Everybody missed it?
Pick a local business; any one — about 80 folks involved with them protested the approval of ATI taking 10,000 square feet of prime retail space at reduced rental rates any one of them would gladly pay. Many of those local businesses are owned by people who live here. They bank here, sometimes locally. They buy groceries, and dine out, and have a beer or glass of wine here. They attend local events. They belong to local business groups that promote local business. The rent they pay sometimes goes to landlords who live here, who in turn do the same things the other business owners do.
National and regional businesses expanding into local markets diverts the local money stream away from the community, where it is spent on large capital expenditures, overseas goods and all too frequently inflated executive salaries. As the money leaves town, an important economic source of funds leaves with it: recirculated income.
John Maynard Keynes first coined the term “Local Multiplier Effect” in his 1936 book The General Theory of Employment, Interest and Money, to describe this phenomenon that creates local money movement that passes from local hand to local hand over and over, on average at least three times before leaving the community.
Pick Anderson’s Book Store and compare that to Barnes & Noble Booksellers. Both fine book stores, both staffed by able and willing employees. Spend $100 dollars at Anderson’s, and about $45 dollars gets spent on things-and I have no idea if these are all applicable to Anderson’s-like accountants/bookkeepers, advertising, legal services, possibly office supplies and a plethora of other expenses. That same $100 at Barnes and Noble-again a fine shop-and about $15 dollars gets spent locally. The remainder leaves town for the corporate offices.
It adds up. Some communities actively advocate a Business To Business (B2B) Import Replacement program to link businesses with local suppliers and services.
Back to ATI.
Council took the short view that $50,000 in property tax income a year was better then waiting for the same property tax income plus an estimated $26,000 a year in sales tax at some later date. To boot, finishing up the Acadia on the Green Redevelopment Agreement hinged upon approving the ATI deal. So in they go, and local residents will be referred there, possibly instead of to the Good Sam Wellness facility, or to any of several existing local physical therapy businesses.
In the former, ATI revenue leaves town immediately for the regional offices. One hopes some jobs for locals come with the business. Patients and workout buffs probably will not even make payments there, instead being billed; few local services being used to keep money in the community. Council harped on the fact ATI users would be eating downtown, and shopping downtown. Given ATI expects their prime time to be before 5am and 8am, and after 6pm when bars and restaurants are open, it appears the opposite would be true, people will be going to ATI instead of to local shops and dining. That $70 therapy visit or that $25 a month membership money never gets a chance to do much inside Downers Grove. Mostly it just leaves. Add on to the local money departing, outside insurance funds never returning into town.
In the latter, at the other smaller physical therapy businesses, or at God Sam’s Wellness Center, all of the benefits of the Local Multiplier Effect (LME) come into play. That insurance payment that left the community comes back to a local business, who passes it on to another local business. That dimes the users drop at the Park District or the YMCA to feel the burn circulates around so others can share the wealth by receiving and in turn using the money. Both of those groups use the money for other programs and activities. The money sticks around and does some more good for the community.
The village needed to determine whether ATI would add value to the downtown, or whether they should wait longer and see if they might get retail to fill the spot. It’s a tough choice. The EDC is tasked with finding warm bodies to fill cold space. When EDC President Greg Bedalov entered into talks with ATI, they took a look around and locked their sights on the middle of AOTG building #1, which is the choicest of the AOTG prime street level space. Thousands of commuters pass by there every weekday; hundreds of Egg Harbor customers see it, and thousands of cars drive by every day. TCF Bank? Charles Place? No thanks, ATI knew where it wanted to be, and that was at DG’s “Grand Central Station”. It meets all three real estate requirements: location, location, location.
Some might say council went with “git ‘er dun”, but it looks like staff and council made their decision based on a cost/benefit analysis, which is usually informal. Letting a property lie unused for three years is about the maximum if you are looking at the short term of ten years, and a difference of $50,000 or $76,000/year in revenues to the village. If you are considering the full 20 years of the potential lease, the break-even point is six years. If you are looking at the life of the building for how it can contribute to village revenues, it never makes fiscal sense to allow a non-sales tax revenue generator into a street level building in the CBD. Everyone knew that three years ago, but as they say, times change.
