Mayor Hopes to Boost Downtown Retailing

Pittsburgh’s Mayor, obviously unhappy about the impending departure of Saks from its Downtown location and the downsizing of Macy’s, has pulled together a blue ribbon panel to recommend ways to halt the exodus of retail and maybe even attract some new stores.

Bulletin for the panel: think parking, and think about the way people shop.

Downtown Pittsburgh attracts tens of thousands of people every day as they go to their jobs along with thousands of visitors staying in hotels or in town for the day on business. They are presumably a built in retail bonanza for Downtown and yet major retail outlets have not fared well in recent decades, with many major stores departing-even those receiving significant taxpayer subsidies. Granted, there is a fair amount of retail remaining, with a few men’s and women’s clothiers, drug stores and some specialty outlets. However, the overall trend has been toward a lower level of retail as shopping continues to expand more and more into the suburbs and less congested areas.

When folks go shopping, as opposed to hurriedly running to the store over their lunch hour to pick up an item, they typically want to have time to browse and visit several shops in a comfortable environment. To do that, they need relatively convenient and inexpensive, if not free, parking. Those who want to see retail expand Downtown would do well to drive into the City in late morning or early afternoon and try to find parking anywhere near retailers. And if one is lucky enough to find a parking spot, rest assured it will cost a packet. In short, expecting large numbers of people to show up Downtown on a weekday to shop is a pipe dream.

Maybe parking prices could be lowered drastically at night or weekends to attract shoppers but that seems a very long shot for two reasons. Retailers cannot survive principally on Saturday traffic and would not open a new outlet on hopes that they could make it on Saturday and maybe some Sunday business. Moreover, who would drive into the City from the suburbs to shop on Saturday when a plethora of more convenient shopping centers are available closer to home and far less difficult to get to? Then too, coming into the City at night to shop is not something many busy family folks will contemplate. Besides, malls offer a wide variety of shops in close proximity to each other and thus maximize the shopper’s use of time and effort spent shopping. Finally, most of the people in town are adult and with minor exceptions, all the retailing in town is aimed at adults. If families with children want to go shopping, Downtown is not a likely destination.

Moreover, the weekend shopper looking for garden supplies or home repair products, hardware or furniture will find slim pickings Downtown. And those shoppers are a big portion of Saturday and Sunday traffic.

This is the reality facing the City as it tries to get more retail in to the Downtown. The Mayor and his minions might want to be grateful for the taxpayer subsidized sports facilities and the convention center as well as the world class, privately funded, entertainment venues that bring large numbers of people into the City. These folks support restaurants, pay parking and amusement taxes and help maintain a vibrant weekend and evening presence in the Golden Triangle and in so doing help sustain property values and the real estate taxes as well as employment in the City. It would be far better for the City to work on keeping those people happy than to spend a lot of time trying to force a square peg into a round hole.

Macy’s is Downsizing-Not Asking for Government Help

Macy’s is reducing its Downtown store’s active floor space by 32 percent. Of course, employees are worried about possible job losses. This downsizing comes on the decades long trend toward smaller downtown retail operations. Since the early 1980s Horne’s and Gimbel’s have left, Kaufmann’s sold and downsized while heavily subsidized Lord and Taylor’s and Lazarus have come and gone quickly.

Meanwhile, Saks Fifth Avenue is telling City officials that it will need government financial help if it is to keep its Downtown store open. One can hope that after the horrible experience and financial losses Pittsburgh has suffered had in trying to prop up or grow Downtown retailing, and in view of the City’s own fiscal problems, elected officials will resist the temptation to waste even more money subsidizing an upscale retailer.

The encouraging part of the Macy’s downsizing story is that the store has not asked for government financial help to maintain its current size or to avoid possible employee cuts. Perhaps the company is being a good citizen expecting to pay its own way and to rise and fall on based on its own efforts and resources. Or perhaps the company simply has seen the pushback to the Saks request and understands the City and state are not in a position to subsidize retail outlets.

Not that there is ever a justification for subsidizing retail. Retail is driven by consumer spending. Helping selected retailers creates an unfair competitive disadvantage for non-subsidized retailers and produces no long term net increases in total sales. It merely attempts to redistribute where sales occur. As Pittsburgh has learned to its chagrin, fighting long term retail trends by throwing money at Downtown department stores is foolish. Too bad City officials refused to listen to folks who tried to tell them back in the mid 1990s what was going to happen if they embarked on a massive scheme of subsiding Downtown retail.

Third Time is the Charm?

At least that seems to be the case as of yesterday’s announcement on the new PNC skyscraper to occupy Wood Street near the area of Fifth and Forbes. The $400 million project, to be called the Tower at PNC Plaza, is togo without a subsidyas the CEO indicated in printed reports that "PNC will pay for the entire project. It will not seek any public funding".

That’s a welcome and overdue change from the last two building projects undertaken by the company since 1999. The FirstSide Center was a $100 million project that had $11.5 million in public money (11.5% of total); the Three PNC Plaza had $48 million in public funding for the $170 million total price tag (28% of total). Proponents of publicly-funded development often say that the level of public help is supposed to decline as building activity accelerates: clearly that was not the case with PNC as the public subsidy was higher in the more recent development. The previous Governor defended the Three PNC project by saying the company was putting $2.50 for every $1.00 in public money and that job growth would help recoup the public’s investment. The bank’s top official said that project would not have been feasible without a subsidy.

The Mayor is bullish on the latest project, noting that it is part of the third renaissance for Pittsburgh. Maybe the building will lead into the fourth by the time of its completion in 2015-a renaissance in which economic activity is undertaken without public help beyond infrastructure. Perhaps PNC has shown the way.