in downtowns.
I don't know, that's a lot of conviction for me. Sure, maybe? Am I the only one who feels like I know less now than when this all started?
They still make some sense in places not blessed with San Diego weather. The problem is, people don't have disposable income to spend at them.
(Another problem might be the lack of book, magazine, toy, and music stores. The stores that are left probably have a clientele that is mostly women, and males don't have much reason to visit the mall and spend money.)
I don't think it's a coincidence that malls, especially non-upscale malls, are dying at the same time there's a proliferation of dollar stores and thrift store chains like Savers (basically a for-profit Goodwill).
Near a mall where I live there once was a Circuit City. Now there's a dollar store and a Savers.
Malls are failing because we simply don't have as much disposable income as we had in the 80s and 90s.
The malls that seem to be doing well are the upscale malls whose clientele still have plenty of disposable income.
"Consumer income has not changed much since 2006, thus over the last 10 years $190 billion in consumer spending was diverted toward mobile phones. [...] Between phones and their services, this is $340 billion that will not be spent on T-shirts and shoes."
[0] http://contrarianedge.com/2017/07/26/not-just-amazons-fault-...
Its also why I think any coming recession will leave the tech industry relatively unharmed.
As for rural areas, why not try something new? Delivery by drone, goods exchanges, unstaffed warehouses access through a smartphone, 3d printers, fast book printers.
It's time for radically new ideas to save the rural divide.
They can be good for those large blocks where the interior of the block is not used efficiently because of the size, since mall shops do not need windows to the outside. Interior urban malls are also great for places where the weather is bad most of the time.
With the urban malls you can still have a strip of shops around them on their outsides.