“It is a standard method for using the time value of money to appraise long-term projects. Used for capital budgeting, and widely throughout economics, it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met.”
In another post I mentioned Net Present Value, or NPV. Sometimes it’s called Net Present Worth. It’s a concept most people on council with one exception, might have no experience with.
Here’s some full disclosure; one of my jobs due diligence requires me to do the NPV math on a sale or purchase. I cheat nowadays: I use a couple different computer calculators that do the math for me so I can just plug in different variables and see what the results yield. This is not an exact methodology, but it usually works, especially for long-term investments. Long-term planning if you will.
In this case, the village needed to determine whether ATI would add value to the downtown, or whether they should wait longer and see if they might get retail to fill the spot. Using NPV calculations isn’t quite germane for the village, unfortunately. Long story short, given the expectation of revenues and the revenues already lost, given a 20 year time frame the village could wait four more years if they could know for certain the space would be filled with retail, which they can’t know.
The guy on council most intimate in knowing how to value real estate deals is Waldack. Deal with it; he knows his numbers. He knows how to value real estate, transactions, and account for variables related to whether or not a given deal makes sense from a hard math POV.
Past that, whether to keep fishing or cut bait is anyone’s guess. I called my buddy, a pseudo-retired economist who taught at U of I, and got his response: “Ask ten expert economists what will happen and you should get at least 30 answers all based on what has happened in the past. Makes for great conferences, by the way, always someone to discourse with. Economists are best analyzing what happened, not specifically seeing the future; that involves bones, blood, entrails, and cauldrons. Candles help set the mood… Listen to what Warren Buffet thinks will happen. He’s been more right than any economist in predicting future markets, and the economy is tied to the market. Buffet says in 2012 or 2013, everything will be fine.”
It’s a tough choice. The village sank about $7.2 million into the AOTG deal with New England Builders, another outside company. In return the village determined that street level retail was something to be desired, and wrote a 90% minimum into the RDA with New England Builders. That deal is now done and gone, as is the $7.2 million-NEB is an outside company, and most if not all of the bond money left town just a surely as if it were spent at Barnes & Noble instead of Anderson’s.
So much for long-term planning in the CBD? Maybe, maybe not. Times changed for the worse, and they can change again for the better. It’s ironic that for all the support council has shown for the concept of shopping local-and they are absolutely correct on the importance, even the need right now-that they lost sight of not just solid long term comprehensive planning, but that what the village also lost in the ATI deal was the Local Multiplier Effect. It wasn’t just settling for the short-term gain of $50,000/year in property taxes instead of the “maybe” of an extra $26,000 in sales tax. It also includes the certainty that 85% of the money that goes into ATI never comes back out into the community; it leaves town.
EJ or was this MT?
your analysis does not take into consideration a National retailer which sells widgets occupying the ATI space, by which an approval from the Village Council would not be needed. Would not 85% of the revenues still leave the community? In fact, when discussions waaay back when AOTG was being planned, it was NATIONAL retailers that were salivating our taste buds. Some of the names bantered about are now on their way out of most malls…like GAP….
The decision was never about Local vs National…it was about service vs. widgets. There was never any control by any government body which would have control over whether New England should lease locally or nationally. Nationally was supposedly the preferred to begin with.
Another flaw or omission in your LME analysis: you omit the fact that on average Local retailers draw less to the location than National retailers. For example the draw of a Home Depot is several times that of an Ace hardware. National retailers often operate at much higher sales per square foot levels than local or regional retailers. So while more of the sales may leave our town, more sales out of the National retailer location is what would help offset this reduction. This also was not taken into consideration in your analysis.
