Chicago suburbs without property taxes – but perhaps not for much longer

In a region known for high property taxes, at least a few suburbs outside Chicago have no property taxes:

A town of about 40,000, Carol Stream managed to avoid a property tax even when another outlier, Schaumburg — a village with a much larger retail base — took the leap during the Great Recession.

But officials say Carol Stream is facing significant budget pressures from rising pension costs. If it maintains the status quo, projections also show the village would exhaust capital reserves during the third year of a five-year plan for roadwork and infrastructure projects…

In Oak Brook, another town that doesn’t charge a property tax, candidates in the last mayoral race took stock of the financial challenges from flat sales tax revenues. Carol Stream also saw a 2.4% drop in sales tax dollars — the village’s largest revenue source — from calendar years 2017 to 2018.

Suburbs have multiple ways to reduce or eliminate residential property taxes. Sales tax revenue can come from shopping malls, big box stores, and other retail options. Schaumburg and Oak Brook have sizable shopping malls surrounded by many more retailers. Communities can also seek out industry; Carol Stream founder Jay Stream intentionally set aside much land for industrial parks (which are still there). Some suburbs would not like this as industry could conflict with an ideal of quiet neighborhoods of single-family homes.

The article suggests these suburbs with no property taxes will have to reconsider because of declining sales tax revenues and rising pension costs. Given the fate of shopping malls and the problems facing retailers, even in successful malls in wealthy areas like in Oak Brook and Schaumburg, communities need additional revenue.

Suburbs typically do not have the ability to quickly counter declining sales tax revenues. In order to not have property taxes in the first place, certain decisions had to be made long ago. Then, later decisions build within a framework of no property taxes. Making changes to land use takes time for study, approval, development, and then reaping benefits. A suburb cannot say it wants to bring in more sales tax revenue and line up a set of retailers operating within a year.

The fate of these suburbs will be worth checking in five years to see whether they can hold on against levying property taxes.

(Reminder: this does not mean residents in these communities do not pay any property taxes. Rather, their suburbs do not collect property taxes even as school districts and other taxing bodies do.)

Building Florida’s Metropica around retail

A new development in Florida is built around a shopping mall:

Once safely inside, Kavana returned to explaining what that vision amounts to. Turns out it’s an Instagram-friendly mall that you can live in—one that happens to be smashed up against the side of an enormous swamp…

Approved for construction in 2014, the first residential tower of Metropica’s 4-million-square-foot planned community is set for move-in soon. On opening day, there will be a DJ spinning as buyers (and prospective ones) check out tennis courts and a state-of-the-art gym while enjoying gourmet popcorn. All this, Kavana said, is to showcase the conveniences and amenities that come with living inside a shopping center. He’s well aware that traditional retail is on the decline, but hopes he can buck the trend by bringing online players like Casper Mattress, which is heavily advertised by podcast hosts and Instagram influencers, to a brick-and-mortar location across from Tower One. Although Casper has yet to sign a lease, he hopes to court them and other retailers who might appeal to those millennials who hate malls but love “experiences,” as he put it…

Still, while it’s true that building your own jewelry at a Kendra Scott store is technically an experience, millennials are the most financially beleaguered generation in modern American history, and the only one to prefer urban environments to suburban and rural ones. Meanwhile, units at Metropica start in the mid six figures, and its $1.3 million penthouse overlooks two vast expanses, the juxtaposition of which defines the weirdness of South Florida’s bedroom communities. In full view is the Everglades Wildlife Management Area—facilitating regular clashes with wild animals—but also the parking lot of the BB&T Center, the arena where a different kind of wild animal, the Florida Panthers, battles visiting teams in professional hockey. With student housing, a building for active seniors, and an assisted living center also in the works, it might one day be possible to spend an entire lifetime in Metropica.

The question, however, is whether anyone will want to do that, or if the master-planned community will go the way of other Florida development boondoggles that were also advertised as utopias before falling into disrepair. Kavana is far from the first person to come to Florida and try to build something out of nothing, and perhaps as a result, the state has a long history of producing what sociologists call non-places. As the theory goes, there are three categories to describe where people spend their time in an ideal society: work, home, and a so-called third place where conversation is the main activity. In his book The Great Good Place, a guy named Ray Oldenburg said that might be a bar, a coffee shop, or the prewar concept of “Main Street”—no matter what form it takes, the third place has to be cheap (if not free), easy to get to without a car, and old enough to be embedded in the community.

Three quick thoughts:

  1. The rest of the article provides a quick overview of multiple large-scale Florida developments that did not work out as intended. At the same time, is it safe to say that development in Florida might have always been on a big scale? I remember visiting the Edison and Ford Winter Estates years ago and reading about how so few people lived on the Gulf Coast of the state then compared to now.
  2. The article does not say much about the funding for this project. As long as not much or any public money is on the line, the project going belly up may not be too harmful. (Of course, there are still environmental costs and partially developed land might be harder to develop in the long run.)
  3. It is also not clear who would move into Metropica outside of the appeal to millennials. Is this intended for Florida residents or people moving to the state? How does it compare to other developments in the area they could choose from? When I see major developments like this in urban areas that have more expensive housing, I always wonder who will move and/or invest in the property. (The Miami area is known for an interesting set of investors.)

