The true cost of big box/franchise retail

Since the early 1980’s, our city forefathers in their flawed thinking have foregone long-term stable housing property tax revenue for larger, short-term tax revenue gains by approving franchise type drive-thru land uses (KFC, Burger King, Eckerds, Rite Aid, Jreck Subs, etc.) over the past ten to twenty years.  What has resulted in places like Butternut St. is a high crime corridor and declining real property values.  Was this trade-off worth it in the end?

Those of us who have lived here need no proof from the data.  We can remember the fight back in the early eighties against putting in the Burger King…after that, Rite Aid and Eckerd destroyed complete blocks of historic buildings.  (One Eastwood resident was on the front lines and it was all over the newspapers).  Then Eckerds (used to be Fays) and Rite Aid became obsolete buildings within ten years, and those buildings were “re-purposed” into dollar stores.  Eckerd and Rite Aid then put up bigger boxes across the street, taking out more historically significant buildings…and the story goes on…incremental erosion of the street and neighborhood character. Ridiculously, when Rite Aid bought out Eckerd, they left both of them in, competing with each other across the intersection.

In the early 1980’s, Butternut Street was a lively, active neighborhood corridor. Those who don’t remember that didn’t care or weren’t noticing!  Now we are left with quite a problem on Butternut: buildings of historic significance are being demolished because of neglect (sound familiar? it’s a well-known developer tactic); the Archimedes Russel building is gone and the Otisco building is a really sad situations.  No one is willing to invest in those properties because of the current crime climate as well as the rough neighborhood it has become (it didn’t used to be) and the poverty of the residents who live near those drive-thrus.

The data is readily accessible.  Butternut Street is a prime example of how a business corridor declines over a period of time as a result of these types of land use. But what about Eastwood? Did the Dunkin’ Donuts on Midler and James make your taxes go down since the late 1990’s like they promised when it was constructed?  No! In fact, big-box stores and fast-food restaurants cost taxpayers more than they produce.

Fiscal Impact Analysis of Residential and Nonresidential Land Use Prototypes [PDF]
by Tischler & Associates, July 2002.

Big box retail, shopping centers, and fast-food restaurants cost taxpayers in Barnstable, Massachusetts, more than they produce in revenue, according to this analysis.  The study compares the tax revenue generated by different kinds of residential and commercial development with the actual cost of providing public services for each land use. The study found that big box retail generates a net annual deficit of $468 per 1,000 square feet. Shopping centers likewise produce an annual drain of $314 per 1,000 square feet. By far the most costly are fast-food restaurants, which have a net annual cost of $5,168 per 1,000 square feet.  In contrast, the study found that specialty retail, a category that includes small-scale Main Street businesses, has a positive impact on pubic revenue (i.e., it generates more tax revenue than it costs to service). Specialty retail produces a net annual return of $326 per 1,000 square feet. Other commercial land uses that are revenue winners include business parks, offices, and hotels. The two main factors behind the higher costs for big box stores, shopping centers, and fast-food outlets, compared to specialty retail shops, are higher road maintenance costs (due to a much greater number of car trips per 1,000 square feet) and greater demand for public safety services.

I don’t know if everyone reading these posts has noticed a recurring theme: the bad economics of bad development. Suburban-style development brings down the values of the residential properties in an urban neighborhood.

Property tax assessments in Syracuse are based on the market value of each property and are used to compute annual tax bills for City, School and County taxes. There are roughly 5,000 residential properties in Eastwood at an average value of about $85,000. That’s the low end of current average listing prices, but the taxes generated by these properties at a property tax rate of $34.836 per $1,000 of assessment would, given those figures, be something like $14,805,300 – over fourteen million dollars! Just look at the drop in housing values on the South Side near Salina and Balantyne to see what bad development does, and imagine the same thing happening in Eastwood. A mere 2% drop in market value would result in a similar decrease in assessed values, that is, $1700 per residence (assuming the same 5,000 residences) would add up to a loss to the City coffers of $296,106 per year.

And if we can assume that we need the same kinds of city services that they need over in Barnstable (and why would we not?), then you can add $5,616 to the annual losses. Ouch!

You can help prevent the incremental erosion of our residential property values.

Attend the Planning Commission meeting on Monday, May 18 at 6:00 pm in City Hall. Tell them to uphold the design standards that were developed by Eastwood residents and professional planners. Prevent the setting of a legal precedent so our business district doesn’t end up looking like Butternut Street or Salina and Ballantyne.


One thought on “The true cost of big box/franchise retail”

  1. People have spent millions fighting and losing against big box sprawl. Why? The private auto system is heavily subsidized. But this subsidy cannot solve the problem of parking. We need to make public transit free. That is the best way to help the main street merchant.

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