Unfortunately for Lancaster, it was Palmdale that successfully wooed the mall developer with a $20,000,000 incentive package back in 1990. The customer traffic heading to and from the new mall spawned a dozen adjacent retail sites that sprouted big box stores and a penumbra of chain restaurants and strip malls. It was a city planner’s dream for almost eighteen years.

What Happened in Lancaster

But then Palmdale was hammered by the economic crash of 2008. The mall lost its Gottschalk’s and Mervyn’s anchor stores. Palmdale’s economic development team felt it had no choice but to entice Macy’s and others to fill the void with multi-million dollar tax deferments and business “incentives." Remember, a big mall with no anchor stores rapidly fails as foot traffic declines. In fact, no developer can even secure bank financing to build or improve a retail complex unless they already have signed contracts with a couple of big stores. That’s why the largest stores in any mall pay the lowest proportional rent. The real cost of the mall is carried by the smaller shops and, very often, the tax payers.

A Cinnabon pays a great deal more per square foot in rent than a big anchor like Macy’s. The Cinnabon is also far more productive and pays more tax and employs more people pound for pound. The anchors effectively take up a lot of space, negotiate with veiled threats, pay as little rent as possible, and virtually no tax. That’s standard business practice across the country.

The idea that a town can repeatedly offer tax abatements to the same property in the short term in order to create tax revenue and prosperity over the long haul is a bad economic model. In fact, having neighboring towns race to see who can repeatedly impoverish themselves the most in an attempt to grow rich on new business is also a bad plan. Both towns know private corporations actively game the system, yet they can’t seem to help themselves. They still wet their pants at the thought that the next town over might get the new Applebee’s or Jiffy Lube instead of them. It’s a form of institutional insanity.

What Happened in Palmdale