Friday, November 16, 2001

$6.6 million face lift proposed to keep Saks

Some council members favor deal

By Ken Alltucker
The Cincinnati Enquirer

        Taxpayers should give Saks Fifth Avenue $6.6 million to dress up its store at Fifth and Race streets rather than face a downtown retailing meltdown, Cincinnati City Manager John Shirey said Thursday.

        City Council members said they aren't thrilled about using public money to help the upscale retailer at a time when the city is forced to dip into cash reserves and cut $11.5 million in spending to close a budget shortfall.

        Yet they fear that a darkened Saks could trigger other retail closings, including Lazarus.

        “I think the council wants to spur economic growth” to increase city revenues, Councilwoman Alicia Reece said. “Now the question is whether Saks is part of that.”

        If City Council approves the deal, it will be the second time in five years that the city has bailed out Saks. In 1996, Saks took an incentive package valued at $2.1 million to remodel its downtown store.

        The proposal comes as downtown shops and restaurants complain of slow business because of April's riots sparked by a police shooting of a 19-year-old man, a slowing economy, slumping convention business and the Sept. 11 terrorist attacks. Earlier this week, Cleveland lost its last downtown anchor store, Dillard's, because of few shoppers.

        The same could happen in Cincinnati, downtown retail experts and City Council members warn, because Lazarus' lease is tied to Saks'. If Saks closes or moves to the suburbs and Lazarus' annual sales drop sharply, Lazarus has the option of closing by 2005.

        The hammer of losing downtown's two largest stores will be a top consideration for some council members.

        “At the very least, we have to retain what we have,” Councilman Jim Tarbell said.

        Ms. Reece added that she “doesn't want to lose Lazarus.”

        The city's $6.6 million investment would pay to upgrade the downtown store's older design to the chain's Art Deco motif, including improved lighting and designer shops for labels such as Gucci and Chanel. The agreement also would erase $500,000 in debt that Saks owes the city from an earlier agreement.

        In turn, the city gets a unique downtown store for another 15 years. However, Saks has the option of closing after five years if it agrees to repay a portion of the city's investment.

        The retailer said improvements such as an expanded beauty salon and new displays for specific clothing brands are a requirement that apparel distributors impose before agreeing to stock merchandise in a store.

        Saks would also expand its handbag, accessories and ladies shoe departments and remodel its cosmetics department to improve sales.

        Details of the Saks proposal were made public the same day Mr. Shirey presented a budget to City Council that calls for spending $7.3 million in cash reserves and cutting another $11.5 million in spending to balance the budget.

        Mr. Shirey said the Saks proposal doesn't affect the budget or other neighborhood development projects because the money will come from taxes generated by downtown properties — a fund than can be used only for downtown projects.

        The city had planned to use the money to attract Nordstrom to a vacant lot across the street from Saks. Nordstrom rejected the offer last November.

        David Ginsburg, who oversees retail and office efforts for Downtown Cincinnati Inc., said a store with the reputation of Saks would be difficult to replace. Another longtime downtown retailer, Closson's, is searching for a new store outside downtown when its lease expires in 2003.

        “An anchor of Saks' prestige and draw makes it easier for us to retain tenants downtown,” said Mr. Ginsburg, who oversees the retail efforts of Downtown Cincinnati Inc. That is the advocacy group for downtown. “It also provides some great leverage to recruit other tenants.”

        Not all city leaders are convinced that Saks offers a good deal. “I get skeptical when we pour money into downtown retail stores,” Councilman Pat DeWine said.

        Mr. Tarbell said it's time to shift downtown's development plan away from retail and toward more housing. That would create a more balanced neighborhood that could sustain itself, he said.

        Mr. Ginsburg said Saks provides a unique draw not only to visitors but also office workers, who fund the largest portion of the city's budget through the earnings tax.

        “Saks Fifth Avenue is a very important part of overall downtown development,” Mr. Ginsburg said. “It also makes downtown a more attractive place for people to want to live, visit and have an office.”


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