Sunday, January 22, 2017

Unabated to the mall: The Rise and Fall of the Pittsburgh Mills Mall

It turns out that one of the first posts here was about the recently opened Pittsburgh Mills Mall in Frazer Township.  At the time local biz/politics guru journalist Jon Delano had a piece on how “Pittsburgh Mills future could be in doubt.”  Last week the mall was again in the news with plenty of national coverage of the fact that much of the mall was foreclosed on and as a result was ‘sold’ for all of  $100.  All a formality of course as equity owners of the site transferred ownership to the lien holders who lent money to the project. Yes, the project is worth more than $100 most likely, but apparently less than whatever $$ is still owed on the loans. Thus the lenders submitted a de minimus bid to complete the transfer of ownership. Somebody lost a lot of money on the project to date.
But a full accounting of the project is not limited to that.  There was a lot of public money that went into facilitating the project as well. Little mentioned in much of the media coverage, but at the time it was developed, the county's $58 million dollar TIF (or Tax increment financing package) that went along with the project was the biggest TIF in Allegheny County’s history.I am pretty sure no public entity retained a stake in the project, and much of what was spent will not be coming back, but I note I know of know formal accounting quantifying that.

The national coverage of the mall's 'sale' seems to imply that the developments are the result of greater travails in the nation’s retail industry.  I wonder.  The mall is one of the newer malls across the nation having only opened in 2005.  A model of patience and tenacity if nothing else, the mall had been in planning for  more than a quarter century before finally opening. 

Local developer Damian Zamias conceived the future Pittsburgh Mills project in the late 1970s.  That’s right, the late 1970s.  By 1997, local opposition to the project, lead by retail businesses near the new project, had been ongoing for 16 years. Some called the situation a veritable 'civil war' in Frazer Township and environs.  Still the project proceeded.  In 1989, Zamias and company threatened topull back from the project if Allegheny County did not continue support for a TIF to go along with the project.  There seems to be have been no risk that would actually happen, and the prevailing wisdom was that the mall was ‘needed’ here. Zamias kept plugging away even though the drain of the project was a major reason his development company went bankrupt in 2001.  You think that might have killed the project?  Of course not.  We all know now bankruptcy is merely a tool of the big developers and the very next year (2002) he raised new capital by bringing in some new partners.

Why was the project ‘needed?’  Apparently back in the 1970s Pennsylvania, and many would say the same thing about Pittsburgh, was considered under-retailed, if you believe that. The metric seems to be based on the number of big regional malls per capita, or so I infer.  

And so, in 2005, after over a quarter century in the works, the mall finally opened to great fanfare. More than a few things had changed in the county from the time the mall was conceived and when it opened.  There was this little tempest in the steel industry that impacted local jobs. The under-retailed Allegheny County over that period saw its population decline by ~370K people, and the opening of entirely new retail developments at projects including The Waterfront, South Side Works, Robinson Town Center (1998), Galleria in Mount Lebanon, the Mall at Robinson (2001), and expansions over that period at Ross Park Mall, the Waterworks, Settlers Ridge, and I am sure many more.

As the project development continued on, more than a few other mall developments in Allegheny county failed.  In 1979 Allegheny Center Mall was… well, an actual mall, as was Parkway Center Mall (sort of a mall?), and there was the long forgotten Eastland Mall (now returned to fallow in North Versailles).  So the market was taking down the major retail developments, Pittsburgh Mills proceeded unabated. The project proceeded pretty much under its own inertia because nobody was willing to question the underlying premise that public money was needed to push Pittsburgh Mills forward.  

The mall also is very different from many of those projects completed in the region since the 1980s. This was no redevelopment of a former factory 'brownfield.'  Again, the project was planned before that was really an issue here. The project was almost entirely built on formerly pristine "greenfield" described as late as: 
Frazer is home to 1,300 people, many of them elderly. The land is rural, and the trees huddle together in bunches, like broccoli clumps.
So you can't say the project in any way is part of the post-industrial transformation that Pittsburgh is proud of.

