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Fleeing Factories, Superstores: Time to Demand Performance Bonds

Neal Peirce / Jul 10 2013

For Release Sunday, July 14, 2013
© 2013 Washington Post Writers Group

Neal Peirce For a half century and more, there’s been an ugly abandonment scene across America – factories, malls, gas stations, superstores abruptly closing and fleeing sites in cities and towns. They leave it to mayors and councils to either suffer the scourge of abandoned territory or pay heavy demolition and cleanup costs.

Translation: Local taxpayers are obliged to pay for private industry’s irresponsibility. It’s a crime against civic America, and it ought to be stopped in its tracks.

Some 17 years ago I wrote a column suggesting that performance bonds, covering all reasonable property recovery costs, be required of all industrial or commercial owners whose properties might constitute a future blight.

Now there’s backup for that idea in a fresh report from Michigan State University that proposes not just bonds but an alternative of long-term mandatory insurance policies for clean-up of properties.

The need is as compelling as ever. My “worst” examples are the wrecks of yesteryear’s industries to be seen from the train windows on Amtrak’s Northeast corridor. Worst of all are 7 miles of Amtrak’s line through north Philadelphia – a succession of long-abandoned, decaying factories strung along the right-of-way, their carcasses slowly falling to pieces, rotten roofs caved in on tops of crumbling red brick walls.

What an embarrassment for the United States, with foreign visitors numbering among the passengers witnessing the carnage from train windows.

Thousands of other dereliction sites languish across urban and suburban America. Hundreds of shopping malls, as a website named has amply documented, have become vacant and indebted hulks. And the trend is accelerating. Analysts suggest that 15 percent of U.S. regional malls will fail in the next five years.

Malls are just part of the problem. Thousands of abandoned facilities – once-active steel and auto plants, gas stations, supermarkets, convenience store blocks, Walmarts, Kmarts and other retailers’ failed big boxes – litter the landscape from sea to shining sea.

And it’s not just the buildings – it’s the parking lots. Contaminated with brake fluid, hydraulic fluid, gas and crankcase oil – everything that drips out of cars – acres of parking space generate runoff that must be treated and hauled off in an environmentally responsible way.

Can good use be made of some abandoned big boxes? Yes. In the book Big Box Reuse (MIT Press, 2008), author Julia Christensen documents how some imaginative communities had been able to reclaim vacated Walmarts and Kmarts for such varied uses as a church, a library, a school, a Head Start center, a medical center, a courthouse, a recreation center or a museum.

But those are relatively isolated cases. The basic big box form – a single-use structure surrounded by a sea of parking space, isolated from town and community centers, rarely connected to public transit – is emblematic of the sprawl and waste that plagues urban development in America.

And big-lot superstores often abuse localities. Dangling the possibility of jobs and commerce before local officials, they sometimes demand and get cut-rate land or outright public subsidies for coming to town. Then by virtue of their presence (and cut-rate prices), they force locally owned stores out of business and help undercut historic downtowns.

All that may have seemed inevitable during the big box era of recent decades – and in fact remains a serious threat. But what’s most inexcusable is the practice of big landowners (retail or industrial) “walking away” from their privately held parcels, forcing local governments (and taxpayers) to pay for removing the blight.

State governments could do a lot to correct this situation by passing laws that require bonding or removal insurance for stores – just as parallel requirements are routinely demanded of cell towers, oil rigs and mining sites.

Of course industry front groups such as ALEC (the American Legislative Council) would quickly mount campaigns to stop legislative action.

Another hurdle is that reform laws would be a red flag to site locators – raising the specter, as Emily Badger notes on the Atlantic Cities website, that “states might wind up competing for jobs based on who allows industry to walk away from the biggest mess.”

Let’s hope there’s sufficient common sense in state capitals to avert such a dog-eat-dog approach. It’s tough to discern equity in an America in which both local governments and lower- to middle-income families struggle to make ends meet – while corporate profits rise and the stock market recovers to pre-recession levels.

Mandatory bonding or insurance to make corporations pay for the full environmental restoration of their abandoned store and plant sites would hardly be a panacea for the inequities in today’s economy. But in good times and bad, it should be the least the public demands.

Neal Peirce’s e-mail is

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  1. A Elizabeth Watson
    Posted July 10, 2013 at 7:06 pm | Permalink

    I’ve never understood why we planners haven’t been able to get more traction for the idea of planning as protection for the taxpaying public. Mitchell Silver’s companion piece explains the divergence that emerged between economic development and planning – time we started connecting some of these dots for the public. “Externalities” isn’t just a word for traditional environmental issues. Thanks for both pieces!

