
                         THE VIRGINIAN-PILOT
                 Copyright (c) 1994, Landmark Communications, Inc.

DATE: FRIDAY, June 3, 1994                    TAG: 9406030030 
SECTION: FRONT                     PAGE: A16    EDITION: FINAL  
SOURCE: Medium 
DATELINE: 940603                                 LENGTH:

GOOD MOVE, BUT SOME QUESTIONS\

{LEAD} The city administration of Norfolk and the rest of the Hampton Roads area are right to be pleased with the apparent conclusion of a deal with Nordstrom and Macy's to bring major retailing back to downtown Norfolk. We share in the celebration and look forward to the arrival of the new shopping center, but taxpayers are right to be asking some questions about how the center will be financed.

Nordstrom and Macy's will certainly be welcome additions to the area's retail mix, which lacks a real upscale outlet. For years many residents have complained about having to drive all the way to Tyson's Corner or Pentagon City in Northern Virginia for a real shopping experience. This was a bizarre situation for a metro area as large and important as Hampton Roads.

{REST} So instead of having to drive all the way up I-95 to shop, the center will hopefully bring people from elsewhere to shop in Norfolk. Vacationers on their way to and from Virginia Beach and Nags Head will be tempted to stop and spend a little money here in our area. And since retailing tends to create a synergy - that is, other businesses thrive in the same area - MacArthur Center might help revive Granby Street and other decaying shopping areas left vacant by the growth of suburban malls.

Most of the financing will come from private sources, which is as it should be. Obviously, Nordstrom and Macy's expect to make money on this deal and it is only fair that those who stand to profit ought to invest their own money.

The city, however, also plans to sell revenue bonds to build two parking garages and reconstruct water and sewer lines in the 17-acre area. The $50 million in revenue bonds will not impact the city's general obligation bonding authority because they will be repaid via dedicated revenues from the parking fees paid by the customers.

In addition, the city will spend directly and in general obligation bonds about $13 million in various site costs relating to infrastructure.

Infrastructure spending is what government is for, though there is more controversy about the city applying for a $32.8 million loan guaranteed by the federal Department of Housing and Urban Development to help construct the Nordstrom store itself. The collateral will be city Community Development Block Grant funds, which are supposed to be used to fight poverty.

Using anti-poverty money to underwrite Nordstrom is likely to strike many people as, well, odd. Housing Authority Director David Rice justified seeking the loan by saying, ``The program is there to help prevent slums and blight in the future, and this project certainly would do that.''

That sounds like a bit of a reach, to say the least. And anyone who has been to Washington, D.C., recently knows that redevelopment of Metro Center as a retailing area has not stemmed middle-class flight from the city. Using anti-poverty money to subsidize an upscale developer is what gives government programs a bad name. Federal funds also usually come equipped with numerous strings and unforeseen regulations that can bite the recipient down the road.

The bottom line appears to be that the city's taxpayers will not be exposed to the loss of more than the $13 million in the event the MacArthur Center does not pan out as a viable entity. The vast bulk of the money being used is private, and the developers are liable for most of the loss if the center does not take off.

As we said, we are happy Nordstrom and Macy's appear to be coming to Norfolk, though we'd be even happier if we did not have to expose the taxpayers at all. Ultimately, the best guarantee of economic success is a level economic playing field that does not favor some businesses over others.

by CNB