Worth noting, the news is the mall was 'sold' to its lenders, but the mall is not closed.  Far from it in fact and is still anchored by a few big retail outlets including Macy's.  Macy's Pittsburgh Mills location does not even appear to be on the recently announced list of locations Macy's is closing.  Just a few weeks ago the Pennsylvania Liquor Control Board announced a new location to open at the mall. Whomever winds up owning and operating the site in the future, the vastly lower debt burden that will have been written off will make for a more viable business going forward. 

There is a big point here that gets to economic growth across southwestern Pennsylvania and the region's future.  Long a region suffering from the loss of manufacturing jobs, most any new development was seen as worth doing no matter.  Questioning whether any project made sense was virtually impossible, and any possible opportunity cost left unaccounted for. Was the public effort put into building the Pittsburgh Mills Mall the best use of the money, let alone the public money, and effort involved?  Was there any alternative that could have had a better chance to catalyze long term economic growth? I propose no answer to that here, but do speculate the question was never asked. The project was projected to produce over 6,100 jobs, by one public document I have seen.  I don’t know the current job count out there these days, but it’s not 6,100 permanent jobs. Even the jobs that were 'created' there have to be just retail jobs that were likely displaced from somewhere else in the region.  Retail is retail and not ever really considered value creation in the long run. 


Thursday, January 12, 2017

Pigskin Mythos

Maybe this blog will live on with only meta commentary looking back on past thoughts. But on this day the Pittsburgh Steelers began an era. Defeating the Minnesota Vikings (16-6) on January 12, 1975, the victory was the first of 4 Steelers Superbowls over just 6 years.

There continues to be this persistent mythos that the Steelers fans during those first Superbowl years were largely made up of vast number of unemployed workers who were cheering the team on as their jobs were being eliminated en masse. It remains to me an odd memory that only lacks in any economic data to support it.  So strong is this whole idea that whole books (by respectable authors)have been written on the topic. I have written about this here many times (for example in 2010: The Economics of Cliff Stoudt), but have had this conversation with innumerable folks who all, almost universally, disagree with me. Often quite vehemently.

Let’s start with this factoid.  Here is a short table of the unemployment rates in Pittsburgh and the United States during the months of each of Pittsburgh’s Superbowl victories.

Superbowl – Pittsburgh Unemployment Rate – US Unemployment rate

Superbowl IX (January 1975)      6.4%      8.1%
Superbowl X (January 1976)      6.7%      7.9%
Superbowl XIII (January 1979)      5.8%     5.9%
Superbowl XIV (January 1980)      6.8%      6.3%

So during 3 of those 4 games, the local unemployment rate was well below the national rate, and in two cases far below the national average.  If you want to take the last game as an exception, here is something to think about.  Pittsburgh MSA employment reached 1,099,600 jobs in February 1980, or just a few days after the Superbowl was played.  That was actually an all-time high in the region’s employment count.  By that I mean an all-time high going back as far as there is consistent metropolitan data reported in 1946. 

Not convinced or think, as some have tried to argue with me, manufacturing employment was collapsing at the time even if overall labor force stats were more positive?  I once posted here the manufacturing employment levels across the 10 counties of southwesternPennsylvania during the 1970s. In 1974 (when those games leading up to Superbowl IX were played), SWPA averaged almost 316 thousand manufacturing jobs, an increase over the most recent years and likely a peak going back over a long time before then.  In 1979 the same region still averaged over 300 thousand manufacturing jobs, about the number the region had at the end of the 1950s if not higher. There had been no big plunge of factory jobs here (yet). 

Still, there are few things I’ve been less able to convince people of than this.  Numbers don’t matter and I’ve had very thoughtful people just say it does not add up to them. What they remember is something very different and contradictory. It's not a question of memory persisting, its a memory that only came later. This may all mean something to recent political news as well, but I will leave that to other pseudo-pundits. 

