Don't waste public money to woo Bloomingdale's

Retail

Don't waste public money to woo Bloomingdale's

by Topher Mathews • June 1, 2012 9:38 am

Both Mayor Vincent Gray and Council Chair Kwame Brown may want to use tax increment financing to lure a high-end tenant like Bloomingdale's to the Georgetown Park mall, the Current reported. That's a foolish policy.

Photo by Mr. T in DC on Flickr.

In tax increment financing ("TIF"), the city issues bonds for a particular project and gives the money to a private developer. A portion of the taxes from the project go towards paying off the bonds. In theory, the city pays back the bonds out of the extra property and/or sales taxes from the now-improved property.

DC has used TIFs in the past. For instance, it set up a $74 million TIF to help the Gallery Place development along. It used a $46 million TIF for the Madarin Oriental hotel. And a $7 million TIF helped pay for the Spy Museum. Each of these projects was successful and they even paid off the bonds ahead of schedule.

But TIFs only work when there's an increment to be found. In other words, they work in areas that will likely see a big improvement in value, and thus tax revenue, from the public investment. If there's no increment, then the only way to pay off the bonds is to cut into the taxes that would arise from the property without the public financing. In that case all you've really done is give free public money to a private developer.

According to the Current article, the argument goes that if there's no TIF for the mall, then Vornado won't be able to land Bloomingdale's and will instead lease to a store like T.J. Maxx. So, the theory goes, the "increment" of having a Bloomingdale's instead of a T.J. Maxx is enough to justify a TIF for the mall.

The twist with this proposal is that a part of the incremental tax proceeds (i.e. the difference in sales taxes that Bloomingdales would pay over T.J. Maxx) would be directed to tax breaks to attract retailers to less established retail districts in DC. Chairman Brown called this a potential "win-win."

This is completely backwards.

If the District wants to get into the TIF game again, it should be directing the TIFs to those less established areas, not the mall. That's where there will be an actual incremental increase in value. That's where we'll get much more bang for our buck. If Vornado, which owns the mall, can't put together a package to attract Bloomingdale's with its own resources, then so be it. Maybe that means they and their partners paid to much when they bought the mall at auction last year. That's not our fault.

I don't want a T.J. Maxx to move in to the mall, but using public funds to help attract one tenant over another is unacceptable. And it's shameful that the Mayor and the Chairman are even thinking about such a ludicrous proposal.

Cross-posted at the Georgetown Metropolitan.

41 comments

Tags: DC, Georgetown, retail, taxes, TIF

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Topher Mathews has lived in the DC area since 1999. He created the Georgetown Metropolitan in 2008 to report on news and events for the neighborhood and to advocate for changes that will enhance its urban form and function. A native of Wilton, CT, he lives with his wife and new daughter in Georgetown.

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Personally, I don't mind having a TJ Maxx. I am likely to buy more at TJ Maxx than at Bloomingdale's.

The economics of this proposal seem really sketchy. Why do they need more money to bring in a Bloomingdale's? I assume Vornado would charge higher rent to a Bloomingdale's than a TJ Maxx. But if they aren't getting the Bloomingdale's, why not drop the rent to somewhere in between, a level which would appeal to Bloomingdale's?

Unless Bloomingdale's insists on paying LESS rent than TJ Maxx, Vornado ought to be able to make the Bloomingdale's deal work on its own and be better off than if it rented to TJ Maxx. If Bloomingdale's won't even pay as much as TJ Maxx, then there's no profit from the TIF that could go to other neighborhoods.

It sounds like Vornado is just threatening that they'll rent to TJ Maxx to try to get money out of the city, and leaders are getting conned.

by David Alpert on Jun 1, 2012 9:45 am • link • report

Why don't you want a TJ Maxx to move into the mall? It's better than what's there now, which is nothing.

by Ron on Jun 1, 2012 9:49 am • link • report

A mall? Yeah, maybe in 1987. Retail's dead. What a foolish idea.

by jason on Jun 1, 2012 9:54 am • link • report

This would be a terrible use of TIF funds. Vornado is a massive private developer with little interest in serving the neighborhoods in which it owns properties (see: http://www.bostonmagazine.com/articles/2011/08/steve-roth-the-pit-boss-behind-the-filenes-crater/), and I agree with David's comment that they're probably just trying to get money out of the city. Invest TIF funds in neighborhoods that could actually see some form of revitalization through public financing.

And a TJ Maxx would be great in Georgetown. I could finally afford to go shopping during my lunch break!

by Allie on Jun 1, 2012 9:55 am • link • report

I can't wait until I'm mayor or a council member so I can start using my position to bring in the brands I like.

