As Lyn wrote in this month’s Decatur Focus…
We will be focusing our efforts and our marketing and advertising budget on business retention in the coming year. We are working with our local business owners to document current rental rates and contact landlords to negotiate rent concessions to help our local business owners survive.
Business-friendly? You betcha.
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Since when is it the City’s business to negotiate in favor of the interests of one busisness (tenant) against the interests of the other (landlord). Does the City plan to help the landlords negotiate rent increases when the market gets better?
FYI – Landlords ARE businesses too, ones that have made (usually) much greater investments in Decatur in the form of the structures they have built or bought than the value of the fixtures, equipment, and merchandise of their tenants.
If a business wants to go to their landloard and renegotiate their lease, that’s between those two parties – NOT the City of Decatur. all like all or our Decatur business to succeed.
Hmm…perhaps this is a bit exacerbated by my post title. I’m guessing the city is looking at this as a way to help both parties. Mightn’t land owners also benefit from knowing what the other current rates around them are? Then an unfilled space might actually find a tenent.
Regardless, I’ll alter the post title to make it sound less biased.
Am I interpreting this correctly: the city wants to get involved in private real estate negotiations? If so – this is absurd. It smacks of government property rights taking. It shows contempt for Decatur’s commercial property owners and poor judgement in the use of government resources.
Why is the city involved in negotiating rent concessions on behalf of renters? Are landlords and tenants too stupid to figure it out themselves? Do commercial real estate professionals (agents, appraisers, managers, etc) need the city’s? Puh-lees
How about this, City of Decatur, negotiate (or just legislate – much more appropriately in your wheelhouse) sales tax and real estate tax reductions for these businesses that are so near and dear.
Commercial property owners should refuse to participate in this stupid plan.
Everyone benefits when businesses succeed. The city collects more sales and use tax when businesses thrive, speculative business see the city as friendly and decide to locate nearby, and landlords see their long term investments appreciate accordingly. So even though this seems outside their immediate realm of responsibility, I appreciate the City looking into relief considering the crisis the we are in. One bad month can tank an otherwise functional business model these days.
C’mon folks, take a deep breath. There is way too little information in that paragraph to start getting upset about the City’s involvement in a real estate transaction. What if the City were approaching the landlords with an idea that the “marketing and advertising” budgets would be spent on increased advertising efforts to get people from outside Decatur to our fair little slice of heaven to spend their $$$$$, in exchange for the landlord lowering rent? There are all kinds of cooperative arrangements that are win-win-win that the City, landlord, and tenants could engage in that would not result in governmental interference of private contractual relations or property rights. There are also tax incentives that could be employed.
While I would agree that it would be improper for the City acting as “bad cop” to come onto the scene and beat down rental rates, I’m not ready to jump to that conclusion yet.
Anyone know what exactly the City is doing? Let’s debate that.
[...] Metro spots an interesting tidbit in the city’s publication. The hamlet he calls home is working with [...]
Guess the city needs some new project to spend all that 40% surplus they keep bragging about.
Can the City help me negotiate a better interest rate on my CD at Decatur First Bank? If I have more interest income, I can spend more at Decatur restaurants.
Decatur Metro readers, remember that the City of Decatur did not become the community that it is today by accident. The city decided 20 years ago to a make concerted effort at developing and promoting a main street concept that prized locally ownded businesses.
By the way, I’m not an employee of the city, just someone who appreciates good economic development planning when I see it.
The business make-up of the city happend with a conscious effort to attract restaurants to the downtown area, which by extension brought people, which then attracted more retail. And of course all of this helped attract more people to become home-owners, condo-owners and renters in the city. Any economic development professional with tell you; supporting existing businesses is the surest way to provide jobs to area residents, maintain a consistent tax base and attract residents and tourists.
