Guest Column: City parking garage with retail space gives city unfair advantage

Recently, I have given a lot of thought to the plans for the city’s mixed-use parking facility.

One thing I have not seen or heard about is property taxes. I am assuming the city would not be paying the county any property taxes for this building.

Another thing not mentioned is that the scope of this project should allow the retail sites to be built at an economy of scale, thus having a cheaper per square foot cost than a competitor’s building.

I believe these two issues will give the city an unfair advantage.

I realize the city intends to rent the units “at market rate,” but there is a fundamental problem with this concept as it relates to the current economy. Currently, there is a higher vacancy rate than we are historically used to. This forces landlords to both lower rates and relax on terms in order to secure tenants. This natural course of landlords deciding how much they can lower their income and tenants deciding what is acceptable to them in the current market is what causes the natural ebb and flow of rates and terms.

In a declining market, whoever can afford to offer the lowest rent will fill up faster. Since the city is using tax dollars to build a large-scale project-and I assume they will not pay property taxes-this puts them in a position to beat out all other landlords.

The problem is there is no “going rate” in this economy. In a stable economy a going rate is easily attainable, but, in an environment of declining rents, who is to decide what the market rate is?  I know the city plans to hire professional management, but their goal will be to fill up the property.

As a broker, I can attest that we work with what we are given to get properties to the income producing stage. It will be difficult if not impossible for a broker to say, “This property could afford to be leased at $12 per square foot, but the going rate is $14, so we will let this property sit vacant” (this is not necessarily the going rate but simply an example).

Assuming it’s possible to ascertain exactly what the going rate is, and the city can stick to this, I believe this project is unfair and negatively impacts the community for several reasons.

1. Increasing the vacancy rate even more. We are already seeing higher vacancy rates, and adding a new building that starts empty adds even more vacancies to the already abundant selection. This will lead to even more empty storefronts, which are unattractive and counter-productive to the initial goal of making downtown look better while improving parking.

2. Higher vacancy rates softening the market. As vacancy rates increase, rent should technically decrease. This goes back to the initial problem of obtaining a market rate. It will be even more difficult to achieve when the city is pushing rental rates down.

3. Government competing with citizens. Historically, the government-specifically in Columbia-does not compete with citizens. Revenue-producing aspects of the government are typically restricted to citizens, or the barriers of entry prohibit citizens from competing.

On a local level there are two specific things that come to mind. The first is public transportation and the second is parking. The city has restricted anyone from making money on parking because it is a primary income producer for the City of Columbia. I personally can-not think of any past instance where the city has entered into competition with the citizens. It is unfair that the city can choose to compete with us, yet we are unable to compete with the city. Worse yet it is the citizen who is being competed against, paying for his competition (tax dollars fund the city).

Most properties are locally owned by Columbia citizens. Most of these owners simply own either one or a small handful of properties, and they are not large scale developers or people with a lot of extra money to lose. They simply made some wise investments in a beautiful and economically growing community. Now these owners are in trouble. They are losing rents to vacancies, businesses going bankrupt and falling rents, and the city wants to put an even larger burden on them by raising vacancies, lowering rents and unfairly competing with them.