More than a dozen merchants from the city-owned Telegraph Channing Mall came before the Berkeley City Council on Tuesday night to ask for management improvements and financial help following a surprise property tax bill that was delivered to them last month.
The 14-shop mall sits at the base of the city-owned Telegraph Channing (formerly “Sather Gate”) Parking Garage just west of Telegraph Avenue between Durant Avenue and Channing Way. The 16,000-square-foot retail space netted about $200,000 for the city last year, despite two vacancies, and one unit that was rented to the library at a discounted rate, according to the staff report prepared for Tuesday’s meeting.
In July, the council requested a report on the mall’s finances and, more recently, the city has been investigating the possibility of hiring a private management firm to take over mall operations.
Merchants speaking before the council, along with several council members, said it would be better for the city to keep the management in-house and invest more to improve the mall, which one official described as a “dismal, dark, dingy plane” that “smells like urine a lot” and “smells like other things a lot.” Neighbors and merchants said the mall is neighborhood-serving, and offers a range of businesses that are hard to find nearby, such as shoe repair, picture framing, copies and mail services and more.
In August, merchants said they were surprised to receive a hefty tax bill out of the blue for what the city described as, essentially, a property tax that can be assessed annually but had never been billed previously. Merchants said they were not warned in advance that the bill was coming; though their leases note that the city could potentially assess additional fees or taxes, said one, the documents have no details about what that might mean.
Along with the tax bill, merchants also cited annual 4% rent increases along with a still-struggling economy as factors combining to make their businesses’ survival in Berkeley uncertain.
“The city’s policies are threatening to drive Revolution Books and other small businesses at Sather Gate Mall out of business,” Reiko Redmonde, a volunteer at the bookshop, which is located in the mall, told the council. “That harms business, harms the avenue and jeopardizes what makes Berkeley unique. It’s unfair, unsound and unnecessary.”
One merchant said that, while traffic through the building used to reach 10,000 to 15,000 visitors a month, it’s now closer to 4,000 to 6,000. Another said his business had declined 60% during the recession over the past five years, making it difficult for him to pay his rent.
Merchants said some landlords on Telegraph have already offered tax relief to struggling merchants, and asked the city to consider doing the same thing. They pointed out that the city increases rent annually at 4% when the consumer price index is just 1-2%. The increase is allowed under their leases but has placed a heavy burden on them that many of their Telegraph Avenue neighbors have not had to shoulder, they said. Also rubbing salt into the wound, they added, is that current vacancies are renting for less than what existing tenants are paying.
The city has held numerous meetings in recent years to investigate ways to rejuvenate Telegraph Avenue. A May city staff report noted the neighborhood’s 48% decline in retail sales since 1990, an “increasingly edgy street scene,” and a rapid decline in recent years in sales of books and music, which made up 43% of the district’s sales in 2007 and now make up just 21%. The city is also working to fix street lighting, allow upper-floor office use, promote Sunday street celebrations and change traffic patterns on Bancroft and Durant, all of which are designed to tackle some of the neighborhood’s challenges.
There was some degree of confusion Tuesday night about exactly what the property (“possessory interest“) tax was, and how the city might handle it. Some staffers told the council it is a county tax that had never been paid, while others said it really wasn’t clear whether it might have been paid, and to and by whom, previously. Some merchants said the tax is actually a city tax, and that it’s a “redundant” tax to money they’re already paying.
On Aug. 30, city staff met with merchants to discuss a range of issues, including the tax bill and the possibility of hiring a private management firm. Tuesday night, the city promised to meet again with merchants in the near-term to try to work out solutions.
Berkeley Mayor Tom Bates said he heard the concerns raised by the merchants, and urged the city manager to be responsive and consider possible rent reductions or other solutions “right away.”
“We need to look at a way for them to not get gouged,” he said.
City manager Christine Daniel said the city plans to take a closer look at the lease agreements, as well as what’s happening with nearby rents, to determine a fair course going forward. She said she’d likely have an update on the issue before the council sometime after Oct. 1.
Councilman Kriss Worthington said the city needs to take a closer look at how it handles rent increases in the mall, and that the city should think twice before handing over city jobs to a private firm.
“This building has operated for over 50 years, with city staff and union workers dealing with these issues generally very effectively for most of those 50 years,” he said, asking for a report back from staff prior to any decisions on the management contract.
Several other council members agreed with him, expressing suspicion about the motives and fees of a private firm, as well as the possible loss of union jobs.
“The record is very checkered if you look at municipal services being privatized in some way or another,” said Councilman Max Anderson. “Their expenses grow to accommodate whatever the revenue stream is.… If we have deficiencies, we need to work on them, not throw the baby out with the bathwater.”
Other council members, Laurie Capitelli and Gordon Wozniak, said a private firm might have more expertise to help make the mall a more desirable destination for shoppers. The goal, said Wozniak, should be to “try to find tenants that are going to draw people there, not just the highest renter or the most politically correct, but something that will draw people there and help the other businesses as well.”
The Sather Gate Garage was built in the late 1960s by the city’s Sather Gate Garage Company, a non-profit corporation. It now has 436 parking spaces above almost 16,000 square feet of retail use. The structure underwent seismic improvements that were completed in 1996, and another project in 2004 included installation of a ventilation system, automatic fire sprinklers, fire alarm, and other fire protection improvements. The garage and mall were renamed the Telegraph Channing Parking Garage in 2006, which was seen as “more reflective of the shopping district.” A summary of its history can be found in this 2006 council report.
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