Fri, Sep 19, 2014 ●
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City fears erosion of commercial tax base

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City fears erosion of commercial tax base

SOUTH PORTLAND - City officials are keeping a close eye on retail revenue this holiday season, especially in light of some bleak forecasts by several national corporations.

Three retailers near the Maine Mall – Linens N Things, Tweeter and Circuit City – have filed for bankruptcy. Tweeter shuttered its business earlier this month and Linen N Things continues to liquidate inventory. During the next three months, Office Depot will close its stores in South Portland and Bangor.

Although not a national retailer, Big Al's Super Value store will close its South Portland location Dec. 30, but continue to operate in Wiscasset.

Meanwhile, there is uncertainty about the future of the Maine Mall. Its owner, the Chicago-based General Growth Properties, raised the possibility of having to seek bankruptcy protection in a third-quarter filing with the federal Securities and Exchange Commission.

City Manager Jim Gailey said the city is keeping a close eye on its commercial tax base, especially the future of GGP. Gailey said he recently met with Interim Finance Director Tracy Roy and Assessor Elizabeth Sawyer about steps the city may need to take if GGP files for bankruptcy protection.

"We're covering our bases right now," Gailey said, noting the city would be high on the list for recovering tax payments should the mall file for bankruptcy protection. "I'm hoping once we get through January or February, we'll get a clear indication of who's around and who's not."

Since the mall owner's corporate economic troubles were made public last month, there have been several investors buying into the company, which owns and operates 200 malls nationwide. And GGP announced last week that it successfully refinanced $896 million in debt.

GGP also gave the city some good news last week by moving ahead with Maine Mall Commons, a $7.8 million retail complex on Maine Mall Road that is expected to have two restaurants and four retail outlets. A GGP representative said last week the company expects to break ground next year.

"Usually, a large commercial complex like that would be putting everything on hold," Gailey said. "But for them to keep on spending money to get their approvals in place is a bright spot."

While confident the city can weather a short period of mall-area vacancies, Gailey said he is concerned about long-term effects of having empty buildings for an extended period of time. Extended vacancies would reduce the annual property and personal property taxes these businesses contribute to the city. It would also reduce incidental revenues, such as occupancy and building permits.

Gailey, however, is more concerned about what he sees as slow erosion of the city's robust commercial sector, which some have described as the economic engine for the entire state.

Over the years, the city has watched the tax burden shift from the commercial sector to residential property owners. In the mid- to late-1990s about 60 percent of the city's property taxes were paid by businesses, but that percentage has dropped to about 52 percent in recent years.

The city is feeling pressure from Scarborough and Westbrook, both of which are expanding their commercial tax base. Developers in Westbrook are moving ahead with plans to build a mall in Stroudwater, only a few miles from the Maine Mall. And commercial real estate brokers are trying to fill vacant storefronts around Cabela's.

"Everyone sees what we have and they all want a piece of the action," said Gailey.

It's time for greater Portland communities to start viewing economic development from a more regional standpoint, he said, and so Gailey has recently opened up discussion with leaders in Westbrook, Scarborough and Portland. He said it took years and creative thinking for Portland to restore businesses to Congress Street, following the rapid buildup of the Maine Mall area.

Gailey fears the same could happen to South Portland, which not only has to compete with a faltering economy but nearby towns also looking to fill vacant storefronts.

"There are only so many people, restaurants and national companies that will come to the district, and the more we thin that out, the weaker the (core) economy will be," Gailey said. "We need to be more of a region and promote our region, and work off of the core, not deplete the core."

Sebago Brewing Company is one of the businesses making the jump across the line to Scarborough. The brewery will close its flagship South Portland restaurant of 10 years on Jan. 31 and expects to open its new location at 201 Southborough Drive in early February, according to Sebago Director of Operations Jason Sargent.

Gailey said the city will have a better idea of the business climate in February, when tax bills are due.

"Vacancies in a district like the mall area is not a good thing. With those companies leaving, those buildings are still there but they are black," Gailey said. "We need to work to help back-fill in those establishments, because a thriving district has all the lights on."

Randy Billings can be reached at 781-3661 ext. 100 or rbillings@theforecaster.net.