The city getting involved in local businesses’ affairs is nothing new. It’s the reason why the city’s economy is so vibrant. Eventually the city was able to back off, because the “market” was able to continue its upward progression unassisted. But with the rate of small business closures effecting the Metro Atlanta area, I’d be worried about all that progress coming to a halt if I was working for Decatur as well. If the planning department thinks they can support small business owners by giving them the information they need to know to renegotiate rents, then by all means, do it. Anything that can lower business’s overhead will help the community as whole a lot more than keeping rents high.
Cities collect occupational taxes or fees for business licenses from each business within the city. This also applies to landlords, but only if they have an office within the city. Most rental property owners do not have an office at every location. Therefore, it is in the City’s best interest to help out the individual business tenants, including professionals (e.g. architects, lawyers or physicians), as opposed to the landlords who may or may not even be paying a fee to operate within the city.
Somewhere between the lines here I’m seeing an attempt to educate landlords, or maybe more accurately, one particular landlord, as to the current market rates for commercial space. There is a certain landlord in Decatur who has a ton of vacant properties – heck, they were vacant even before the economic downturn. These properties in many cases personify the “broken windows” theory. It is in the city’s and community’s interest to get these properties occupied and cared for, now more than ever.
The reason these properties are almost perpetually vacant is that the landlord has an unrealistic expectation of rental rates. At some point this landlord will either go broke or die, but in the meantime the city and community suffers, so it’s not a bad idea to try and bring this person around to reality.
E, are you referring to Vision properties?
There are better ways for the City to bring landlord and tenants to “reality” than holding hands in private contractual negotiations and wining and dining them – update our building, tax and zoning codes. Take a serious, long-term, and open look at our parking ordinances, neighborhood business district overlays, tax incentives, etc. and follow through with code updates that encourages new retail, build outs, and tenant stability.
I have rented commercial space in Decatur for six years. After the Artisan was built every landlord in Decatur wanted to raise their rents and most of them did. They called the leasing agent at the Artisan and asked, “how much?” the landlords raised their rents thinking, “well, I’m at least a little less than the Artisan.”. I believe the rental values down here are about 18 to 20 a square foot. The Artisan was maybe 38 per. I pay probably 26. I am trying to get my landlord to come down a little and it seems unlikely at this point. I guess what many of us are concerned with is that Decatur will lose many of it’s quality businesses BEFORE rents come down. Then we have many empty spaces until the rents come down and the new businesses that refill these spaces are lesser in quality. A lot of effort by the City has been done to get the downtown to look the way it does. It would be a shame let it slide during this recession. The city should help because frankly the landlords have not the slightest idea what the rental structure should be for this town given the real level of commerce here. No one can pay 38 a square foot here and survive. To the haters….look, the government has gotten involved in lots of business decisions throughout our history. I’ll name a few… The creation of the weekend, 40 hour work week, ending child labor, ending slavery, the creation of the FDIC, etc. Government and business can do great things together. I guess that makes me a socialist to about a third of the American population. Oh well.
Landlords–or we should say propery owners because not all landlords actually own the property–pay property taxes, but they do not always pay occupation taxes. As “Leasing” pointed out earlier, property taxes are passed on to the tenants. Therefore, unless the landlord has an actual office within the City, the City does see any revenue from the profits the landlord earns on the leases. However, the City collects revenue from the profits of individual businesses. Again, this is why it is in the City’s best interest to support the business lessees.
Oh, just a little bit more reporting to the government.
Is this going to be like the US Census (for businesses) ? I have to (as a business owner) fill out
(what I consider) private information about income, employees etc etc – under penalty of law if I do not respond!!
More of my time filling out data requests from mother government.
If someone wants to start a business and shop rents around the city, put it one a website or whatever, I say ‘ Go for it”
Spend my tax dollars to do the same thing ……… no so much!
BTW, did you know that in Dekalb County, if you are renting an office. Say a 10X10 office painted and ready to go. Just add your desk, file cabinet and computer. When you go for a business license ($150) you must also get a building inspection for an additional $170. With two inspections, a building and fire inspection!!!
