Albany

Uncertainty abounds in America's decaying retail stores, but one thing is clear: Taxpayers, often in economically vulnerable towns and counties in rural and suburban areas, will pay the highest price for the sector's reckoning.

They will pay first in the form of plummeting sales tax revenue; next in property taxes and legal fees, as shop owners chase lower assessment values; then in widespread job loss; and, finally, in vacant properties occupying swaths of land that once anchored local economies.

"There's an awful lot to be frightened about," said Albany County Comptroller Michael Conners. "The future could be terrifying for all of us in government."

Take, for example, Hudson Valley Mall, the only shopping mall between Poughkeepsie and Albany. Last year it was bought for 12 percent of its previous worth by a Georgia real estate company in what was essentially a fire sale. Valued at $66 million in 2009, it was the largest source of property taxes for the town of Ulster, keeping afloat the 12,000 residents there who are no strangers to economic downturn and stagnating population growth.

Now the new owners want the property value reassessed to the $8 million they paid for it — a decrease that would drop the mall's rank on the town's property tax rolls from first to 20th and leave a gaping 6.5 percent hole in the townwide tax levy.

"That would equate to enough money to have to look at a 4.5 percent cut in total general fund expenses," said Ulster town Supervisor James Quigley. "That's damn near impossible without cutting people."

The Ulster case is a warning to local governments who've staked their budgets on the permanence of retail's high tide. A decade after the sector's peak, storefronts continue to close at historic clips as online retailers poach sales and foot traffic, and as memories of 2008 and the pain of the Great Recession persist with consumers.

Closures of 2,800 stores have already been announced this year — a number double the rate over the same period last year, according to Credit Suisse. All told, the brokerage firm estimates more than 8,600 retailers will close in 2017, eclipsing the rate seen during the 2008 recession. At least 10 retail companies have already filed for bankruptcy this year, the Wall Street Journal reported Saturday, compared to nine in 2016.

That will likely mean a glut of properties across America, where retail space per capita far exceeds any other country. America has about 23.5 square feet of such space per capita, compared with Canada's 16.4 square feet in Canada and 11.1 square feet in Australia, the second- and third-highest on the list, according to Morningstar, an investment research firm.

"Reality is reality, and the stores know this: No one really spends the day shopping anymore unless the weather is crummy. That's so 1990," said Ted Potrikus, president and CEO of the Retail Council of New York State. "Shopping malls were built on this model that presumed everyone wanted to do that forever. ... Town and county governments have a real whopper on their hands."

The 2008 recession turned the "American shopper — famous for our free-spending ways — into the American scrimper," wrote the Consumer Reports National Research Center in 2014. "Just as the Great Depression scarred an older generation of Americans, so too has this country's most recent economic contraction left behind a more cautious nation."

Nearly a decade after the collapse, consumer confidence has mostly recovered, but hurdles to spending remain for the young, credit-scarce, debt-swamped would-be shoppers who once spent casual days and dollars circling their local food courts. And those who still make such visits do so more efficiently these days, scouting the internet for products before their visits and thus minimizing foot traffic on which small stores once depended.

Consumers once flocked from across upstate New York to Capital Region malls, providing a reliable chunk of sales tax revenue that propped up towns and villages far removed from the area's downtowns.

But that's changing. From the sector's 1997 peak through 2012, more than 1,500 department store jobs were lost in the Capital Region, according to the U.S. Economic Census — a number that's without doubt plummeted even further in the five years since the last survey was taken as Macy's, Sears, JCPenney and other retail giants shutter stores in perpetuity. Total regional employment in the at-large retail sector, meanwhile, has slid to 2003 levels, just barely topping 48,000 this year, according to the state Department of Labor.

Albany County leans on those revenue sources more than federal and state aid combined, meaning it's especially susceptible to both small and large market forces. "Here's the thing that terrifies me: economic downturn," Conners said. "If the economy gets a cold, Albany County gets pneumonia."

Not even Saratoga Springs, with its bustling downtown corridor and steady population growth, can keep an entire county afloat.

"We believe that we're looking at millions in lost revenues," said Saratoga County Administrator Spencer Hellwig. "There's no question about it.

"The reality is, if there's not controlled, ongoing commercial growth, you die."

Last year Macy's announced it would close more than 100 stores in mostly rural parts of the country, setting off a domino effect for mall owners that had relied on the retailer to anchor its rents and bring in foot traffic that would, in turn, attract smaller boutiques. (Just before loan holders seized and then sold it, the Hudson Valley Mall lost both its JCPenney and Macy's.)

Much like what happened with the last wave of office store closures, "you get this glut of (retail) space and the value just goes down," Potrikus said. "Not just to the landlord, but to the community where the landlord is paying taxes. ... People look around and think, 'Is this the real estate that it was five or 10 years ago?'"

In Guilderland, Crossgates Mall's $250 million assessment means a huge contribution to town property taxes — five times the amount of Guilderland's second-highest taxpayer, National Grid. The operators of the mall are slowly pivoting their operations from retail to entertainment centers like Dave 'n Busters, and have plans for a 192-room hotel that they say will attract nationwide tourism.

But in a town that lives and dies by the mall, even small changes reverberate. The Macy's at Crossgates, for example, now wants to halve its property value assessment in a move that could cost local and school property tax rolls almost $200,000 each year. Earlier this month, the Guilderland Town Board agreed to share legal costs with Guilderland Central School District, which stands to lose the most should the department store's tax value drop from $11.5 million to $5.3 million, as Macy's hopes. "It would really redistribute the tax rate among taxpayers," said Neil Sanders, the school district's assistant superintendent for business.

"It's going to be a battle of appraisers," said Town Supervisor Peter Barber.

So what's a town to do?

Adapt, or else, experts say.

Through foresight and a bit of luck, Clifton Park officials have leveraged their proximity to Saratoga Race Course to reinvent their economy around hospitality and tourism. The town is "definitely in a hotel boom," John Scavo, planning director, said in December. That growth has provided the client base for medium-sized retailers along the Adirondack Northway, Clifton Park Supervisor Phil Barrett said last week.

"Looking back now," Barrett said, "it's a much different atmosphere (than in the early 2000s). ... The retail environment has evolved."

Others want to expand the state's online tax structure. New York already taxes sales directly from Amazon, but a proposal that failed to emerge from state legislative budget talks this year would have expanded the tax to include in-state retailers using online marketplaces. Gov. Andrew Cuomo and other supporters said the proposal would have generated more than $128 million this year. Similar ideas have been floated at the federal level, to no end.

"This is the way it's going. This is the new economy," said Stephen J. Acquario, executive director of the New York State Association of Counties, which supported the tax. "It's illogical and irresponsible for the state government not to modernize its tax structure to keep up with economic conditions."

Yet adding a new tax on online sales is a tough sell to New Yorkers, who according to the state comptroller's office collectively pay among the nation's highest rates of state and local sales tax.

Nor is it likely to balance county ledgers in full, or halt the inevitable and seismic shifts in consumer spending habits.

"I don't want to say retail is dead," said Potrikus, of the Retail Council. "It's just in the middle of this giant transition. But where is that pendulum swinging?"

rdownen@timesunion.com • 518-454-5018 • @RobertDownenTU