Nostalgia for shopping malls amid decades of critique

Many shopping malls are in dire straits. The potential end of shopping malls can also induce nostalgia and good memories. Add to the decades-long critique of how shopping malls have harmed communities and societies and we have an odd moment: should we celebrate or lament the end of shopping malls?

A few reasons why there is nostalgia:

  1. The shopping mall was a prime social space, let alone a business space, for at least a generation or two. Hanging out at the mall as a teenager was a sign of independence for many and it is glorified by media narratives and images.
  2. The shopping mall is a marker of the past and those growing older can often lament the disappearance of what they knew. Perhaps they did not even like shopping malls or visit them very much but they are a marker for a particular era.
  3. The shopping mall was a significant shift in the shopping experience by providing a collection of chain stores in a single place surrounded by plentiful parking. While we have since moved to big box stores and now to online shopping, the shopping mall transformed retail.

But balance the nostalgia with the critiques:

  1. Shopping malls killed downtowns, from big cities to suburbs to small towns, across the country.
  2. Shopping malls are part of suburban sprawl that wastes resources and land (and contributes to more driving)
  3. They contributed to mass consumption and commercialization. As one quick example: would the commercial celebration of Christmas today be the same without the development of the mall?

How shopping malls end up in the collective memory down the road still remains to be seen. Once the generations that spent so much time in shopping malls is gone, what will their legacy be?

 

Chicago area malls trying to reinvent themselves yet not adding many residential units

Multiple suburban shopping malls in the Chicago area are trying to turn it around with different uses:

A casino is envisioned for the former Lakehurst Shopping Center site in Waukegan, which closed in 2001 and was demolished in 2004. It was the proposed site of a casino until the 10th and final state license was awarded to Des Plaines in 2008. With the latest round of gambling expansion, Waukegan could revive that dream.

St. Charles has seen little momentum on a concept plan presented two years ago for the largely vacant former Charlestowne Mall site north of Route 64. It called for the property’s complete revitalization, including a residential development, a smaller mall building and the construction of free-standing commercial structures. Mall owners have yet to make a deal with developers.

Stratford Square Mall in Bloomingdale, which opened in 1981, has been struggling for several years having lost three anchor stores since 2014. It launched a multimillion-dollar renovation project featuring interior and exterior improvements at the 1.3 million-square-foot center. An earlier renovation included the 2014 opening of Round1, a 40,000-square-foot entertainment center featuring bowling, billiards, video games and karaoke…

To further increase foot traffic, several suburban malls have incorporated entertainment venues. There’s now a Cinemark movie theater at Spring Hill Mall in West Dundee, a Round One entertainment center at Fox Valley Mall in Aurora, an AMC Hawthorn 12 theater and a Dave & Buster’s at Hawthorn Mall, a Pinstripes near Oakbrook Center and Pac-Man Entertainment (formerly Level 257) at Woodfield.

With retailers everywhere struggling, the trend toward multiple uses in shopping malls continues. The hope is that multiple uses can attract people to the site who after eating might want to shop or who after seeing a movie might want to eat there and so on. (I think this then could lead to the issue of how many entertainment centers can make it in the suburbs but that is another problem to tackle later.)

One piece that is missing from these descriptions: adding residential units. This would likely require some zoning changes as the mall properties probably only allow commercial properties now. Furthermore, it could take some work to reintegrate the full property with the surrounding street grid (which likely includes residential units nearby). Having residents on site could address multiple problems facing suburbs: filling vacant space; providing round-the-clock customers; increased population growth which is an issue in many suburbs with no major land parcels left; and the possibility of having affordable housing. These residential units may not bring in as much money as stores and restaurants that add property and sales tax revenues but they could add life to stand-along properties.

Bringing medical clinics to vacant shopping mall space

Filling emptying shopping malls can be a hard task. Add medical services to the list of possible replacement uses:

Mall of America in Minneapolis, America’s largest mall, announced plans last week to open a 2,300-square-foot walk-in clinic in November with medical exam rooms, a radiology room, lab space and a pharmacy dispensary service. Mall of America is teaming up with University of Minnesota physicians and a Minnesota-based health care system to operate the clinic…

While mall leases for clothing retailers declined by more than 10% since 2017, medical clinics at malls have risen by almost 60% during the same period, according to Drew Myers, real estate analyst at CoStar Group. The growth of medical clinic leases at malls has been the “strongest among all major retail sectors over the past five years,” he said.