Maybe its just me but the word onerous, jumps to mind
From reading what they said in the Focus, it sounds like the City is trying to help keep tenants afloat by helping them get concessions from property owners. If lease rate information is distributed, perhaps a business might be saved by relocating or the possibility of that happening causing concessions.
If all the City is doing is providing info, I don’t see what there is to get worked up about.
Mickey,
What kind of accounting do you have where you show a profit but have not addressed all of your costs?
If you are going to throw the “profitable” part of my statement out the window then you need to throw the “all costs” part out as well.
I appreciate that not all businesses are profitable – particularly not now. Never-the-less, if I am not grossly mistaken, the commercial real estate business model is generally set up to try to account for ALL the costs of doing business, plus a profit and an accounting for risk and extract this amount from the tenant over a period of time. I’m all for this.
In this accounting, there is not an assesment of govrnmental intervention on the behalf of one party against the other.
How does one structure a contract that supports the building pro forma when you can’t know if or when the city will come along and seek to negotiate a better rate on behalf of one of your tenants?
I’m confused by your statement about the building owner trying to limit their losses in this market. If your building is losing money you want a third party to come to you, with the force and authority of government, to re-negotiate a lower lease rate for your tenants – thereby bringing in even less?
[edited]
OK folks — Let me clarify that many of our landlords are already working with their tenants to find ways to mutually survive this economic downturn. They are doing this because it makes good business sense to try and keep a good tenant when possible. “The City” doesn’t have the ability to force rent concessions and that was never the intention of the meeting. We routinely check in with our landlords as well as our tenants. We also have some property owners who don’t live in the metro area and we want to help them understand the importance of keeping locally owned businesses if possible. Some of these landlords have priced retail space to the point that makes it difficult for locally owned businesses to survive. It’s the locally owned businesses that make the City of Decatur unique and we want to impress upon landlords who are not as familiar with our city the importance of maintaining a healthy balance between locally owned businesses and corporate/franchise businesses. They are all important to our economy but in reality, it’s the locally owned businesses that have established Decatur as a restaurant and retail destination. We meet regularly with our retail and restaurant tenants and the landlord meeting is simply a chance to compare notes, share ideas and inform this equally important constituent group about what we are doing to help our city’s retail and restaurant businesses through this economic downturn.
So diabolical! Will this trampling of free market capitalism never cease? Will the persecution never stop? Holding meetings? Comparing notes?
Government run amok!
As I learned long ago (ok maybe a year ago)…when you don’t give the city of Decatur the benefit of the doubt, you do so at your own risk.
And Scott, I’m going to have to force some sarcasm concessions on you going forward.
Let Scott have at it – he’s just getting warmed up !
[edited: no name-calling] I’m sure personally they are not losing anything.
Why does everyone want to bash a city who is trying to help their local businesses in a tough economic time? It is obvious the Decatur Development Authority is concerned about the amount of businesses closing doors and amount of for lease signs in windows. Especially while
landlords sit smug in their own lil’ demographic.
I do believe that the city should pay more attention to parking issues, so that visiting a local business doesn’t revolve around a parking problem. Yeah I know Brick Store has no problems blah blah blah. (an exception)
Oh and Small Business Owner You are obviously not a small business owner, but a landlord & by the way you are paying too much rent.
You gotta love Small Business Owner’s armchair economics.
I don’t really understand your response though. My point was to challenge your flawed assumption that a business ALWAYS passes along increased costs to their customers – or in this case that a landlord always passes along increased coast to their tenants.
That is just simply not true and reflects your lack of understanding of basic economics. A business can’t simply pass along every increased cost, or there will be a point of diminishing returns. As Lyn mentioned above, it may actually help a landlord to make some concessions to keep a tenant, rather than lose that tenant and then spend months and months without any revenue at all. It seems to me they are just trying to facilitate this, rather than take sides or force concessions … they don’t have the ability to do so anyway.