  2. Posted July 10, 2013 at 9:15 pm | Permalink

    Such bonds a long overdue good idea!!

  3. Joel King
    Posted July 10, 2013 at 11:23 pm | Permalink

    Excellent article. I saw my first abandoned mall in Long Beach, CA about 10 yrs ago. It blew me away that it could actually happen. I like Neal’s idea.

  4. Posted July 11, 2013 at 12:37 am | Permalink

    The taxpayers pay twice for abandoned commercial and industrial properties because most cities give “sweetheart” deals (tax breaks and other incentives) to companies to locate there in the first place and if the companies leave, taxpayers pay again for the clean-up and re-development. Performance bonds would help cities ensure existing enterpises don’t default. But the larger issue is the tax code’s huge incentives to corporations to default on promises when there is more money to be made from the default than fulfilling the contracts. In the design world, Andres Duany, Elizabeth Plater-Zyberk and their colleagues have been recommending redevelopment of properties where it makes good economic sense. The idea is not just part of “new urbanism”. At Duany’s presentation in Everett some 20 plus years ago he outlined how to transform and connect malls to neighboring communities, adding town homes, residential and office buildings to parking lots, with gardens and trees that created walkable, livable scale communities. Mixed use development still gives the biggest bang for the buck. Unfortunately we still have to deal with wrong sized, failed enterprises that were based on the myth of unlimited growth and supported by tax incentives. Thanks for giving us some ideas on how to do this work, Neal. Much appreciated.

  5. Richard Wakeford
    Posted July 11, 2013 at 1:31 am | Permalink

    In the UK, such arrangements apply to the clean up of some mineral extraction sites. I’m running a workshop on land use at University of Nebraska’s Rural Futures Conference in November. Has anyone got data about the extent of abandoned sites in the US – and how many are ex retail, town many ex-industrial. As Neal says, the view from the train can be pretty unattractive. And its interesting what trees hide as they grow on abandoned lots.

  6. Perry Cofield
    Posted July 11, 2013 at 6:55 am | Permalink

    Abandoned buildings are a fascinating problem that governments seem to have at the bottom of their list of priorities. Here in Arlington VA, apparently you don’t need a permit to raze an old house! So all the concern over lead and asbestos in existing buildings suddenly becomes defacto non-existent in demolition? This could be worth a column in itself.

  7. Mary DeWolf
    Posted July 11, 2013 at 8:44 am | Permalink

    You are brilliant and caring, Neal!
    What happens after the property taxes are not paid? Who makes the decisions then?? Traditionally and legally it has been the municipality that takes ownership.

  8. Bob Moreo
    Posted July 11, 2013 at 9:19 am | Permalink

    “Let’s hope there’s sufficient common sense in state capitals…”

    Let me stop you right there.

  9. Cave Johnson
    Posted July 11, 2013 at 11:00 am | Permalink

    It’s an interesting idea, but I wonder if there isn’t a better way to tackle the underlying problem. Firms abandon property when they can’t use it and the can’t sell it. A piece of urban land has all the costs of the improvements the firm made, but also the value of the infrastructure serving the site. There is a lot of value there, why is the market not pricing the ground appropriately? I think we need to examine that first to figure out what’s wrong. If the market was working properly, firms would be designing buildings so that they could be easily reused and would treat the land as a valuable asset. Instead, they are treating it like a disposable supply.

    I suspect a huge part of the problem is that local governments have been extending services betting on the come for years and the over-supply of urban land is causing the market to completely disregard that value. It’s also possible that local governments are not properly capturing the costs of infrastructure extensions. Local governments bet on 30 years worth of tax revenue, but retailers plans have them in and out in half that time. This make raw land look cheap and redevelopment look expensive.

    The core problem is that local governments need to do a better job, on the front end, of capturing the value of the infrastructure they extend so that the value of their existing infrastructure is properly priced. If they do that, land will be too valuable to let it sit idle.

  10. Neal Peirce
    Posted July 17, 2013 at 10:55 am | Permalink

    Comment received from Joanne Fox
    Your article “Time to demand performance bonds” in Sunday’s paper was right on. It’s infuriating seeing all the trees cut down and asphalt poured for shopping centers, etc. that will be defunct and left to rot in a few years. I understand that the owners get tax write-offs when the shopping centers go under. Germany already addresses this issue, and it shows. It’s time the United States addressed this issue as you suggest! And – it’s not just commercial businesses; public schools fall to the same fate.

    Please keep plugging this issue.