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After 35 years in public education as a high school English teacher and university administrator, I began my second life as a freelance writer, winning San Diego Society of Professional Journalist awards for my opinion columns in the former San Diego daily North County Times and the San Diego Free Press.

Monday, January 25, 2016

Consultants Agree on Inflated Lagoon Mall Benefits Part 2

Retail Demand and Revenue Overstated



The Westfield Corporation donated $75,000 to the opponents of Carlsbad's Measure A, which, if passed, would enable an L.A. developer to build a mall near the city's pristine Agua Hedionda Lagoon.

The developer, Rick Caruso, has spent $7 million for paid signature gatherers in a misleading initiative campaign, out-of-town marketing consultants to develop a flood of glossy mailers and TV ads, staffing of an information center at the lagoon, and transporting local residents to behold the splendor of his L.A. mall.

The group opposing the billionaire's plan, Citizens for North County, has relied on an army of volunteers to gather referendum signatures, canvass neighborhoods, organize pop-up tents information meetings, use social media, put up handmade signs, and host fundraisers to pay for two mass mailings.

On election day, February 23, we'll learn if Caruso's Goliath campaign has been slain by David's citizen volunteers.

Skeptics say owners of the Westfield University Towne Center in LaJolla have a self-interest in defeating a market competitor's plan. But Carlsbad's City Council has its own political interests at stake. The mayor and all four council members have promised Caruso's development will cost taxpayers nothing, protect open space, and generate an annual $2.6 million windfall to the city. Donald Trump would call those campaign promises, "Yuge!"

Confining himself to an ad hominem attack on Westfield, Caruso ignored his competitor's 252-page peer analysis of his project, containing an economic/fiscal report by HR&A consultants. City officials also disregarded it. Had they read it they would have discovered the city's own consultants, RSG, and Westfield's HR&A, agree that Caruso's claims of economic benefits are grossly overstated. Their findings differ only in degree.

To estimate the area's excess retail demand, HR&A found, Caruso incorrectly designates his proposed shopping center a “super-regional” mall, normally defined as having a minimum of 1 million square feet of retail space with at least 3 department stores. Caruso's will have just one within 585,000 sq. ft. Mis-designating his mall allows the developer to expand the city's projected Secondary Market Area (SMA). By adding households Caruso deceptively produces additional excess retail demand, suggesting local businesses will not lose customers because of his project.

Caruso's bogus SMA expansion also generates higher annual average household incomes in the marketplace. The $85,000 average for Carlsbad/Oceanside/Encinitas rises to $103,000 when you include Del Mar, Rancho Santa Fe, 4S Ranch, Fairbanks Ranch, and La Jolla.

Overstating retail excess demand and household income is bad news for Carlsbad Village shops and restaurants. Phony promises of a larger, wealthier customer base hide the likelihood of a higher rate of failure for local small businesses caused by his new shopping center.

HR&A's analysis reveals an astonishing miscalculation, or intentional misstatement, of Caruso's projected annual increase in average household income in Carlsbad's retail market areas. Without any justification, the 1 percent five-year historical average jumps to 3.2 percent from 2014 to 2015, three times higher than any previous year-to-year increase.

Could it be the "mistake" was just the developer's means to an end to support his excess retail demand targets?

Caruso claims his shopping center will generate $200 million to $307 million each year in tourist spending, with no estimate of the number of city visitors. HR&A assumed an average expenditure of $80 per visitor, to produce an estimated 2.5 million to 3.8 million new visitors annually. Absent any documentation or comparables in other cities, it strains credibility to think his mall alone will more than double the estimated 3 million visitors to the city in 2013.

A 2,500-seat multiplex movie theater, residing on one acre of his 13-acre mall, was not mentioned in Caruso's promises of economic benefits. Maybe that's because there are now three multiplex theaters within 10 miles of his development and 20 more within 25 miles. That amounts to one for every 31,000 residents. There's one for every 48,000 in all of western San Diego County. The local theater market looks saturated to me, especially since they all seem to show the same movies at the same time.

In Carlsbad's Voters Guide you won't find any shadows cast on the developer's sunny promises For a fact check read my Riehl Voters Guide, to appear here next week, for a list of the top ten reasons to vote No on Measure A. Take it with you to the polls, or keep it by your side if you're voting absentee. Share it with friends.

Don't put our city's future at risk in the hands of a developer who promises to make Carlsbad's Carusoland look like the one he built in L.A, the one he says attracts more visitors than Disneyland or the Great Wall of China.

4 comments:

  1. Perfect timing, to release this penetrating analysis.... it exposes false pretenses and underlying mistakes made by economic and land use analysts in forecasting grossly overstated revenue projections, and secondary land use benefits. Nicely done.

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  2. Richard, excellent piece of investigation combined with journalism - a lost talent in our world of sensationalist writing that is without any substance or basis in FACTS. I applaud your efforts. Caruso's scam will be defeated IF we can get the good and smarts citizens of Carlsbad to read these important FACTS.

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  3. Sustained loan cost cuts and bits of gossip in Washington D.C. would like to start expanded purchasing action in the land market. Taking into account the current week's improvements, lodging costs might start to expand much sooner than anticipated. http://www.mordocrosswords.com/2016/03/they-may-get-inflated.html

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