Combo Pizza hut/K&G menswear stores in every neighborhood!

by X on Jun 1, 2012 9:59 am • link • report

What's happening with Georgetown Park in general? It was supposed to be undergoing some sort of massive interior redesign but I haven't heard much about it. Last time I went by I don't remember seeing any construction or other signs that the interior space was being redone to accomodate large-format retailers.

by Adam L on Jun 1, 2012 10:01 am • link • report

I'd rather see a Bloomingdale's built in Hill East and the Redskins practice facility moved to the Georgetown Mall.

by aaa on Jun 1, 2012 10:04 am • link • report

I thought it was Target not TJ Maxx.

If TJ Maxx moves in, you're going to see high end retail in Georgetown flee. They are already moving to Metro center and it will continue. I'd say 14 stores or more. Remove the high end retail and you're going to lose more restaurants.

I've seen Georgetown in 10 years really decline. And it is going to get worse before it gets better.

by charlie on Jun 1, 2012 10:12 am • link • report

@Ron

Why don't you want a TJ Maxx to move into the mall? It's better than what's there now, which is nothing.

The same reason you don't want students and other renters moving into Georgetown - because it detracts from the "character" of the neighborhood.

When you have so much invested in a certain image, appearances become paramount. You would rather have a distinguished-looking facade with nothing behind it than an occupied space that conveys a pedestrian, unrefined aesthetic.

by Dizzy on Jun 1, 2012 10:12 am • link • report

@Charlie

A TJ Maxx just opened in Metro Center, but you're saying that's where high end retail would "flee" to avoid TJ Maxx. I'm confused.

by Corey H. on Jun 1, 2012 10:23 am • link • report

Great post and good to expose Vornado's weak attempt to bully its way into getting subsidies that won't improve the public good.

by John D on Jun 1, 2012 10:23 am • link • report

Georgetown is being choked to death by vehicular traffic. The roads are too wide, parking is too cheap, and sidewalks are too skinny. Much of Georgetown has become unfriendly to DC residents while the tourists continue to flock to it. Tourists will continue to go to the same chains they find on their strip malls back home and neglect the unique shops and restaurants that made Georgetown what it is (RIP Furman's). It's a vicious cycle.

by cmc on Jun 1, 2012 10:23 am • link • report

Will the area experience an increase in value if Bloomingdale is located in G'town Mall? I don't know for sure, but I can imagine that the Bloomies near Mazza Gallerie did well for and in an area that was already pricey.

I'm not particularly gung ho over the idea of choosing one over the other. But isn't this a standard US business practice? Providing incentives to attract more lucrative businesses..even in areas that aren't underserved? Or am I referring to a situation totally different than what's proposed here?

Personally, I would like to have a Bloomies there. But the current mall sucks major MAJOR gluteus maximus.

by HogWash on Jun 1, 2012 10:26 am • link • report

a) There's nothing wrong with a TJ Maxx store there. It might actually cater to the locals (i.e. students), instead of being a destination for far-flung shoppers who arrive by car and snarl traffic.

b) it's not the District's fault that mall is dead. Malls are over, period. Why spend money to prop it up?

by Flora on Jun 1, 2012 10:28 am • link • report

@charlie

If TJ Maxx moves in, you're going to see high end retail in Georgetown flee. They are already moving to Metro center and it will continue. I'd say 14 stores or more.

So, a TJ Maxx in Georgetown will make retail flee to Metro Center, right next to the TJ Maxx that just opened?

http://pqliving.com/downtown-dc-tj-maxx-opens-tomorrow/

Not following the logic there.

by Alex B. on Jun 1, 2012 10:28 am • link • report

The same reason you don't want students and other renters moving into Georgetown - because it detracts from the "character" of the neighborhood.

Newsflash from the past (Jan 23, 1789): "Georgetown University has opened door in a small building on a remote hilltop far away from dockside Georgetown, MD. Local residents are wondering why students would travel so far uphill to the suburbs while all economic activity is right on the river. Local opponents of the university are happy the school is far away from the docks. 'I hope those Jesuits will not come and disturb my customers with their proselytism', said a local bar owner."

Students moved into Georgetown more than 200 years ago. Accept it.

by Jasper on Jun 1, 2012 10:29 am • link • report

@CoreyH; I'm not bashing TJ MAxx, I'm bashing their customers. Target would be no different. Georgetown has survived for 20+ years on being an outdoor mall. Move the anchor tenant to a low end retailer and the high end retailers will jump.