Mall landlords are betting that when patients visit for a flu shot or eye exam, they’ll shop around for clothes or electronics. Adding medical clinics also makes sense for mall owners because they draw in doctors, nurses and technicians every day who may shop and eat at restaurants, according to a May research report by real estate firm JLL. Health care providers are also attractive tenants for mall landlords because they tend to have high credit ratings and sign longer leases compared with other retailers, JLL analysts noted.

On the provider and health insurer side, shopping malls give companies convenient locations to set up outpatient care posts and preventative care locations for patients. Providers are increasingly looking to these lower-cost clinics to help patients avoid expensive trips to the emergency room.

The medical offices can serve the new residents and commercial uses that are also now occupying shopping mall space in addition to blending shopping and medical trips (dubbed “medtail” in the article). Just wait until the new hospital takes over the mall and patients and visitors can walk out one door and into a clothing store down the hall.

More broadly, this hints at a blending of activity within single structures that suburbs are not used to. Suburbs are known for separating land uses, often with the goal of protecting single-family homes. Suburban downtowns, places where multiple uses might be found, are limited and now often seem geared more toward entertainment and cultural use. Could the shopping mall truly be a community center in the coming decades with more residential units, medical offices, and community spaces?

Bringing in tourists just to see the airport

Airports are often considered gateways to other tourist activities. Yet, they can be tourist destinations in their own right:

Hughey’s at the vanguard of a new phenomenon: terminal tourism. Programs adopted or being considered by a number of airports allow people beyond security checkpoints so they can meet arriving relatives or just hang out. It’s a bit of a return to the days before the 9-11 terrorist attacks, when airport security was more relaxed and you didn’t need a ticket for a flight to get inside. The programs are taking root as airports expand options to fill passenger dwell time, as it’s called — those often mind-numbing hours between when people make it through security and when their flights take off. Now many airports feature live music and art exhibits. There are spas, microbreweries, playgrounds, gourmet restaurants and wine bars.

Pittsburgh was the first airport to open up to non-travelers, in 2017, and Tampa started doing so last month. Seattle-Tacoma is evaluating a pilot it tested earlier this year and Hartsfield-Jackson Atlanta International, the nation’s busiest, may seek approval for a trial run. The idea is under consideration in Detroit and Austin…

Some view it as a potential money-maker; officials with the facilities in Atlanta and Detroit figure they might see additional revenue from parking and concessions. A survey of visitors during Seattle-Tacoma’s trial showed people stayed an average 2.5 hours — though they spent only an average $10.29.

At Pittsburgh International, the impetus was popular demand, said Chief Executive Officer Christina Cassotis. She was peppered whenever she appeared at public forums. “In the top five questions was always, ‘Why can’t we go back to the airport and see what’s going on out there?”’

I know there are security concerns but I cannot believe it took this long to consider this potential revenue generator given the number of cities interested in tourism. If the buildings are already there, why not invite more people in?

Some of the discussion in the article suggested airport tourists are drawn by food and shopping. I also assume the terminals provide some other nice features: watching airplanes and a safe, controlled, clean environment. In all these senses, airports are then like shopping malls with options for dining, shopping, and entertainment all within a pleasant indoor setting. And having been in almost all of the airports listed above, newer facilities are definitely headed toward shopping mall status with large shopping and dining areas plus interesting amenities for people on the go. For example, Sea-Tac offers a large glass window for watching planes.

Now, if only those struggling shopping malls could find something as interesting as planes landing and taking off to attract visitors…

Strategies for renovating old downtown office buildings to compete with new towers

Pressure on office and residential space in Chicago’s Loop is coming from multiple angles, including the need for older buildings to adapt to modern office requirements:

Kamin said he expects more office buildings to find a second life as hotels or residential towers. “I don’t think there’s a successful path for some of these functionally obsolete buildings as offices,” Kamin said…

The high cost just to acquire a property presents relatively few opportunities for major overhauls, said developer Craig Golden of Blue Star Properties…

The venture took out a nearly $100 million construction loan in 2016, and converted the 20-story building into modern offices, branded as The National — a reference to the property’s 1907 opening as the home of Commercial National Bank.

The developers added the type of distinguishing feature that has helped properties thrive in recent years, creating the sprawling Revival Food Hall on the ground floor. The food hall brings in lunch crowds from throughout downtown, adding to the building’s vibrancy. Office tenants include co-working firm WeWork and the headquarters of Paper Source.

I have heard that it is often cheaper for companies to build a new big box store than to reuse and/or renovate one built by another company. Thus, problems with vacancies when companies close locations. Could the same be true for downtown office buildings – the cost of renovation is too high? I find this a little hard to believe given the difficult process that can ensue in order to construct a sizable building in a major city.

Similarly, the strategy of adding enticing dining options echoes what is happening with shopping malls expanding beyond retail to dining, residences, hotels, and a variety of entertainment establishments. The goal is to both promote multiple uses but also cross-traffic between organizations and business as people need to work, eat, enjoy life, and sleep.

Perhaps we will know there is really a problem when multiple older structures are torn down to make way for new buildings.