Feb 17, 2009

Retailers’ loss of revenue hammers city and state budgetsBy Jayne O'DonnellUSAToday.com

In the world of shopping centers, strip malls and the cities that house them, a closed Ann Taylor here or an out-of-business Circuit City there might not matter much.

But the timing and immensity of the current downturn in retail are dire, and not just for the employees who lose jobs, the company shareholders and the shoppers who no longer can buy from their favorite stores. Cities — entire regions, even — that boomed as Americans shopped till they almost dropped for more than a decade are struggling mightily because spending has almost slammed to a stop.

The resulting store closures (150,000 are expected this year), steep declines in sales taxes collected by cities and states, and the plethora of empty buildings are wreaking havoc on budgets, wrecking town center plans and ruining dreams for revitalization.

Outside St. Louis, the decline of Crestwood Court mall, which is more than half vacant, is crushing the city’s budget. About half of the city’s $14 million in revenue in 2008 came from sales taxes, which were down almost 10% last year.

Sears is the only major tenant left at Crestwood. Dillard’s left the mall a couple of years ago, and many smaller stores have followed. The ultimate blow could be Macy’s planned closing in April, but mall owner Centrum Properties is hoping to keep the existing tenants and perhaps use some of the other space for artists until it tries to convert the mall into an open-air center late next year or in 2011.

Sixty-year-old roads may not get repaired; parks may not get improved; and property taxes may have to rise.

“Most people would agree we were too heavily reliant on sales taxes for some time,” says Jim Eckrich, city administrator. “But the city succeeded for a long time with those sales taxes.”

So did others.

The very top few malls in the U.S. can do as much as $1 billion in sales annually, says retail real estate consultant Jim Bieri. Even an average one can do $300 million. With sales taxes that average 6% nationally going into city, county and state coffers plus the property taxes and jobs created, it’s easy to see why government officials work hard to lure and keep retail developments. The revenue pays for services such as schools, police, fire and public transportation.

Read complete article.