Last year I moderated a panel of suburban mall developers as part of an economic forum at New York University. It was a spirited conversation among some heavy hitters, including a few well-capitalized investors whose opinions directly shape communities around the country. Needless to say, this was a high-testosterone affair.
A couple weeks prior to the event, I’d had an opportunity to visit Akron, Ohio, and, as part of that visit, experience the rotting corpse that was the Rolling Acres Mall. As I listened to these men talk about their efforts to deploy Wall Street capital to build the next generation of malls—places that offered a theme park-style experience as an entrée to a shopping dessert—I wondered where a place like Akron, and a property like Rolling Acres, would fit into these investors’ visions for the communities they were “developing.” I asked the question. The reply I received from one of them—and this is a quote:
I don’t give a F*CK about Akron!
Truth. As our economy continues to grow more centralized and efficient (read: tightly wound and deeply fragile), there is comparatively little profit to be made by providing high-end “experience retail” to what some Wall Streeters think of as a population of comparatively poor, blue collar, overly-indebted rubes living in flyover country. The real profits—as the panelists explained to me—are in the “top 50” markets. That’s where the money is.
And if you aren’t in one of those fifty places, your failing malls will either be “rescued” by a mix of consignment stores, tattoo parlors and social services, or they will slowly rot away, leaving a persistent and painful reminder of the community’s failure and the fact that the big players didn’t think your place was worth saving. Oh, and this gigantic monument to disgrace will sit along one of your most highly visible corridors.
The latter is the fate of Akron’s Rolling Acres Mall.
Rolling Acres opened in 1975 and closed thirty-three years later, in 2008. Thirty-three years, by the way, is just three years longer than the tax subsidy the city is now prepared to give for redevelopment of the site. Akron is going to borrow money to build a bunch of infrastructure, based on hopes that a new mega-development will last as long as the last mega-development that failed on the exact same site. What is it they say about the definition of insanity?
"Outside Goodyear, this is the biggest thing that we have seen," councilman Mike Freeman told Cleveland.com. "This grabs the whole city when you're talking $30 million in payroll."
No offense to the councilmember, but that’s kind of silly. Yes, $30 million is a big number, and if it happens as planned, it will provide the city an additional $750,000 each year in income tax revenue (Akron has a 2.5% local income tax rate). I’m not suggesting that three quarters of a million dollars isn’t a lot of money, but for some context, Akron’s entire 2018 budget is $530 million. A successful redevelopment of the Rolling Acres site will provide a 0.8% increase in income tax receipts, an amount hardly worth getting excited about.
If what “grabs the whole city” is the impact to Akron’s city budget—and council members, who essentially serve as the board of directors for the municipal corporation that is Akron, do see it that way—then we’re becoming very excited over nothing. For context, Akron will pay $5.6 million in interest alone on general obligation debt in 2018. They’ll pay an additional $5.1 million in just interest on sewer bonds. If an additional $750,000 in annual revenue means this much to us, something is very wrong.
But if “the biggest thing that we have seen” is the proposed 500 new jobs the mall is estimated to create, then we have an even bigger problem. Because even if every single job, at an average wage of $60,000 per year, went to current Akron residents—something not required by a development agreement and almost impossible to imagine actually happening—that would put only a tiny dent in the population of 18,900 unemployed Akronites, who represent 5.1% of the labor force.
By the numbers, this proposal is just not a good deal. Akron gives away decades of property tax revenue and commits to even more infrastructure liabilities in exchange for a tiny bit of income tax and a handful of jobs. As a long-term strategy for the city of Akron, it’s not replicable or even scalable. The isolated location of the site ensures there will be few, if any, spinoff investments. The large scale of the operation suggests that the mall won’t be the kind of neighbor that increases adjacent property values.
Yet, here we are, falling all over ourselves to make this deal happen, talking like we’re the pimply-faced geek who just got asked out by the prom queen.
"With a project of this magnitude, it's pretty hard to leave a $100 million development sitting out in the wind and a $30 million payroll just out there," [Council President Margo] Sommerville said. "I hope we understand this is big for the city of Akron."
Only it’s not big for the city of Akron, unless your only goal is to heal the scar in the community psyche left behind by the failure of Rolling Acres, no matter how much it costs. If what we’re measuring this deal against is the scale of that community pain, then yes, this is a big deal. On a normal day, nobody from the outside world "gives a f*ck about Akron," but now here is somebody who does. All it took was 30 years of tax subsidy and a bit of new infrastructure. That’s cheaper than therapy. And more to the point, wanting someone—anyone—to bet on your town is human. I absolutely understand why the average Akronite would be tempted by this deal—even if I also believe its leaders have a responsibility to set emotions aside and do better.
Akron is living with what psychologists call a sunk cost fallacy: the tendency to examine new opportunities not on their own merit, but to consider them in the context of past investments. This causes us to double down on previous failures and to discount new opportunities. That’s a tragic cycle leadership can overcome, but only through intention and focus.
If Akron’s goal is to grow the tax base by a measly $100 million over the next three decades, then let’s talk about how we can make better (read: low-risk, iterative, Strong Towns-style) neighborhood investments that reverse the cycle of decline and get private capital off the sidelines. There are some really smart people in Akron doing this work already. Given the low costs and high potential returns of the Strong Towns approach, there is no reason not to put our faith and our resources into these local leaders.
If the goal is to add 500 jobs over the next few years and experience a modest $750,000 increase in income tax revenue, then let’s talk about the role of neighborhood commercial development, an economic gardening program and small business incubators. Such efforts would cost a fraction of what will be sacrificed in the process of redeveloping Rolling Acres, and they would likely result in more jobs and a broader, more stable employment base.
Decades of bad development choices and misguided public investments have given Akron more than its share of problem sites, including Rolling Acres. Recognizing these as mistakes of policy, not flaws of character, will free us to look at new opportunities with an eye towards their real long term potential, instead of just what we think will redeem us as quickly as possible.
(Top photo source: Nicholas Eckhart via Flickr. Creative Commons license.)