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.

Reaction to Saks Closing Announcement Will Be Telling

"Based on the current circumstances, we cannot justify such an investment since it is unlikely that we could achieve a reasonable return on the investment due to declining sales volume". This comment from a Saks Fifth Avenue spokesperson during an announcement the upscale store will be closing its Downtown location when its lease expires next September because it failed to gain a commitment for $10 million in improvements from the store’s landlord and the City. Perhaps this was too much honesty from the spokesperson in terms of trying to solicit taxpayer help.

The failure of heavily subsidized Lazarus and Lord and Taylor’s stores in Downtown during the past seven years has substantially lowered competition for Saks. The fact that the store still cannot make a go of it is very instructive about the shopping patterns in southwestern Pennsylvania.

How the City, the County and the state, react to the Saks announcement will be very telling. As short as a dozen years ago the development "vision" for Downtown was as a retail destination. In pursuit of that vision, several publicly funded schemes were put together to promote Downtown retail establishments. Should Saks close, Macy’s will be the lone downtown department store, a company that is reacting to economic conditions by downsizing its footprint, not asking for a subsidy.

If the owner of the building is not willing to meet Saks’ terms, why should taxpayers be on the hook? The apparently honest statement by the spokesperson that future sales will not justify Saks undertaking the needed investment is a clear signal to elected officials: they would be ill advised in putting tax dollars into this situation. In light of previous bad experiences with subsidizing retail, they would be incredibly tone deaf if they spend $10 million to prop up a store that caters to high income shoppers.

Taxpayers About to be Sacked by Saks?

Here we go again. A retailer needs government money to stay in Downtown Pittsburgh. Saks Fifth Avenue is telling local officials it might require as much as $10 million to refurbish its current location in the City. The City does not have the money and its experience in subsiding downtown retailers is dreadful at best. Having learned nothing from the previous examples of misusing tax dollars to underwrite retail operations, the City now plans to ask the state to kick in money for the Saks makeover.

The irony is so thick one can cut it with a knife. Not only is taxpayer subsidy of retailing in general a losing proposition, but subsidizing upscale retailing defies all logic. Why should the citizenry be asked to pay taxes to help hold down prices for customers at ritzy retail establishments?

It seems policy makers are incapable of putting two and two together. Just look at the record of earlier handouts and the ongoing largesse being plowed into very rich sports team owners.

Saks Salvo Smacks of Past

Downtown Pittsburgh, September 24, 2010. The department store Saks Fifth Avenue has intimated that it needs help for renovation of its store, preferably from its landlord, but it would not turn down assistance from the City or its agencies, either.

"If it is important to the community for us to remain a viable retail presence in Downtown, it is necessary that the city and/or the landlord provide Saks an economic incentive for us to continue to operate" said the store’s spokesperson.

She also noted that "we are not looking to expand, but to comprehensively remodel both the interior and exterior of the store to meet the standards of both our customers and our design partners". The chain does not want to invest much in the building "because it’s unlikely there would be a reasonable return on investment because of reduced sales".

Downtown Pittsburgh, October 12, 1995. In a proposal outlining projects that would comprise the Center Triangle Tax Increment Financing District in Downtown, the Urban Redevelopment Authority (URA) noted that "the retention of a major department store in the downtown is considered to be very important" and a tax increment finance arrangement was critical to make the project viable. The development costs of that store totaled $78 million. Five years later the URA’s chairman noted that "…this store will become one of the most popular places to shop in a revitalized Downtown". Four years later it was gone.

It probably won’t come as much of a surprise that the store was Lazarus and is now a condominium project, which itself has received a fair share of public subsidy to help with its conversion. Is history repeating in Downtown?