This is a spin off from the current thread on economic development. However, since I am addressing two specific items I thought new blog entry was warranted.
The useful life of a significant investment, be it an outlet mall or a residential/retail complex, has to range to at least 20-50 years for there to be an acceptable rate of return, particularly if governmental subsidies or tax incentives are included. Therefore, a large investment like Tanger Outlets (just over the county line) or 140 West Franklin represents a bet on the future. In the case of these two projects the bets on the future could not be more different.
The Tanger Outlet bet is that the future will be very much like the recent past in that low transporation costs will persist, allowing large volumes of goods to be transported long distances to a place where people get in their large personal vehicles and travel 10-100 miles to buy these goods. In aligning themselves with this bet on the future Alamance County is arranging its infrastructure, tax base, and utility services to allow for car travel to shopping destinations along the highway.
The 140 West bet is that transportation costs will rise at an above average rate in the future and that creating denser living and shopping opportunities will becoming increasingly attractive as the expense of living in a distant suburb where every errand or activity involves a car ride becomes prohibitive. Ironically, perhaps, Chapel Hill and Orange County, by aligning themselves with 140 West bet are taking the view that future will be more like the pre-suburban past in that the economic efficiencies of dense living will revitalize our urban centers and that the far suburbs will revert to agricultural activies as increase transporation costs tip the economic balance back to more local foods.
Personally, I am of the 140 West view. That's why when I bought my first house in Pennsylvania it was in the town of Kennet Square, and now I live in Chapel Hill. It is my view that the suburban phenomena is a temporary condition driven by the availabilty of cheap gasoline and the one-time shift from one to two wager earner households. If I am correct, 30 years from now people will be living in 140 West and enjoying a good meal made from local foods at restaurants just down the stairs, and Tanger Outlets will be an empty shell along the highway looking for a new use.
To address some other views discussed on the site... While I like 140 West as a project and investement, I do recognize that more is needed. We need to continue to look for ways to encourage high tech and light manufacturing activity in Orange County. I am excluding heavy manufacturing not out of liberal NIMBYism but due to the fact that Orange County has no structural advantage for heavy industry, e.g. no deep water port, no nearby raw materials. To that end I find it unfortunate that we are converting the old Duke Energy Building to residential use (I wanted to see the IFC move the the vacant sorority on Hillsborough Street) instead of a place for some of our high-tech start ups to grow into. Also, every time I drive out of Carrboro through White Cross I see several vacant buildings and properties suitable to light industry. These are the types of projects that I suggest that Orange County focus on.
Issues:
Comments
Solid points
You hit the bulls-eye on obvious trends that favor low fuel-use and very local options. The death-throes of old-school economics will continue to be heard from Chamber-centric types and big business cheerleaders, but I think we are farther into the future than we know. Fuel costs and uncertain outside investors bring us back to the resilient economy that local businesses represent.
Technology always improves
Technology always improves over time and societies almost always become wealthier over time and when you take those two together the costs of transportation are going to come down over time. Places like Tanger Outlet may become obselete over a long period of time but if so it will because tastes change or the culture changes or society changes, not because transportation costs are too high.That's not really the question though. it's not a question of an Alamance model versus an Orange model. Tanger Outlets was going to be built in that general area and the only question was whether we were going to do something and get the tax revenue for us or do nothing and let the tax revenues go to them. If it's going to be built anyway then why not build it on our side of the border? It is literally right on their side of the border. That's awful that we let that happen.But of course, the reason Alamance built it right on the border instead of deep in Alamance County was that they knew many Orange County resident would want to shop there. If many Orange County residents want to shop there and if the tax money goes to Alamance as a result of our inaction then why isn't it built on our side of the border? It's bad government, plain and simple.