It’s always amazing that conservative extremists are always looking for black helicopters in the sky when the government is involved in anything.
Now if you want to talk about whether some of the functions of city government ought to be handled seperated by the DBA as a private organization … then that is a different discussion altogether and maybe we ought to have it.
Since no one was able to resolve the age old “individual good vs. greater good” debate without devolving into insults, comments on this post are now closed.
G’day to y’all.
Yes, without a doubt landlords benefit by having tenants. My complaint is that it is not the City’s business to take sides.
Maybe it’s not in the city’s interest to do this — I don’t have an opinion about that. But the city has interests here too, including avoiding high turnover of businesses in Decatur. What goes on in Decatur is the city’s business.
But why is laying rents out on the table “taking sides” with local business owners? Couldn’t it be beneficial to both parties?
I’m sure there are landowners out there that would like to have a better sense of the rental market in Decatur since the huge fluctuations in the economy. Then perhaps they can fill space.
“What goes on in Decatur is the city’s business”? To quote WIlliam F Buckley, Jr., “I won’t insult your intelligence by suggesting that you really believe what you just said.”
Surely, you overlooked my comment boout it not being the City’s business to TAKE SIDES.
The City and it’s develpoment authority, the DBA, etc. can rah, rah, support, entice, cajole, advertise, and work in many ways to encourage both businesses and customers to come to Decatur.
That said, a private real estate transaction is just that – PRIVATE.
One of the chief purposes of ANY government is to provide a method of ENFORCING legal and binding contracts – NOT to be an ADVOCATE for one party against the other.
Brad,
Your interpretation is my take on the situation as well.
Onward marches the nanny-state.
“We are working with our local business owners to document current rental rates and contact landlords to negotiate rent concessions” seems pretty clear to me.
As long as we are going down that path though, why are resturaants and retailers the only beneficiariesof the City’s largesse? Why not real estate agents, architects, contractors, and other professionals as well? I’d like my rent reduced. My business has been hurt by the economy. I pay my taxes.
I honestly do not think whatever the City is doing is clear from that sentence. Whatever effort the City is undertaking probably cannot be summed up into one sentence thrown into a blurb into a larger article. My only point is that we should not make this out to be something it is not. Debating hypotheticals is fine. Just make it a hypothetical. I would be worried about rumors starting based on a debate of hypotheticals. If we’re going to debate what the City is doing, we need to know exactly what the city is doing.
See E’s post below. I’ve heard similar rumblings about this one owner. Maybe efforts are concentrated there? I don’t know. And that’s the point.
Amen to that. Can we please not be the typical American community where everyone is poised to be offended? Have we become so cynical that, in the absence of any meaningful detail, we automatically jump to conclusion that the man is screwing us once again? Decatur’s history of public engagement and considered decision making deserves better.
Isn’t it also possible that such a process could just as easily help identify and educate retailers with unreasonable expectations of market costs? Why is the assumption that only landlords lose out as the result of negotiation?
and who pay’s decatur city r.e. taxes? – the landlord. you’re statement is ridiculous an shows a prominent community contempt for the business of real estate management and development.
And these taxes are passed onto the tenants.
Not true. Most tennents in Decatur pay the property taxes. Crazy, huh? It’s usually built into the CAM. Commercial leases here are veryone sided. Tennents pay the taxes and for almost all repairs to the building. It’s not like residential leasing.
Ther is a difference between providing data to all parties and being the agent for one of the parties in a contract. I have been leasing space in Decatur for 8 years. I’m paying around $22 per foot. I have a lease and I expect it to be honored.
Once you have the govenrment stepping in to renegotiate a contract on behalf of one party, for what ever the reason, no matter how good the intentions, the other party can no longer expect equal treatment under the law. If the shoe were on the other foot, would you want Decatur coming to you and negotiating a price reduction on your merchandise because the average Decaturite’s salary had been reduced due the the recession?