So why the disconnect? I think the 1970s were a traumatic economic time with multiple oil embargoes making gas prices jump, high inflation and the dreaded ‘stagflation’ or inflation without growth.  Certainly those things impacted everyone in Pittsburgh, but they impacted all Americans.  Did manufacturing have slow times during the two national recessions of the 1970s? Yes, but even that has to be taken into context.  Manufacturing employment had always been highly cyclical and fluctuated with the national economy.  When national unemployment rates went up, unemployment in manufacturing industries, and manufacturing regions, went up even higher. Pittsburgh experienced multiple periods of double digit unemployment rates many times during the 1950s and 1960s, yet never even came close to a a double digit rate during the 1970s. Even in the two national recessions of the 1970s, US Steel - then still the region's largest employer - did not fare badly during the decade (again, strongly against popular belief).  Don't take that from me, here is a contemporary quote from then US Steel Chairman in 1975 saying the recession the nation was then in the middle of was "Steel's best recession ever."   

But history has many ironies.  In the very month the very last of those superbowls, Superbowl XIV in January 1980, the NBER later recorded that month as the beginning of a new recession.  Though it was a short recession, ending officially after just 7 months, there was only a brief respite before another recession started in 1981.  Some consider the two just part of one big economic downturn, but one which see the palpable collapse of so many local steel jobs.  But another Superbowl victory did not come for decades. 

Anyways…  playoff time is a funny time in pundit land.  The merging of sports and general opining can get kind of funny this time of year.   Who remembers our friend Bill Johnson from Denver who parachuted in to write a story criticizing Pittsburgh aesthetics during the championship game in 2006.  I am sure we have a few alien reporters among us from Kansas City right now.  



Monday, January 02, 2017

Population past - population future: migration and Pittsburgh

Reading the PG piece parsing some migration data from American Community Survey: Philadelphia to Pittsburgh, a moving trend.  The punch line: the data shows a net gain of population due to migration from Philadelphia to Pittsburgh (metropolitan areas, respectively)

I figure I should update my graphic tracking the relative difference between the unemployment rates in Pittsburgh and the United States.  Why do I care?   Mostly because when it comes to economic migration within the United States, this is a pretty solid predictor of net migration rates across metro areas, or at the very least it has been for Pittsburgh.  '

The PG piece used some data the Census gnomes have put out looking at migration between metropolitan areas over the period 2010-2014. That happens to be at the end of a unprecedented period when Pittsburgh maintained a streak of monthly unemployment rates below the national average.  Basically for 99 continuous months, the local unemployment rate was below the national average. For 109 months the local unemployment rate did not exceed the national average (there were a few moths in there where the two rates were the same.)   Few really noticed, but I do not there was any comparable period that was true for a longer period of time since metropolitan region unemployment metrics were regularly reported in the late 1940s.  Think about that. 

Unsurprisingly for most of those years the Pittsburgh MSA showed positive net in-migration, also an unprecedented demographic trend to be sustained for Pittsburgh since the 1940s. 

Alas, it probably isn't true right now.  See the  trend really was broken in February 2014, and since then the local unemployment rate has been above the national average.  That isn't the end of the world, but what is problematic is how far above the national average Pittsburgh's unemployment rate has been.  For both October and November, Pittsburgh unemployment rate has been 1.2 percentage points above the national average. That also is unprecedented in that you have to go back to the mid 1980s (not a good period for Pittsburgh) when the local rate was so far above the national rate.  As long as you have that type of differential, you will have folks finding better opportunities elsewhere and you will see working age population migration follow.

The future??   Pittsburgh's unemployment rate dropped 0.3 percentage points between October and November.  That, by the way, was the biggest month over month drop in 16 years one of the biggest month over month drops in decades. So a good sign for the local economy and a sign the local job market is tightening.  But the national unemployment rate dropped by the same 0.3 percentage points at the same time.  As long as you see such tight labor markets across the nation, and so much tighter than here, you just can't expect there to be net migration flows like what we saw over those 109 months where Pittsburgh fared at least we well as the nation.  Pittsburgh may do better than it has in the past, but there are just too many places with too many opportunities to expect Pittsburgh to pull folks given the relatively higher unemployment rate here. 

For now and for the next couple years at least - remembering most data like the Philadelphia migration story today, are pretty much backward-looking due to the latency of data coming out - the story will be of population loss due to net out-migration and continuing natural population decline (deaths exceeding births) endemic to Pittsburgh since the 1990s.  Lots of other local stories follow from all of this... Allegheny County population trends... city of Pittsburgh population trends and all sorts of real estate trends.  So....   watch this space?  Maybe,