The Congress Avenue Incumbent Subsidy Fund

Mayor Wynn and company believe we need a Congress Avenue Retail Retention and Enhancement Fund:

They plan to create a fund to support and attract shops, restaurants and other businesses on Congress Avenue from Town Lake to the Capitol. The money would come from a portion of the development fees for new Congress Avenue projects.

"We want to make it where there is a fighting chance for more tenants to stay, and thrive, rather than move away," said Mayor Will Wynn, who is supporting the program along with City Council Members Betty Dunkerley and Mike Martinez.

At its Jan. 11 meeting, the City Council is expected to direct the city manager to develop the program. Many details must be worked out, including establishing criteria for businesses that would qualify for help and deciding what fees would go into the fund.

My first reaction to this was, "Huh?"  Retail shops and restaurants are doing just fine on Congress.  The article corroborates this:  The manager of Keepers, a clothing store at Fifth and Congress, says it's posted double-digit gains since opening last year.   

You don't have to read the article very closely to realize what this is about.  Some of the money may be used to move the Las Manitas sisters into the nearby building they already own.  This prospect has helped break the "impasse" between Las Manitas and Marriott.

Oh.  I get it now.  They're proposing to use City money to pay for Las Manitas's move so they don't have to take a public stand on the Las Manitas-Marriott dispute.  Very bold.

Let's ignore the politics and consider the idea on its own merit.  Does it have any?

No.

Retail doesn't need help on Congress.  Congress is lined with shops and restaurants.  We won't lose any of this retail space because we make new developments include street-level retail (as we should).  The signs in the windows may change, but the only way we'll see shuttered windows is if the microeconomy goes in the tank, in which case rising rents won't be a problem.

The real pont, of course, is not to promote retail generally, but to protect specific incumbent shops and restaurants. 

Which ones?  No surprise that Las Manitas made the cut.  Determining who else gets protected status is one of the "details" the City Manager is supposed to work out.  (Maybe just the iconic?)  It seems unlikely that every Congress Avenue business will be eligible, given the potential cost.  Whether an owner gets protection could depend on his (or his customers') political connections.   

There are at least three other problems as I see it:

First, how do we determine whether an eligible business really needs a subsidy?  If hard times will be the ticket to free money, get ready for a lot of groaning about high rents and taxes.  It is notoriously difficult for the government (or any outsider) to tell how well a business is really doing without a full-fledged audit.

Second, how do we determine why a struggling eligible business is struggling?  Is it because of rising rents?  Or could it be poor management?  Maybe business has fallen off because service isn't what it used to be.  In this case, a City subsidy is not only pointless; it reduces management's incentive to fix the problem.

Third, rising rents are a form of information.  Rents don't rise unless someone is willing to pay.  If an incumbent is priced out, this means someone else believes there is more demand for their goods or services at that spot.  The incumbent may be able to move to a cheaper location and keep its customer base.  We shouldn't use City subsidies to perpetuate the inefficient use of scarce space. 

It's a bad idea any way you cut it.

Comments

[guest]

You a such a fucking idiot. The fund is to help ratain local independant businesses who would continue to be pushed out and leveled due to large scale development.

If we don't put something in place....there wont be anything left on Congress Ave. other than corporate hell.

Yes...it will help Las Manitas stay on the avenue...that's part of the intention.

Does anyone remember Ted's Greek Corner, Liberty Lunch, Matt's El Rancho....all of them use to be right down town. All of them are gone or no longer down town.

Get a clue and realize that without programs like this we loose all control and influence on what our downtown looks like 20 years from now.

The funds for this program will not be taken from you...they are fees that have been waived to big developers over the last 8 years...and now...will no longer be waived because there doesn't need to be an incentive to develop downtown. The market it the incentive.

[AC]

Let me help you with a concept that I can tell is difficult for you: When the City begins collecting fees from downtown developers, that is new revenue, just like new tax revenue or new user fees. The City could spend that new money on parks. Or bike lanes. Or any other worthy cause. Instead, it will spend that money to prop up local businesses that have been beatified by popular opinion. I think that sucks.

Where's the evidence that Congress is turning into "corporate hell"? The list you gave -- well, those left over the span of many years. Other local businesses have moved to Congress in the meantime. What do you want? To stave off change forever, using the public fisc to boot?

That's the idiotic opinion.

[dan]

Is “guest” a caricature? Who calls someone else an idiot while making more than two grammatical errors per sentence? That can't be real.

On topic: Is this really only going to be for incumbent businesses? According to the populist logic that led to this idea, it makes sense to let new business take a cut.

I think it’s a bad idea either way (since it will just encourage rent seeking), but it would be less bad if the subsidy didn't act as a barrier to entry new businesses. Lobbying is a barrier to entry, so there won’t be no barrier to entry, but it would be smaller, at least.

[AC]

Dan, I gleaned that it was just for incumbents from the article -- the point seemed to be to protect existing businesses from rising rents or redevelopment -- but their proposal is so vague at this point that it could open up to new businesses.

There's probably a better argument for subsidizing the 2nd street retail district. There it's the chicken and the egg: once all of the retail and residential are in, they'll draw a lot of foot traffic, which will make it a good place for business. But it's not a good place for business until there's a lot of foot traffic . . . . In other words, someone's got to set up shop first.

In fact, I believe the first tenants are getting reduced rents for the first year or two, although I'm not sure if that was negotiated by the city or if is just a sound business practice by the property owners. Whatever the inducements, they apparently were enough to draw lots of retail.