Good points, DGDad, but I’ll let Thoman respond, as he wrote the post. (The byline is in the small type under the headline next to the date.)
Can we move past this ATI deal? The vote is over, stop crying over spilled milk!
“The Village’s overall goal of this effort is to enhance and maintain the downtown as the viable, cohesive and lively focal point of the village.” The 1997 Lakota Master Plan clearly identifies the downtown as a nexus of “feel good” merchandise and “looking good” streetscape, not of national chain stores creating an outdoor mall. It’s too small for that, which the plan also clearly identifies. Stores identified were entertainment, music, video, clothes, restaurants.
The collective memory that thinks national chains were salivated over for downtown is a mystery to me, and needs a reboot. Who would really think a national chain of merchandisers would locate there instead of a few miles away on 75th, or on Butterfield, where the big boxes exist in herds for a reason. Rather “develop shops and restaurants” was the recommendation (emphasis mine). Since when did “shops” become “national chains”? Probably when the actual Lakota Plan was forgotten.
Time to refresh everyone’s memories as to what was intended. Here is a direct link to that 1997 Lakota Master Plan. It’s not a bad plan; it was actually being followed fairly well. The plan emphasized retail and restaurants. As to widgets vs. service, that’s a larger topic addressed by council when they put a 90% widget clause into the original RDA. It made sense then and it still does. Locally owned and operated is the bonus that helps keep the local economy pumping, good times or bad.
And again, I have nothing bad to say about ATI. They are fine people and provide fine services. I disagree smack in the middle of downtown is the best place, and suggest that we gave up more than just retail sales tax when council approved the deal.
Warren Buffett holds his positions during economic down cycles. That is a key element to his success. When others run scared, he hangs tough.
‘…identified were music and video….’
Music and video?!? CD’s and DVD rentals? The same DVD’s rented out of a 3′ x 6′ Red Box in front of Jewel? Good thing we didn’t follow this plan too closely. Just goes to show you have to shift with the times or be left behind, isn’t that exactly what we did?
Kudos to our village council for not over thinking the situation.
Dad, the widget seller would generate sales tax, the local business would generate the LME, the local retailer does both. If MT’s musings prove correct, ATI will do neither. Time will tell. WHere MT errs is applying NPV. The Village isn’t buying OR selling.
Why did the EDC even offer up Acadia knowing two important facts; first the 90/10 contract in place between the Village and New England Builders, and second the open available space at Charles Place and TCF bank’s old location? How long has that old TCF Bank building been vacant? Why isn’t that a priority to fill? Service businesses would be much more suited over on Forrest or Mochel (Charles Place) where they have either their own parking lot or have direct access to the parking deck.I agree that ATI wanted Acadia because of location, location, location, so now that the EDC and Village have given our best location to a gym/physical therapy business what kind of businesses will desire to move into our downtown Downers…SERVICE!
Is ATI in-network with Cigna?
Confussed: Most, if not all, of this has been covered in previous posts, but I’ll save you the trouble of searching the archives. The Charles Place redevelopment agreement, which calls for a 75-25 retail split was iron-clad. In contrast, the Acadia agreement allowed for the developer to deviate from the 90-10 guideline with council approval.
As for the TCF building, I spoke with the present owner, who had previously announced a condo-retail project for the space (now on hold due to economic conditions). He acknowledged that new space is typically more attractive to tenants than old space, such as the bank building.
Finally, the EDC and the Downtown Management Corp., showed ATI all available sites. Acadia was ATI’s choice and the council approved that request.
The mayor offered these comments at the Oct. 6 meeting:
“If you think the 90-10 ratio was visionary, then you must also agree that our opt-out language was every bit as visionary. Because if something isn’t working, having the ability to say ‘okay, we tried’ and move in a different direction is a prudent use of contractual language — and that language, indeed, is in the agreement.”
Well said by the Mayor. When he isn’t dolling out humorous anecdotes and pest control advice on the alternate village blog,
he quickly and neatly sums up an issue in a few short sentences-and he’s absolutely right.