I don’t think you would.
How is that any different for the landlord or owner?
A booksop sells books – we would all be upset if Decatur said that they were going to reserch the average price of books then negotiate book price concessions with the book store, yet so many of us think its a good idea when Decatur speaks of doing exactly the same thing but with people who own commercial real estate.
The rebuttals and replies in support of Decatur’s ill conceived program smack of wealth envy.
Ooooo the evil landlord doesn’t have an office in Decatur and therefore doesn’t pay an occupation tax and somehow doesn’t carry his weight.
Who is it that siigns for the loans and takes the risk that ANYONE will rent space in their buildings. If not for the building owners and landlords who are at risk to lease space, how many of the Decatur business could even be here? Not many, as unless the business could afford to buy its own building, there would not be a space for them to do business from.
Building owners LOOSE MONEY when spaces sit vacant. They have no interest in having unoccupied space. I’m sure any property owner in Decatur would love to have their vacant spaces leased.
If the City wants to get into the lease negotiation business, the CIty needs to go ahead and use their power of Eminent Domain and purchase the properties for the greater good of the community – the Supreme Court (in a misguided ruling that one hopeful day will they will reverse), has ruled that “Economic Development” is a legitimate aspect of government, one for which a city such as ours can legitimately condem properties under the auspices of eminent domain. If we truly want the City to be a prty to our commercial leases, there is a right and a wrong way for the City to go about it – from the admittedly brief statement, the implication is that the City is going about this the wrong way.
Exactly. So if the City wants to make it easier to keep business in Decatur, the City can lower its taxes on businesses.
The City isn’t interested in reducing its revenue from the tenants, instead it appears that the city is seeking to reduce the cost for tenants by negotiating concessions on the tenant’s behalf form the building owner.
Yep that seems fair and appropriate.
As a renter of my home, that is why I get upset when someone says I don’t pay property tax. I pay it to my “landlord”, who takes his cut and passes it on to the taxing authority. What’s even worse, he gets to deduct the property tax on his federal income tax return as a business expense, and I don’t.
and if there are no tenants?
and if the tenants don’t pay?
and if the rent will not cover the taxes?
and if the taxes are not paid?
in all of these cases the taxes are still due and the building has a lien.
if the tenants don’t want taxes as part of their CAM expenses, negotiate that term of the lease or don’t rent there.
Taxes are not always passed on to the tenant. Ultimately, the property owner is responsible for paying the taxes. Saying the taxes are passed on to the tenant is overly simplistic and in may cases just simply wrong.
Are you kidding?
Surely you understand that taxes represent a cost to doing business. Electricity, land purchase, interest on loans, maintenance, and so forth are also costs.
Unless the property owner is a government, they exist to make a profit.
A profit is the excess money left over after all the costs have been paid.
You may not see it, you may not recognize it when it happens, but ALL costs of business of ANY profitable business are ulitmately born by the consumer – in this case the tenant. The tenant in turn passes them on through their prices for goods and services to the retail consumer.
You are right, that is how many leases are STRUCTURED, but whether taxes are seperate line item (CAM charge) or built into the base lease, the landlord is the City’s tax collector for building property taxes that are paid, transparently or not, by the tenant.
The tenant builds theses costs into their cost of business and charges accordingly for their good or services.
Just because you don’t see something does not mean its not there.
A building owner does not have a magic pot of money for taxes or insurance or other costs of doing business – all of this is collected from the tenant.
Specious,
I see your comment above (to another Rick) and I understand your point.
Yes, the building owner is responsible for collecting the taxes by some means or he risks losing the building to the City for failure to pay taxes – no argument.
My problem is the underlieing tone from many that somehow the building owners don’t do their fair share. They do. They take the risk.
My other point was that in a profitable venture, all these costs eventually flow back to the individual consumer – regardless of the structure of the deal or the lease.
Since the tax rate is set by government, if government wants to make it easier on businesses, this is a variable under their control that can be adjusted.