Now, in the long term, that might be better. I think Georgtown might be nicer as a less commercialized district, and return to the funky 1970s vibe.

But I don't think the planners and tax officals would feel the same way. And I really doubt the landlords do.

The "community?" Who knows. I think a good start would be razing most of M st and putting up 12 stories condos. That is what the market wants, after all.

by charlie on Jun 1, 2012 10:33 am • link • report

The Georgetown Mall will only succeed if they build a metro station in it (ala Manhattan Mall). It is really is the perfect place for it, though it would be fairly expensive.

by cmc on Jun 1, 2012 10:43 am • link • report

@Jasper

Gotta check the byline - you know the views I was describing aren't my own. They are all too common, though. What charlie says above is a nice case in point - the problem is TJ Maxx customers, who are not the sort of people that "we" want to be attracting to Georgetown.

by Dizzy on Jun 1, 2012 10:54 am • link • report

Bloomingdale's should be downtown at Metro Center, not in G'town. In the Woodies Building or in the new City Center complex, somewhere near Macy's.

by Downtowner on Jun 1, 2012 10:54 am • link • report

Just to explain, I don't want to see TJ Maxx go into the mall because I don't want to see any big box store go into the mall, but if there had to be one, I'd rathe it be something more useful to residents like Target would be. (Most Georgetowners I've spoken would be happy to see a Target move in).

I just don't happen to shop at TJ Maxx so I'm expressing my personal preference. But that's just my preference. And to be clear: I don't think we should issue TIFs based upon my personal preference in stores! Or my neighbors!

Another reason I don't want TJ Maxx? I'll get their terribly jingle caught in my head every time I walk by: T T T T T T T T - TJ Maxx!

by Topher Mathews on Jun 1, 2012 11:11 am • link • report

Are we talking about the entire mall for Bloomies? It's too big for any of the spaces.

And TJ Maxx is much smaller.

by Tom Coumaris on Jun 1, 2012 11:15 am • link • report

This building doesn't need any taxpayer support. If WMATA wants to put a Metro stop in - then yes throw in some money but no need to subsidize Bloomie or TJ Maxx. GP Mall really needs to figure out what it can be - and throwing tax payer dollars at it isn't the solution.
What would be cool is if one day a week Georgetown closed M street from Key Bridge to Four Seasons (or Even Wisconsin) to cars.

by andy(2) on Jun 1, 2012 11:17 am • link • report

@Andy(2)

Great minds and such...:
http://georgetownmetropolitan.com/2010/04/09/why-not-shut-down-m-st-on-weekends/

by Topher Mathews on Jun 1, 2012 11:20 am • link • report

I hafta cosign Downtowner. Bloomies would be so much better downtown. It could replace the godawful forever 21.

And there's a metro there guaranteed to bring in constant foot traffic.

by HogWash on Jun 1, 2012 11:21 am • link • report

High-end retail brands like Bloomingdales actually tend to pay much lower rents than a TJMaxx and require significant more upfront costs to complete their stores. This is because a Bloomingdales brings a much greater amount of customer traffic and spending. As a result, other brands and retailers will be eager to locate near them, fashion boutiques, local cafes & restaurants, etc... (they know this and use it to their advantage in negotiating with landlords)

A TJMaxx will drive away other stores like JCrew, Intermix, Dean & Deluca, etc...

Have you ever been to a TJMaxx in a strip mall? Think about what else tends to locate near by...fast food chains, other discount retailers, and so on.

TIF dollars are "forward financing", they are not grants (i.e. free money). There is no doubt that a redeveloped Georgetown Park will bring in more tax revenue than the existing mall does today, and experienced economists will do the analysis for just how much increment will be created, determining the size of the TIF.

The argument of whether you prefer a TJMaxx w/McDonald's and TGI Fridays, vs. Bloomingdales w/brands similar to what exist in the area today...that is a matter of taste and everyone is entitled to their own opinion.

But to make the assumption that the TIF money is simply a matter of choice between two brands, w/politicians picking favorites, is naive. There is a much bigger picture & discussion that revolves around the future development of the entire area.

by Brian on Jun 1, 2012 11:27 am • link • report

Wasn't Nats Park financed with TIF's and wasn't one of the issues in that controversy that even though TIF's are technically paid back, DC can only be on the hook for so much TIF money at a time and preserve our bond rating?

by Tom Coumaris on Jun 1, 2012 11:28 am • link • report

@Topher @Andy(2)

Alas, the Sunday Streets concept may not work in DC at all. The local homeland security agency doesn't like the idea of closing off a stretch of road only to have some cross-streets accessible. They tried doing this with K Street a couple of years ago and, well, we haven't had one yet, have we?

by OctaviusIII on Jun 1, 2012 12:38 pm • link • report

Bloomingdale's should be downtown...somewhere near Macy's.