Wish he would join the discussion here in the first person, versus the quoted comment.
Rather than go with what he’s told me in the past, I’ll see if I can get him to sum up his position in a few short sentences, Meat.
Here is the mayor’s response to Meat’s stated wish that “he would join the discussion here in the first person”:
Feel free to tell “Meat” and others that I am happy to have (and do have) daily policy and governing discussions via email, calls, personal conversations in the street, etc. with neighbors and residents. This happens all the time, every day. The Council also has its regular Tuesday night meetings — which are broadcast live over cable and radio, re-played over cable, web-cast and pod-cast. All such interactions are with resident-stakeholders; not, respectfully, pseudonymous monikers. These “fully disclosed” interactions are seminal, I contend, to good local government and separates and distinguishes small town governance versus anti-septic and artificial big “G” government; which is entirely impersonal, many times overwhelming in size, and mostly unresponsive.
My colleagues and I have tried very hard to make ourselves totally accessible and responsive to all resident-stakeholders and to promote an entirely welcoming and informal meeting atmosphere for high-brow debate and discussion as to the issues of our day. Thus, I choose to interact with resident-stakeholders in fully disclosed environments (as mentioned above); those that necessarily promote, to my mind, the most authentic and best aspects of Downers Grove.
Ugh. The illusion of the intranet’s first and only all ‘fully disclosed non-pseudonym supported’ blog continues.
Shame. This space is where the majority of this town’s residents share and debate issues, the conversation could only be enhanced by the mayor’s (occasional) input.
I’ve always admired the council members who had the courage to post here, kudos.
I don’t blame the Mayor Meat. Why get into a pissing match with someone who doesn’t have the guts to post with their real name. I don’t mind the banter back and forth, I love it quite frankley, but a Mayor has better things to do with his/her time.
Problem is, Chad, what’s a “real name” on the internet? And if a public official has “better things to do,” I would assume that would apply to all sites, not just this one.
Finally, your comment doesn’t take into consideration the fact that this site has grown, changed and improved over time. All comments are moderated and pissing matches are few and far between, as a result.
I’ll have more to say about this issue in the next few days.
Elaine-
EXACTLY my point.
Thank you
EJ,
I do agree you have done a better job of moderation than in the past. I still feel the proper place to address village officials is via email, phone or in person at the council meetings. This blog is a place to discuss the issues. It also allows for people who may not want to go to meetings a chance to voice their opine. If a public official doesn’t want to partake then that is their prerogative. I like the discourse, I think its healthy and fun.
Meat,
You said “I’ve always admired the council members who had the courage to post here, kudos.”
This praise is coming from someone who doesn’t have the courage to even identify himself and stand behind his convictions. Hiding in anonymity and speaking of other’s “courage” is a joke. A joke that keeps on giving!! I don’t mean to pick on you, but you have a holier than thou attitude sometimes. I like you Meat. I know who the real Meat is, I email you every now and again. I have seen you around town. You’re a flippin’ former bouncer, why do you need to hide?
Chad,
I agree. This is a place to discuss the issues. The more the merrier.
Courage is not a factor. I have both a personal and professional life that I like to keep separate, blogging anonymously allows me (and the overwhelming majority of millions worldwide) to do just that.
I’m a resident, but I’m also an employee, a father, a husband, a marginally talented volleyball player and a frustrated baker. I don’t think its unreasonable for me to want to limit access to those different facets of my life to the people I choose.
You can’t prove anyone’s identity on a blog. Period. To refuse to contribute to the discussion here because of anonymity, but contribute elsewhere because you assume everyone is using they’re real identities is naive. I suspect Elaine agrees. There are no blogs anywhere on the internet that can assure an individual’s identity. None. Why is that an issue here?
Since your interested, I’m also a former paperboy, dishwasher, international male model and trusted adviser to 4 Presidents and 1 Pope. I was between jobs when I bounced.