Cornucopianism
I am open to the suggest that there is a could be a short term advantage if Tanger Outlets were located 200 yards the east provided that the incentives required by Orange County to acheive this were appropriate. But if you want to see an engineer's eye start to twitch hit them with your first sentence. At the risk of going non-local for a moment, societies do not growth wealthier over time, they rise during periods when they have a comparitive advantage, they peak, and when the comparitive advantge goes away, they whither. For more on this phenomena check on the Assyrians, the Persians, the Romans, the British, the Brazilian rubber barons .... The US runs on petrolem, gasoline for cars and far more importantly diesel for train engines, trucks, and ships. The petroleum we use represents 300 million years of sunlight captured by algae and phyotoplankton which fell to the bottom of the water in places which were buried by plate technonics at a very specific depth where the pressure and temperature was just right to pyrolyze the hydrocarbons from their cells in to petroleum. This depth is called the "oil band" and it is becoming rapidly depleted. Worldwide new oil discovery peaked in 1966 and yearly world oil productoin has been flat since 2006. We've blown through most of this 300 million years of stored sunlight in a little over 100 years.Further we have already gathered and used most of the easy to reach oil. 100 years ago we could expend 1 BTU of input to get 20 BTUs of oil-based energy from the ground. Now, since the easy stuff is gone, even with all of our technological advances that 1 BTU of input gets us only about 1.5 BTUs of energy back out. When this ratio reaches 1 to 1, and it will soon, the game is over. I could keep going and on this and we could go on on about alternative fuel options and how long it will take until the demand for batteries in Priuses and Leaf to exhaust supplies of the rare earth metals required to make them. Discussions of investment for the future must take into account the constraints, both supply and thermodynamic, of our one time chance to use our oil endowment rather than closing our eyes and hoping for a miraculous technological solution. That type of Cornucopianism leads to have a things like a president making ludicrous statements like "hydrogen economy". Wait .... feeling eye start to twitch again.
When I said societies grow
When I said societies grow wealthier over time I didn't mean the US was going to be on top forever, rather I meant that civilzation as a whole gets wealthier. The empires you list are history and yet that average person living in those places in 2011 is much wealthier than were the kings of those empires. In the coming decades the US may not stay atop the world pecking order but Americans (and most other earthlings) will very likely become more wealthy than they are now IMO.Or are you saying that there's going to be a collapse of civilization in coming years due to a lack of oil that is so severe that it will be a big deal for average citizens in even the wealthy countries to go on a 20 mile round trip shopping? If so that sounds draconian, but then again your line "When it reaches 1 to 1, and it will soon, the game is over" does sound draconian. Care to make any specific predictions? I'm guessing you know about the Simmons-Tierney bet and if so you're aware of how doomsday predictions can turn out. The longer term issue isn't oil but energy. Matter is literally (a very large amount of) energy. And a tremendous amount of energy is poured onto the earths surface constantly by the Sun. And in addition to those two source there are other ways to generate energy, as our oil use indicates. But despite all that, once we can't use oil to move people around a lot we won't be able to move people around a lot anymore? In 1850 we found a substance that we could use to move people around a lot but in 2050, when that substance ran out, we were no longer able to move people around a lot despite the advances in technology from 1850 to 2050?
Oil is Unique
Jose,You raise reasonable points and I don't want to spin off on a long "peak oil" debate on the local political blog (though I recognize that I opened the door.) Other than nuclear fission, tides, and geothermal all energy sources stem directly or indirectly from sunshine (I'm counting hydo power as being solar driven rain). Using the stored sunshine in the oil allows us to live on many more than one year of sunshine at a time. When it is gone we will need to live on one year of sunshine at a time, which is a very different proposition. As for the "game over" comment my point is that if you need to expend 1 BTU of energy to get one BTU, it makes no sense. Therefore, things like oil shale and ethanol will not, IMO, every amount to much.I am also not predicting societal collapse. But supply-demand behavior gets erratic at some where around 90% capacity utilization. The supply chain starts to falter and shortages and price spikes occur. With flat global petroleum production levels, declining new discovery, and increasing consumpiton in growing economies we are going to see a very erratic supply chain and eventual long term structural increases in fuel costs.Even today, $4 per gallon gasoline impacts the commuting and travel decisions of many people. As fuel prices continue to rise more quickly than wages, this trend will continue. I assume, but do not specifically know, that an outlet mall runs on a high-volume, low-margin model and that Tanger has some break-even point for shoppers per day. If the number of daily shopper drops 10%, 20% they may no longer be profitable.There is a cross over point somewhere beyond which is starts making better economic sense for the consumer to let the goods come to him/her either by letting a truck deliver it to a store closer to their home (Unviersity Mall v. Tanger Outlets) or ordering on-line and letting UPS do it (UPS being more efficient than individual cars since it carries more value of goods per unit of fuel expended).My view is that we are on the cusp of that cross-over and that things like exurbs and outlet malls will become increasingly less competative over the next two decades. Therefore, what I am looking for from our local officials are policies and decisions consistent with this view. Therefore, I support projects like preserving the rural buffer, approving taller buildings, and working to ensure that Orange County ties in well to regional rail projects.
