Should government speculate in luxury shopping malls?

The conservative right has done a great job of selling America the idea that big government is bad and  a free-market economy best left unfettered by pesky government interference.  Over and over we hear how taxes are too high and the system full of waste.

Isn’t it odd that this same principle doesn’t apply to commercial real estate development, where the biggest public dollars are involved?  When for-profit corporations build big buildings, then the government is smarter than the free market.  Government intervention is not only encouraged to over-ride current realities of supply and demand, cities are routinely blackmailed by the for-profit sector as they negotiate richer and richer deals at taxpayer expense, our corporate “citizens” suggesting they can get better deals outside city limits if municipalities don’t pay up.

These days Cincinnati is turning the entire decision-making process over to the corporate sector:  3CDC, the Port Authority, and REDI, their governing boards almost entirely composed of corporate executives with no possibility for input from the public.   ALL deals are perceived as desirable, with no critical assessments beyond available financing.   And it doesn’t seem to matter that government agencies have crappy track records in terms of investment decisions since nobody ever bothers to measure our returns. We’re apparently mesmerized by the soothing repetition of the “job creation” mantra, that greatest trickle-down hoax of them all.

Kenwood_Towne_Place-304

Perhaps my favorite example of bad real estate investments by a public agency is the Port Authority’s involvement in Kenwood Towne Place, now called the Kenwood Collection, a development in a “flourishing luxury retail corridor.”* The Port Authority owns the 2,500-space public parking garage financed with bonds that mature in 2039. Since parking is free at the mall, it’s hard to understand exactly how the revenue is generated to pay off the debt – but it surely hasn’t been easy as the development drowned under a sea of liens filed by subcontractors who were never paid, many of them smaller minority-owned companies trying to benefit from the Port’s Economic Inclusion Policy. The FBI was involved.  There was a criminal investigation as well as civil litigation.  It’s been a mess.

Why was government ever involved in a $30,000,000 parking garage in a “flourishing luxury retail corridor”? When should public servants expect middle-class taxpayers to shoulder this kind of financial risk with no possibility of personal reward?  While there’s a clear public benefit to fix  environmental brown-fields and actual blight, using government intervention to provide more covered parking so shoppers don’t have to get wet on their way to Crate & Barrel is absolutely absurd.

According to the Constitution, government was established for the purposes of unity, justice, domestic tranquility, defense, promotion of the general welfare of the citizens and securing liberty for all. It doesn’t say a damn thing about making the rich richer and convenient parking at fancy shopping malls.

* “flourishing luxury retail corridor” is the term used on the Port Authority’s website – though it is currently difficult to locate information on the Kenwood Project.  The “Our Projects” tab is now limited to deals done within the last ten years in the Central Business District.

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6 thoughts on “Should government speculate in luxury shopping malls?

  1. Bill Collins

    Thanks for this.

    Speaking of subsidized development like this one at the Montgomery Road/Kenwood Road/I-71 interchange: I cannot help but think of the way that, back in the 1950s, the State of Ohio subsidized the Williams family at this site.

    In the early 1950s, as I understand it, this land was part of the Meijer winery. By the mid-1950s Mr. Williams from the Williams clan (Western-Southern) bought that land and developed the Kenwood Plaza shopping center (now called the Kenwood Towne Center) at that northeast corner of Montgomery Road and Kenwood Road.

    Then, as the State of Ohio proceeded over the next 20 years to plan and then build the Northeast Freeway (now known as the 71 freeway), somehow its route was planned and then built to pass conveniently alongside the Williams’s shopping center. To top it off, the Williamses got the benefit of not just one freeway interchange being built next to their property (the full I-71 interchange with Montgomery Road), but also another interchange (the half I-71 interchange with Kenwood Road) built within sight of the mall.

