A Tale of One City

An interesting article crossed my desk the other day, primarily because I had, a few years ago, some limited involvement in the project (very limited). The article titled: 12 Things that Could Replace ElkGrove’s Unfinished Mall – Pick One. It is a poll of the residences to see what they think about how to fix a disaster.

Elk Grove Mall - Photo Linda Ford

The mall, in Elk Grove, California, was begun more than 10 years ago, went through a long and arduous approval process (in California they are ALL arduous), then law suits. A fairly classic and uninteresting design was begun by General Growth Properties, then when the economy turn south, taking General Growth into bankruptcy, it was stopped. Now it sits, south of Sacramento, fenced in and a derelict, in the west boomtowns became ghost towns – now we have ghost malls. In the grey fog of the Central Valley of California it looks forlorn and unwanted.

In spite of its abandonment (for all intents), the community sees an opportunity, or at least that was my take from the article. There are a couple of points to be made, the south side of Sacramento needs retail, it grew fast and the last thing of substance to arrive is usually quality retail. The residents have to go north to Sacramento and Roseville to really find quality, and south to a marginal center in Stockton (and that’s a whole other discussion itself).

The Patch (the news outlet that posted the story) is an interesting business in itself that’s worth looking into. Owned by AOL, it operates some 850 local and hyperlocal news websites across the country. Their goal is to provide local information, online. This is a direct result of the loss and collapse of the small town (and large) newspaper industry. Its future is uncertain – now back to the story.

The Patch suggested a poll of the Elk Groveiers. If you had a choice, what do you think of these?

• Casino
• Agriculture College
• Solar Energy Field
• Outlet Mall
• State Prison
• Soccer Arena
• Branch Campus of UC Davis/Sac State/Drexel
• Shopping Mall (Large department stores
• Air Soft Park
• Go Kart Track
• Scandia / Raging Waters / Family Fun
• Aquatics Center

What do you do with a derelict mall, even if the builder wanted to give it away? Development is not a zero sum game, costs have to be recovered, management and maintenance costs are very high, and the city needs revenue, not a drain. And it would be nice if there were jobs, permanent jobs.

I can easily nix the aquatics center, water park, go kart and air soft park, and soccer arena – their costs are high, they can only be open during the summer (mostly), and they produce few permanent jobs (ask Stockton how their venture into arenas went – it helped to bankrupt the town). Branch campuses take years and years to develop – even if the state had money, but it’s almost as derelict as the mall is itself. Solar energy field – warm and fuzzy but no jobs and in winter, weeks with no sun. The state prison does produce jobs and the money flows back through the community, but the state again has no money to take care of what they have now let alone another prison. That leaves the casino, outlet mall, and shopping mall – back where we started.

There are hundreds of villages and small cities faced with this same challenge: How do we move forward and entice (bribe) businesses back into our city, county, and state? What can be offered? Today land is relatively cheap, so free land is not an option that works. Customers and an educated work force are critical to the decision makers. They have a business to run, make sales, make profits – we seemed to have forgotten this.

Here are some off-the-cuff ideas: reduce impact fees to almost zero, reduce property taxes for a set period of time, wave mitigation fees, and eliminate social obligations in conditions of approval (extractions for community needs such as parks, roads, and public health). The goal is help support running a business that adds to the community with jobs, wages, and long term tax revenues. The idea of a new downtown (found here) is interesting – in the days of wine and roses maybe, today impossible.   

Cities will have to compete for businesses and encourage them to return, ask once complacent states like Michigan and California how they are doing.

Stay tuned . . . . . . . .

NOODLING AUGUST

Home Prices Rising

They are still going up, and according to one report – Everywhere! With pent up demand and a growing population this is not a shock. And considering little things like the number of college graduates every year, growing families, and a new term I want to invent, “Emerging Adults,” it's just demographics. Sure there are young adults living with mom and dad and the overall hot apartment market (and rising rents) to confuse the numbers and absorb these demographics, but demand is growing. As we climb out of this disaster look for substantial increases in both new home and existing home prices, and don’t be surprised by dramatic increases by 2014. Here are a couple of interesting articles:

• Rising HomePrices: Federal Reserve Atlanta
• US Housing – Surprising Numbers (for an absolutely different take)
• WSJ: Why Home Prices are Rising

Retail – Competition is a GOOD thing

The Shakespearean tragi/comedy that is General Growth Properties (GGP) continues. After the largest bankruptcy in financial history, the unceremonious dumping of the family that built the company, and the takeover (with 42% ownership) by Brookfield Asset Management, Inc., it is still a ship trying to find a port. The man who kicked this all into gear and helped resurrect it from the dead was Pershing Square’s Bill Ackman (10% ownership). There is too much history to go into (the following sites will help if interested), at least for now. But Ackman wants GGP to essentially sell itself to Simon Property Group or some other entity. If Simon absorbs GGP there will be a major shift in the retail firmament. My guess is that many national retailers are holding their collective breaths. The stock holders may be happy but the consumer may be in for another surprise.

Here are some interesting articles:

• Will Brookfield be able to hold off Pershing
• Ackman turns up heat on GGP after Brookfield bails

High-Speed Rail – I will never give up!

High-Speed Rail is like the strange aunt that lives in the basement, you know she’s there, she won’t leave, and you hope she doesn’t come upstairs when there are guests, especially in California. After November all sorts of things may happen. In one scenario HSR will be dead as a doornail, in another it could be like suddenly declaring the end of Prohibition. You choose since it will be based on your choice and your money. The old saw, “Throwing good money after bad,” comes to mind. In 1938 you could take a train (steam driven) from New York to Chicago (the 20th Century Limited) in 16 hours – exactly. And more often than not it ran exactly on schedule. This is the train that made famous the term “Red Carpet Service.” Elegance and style also made it famous – the scene in North by Northwest with Cary Grant and Eva Marie Saint was shot on that train. Today Amtrak (using the same route) takes from 18 to 27 hours (and the last is direct!). And I’ve heard you should safely double it. I give up; go build the dinosaurs, pad the union labor ranks, buy the trains and engines from China and France and who knows where else. The rails will probably be rolled in China, the only small bit of pleasure will be knowing the natural gas used to fuel the power plants will be American.

Here’s a great take:

• New Setbacks for the Beleaguered California Bullet Train

And lastly thanks, as always, to Aaron Renn (GO HERE) , for the following videos. Every city should market itself, brand itself. Here is Memphis, Tennessee’s shot, followed by Dubai. Just think about it.

 Memphis, Tennessee

and Dubai

Stay tuned . . . . .