ALBANY COUNTY — Ever since the United States Census Bureau, in 1999, started tracking digital shopping’s share of domestic retail sales, that share has grown. Steadily. So, it’s not news that more and more people are buying online.

What’s new is the cumulative effect of e-commerce on shopping malls. Many malls are closing. Some retail experts are predicting as many a one-third of America’s malls will close soon. The United States has 48 square feet of retail space per citizen — more than twice as much as anywhere else.

The saturation point has been reached. Ted Potrikus, president and chief executive officer of the Retail Council of New York State, took a look back a quarter of a century — after the city shopping centers gave way to the suburban malls.

“Rotterdam [Square Mall] and some of the other regional shopping malls cropped up back when everybody was building, and it was funny,” he said, “because back then in the 1990s and early 2000s, when all of this this was happening, the question I would get frequently was, ‘Gosh, don’t we have enough fill-in-the-blank, don’t we have enough department stores, or sporting-goods stores?’

“And the answer was always, ‘Well, we’ll know when more start closing than opening, that we’ve reached the saturation point.’ So, at some point in the last decade or half-decade, we’ve reached that saturation point around here, and a lot of other parts of the country, where there are just too many stores,” Potrikus said.

“Any time a developer builds something, that company is going to want to make sure it’s in use,” Potrikus continued. “And they’ll do anything they can to try to figure out how to fill it, in a way that’s going to be sustainable.”

The new trend is to offer mall-goers experiences that, unlike retail goods, can’t be purchased online.

Michael Gately — the new general manager of Crossgates Mall in Guilderland, said, “Now that we’ve made the shift toward entertainment, people are coming from further away to enjoy the services and the entertainment.”

This trend will only increase, Gately said, with the construction of a hotel that Crossgates’ management, Pyramid, hopes to build on Western Avenue at the entrance to the mall.

Entertainment businesses help drive retail sales, Gately said. “I think anything that draws people and draws traffic has a positive impact in terms of sales. To use those offerings,” he said, referring to entertainment businesses, “people walk through the mall. Any time we bring people into the mall, it has a positive impact on our existing retailers as well.”

Up to 20 percent of Crossgates’ space is now devoted to enterprises other than retail sales.

Sales-tax revenue can be hurt, according to Albany County Comptroller Michael Conners, “as people migrate onto the internet” to do their shopping, “as they’ve been steadily doing for the last 16 years.” Entertainment venues don’t pay sales tax.

Local municipalities in Albany County get the lion’s share of their revenues from sales tax, which is divided according to population.

Macy’s seeks reduced assessment

Macy’s, which has recently closed branches across the country,  hopes to lower the assessed value on its anchor store in Crossgates Mall, and the town and school district have signed a cost-sharing agreement to fight the reassessment together.

Macy’s in Crossgates, now assessed at $11.5 million, says the assessment should be lowered by more than half, to $5.28 million.

Neil Sanders, the school district’s assistant superintendent for business, said that, if the assessment were lowered exactly as Macy’s is asking, the amount of tax revenue that the school district would lose during the first year is $138,520.

Under the agreement, the town and school district have hired two attorneys, Christopher Langlois of Girvin & Ferlazzo, P.C. and town attorney James Melita; both are working on behalf of both the town and school district.

The school district will pay 70 percent of the attorneys’ fees, and the town, 30 percent, since the school district collects far more in tax money than the town. This is similar to an arrangement the town and school district had when battling challenges earlier from 20 Mall and from Crossgates Mall.

Sanders could not predict how much it might cost. “There are a lot of variables involved,” he said. “Primarily, will we settle without going to trial, or will we go to trial. Going to trial is more expensive.”

Sanders didn’t know how long the process might take, but said that these things “tend to move rather slowly,” and that it wasn’t surprising that “a lot hasn’t happened yet.”

Guilderland’s town attorney, James Melita said that Guilderland believes Macy’s current assessment to be fair on the basis of comparison with similar stores in other locations.

Melita speculated that Macy’s made the request because the company is “taking a look at their assessments as a whole — all of their stores.” He added, “It’s an expense to run a department store, and probably they’re looking to save money wherever they can.”

He said that the parties are “early on in the litigations” and are attending court conferences “to determine if we can come to an agreeable number.”

If they cannot agree, he said, then they will “start exchanging documents and moving forward with litigation.”

The Enterprise, after emailing the attorney who is representing Macy’s — Bruce Zeftel — received a call back from a Macy’s spokeswoman in Chicago who did not wish to be identified; she said that she could only say the store “believes that the valuation is too high.”

Conners said that he was not involved with the request from Macy’s but he said that, if Macy’s is saying that it’s worth only half of its assessed value, then it’s probably safe to assume that its sales must be down.

County finances

Conners, in his State of the Fisc speech delivered earlier this month, noted that both sales tax and property tax went up from 2015 to 2016. Sales tax over that period in Albany County rose $3 million, to almost $260 million. Property tax over the same period rose $7 million, to $88.5 million.

Conners said that concerns about sales-tax revenue and their impact on the county are not so much immediate as they are long-term.

“We’ve enjoyed over the last 20 years a steady growth in sales-tax revenue,” he said.

State sales, excise, and user taxes have, for the most part, climbed over the past decade or more. During the Great Recession, there was a downturn between fiscal years 2006 and 2007 (from $12.5 billion to $12.1 billion), and another between 2009 and 2010 (from $12.6 billion to $12.2 billion).

Otherwise, the numbers have climbed, to $13.9 billion in 2013, $14.5 billion in 2014-15, and $14.8 billion in 2015-16, according to statistics from the New York State Department of Taxation and Finance.

Conners said that while the picture for revenue from sales tax may look good now, there could be “really serious kinds of problems down the road” — particularly for Albany County — if the internet continues to take sales from brick-and-mortar stores.