    The result of this public subsidy of the Williams clan by state and federal taxpayers was to build an unneeded suburban retail center that led during the following years to the virtual destruction of all the town and neighborhood business districts in northeastern part of Cincinnati and its suburbs (ie, downtown Montgomery, downtown Madeira, downtown Silverton and the neighborhood business districts of Madisonville, Kennedy Heights and Pleasant Ridge). Only now — 50 years later — are we finally digging out from these negative effects on community development that flowed directly from this subsidizing of the Kenwood Towne Center by the State of Ohio.

    Money talked then, and money talks now. Thanks for exposing these abuses of the taxpayers trust.

    Reply
  2. 5chw4r7z

    These stats are old but interesting,
    Donald Shoup reports that in 2002 between $127 billion and $374 billion a year was spent nationally to subsidize off-street parking, as much as the U.S. spent on Medicare or national defense that year.

    The High Cost of Free Parking by Donald Shoup, an urban planning professor at UCLA. http://shoup.bol.ucla.edu

    Reply
  3. Blue Ash Mom

    I discovered your blog last week quite by happy accident and have been enjoying myself poking around in all its corners since. You are really doing a public service, and putting all of our local print media to shame.

    Re: This post. As you can tell by my name, I live near Kenwood Mall, and occasionally visit both Crate & Barrel and its neighbor, the Container Store. There is always plenty of parking in the surface lot in front of those stores, and I always find surface lots a lot easier to navigate than parking garages; they could do it the other way around, the garage could be free and the surface lot could have a fee, and I probably would choose to pay to park. I suspect I have lots of company in that preference. Else Rookwood wouldn’t look the way it does.

    I’d long assumed the pay parking at “the Kenwood Collection” was for all the people who were going to be working in that tower, although where the businesses that were/are going to rent space in that tower were/are going to come from has been a puzzle to me. There is lots and lots of available office space all up and down Reed Hartman. In this regard, I am reminded of the luxury hotel boom downtown: just how many luxury (or for that matter, any kind of) hotels is there a downtown market for anyway?

    Also have to say, appreciate Bill Collins’ history of how the mall area came to look like what it does.

    I’ll be back, you are bookmarked.

    Reply
    1. executivedreamer Post author

      Well, you can see I haven’t been to Crate & Barrel for a while. The last time I was there 5 years ago, parking was free. Thanks for the update – and thanks for reading, Blue Ash Mom.

      Reply
      1. Blue Ash Mom

        Sorry, I obviously wasn’t clear — parking in the surface lot IS free, but IF they charged for the surface lot, I imagine I’d probably pay for it, the three or four times a year I find myself over there. I was trying to make a point that surface lots are a lot more appealing to a lot of us, which makes the mega-indoor garage even more ludicrous. Have fun in Italy.

  4. Architect

    I don’t know how the details of the kenwood collection project we’re hammered out. I do undersramd that the parking provided in the garage is to support the office and retail uses in that building. The surface parkung is actuall almost all owned by kenwood towne centre with a shared use agreement with kenwood collectio. What I understand about public money funding garages is this…density and therfore taxable revenue on any particular lot of land is driven by zoning and it’s parking requirements. Developers want to maximize their potential revenue and will usually maximize the amount of space they can build to do that. Often however structured parking, while increasing the amount of space they could build to rent or sell, is just too expensive to construct. Therefore, to fill this gap, TIF or other type of public funding can be invested by the community in order to make a higher density feasible. This in turn perminantly increases the potential taxable revenue. If it is TIF funding, those increased taxes pay back the TIF over a certain number of years based on projected revenue. From my understanding TIF funds can only be used on public improvements, i.e. utilities, roads, parking garages open to the public. I don’t have a full understanding on how the Port Authority’s programs work, but do know that the assets that the Port Authority holds allows them to get low rates and benifits them in other ways. Often they will hold land while a project is being developed and then the developer is required to take the land back at the end of construction. This allows the developer to avoid land taxes prior to having income from the completed project and allows the Port Authority the benifits of having more value in their portfolio. I would be open to others further explaining how this process works.

    Reply

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