A Different Kind of Subsidy

April 18, 2017 at 12:47 pm | Posted in Uncategorized | Comments Off on A Different Kind of Subsidy

What is a Subsidy?

One thing I really get tired of is the time-worn adage from the suburb-haters. “We’re subsidizing your ‘sprawl'”. I don’t really deny this, but part of living in society is everyone subsidizes someone else. The working subsidize the retired and the disabled. The people that make the lifestyle choice not to have kids subsidize those that do. And even limiting it strictly to development, a person in a duplex the Wedge might subsidize my lifestyle in Bloomington. But the person in an apartment downtown is subsidizing the lifestyle of the person in the Wedge. And in turn I’m subsidizing the lifestyle of a person in Elko. It should also be noted that Bloomington is a huge loser with the fiscal disparities pool, a Robin Hood scheme to redistribute property tax dollars between various cities in the metro. (Minneapolis breaks even and St. Paul is a big winner thanks to tax free buildings for colleges and state government waste and bloat.) But there’s a subsidy most people don’t think of. The inner ring suburbs bear the burden of providing low value and/or subjectively undesirable retail to the cities, like big box retail, car dealerships, and gun shops.

Discount Stores, Hypermarkets, and Groceries

Although there’s (for now) plenty of Cub Foods in the cities, there’s exactly one Menards (in Midway) and Home Depot (the Quarry). For the most part if you want to fix up your house, and with the age of housing in the cities there’s a lot of it, you’re stuck paying outrageous prices at the local cute “Hipster Hardware”, or else driving. And the suburbs have more low value big box retail than they would need just for their own residents.

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Home Depot in Richfield, but the de-facto store for the entirety of South Minneapolis

Here’s a map showing home improvement stores in blue and discount / hypermarkets in red.

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Minneapolis area discount / hyerpmarkets (red), home improvement (blue), and large format grocery (greeen)

If we assume Cub Foods and the Lake Street K-Mart are not long for this world, the map gets even more sparse in the center. It’s not hard to see that with the coming of HyVee, Cub’s days are numbered. HyVee seems not particularly interested in taking over existing stores, and at any rate the Cub stores are much smaller than their preferred size.

Speaking of Hyvee, I’ll comment on the Terrace Theater situation. I’m a big believer in private property rights, provided you don’t do anything to impact you neighbors private property rights. Want a high pressure sodium vapor yardlight? (Banned on private property in Bloomington even thought it seems to be fine for the city to use them as streetlights) Fine. Want to build a 20 story apartment tower on three sides of my property with balconies overlooking my backyard?  Hell No!

Was I sad to see the Terrace Theater go? Yes. But we can’t save everything, and it was private property for the owner to do as he wished. I know there were offers to buy the theater, but imagine if I was trying to sell my house. The only interest in the property as a whole is someone that wants to tear it down and build something else, but it turns out George Washington slept in my garage. So I have all sorts of people screaming at me not to tear my garage down, and even offering to buy the garage, and the garage only, not the rest of the house, and without which the rest of the house is a lot less valuable.

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The Terrace Theater

Cars, Guns and Gas

Suppose you need a new car (80% of Minneapolis residents own one). Sorry, can’t buy one at all in Minneapolis, go to the suburbs. Need a gun (Nationally 1/3rd of households have one)? Sorry, can’t buy one in Minneapolis, go to the suburbs. In Bloomington which is still trying to court Bass Pro Shops as a Mall of America tenant, there was a kerfuffle with the city  tightening the zoning ordinance to prevent the proliferation of smaller shops. Essentially the only place you can sell guns in Bloomington now is a few parcels in the Oxboro area and near I-494.

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Minneapolis area new car dealers.

What about gasoline stations? There’s still many in the city, but they’re disappearing. The business model of a couple of pumps in front and a small store that sells hot dogs is no longer viable.  When you only make 3 cents a gallon, you need to sell a lot of it to be successful, which means a lot of pumps so people don’t see a line and decided to drive onto the next station. And in addition sell a lot of high profit items like donuts and car washes, with a store that has parking so motorists will stop to buy a donut on their way to work.

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Small gasoline station, closed despite it’s prime location right next to the freeway.

Gasoline station attempts to expand to be viable have met with mixed success. Bobby and Steve’s on Washington Ave and Holiday on Central Ave were able to expand, despite opposition. SuperAmerica on 40th St and Lyndale Ave was not

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SuperAmerica- Denied the oppurtunity to remain viable it’s probably not long for this world.

Unsurprisingly with few gasoline pumps per resident in the city, the place was packed when I visited, but if you have a tiny capacity you cannot be viable no matter how busy your are. For now SuperAmerica is still open, but it doesn’t offer a car wash or the food offerings that an expanded store would have, and thus probably won’t be open forever. Urbanists tend to yawn when an individual gas stations closes, figuring a hipster cafe with zero lot setback will be better, but what if there’s eventually only a couple of stations in the entire city. Maybe they figure no great loss, the suburbs can build more large stations to accommodate them, which is my point exactly.

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So Why Are Things Like This?

I can think of three things.

First, the cost of land is simply high, that means that fitting a standard Home Depot in Minneapolis is difficult to impossible. An attempt to fit a K-Mart in ended in the disaster we all know.

Second, NIMBYism is much worse in the cities. It’s so hard get anything built that’s not cute and “urban”. It’s a lot easier to get your efficient prototype built in the burbs.

Third, there’s the cities anti-business ordinances like sick leave, minimum wage, and staple foods. Could Hyvee have found some cheap land in the city that they could have built on? Maybe, but better to locate just outside of the city where they can still attract city residents while being exempt from the ordinances. Obviously staple foods doesn’t impact Hyvee, but it does gasoline stations, who now have to figure out how to be fresh grocers, and deal with multiple weekly deliveries, product waste, and low profit that fresh produce involves.

Conclusion

So do I think the city should change things? Not necessarily. They can run things how they want, it’s none of my business; I choose not to live in the city and have little to do with it. My point is simply that it’s too simplistic to say “the city subsidizes the suburbs”, and I’m fine with this reverse subsidy since I’m part of society.

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