If that does happen, “the impact could have devastating consequences for us,” since Albany County is “heavily reliant” on sales tax, the comptroller said, at the county and the city, town, and village level.

“I believe the only county in New York State that gets a larger percentage of its revenue from sales tax than us is Nassau County,” said Conners of the Long Island county.

As a shopping destination, Albany County has three big malls, Conners said: Crossgates, Colonie Center, and Latham Farms, “plus a ton of other retail.”

Currently, the county gets a great deal of sales-tax revenue from shoppers who don’t live in Albany County, he said.

When someone from, say, Warren County goes to Crossgates and buys a pair of sneakers, he explained, the 8-percent sales tax on that purchase is divided equally between New York State and Albany County. Albany County then divides its 50 percent by a 60-40 ratio, with 60 percent going to the county, and 40 percent divided among the county’s municipalities according to population.

If that same shopper from Warren County buys a pair of sneakers online, the sales tax — provided that any is charged — is divided between the state and Warren County.

Not all online retailers charge sales tax, said Conners.

Online taxes

Online retailers are required to charge sales tax and remit that money to New York State if they have a physical presence in the state, said James Gazzale of the New York State Department of Taxation and Finance.

Generally a vendor must collect tax at the combined state and local rate where the item is delivered, said Gazzale.

If a vendor does not charge sales tax, the purchaser still owes it “and must remit the use tax directly to the Tax Department, usually on the PIT return,” he said, referring to the Personal Income Tax return.

If an online retailer does not charge any sales tax, that’s “a double hit,” said Conners, since “you lose the sales tax completely.”

Conners said that many counties use the entire portion they receive from the state, without distributing a portion to their municipalities.

He added that Guilderland does not receive, for instance, all of the sales-tax revenue generated at Crossgates Mall. The largest population in Albany County is in the city of Albany, so the largest share of the municipalities’ revenue goes there.

Trends at Crossgates and other malls

Meanwhile, the trend at Crossgates, as at many other malls across the country, is to host businesses that are not retailed-based, but instead offer “experiences.” Sales tax is not charged on experiences.

So if you go bowling at Lucky Strike Social, and then go to 5 Wits to play an interactive adventure, you will not be paying any sales tax, and the county will not receive that revenue, said Conners and Gazzale. Sales tax would be charged, though, on any food and drink you bought while playing those games.

Businesses offering experiences in the mall tend to occupy a lot of floor space. For example, Billy Beez — an indoor children’s amusement park on the third floor, above Best Buy — fills 25,000 square feet. Lucky Strike Social — on the first floor near Dave and Buster’s and including a bowling alley, a sushi bar, an arcade, and a dance and performance hall — is about 50,000 square feet.

Funny Bone Comedy Club — on the second level near Spencer’s Gifts — is about 10,000 square feet. Mirbeau Spa, which will open in the fall, will occupy 17,000 square feet on the west end of the mall’s upper level.

Before coming to Crossgates, Gately was general manager at a Pyramid mall in Manassas, Virginia. He noted that the Virginia mall opened an indoor go-kart track that remains very popular.

About 14 percent of the mall’s square footage is currently occupied by entertainment-oriented businesses, according to Jennifer Smith, marketing director of Crossgates; some of those offer dining in addition to entertainment, she said.

If the restaurants and eateries that are currently open or under construction are factored in, that figure rises, she said, to about 20 percent.

There are about 160 total businesses in Crossgates, Smith said.

Mall management doesn’t have a specific idea of what the ideal mix would be, she said. “We believe that we are still trying to find the ideal percentage or ratio of the three,” she said, referring to shops, entertainment destinations, and restaurants. “As the shopping center industry continues to evolve, we expect the percentages to fluctuate,” she added.

Crossgates Mall tracks where its customers come from mainly by using the information it gathers when customers use the mall’s free wifi, as well as information from retailers, Smith said.

A map that was recently displayed as Pyramid presented plans for a Guilderland hotel showed Crossgates visitors came from across the United States and from other countries as well; most, however, were centered in the northeastern United States.

Keys to success

Much of what makes one mall succeed, and another close, said Ted Potrikus, is location. “Crossgates is beautifully placed right there at the intersection of two major highways, 87 and 90.”

It also has a reputation, he said, as the area mall that offers visitors the most to do.

As shopping trends have changed, Potrikus said, mall owners have said to themselves, “People don’t spend the day at the mall the way that they used to. How do I get them back — well, how about movie theaters, trendy restaurants, and maybe a bowling alley; see if that works!”

These days, customers can have instant access, via their mobile phones and even price-comparison apps, to information about how much a particular items costs elsewhere or online. People often go to a brick-and-mortar store to look at and compare products, and then choose to buy online at a lower price.

This, Potrikus, is “the sort of thing that’s causing so many stores to close.” And then the public is mad, he said, or disappointed, and people say, “‘Oh, I used to love that store!’”

He said, “Stores aren’t going to stay open because you feel good about them.”

One thing stores are doing to counteract the competition from the Web, he said, is “try to keep everything priced competitive.” He said they are also focusing on “hands-on, face-to-face customer service,” and the idea that, if there’s a problem with a product, it can be brought back to the store.

Retailers that have been most successful, said Crossgates Mall’s general manager, Gately, have found ways to integrate online sales into the store, through, for instance, offering customers a chance to purchase online and pick up items in the store.

The new trend toward entertainment-based business at malls is a good thing for the county if it keeps malls open, said Conners, calling it a creative approach to using mall space.

“The good thing for us is to keep action in the mall — they’re able to pay their rents, and they’re able to pay their taxes, and the facilities are up and running,” said Conners.

“There have been a huge number of malls across the country that have closed in the last five or six years. We obviously don’t want to see that happen here.”