The number of miles driven
The number of miles driven by people to outlet malls around here is dwarfed by the number driven to and from work. Thousands of people drive 5 or 10 or 20 miles to work at UNC in the morning and then back home at night. I don't see how adding some condos to downtown Chapel Hill that these people can't afford to buy is going to make much of a difference. The more rural buffer there is in Carrboro the more people drive to work at UNC from Cary and northern Chatham and Durham so why are we protecting the rural buffer in Carrboro and simultaneously saying we want less driving? Online ordering is great. That is one way technology changes and less efficient ways become obselete. (Why are we expanding the physical structure that contains the library again?) But speaking of University Mall, plenty of people drive right past that and go to the conglomeration of stores between Chapel Hill and Durham. Why? For that matter, places like Tanger and Southpoint are very popular and people who think that this is a bad thing would do well to stop fretting over it for a moment and ask themselves why they are so popular. And if the answer is "Because the masses are too dumb to know any better" then they should re-book their world outlook. Any large scale change, by definition, involves the masses. As far as outlet stores or whatever it is that lots of people go to, whether such a thing seems sensible to me depends on how often people go there. If there's something that people buy rarely then I think it's a darn good idea to have a giant store for it 10 miles away from everybody. That way, the 364 days a year you aren't buying those things the land near you could be used for something useful instead of selling something you don't buy 364 days per year. And then the 1 day of the year when you need the products the outlets sell you go there and battle the traffic and then see all these big stores and all this big selection and get everything you need for a long time and then get out. I go to Southpoint maybe once a year and it's a pain to get in and out of but it's better than having all those Southpoint stores or their equivalent spread all over the area every day of the year.The ultimate in this concept is cars. I have driven by the car dealerships on East Frankin/ 15-501 a bajillion times but I've never even bought a new car. What a waste. There ought to be a big place 10 miles from where anybody lives that does nothing but sell every kind of car imaginable. Then the land used for car dealerships now could be used for something perpetually useful instead and you could just not think about getting a new car for 5 or 10 or 25 year and then when the time finally comes that you want to buy a new one you can go to one central place and see them all at once instead of having go take the time to go around to seperate dealerships. I'd like to know how much gas I've wasted in my life simply drivig past car dealerships.
Bad Short Term
I agree in part with Terri. There are significant short term problems with malls like Tanger. I think our local governments are doing the right thing by forgoing any short sighted gain in taxes that they may bring. The short term problems are negative effects on the environment, bad traffic, negative effect on locally owned and operated businesses, a destruction of the walkable community which can effect health, etc. etc.
Plus we don't have enough evidence that increasing the commercial tax base in the retail sector will lower or maintain residential taxes at current levels. That is a old canard that needs to be retired IMHO. Please show me more than one study that is done by bipartisan orgs that shows that in Orange County big box store taxes will lower our property taxes. No... the John Locke Foundation doesn't count...
Either or?
Your argument misses the short-term, long-term conditions. With Tanger Outlet, the investment is paying off immediately. The investors probably have a 10-15 year pay-off schedule. So if the future model doesn't include large malls, they will most likely have recouped their investment.The lot 5 deal, on the other hand, depends on a lot of other factors occurring which means the pay-off won't start occurring until into the future. Look at Greenbridge--the retail portion of the investment is sitting pretty much empty. Meadowmont, Southern Village, and Hwy 54 retail areas have occupants, but they aren't thriving. Based on that evidence, I think we can safely expect lot 5 retail to be non-productive for a good while. Personally, I don't think the future will be an either or situation. I think we will continue to have malls and small shopping venues. Or maybe, on the brighter side, our society will stop being so acquisitive and shopping will play a lessor role altogether.
I agree
that it may not be an either or situation. I hesitate to comment in any more depth until I’ve looked at this more, but there may be something to be said for not putting all our eggs in one basket, and diversifying our approach to development, for multiple potential future models.
Shopping in Stores
Hopefully there will be a feeling of community in Chapel Hill that will lure shoppers down, not just for the articles for sale, but for the feeling of belonging, meeting friends, of sitting are reading on a bench under a tree, of sipping coffee in a patio on the street with a friend, of window shopping and buying articles that are local and unique. Otherwise, I'll just shop on the web.
My property tax bill is
My property tax bill is determined by the governmental budgets and the total value of the real estate which must support them. I get charged fo rmy share of the overall obligation. If the value of the total real estate grows faster than the budgets do, then my tax bill should decline. No, there is no guarantee that increased commercial development will result in tax decreases for homeowners, because those with the authority to decide how our money is spent might choose (with or without our agreement) to increase government spending with the enhanced revenue rather than decrease taxes for everybody else. So, if the additional tax money generated by non-residential property is spent on new things, rather than being used to help existing taxpayers through reducing their taxes, that's a decision of government, not an argument against development.
