Jake Haulk: 'Handing out subsidies creates an unlevel playing field'

Sunday, August 10, 2003

The closing of the Lord & Taylor store actually provides little new evidence about the future of Pittsburgh.

	Which way up for Downtown? The announced departure of Lord & Taylor rattled the retail outlook for the Golden Triangle. We asked four observers to assess the impact and look forward. (V.W.H. Campbell, Jr. Post-Gazette) Related articles Jake Haulk: Let the market decide Rob Pfaffmann: Think big by thinking small Eve Picker: Shoot for the stars Barry Hannegan: Not-so grand illusion

The city's prospects do not revolve around the success or failure of this particular store.

Lord & Taylor's inability to succeed Downtown merely serves to reinforce what has been obvious for years. Large-scale retailing has a very tough time Downtown. Parking problems, the convenience of suburban shopping centers and the lack of a sizable Downtown residential population combine to limit shopping.

In the Oct. 29, 2000, Post-Gazette, reporter Teresa Lindeman wrote: "At the risk of overstating the importance of a single store, the Lord & Taylor presence could be significant for Pittsburgh. It may offer the best opportunity yet to test the theories on revitalizing Downtown retail." The test has been carried out and the results are clear. What we already knew has been confirmed.

Clearly, Pittsburgh's administration and the Urban Redevelopment Authority believe that top-down planning and doling out subsidies can build a critical mass of retailing that will bring droves of people back Downtown to shop. There are two major problems with this approach.

First, trying to force economic activity through planning and government largess rather than allowing the marketplace to determine the highest and best use of property is almost guaranteed to fail.

Do the experiences with Allegheny Center Mall, East Liberty, Hill District and Lazarus projects not give the URA pause when it comes to proposing grandiose schemes? Apparently not. Being a planner or a government developer means never having to admit a mistake. So we get still more planning that ignores economic and demographic realities. Without question, building on the city's comparative advantage as the region's center of financial, legal, education and corporate headquarters would be a far more effective development strategy than trying to force a massive increase in retailing.

The second problem with handing out subsidies to retailers is that it creates an unlevel playing field and unfair competition to the detriment of companies that have not sought or received subsidies.

In addition, the city suffers dramatically from listening to its own hype. For example, in the "Economic Development" section of the city's Web page, you can still find the following gem, "Lord & Taylor's presence solidifies Downtown Pittsburgh's position as the region's leading concentration of high-end retailers, making our Downtown the premier spot for shoppers." Self-promotion is one thing, but hyperbole such as this Web site quote reveals a mind-set that is dangerously removed from reality.

Finally and ironically, subsidizing retail in the city (the Lazarus store Downtown, Home Depot in East Liberty) has opened the floodgates for developers to seek subsidies in the suburbs. Hardly a new suburban shopping area is being built that did not seek some tax relief or tax-increment financing. Subsidies beget subsidies, resulting in overbuilding of retail. This in turn makes it more difficult for all retailers to be profitable, whether they are subsidized or not.

That is what we should have learned from recent experience. However, it is unlikely that we will see any change in behavior. Giving away other people's money is still far too easy.

Jake Haulk is president of the Allegheny Institute (jake@alleghenyinstitute.org)

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