Since they are owned by the same company, that probably won't happen.

Yes I know they co-exist in existing malls, but that is a result of their being former competitors. Now that they share a corporate parent, I don't see them deliberately opening near each other.

by Marian Berry on Jun 1, 2012 12:51 pm • link • report

http://urbanplacesandspaces.blogspot.com/2012/06/turnabout-is-fair-play-why-topher.html

by Richard Layman on Jun 1, 2012 12:53 pm • link • report

There are quite a few local examples of similar inaction by Vornado, Allie. I believe Springfield Mall officially closes on June 30... It's sickening that they are getting away with allowing areas to decline.

by selxic on Jun 1, 2012 1:13 pm • link • report

The article that this post is reponding to mentions that the alternative to Bloomingdale's would be Target, not TJmaxx. Even though they might both be considered "discount" retailers, they're fundamentally different types of stores. I wonder how hard the council members have crunched the numbers and compared the real difference from sales tax receipts (Target sells lower price items but at a high volume, B's sells higher-priced items but at a lower volume).

by grumpy on Jun 1, 2012 1:31 pm • link • report

It would make better sense to put Bloomies downtown. I'm amazed that there hasn't been news of high-end stores like Bloomies coming to the City Place DC project at the old Convention Center site.

by ceefer66 on Jun 1, 2012 1:56 pm • link • report

Remove the high end retail and you're going to lose more restaurants.

Getting rid of those low-quality restaurants in Georgetown would be an improvement!

by JustMe on Jun 1, 2012 1:59 pm • link • report

If TJ Maxx moves in, you're going to see high end retail in Georgetown flee. They are already moving to Metro center and it will continue.

From the city's perspective, it doesn't matter if high end retail is in Georgetown or Metro Center. Putting a high end retail cluster in either location is more or less equally as good for the city. The problem would be if high end retail moved out of the city altogether but there's no evidence of that being a risk.

by Falls Church on Jun 1, 2012 2:00 pm • link • report

Selxic, I believe that Vornado has big plans for Springfield Mall and the area. But the mall is so crappy that they are closing it completely in order to be able to fix it up faster.

by DC Dave on Jun 1, 2012 2:00 pm • link • report

Remove the high end retail and you're going to lose more restaurants.

Getting rid of those low-quality restaurants in Georgetown would be an improvement!

Amen to this. I can count the restaurants in Georgetown worth keeping on one hand, and one of them is a bakery, not a restaurant (no, not the ridiculous and tasteless Georgetown Cupcakes).

by dcd on Jun 1, 2012 3:05 pm • link • report

Getting rid of those low-quality restaurants in Georgetown would be an improvement

I can't even tell you the last time I dined in a G'town restaurant. It's been years. The dining options suck.

not the ridiculous and tasteless Georgetown Cupcakes).

And amen to that!

by HogWash on Jun 1, 2012 3:34 pm • link • report

Are we talking about the entire mall for Bloomies? It's too big for any of the spaces.

Well, someone else probably knows the answer to this, but I got the impression that the basically the entire mall would become one or two large retail spaces, and that the developers preference was to have Target AND Bloomingdales. But maybe it's an either/or situation, or maybe even one large, and a few smaller stores could happen. Are there any concrete plans at all yet, anyone?

by kinverson on Jun 1, 2012 4:17 pm • link • report

I can count the restaurants in Georgetown worth keeping on one hand, and one of them is a bakery, not a restaurant (no, not the ridiculous and tasteless Georgetown Cupcakes).

Surely, you're referring to the amazing Baked & Wired with delicious baked goods, the lowest cost per ounce of cupcake in DC (yes, someone analyzed this), the best coffee selection in DC (yes, a wider selection of top-end roasters than Peregrine) and great live music. Everyone should go there.

by Falls Church on Jun 1, 2012 6:09 pm • link • report

Here is the problem that I see. I think that Bloomingdales would be a much better fit for Georgetown than TJ Maxx. That being said, however, I think the Georgetown Park Mall has one major problem: parking there is difficult. To get there you have to either approach from Wisconsin Avenue or M Street and traffic there is going to always be congested.

As for Springfield Mall it is undergoing needed renovations. It is closing for renovations, not for good. And the anchor stores at the mall plan to remain open during the renovation.

by Rain17 on Jun 3, 2012 1:13 am • link • report