And we are the government
so we do have a voice in all this. Right?
Almost
Try getting the use of your tax money by the state & federal governments to change. Without the massive shakedown of taxpayers for war profiteering, we'd have no issues with local funding & taxation.
Underlying Assumption
I was really struck by Jose's argument that "Technology always improves over time and societies almost always become wealthier over time and when you take those two together the costs of transportation are going to come down over time." I looked up the combination of mileage and cost of gas for the car my family had when I was a kid: 1975 Gran Fury (mileage: 10/14, gas: $.57/gal). Now I have a 2009 Pontiac Vibe (mileage: 26/32, gas: $3/gal). If you do the math, my transportation cost is twice as high as my dad's. For a simple control for inflation, compare the cost of milk ($1.57/gal in 1975, $3/gal now). My milk cost is twice as much as my dad's. In other words, it doesn't cost me any more (relatively speaking) to drive to Tanger Outlets then it would have in 1975. If you are relying on cost to change our habits, then I think you will have a long wait.
Let me qualify that a bit.
Let me qualify that a bit. It's not solely the costs of transporting people to and from Tanger, or wherever, that counts. It's the costs of transporting people and/or new technologies doing something that used to be accomplished only by transporting people.Internet shopping is a good example. Before the Internet exsited, nobody went on it. (I bet you can't argue with that.) But today, lots of people go onto the Internet, find what they want and buy it, without transporting themselves anywhere. Imagine if the Internet didn't exist. Most of those people that buy stuff on the Internet today would still buy the stuff. Where do you think they'd go? Most of them would go to the big outlet mall places. If the local alternatives to the outlet shopping malls were really preferable then people would be going to them now. So even though the outlet malls are popluar right now, they'd be even more popular without the Internet. The Internet has hurt the outlet malls because it has made the effective cost of transporting yourself lower, since people can in a sense transport themselves to the stores from their own living room via the Internet. Outlet malls didn't exist a few decades ago and at some point in the future things will change enough so that there will be no need for them to exist because there will be a better way to do it. If that day was in the forseeable future then I'd be all for not building outlet malls. That day isn't in the forseeable future though and since they're going to be built anyway we might as well build them on our side of the county border instead of 200 yards further away on the Alamance side of the county border.
Also, keep in mind that your
Also, keep in mind that your car in 2011 is much higher quality than it was in 1975. It's less likely to break down. It's more likely to have AC. It will last more miles before you have to replace it. It pollutes much less per mile driven, even taking into account that AC pollutes more than non-AC, which means nobody has to pay for the cost of that non-existent polluation later. Etc. All of that is a form of wealth.Time is a form of wealth too and the longer we have to sit in traffic the more time it costs us and thus the more wealth it costs us. So that's a consideration too. We have more traffic to battle around here nowadays but then again that's partly a result of this area growing a lot. The metro Detroit area doesn't have nearly as much traffic as they used to and that should be an advantage for them. And yet, does anyone want to move there? Notice how time passes and we get so much wealthier and yet we feel so much more pressed for time. I'm sitting here typing this to whoever wants to read it and it takes minutes but 25 years ago what I would have had to do was write a message and then have a postman come to my house and pick it up and deliver it to everyone else via postal mail and then everyone would have had to take the time to read it. Or else I would've had to call up everybody on the telephone, thereby wasting the time of 99.9% of the people I called that aren't interested in hearing from me. Being able to type something in your house and hit a key and then have anyone anywhere with an internet connection be able to read it is wealth. We have access to so much wealth that we struggle to consume it all and that is why people feel so rushed for time. Thinking that the constantly increasing wealth is going to suddenly stop isn't the point rather trying to do what we can to ensure that the constantly increasing wealth corresponds to constantly increasing happiness is the point.
Orange & Alamance County economic development
The loss of manufacturing in N.C. and America is one of the reasons local, state, and national economies are so bad. We have to develop once again the best technology and the best goods to sell to the rest of the world. Terri is correct. We need to acquire less and save more.
quality of goods
Also, Tanger is a chain of identical outlet centers that contract lower-quality goods to be sold in them. You won't find e.g. a Baby Gap shirt there that is sold in a shopping mall Gap because the companies at Tanger don't compete with themselves.
You'd have to go to Durham for the real deal!