For a governmental body to want to get between two private entities to revise a contract is just plain wrong.
You may not see it, you may not recognize it when it happens, but ALL costs of business of ANY profitable business are ulitmately born by the consumer – in this case the tenant. The tenant in turn passes them on through their prices for goods and services to the retail consumer.
You are assuming, first, that all businesses/landlords are actually making a profit rather than just trying to limit their losses (this is the case for many businesses in this economy, but think specifically of the car manufacturers who just want to get inventory off their lots or in the case of landlords who just want to get some income in rather than seeing a total loss with a vacancy).
Second, you are assuming that that any increased costs by the business/landlord are passed on to the customer/tenant instead of reducing their profit or increasing their losses. Again, in this economy, this might not be practical (or beneficial to the business/landlord) as a sale is a sale or a tenant is a tenant.
Therefore your statement that ALL costs of ANY profitable business is just patently absurd.
I guess it just depends on how active you believe Decatur will try to be when they “contact landlords to negotiate rent concessions”.
See. I told y’all…..
Wow. There’s lots of ideology in these comments (cf. “nanny state,” “government taking property rights”, etc). I specify “ideology” because it looks like none of us know any of the details concerning this negotiation – and yet some of us have very strong opinions. Let’s be glad that we have a local government that wants to see local shops and landowners alike stay in business. Because, as of right now, that’s all anybody knows. You can save your best “nanny state” jabs for when the details emerge, but let’s be sure to read them and think about them before we blurt anything out.
Small Business Owner, you keep making statements that are based on your pre-conceived notions of how the world should work (that is to say, your ideology) instead of addressing the facts at hand. Here is an example:
You wrote: “Once you have the govenrment stepping in to renegotiate a contract on behalf of one party, for what ever the reason, no matter how good the intentions, the other party can no longer expect equal treatment under the law.”
How do you know this? From my experience, judges rule against local governments all the time in court cases. The state isn’t one giant unified organism that always seeks to oppress you. It has checks and balances.
Here is another example: “The rebuttals and replies in support of Decatur’s ill conceived program smack of wealth envy.”
How do you know what the real motivations are for the comments in support of Decatur’s proposal? I doubt anybody has wealth envy, whatever that is. It sounds like something made up to marginalize opposing points of view. I myself don’t know enough to support or oppose this, but I do know that I want a vibrant downtown.
Let’s suggest a hypothetical situation: if someone wanted to rent a bunch of storefront space in downtown Decatur and leave it vacant on purpose, should we let them do it? Who could stop them? I would hope that the city would step in and try to get real businesses in there. Why? Because it’s better for everybody if our city works properly. A good deal of that relies upon the storefronts being full. If that situation (the city helping keep storefronts occupied) makes you angry, you should think about adopting a more pragmatic point of view. Conservative principles are good and fine – until they (or any other principles) begin to interfere with a functioning society.
I agree [edited: no name calling] Landlords should be hated because they are nothing but lucky and we need more parking. Just like downtown Atlanta, parking lots and parking decks should be built downtown to accommodate more parking convenience.
“Let’s suggest a hypothetical situation: if someone wanted to rent a bunch of storefront space in downtown Decatur and leave it vacant on purpose, should we let them do it?”
B,
Please consider the ramifications of your proposal. Who are you, or me or the city or anyone else to stop them?
Do you really endorse the city, or any other authority, having the power to force you to lease a space that you legally own and maintain?
If a developer wants to comply with building and zoning codes, and construct a building, pay property taxes on that building, maintain the building – but otherwise leave it vacant for wahtever reason suits his purposes, that is his right. People are allowed to make what others consider to be bad decisions. Would you have it otherwise?
There you go EJ.
You summarize so nicely. It only takes a little while and a little scratching for your colors to show.
God it must be great to be a victim.
[edited: no personal insults]
Gather some initiative, open a business, take some risk, and then come back.