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Malled!

For revenue-hungry cities in the northern metro area, it's shop 'til you're dropped

But the same bucolic landscape that marketing rhapsody celebrated was already endangered. Roll Development's FlatIron Marketplace opened just east of the mall in early 2001; the 432,000-square-foot "lifestyle center" featured some thirty chain stores and restaurants and was anchored by Best Buy, Nordstrom Rack and the Great Indoors. And soon more dirt will be moved for Coalton Acres' massive, 165-acre Main Street at FlatIron, with 657,000 square feet of stores, restaurants and office space, including a 200-room Marriott, a DSW Shoe Warehouse and a 206,000-square-foot Wal-Mart Supercenter.

The sheer size of the mega-mall and these two neighboring companions makes FlatIron a city unto itself -- an arcadia of shopping where nobody lives, but where everybody goes to get their clothing, food and entertainment. Unlike shopping districts that are designed to serve a specific area, FlatIron leasing agents boast that the mall is strategically located to attract shoppers from as far away as Laramie and Cheyenne, not to mention Fort Collins, Greeley, Loveland, Longmont and the north Denver suburbs. And especially Boulder.

Having long used a city sales tax to purchase open space around city edges, the Boulder City Council faced its own shopping-center dilemma in the late '70s. "The issue wasn't shopping center or no shopping center," says former Boulder County commissioner Paul Danish, who'd authored the city's original growth-management plan as a member of Boulder City Council in 1976. "The issue there was, where does the shopping center go?" Crossroads Mall had stood at two main thoroughfares, Arapahoe Avenue and 28th Street, a half mile from the downtown core, since 1963. But now developers were eyeing Foothills Parkway at the far edge of the city for a new collection of department stores.

"We had done comprehensive planning that showed a compact city, and we wanted it centrally located," Danish says. Developers threatened to take their project to nearby Louisville unless Boulder capitulated, and finally both parties reached an agreement that the city would institute an urban-renewal authority and set up tax-increment financing to pay for the expansion of Crossroads. Completed in 1983, the new, two-story section included several department stores and a Foley's, which was the only large retailer still in operation when the mall finally bottomed out in the late '90s.

While Crossroads died, FlatIron Crossing was born. The area was ripe for a regional mall. "They understood that they had the emerging Superior," says CU's Byron Koste. "The area supplied expensive housing that grew up overnight. All of a sudden, there were a couple of thousand new homes, all $400,000 to $600,000; the people who lived there were often dual-income with a disposable income to die for; and [developers] gave them a mall right down the street where they could spend it."

FlatIron was not only an aesthetic offense to Boulder's environmentally focused policy, but an economic barb as well. In 2001 and 2002, Boulder felt a sudden bloodletting of sales-tax revenue -- what city economic strategists refer to as "leakage" or "retail outflow" -- that has only recently slowed. Other cities felt the pinch, too. "The economics of it for the city is clear," Koste notes. "You don't want your residents running across a jurisdictional boundary and spending their money in somebody else's limits and that city gets the sales-tax bump. So they're vitally important for the community."

For Broomfield, FlatIron was a bonanza. The sales-tax collections have helped the city pay for more open space, new city buildings, state-of-the-art recreation centers and a strong police and fire force. While nearby cities had to tighten their belts in the early 2000s, Broomfield was relatively awash in revenue. Since it opened, the entire FlatIron District has generated $79.7 million in sales tax -- but not all of that has ended up in city coffers.

To score the three large projects, Broomfield granted the developers a big-money incentive in the form of a $135 million abatement on future sales-tax revenue earned by the district, according to Greg Demko, finance director for the City and County of Broomfield. Since the district was four miles away from the city's core, it required a huge amount of new public infrastructure: roads, streetlights, sidewalks, sewer and gas lines and highway interchange upgrades. The developers subsidized the city while it created that infrastructure; so far, Broomfield has rebated $37.5 million back to the developers. But Demko is quick to point out that this wasn't a flat-out subsidy to line the developers' pockets. "They are paying all of their property taxes," he notes. "It's not urban renewal; this is a development agreement with share-back revenue they produce."

And even with the rebate, the $42 million retained by the city over the period accounts for 52 percent of Broomfield's sales-tax collections, doubling the cash in city coffers. If the mall's sales tax continues at current rates, Demko projects, Broomfield's debt will be paid off by 2022 at a total cost of $282 million.

According to the International Council of Shopping Centers, a non-profit trade group for retail developments, FlatIron took in $12 million in 2004, about $398 per square foot. The national average for enclosed malls was $366 per square foot. FlatIron has a 98 percent leased rate, says mall spokeswoman Heather Dray, "which is higher than the national average." But that percentage doesn't include anchors or the now-vacant Lord & Taylor. It also doesn't seem to reflect the mall's outdoor section, The Village at FlatIron Crossing, which has been struggling to attract and retain tenants since the mall opened.

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