It's official: Springing for hummus and a chicken kebab at Andie's does more for the city's fortunes than spending the same money at Olive Garden. Or so says a just-released study commissioned by local business groups in rapidly gentrifying Andersonville, who hope the results will push local policy makers--and consumers--to support locally owned businesses like the ones that pack the neighborhood's thriving Clark Street strip.
In the last few years escalating property values have caused Andersonville property taxes to skyrocket--doubling in the last year on some buildings--and rents have been driven up in turn. Meanwhile, chains are nibbling away at the edges of the neighborhood. Clark Street has a Starbucks and a Quizno's, and Subway and Chipotle Mexican Grill have come knocking. The Borders Books & Music that opened earlier this year at Broadway and Lawrence is causing worries for the owners of Women & Children First. And a Target slated for the Wilson Yard development, just south of Borders at Broadway and Wilson, is making everyone nervous.
As I reported here in early June, last fall the Andersonville Chamber of Commerce and a sister agency, the Andersonville Development Corporation, got in touch with Matt Cunningham and Dan Houston, two urban planners for hire. In 2002 the pair made a name for their fledgling firm, Civic Economics, with a study commissioned by the owners of a bookstore in Austin, Texas, and a neighboring record shop who wanted to prevent Borders from moving in across the street. After devising a model that compared the impacts of chain stores and locally owned businesses on the Austin economy, Civic Economics determined that of every $100 spent at a locally owned shop, $45 would continue to circulate in the community, but of the same $100 spent at Borders only $13 would stay in the city. After four months Borders pulled out of the proposed site, and though the chain says the decision had nothing to do with the study, the New York Times and National Public Radio picked up the story, as did Publishers Weekly, the American Booksellers Association newsletter, and a Minnesota-based advocacy group called the Institute for Local Self-Reliance.
In June 2003 Ann Christophersen, co-owner of Women & Children First, was talking up the Austin study at a local forum on sustainable business practices. Andersonville Chamber of Commerce director Ellen Shepard was in the audience, and soon after her office met with Civic Economics about conducting a similar study in Chicago.
Cunningham and Houston had been looking to do a follow-up project that would allow them to study a wider range of businesses, and Andersonville, with its dense strip of small businesses, was a perfect site--especially since by then Cunningham lived in the neighborhood. He and Houston figured they had a nice little nine-week job on their hands.
That was a year ago. Finalizing the deal took until spring, and the study itself took several months to complete, mainly because some of the participating businesses were slow to give the planners a look at their financials. "This is awfully hard for local businesses to do--to let somebody in and look at the books," says Houston. "If Matt and I were asked to open up our financial statements, we'd probably hesitate."
Ten local businesses ultimately signed on to the project, including Women & Children First, several restaurants, and a White Hen Pantry at Clark and Catalpa, which Cunningham and Houston included to determine how a locally owned franchise stacked up against both indies and chains. They hoped to pair each business with a corporate-owned one in a similar field, but not all the matches were precise. Comparing the economic impact of Women & Children First to that of a Borders was pretty straightforward. More fanciful was the comparison of Star Gaze, a lesbian bar that serves food, to an Applebee's. The biggest stretch was the notion that the Joel Hall Dance Center could reasonably be compared with a chain movie theater. ("Um, entertainment?" Cunningham offers, shrugging. "There was really nothing else we could do.")
Eventually all the Andersonville businesses did open their books to the pair, who relied on public documents, like corporate filings with the Securities and Exchange Commission, to figure out how the chains compared. As in the Austin study, they looked at several ways businesses could contribute to the local economy, including wages, outsourced work, charitable giving, and profits. Then they added on what economists call multipliers, calculating the ripple effects of wages and fees paid to local workers and businesses, as when the bookstore clerk gets lunch at the falafel stand down the street.
The bottom line: $100 spent at a chain would send $43 circulating back through Chicago's economy. Of the same $100 spent at a locally owned business $73 would stay in the city--a notable difference but nowhere near that found in Austin, where local businesses returned more than three times as much revenue to the local economy than an average Borders.
One reason for the discrepancy is that the cost of doing business in Chicago is higher for chains and independents alike, and the chains' higher costs ratchet up their local contribution. Another is that many of the enterprises in the Chicago study--like restaurants and hair salons--are so labor-intensive that they put more wages back into the local economy than bookstores do, no matter who owns them. And no Chicago business outperformed its counterpart as spectacularly as Austin's BookPeople beat Borders.
When the new study was released last week, 40th Ward alderman Patrick O'Connor and state rep Harry Osterman showed up at the press conference. They say they support the idea of helping locally owned businesses stay competitive, but they're still fishing around for a plan. Neighborhood business groups often mention, as a model, a San Francisco ordinance that makes chains go through a public-hearing process to get into certain neighborhoods. O'Connor would prefer something more systematic, like a moratorium on chains in certain neighborhoods similar to the city's dry precincts, where residents have voted to ban liquor stores and bars. But he thinks that the real problem is property taxes. Osterman says he'll look into a commercial analogue to the recent "homeowner's exemption" property tax cap, a three-year shield for homeowners that takes effect this year (for more on that see the Works, Ben Joravsky's column on page six). That wouldn't help shops that rent from absentee landlords, he admits, but it might be a start.
Jill Metz, president of the Andersonville Development Corporation, one of the study's sponsors, runs her law practice out of a building on Broadway that she co-owns with arts consultant Ronna Hoffberg. Last year their property tax bill was $22,000; this year it's close to $42,000. Hoffberg says she loves the study, but she thinks the tax issue trumps any plan to rally consumer support for locally owned businesses. "People say to me, 'It's your fault if you didn't write leases that allow you to pass along these kinds of increases to tenants,' she says. 'Well, who will they pass it on to? They'll pack up and leave--and that's how I'll get Subway as a tenant."
Hoffberg gets no argument from Ellen Shepard. Without some change in the tax system, she says, "the rest of our efforts to save local businesses will be a moot point."
At an October 20 town hall meeting at the Swedish-American Museum, Stacy Mitchell, a researcher from the Institute for Local Self-Reliance, gave a talk about strategies other cities have used to support local businesses, discourage chains, and urge consumers to shop at locally owned stores. Some have used zoning to limit the size of retail outlets, hampering chain stores, which often have a larger footprint. In Boulder, a group of local cafes went in together on paper cups bearing the name of every shop in the collective. Not just a PR tactic, they also saved money on the cups, which they bought in bulk.
She got a big hand, but tough questions followed. The study was "much ado about nothing, in a neighborhood like this," said Tim Rasmussen, owner of Charlie's Ale House. His taxes tripled this year, but with his business thriving he's not terribly worried. The real competitors--"big-box" stores like Target and Wal-Mart that can undersell smaller stores and draw consumers from a distance--aren't about to open on Clark Street, he said, where there's little parking and lots of traffic. "Here, you're going to get a Starbucks," he says, "but the danger is the Target that's going to open up at Wilson Yard. And this neighborhood doesn't have what it takes to combat that."
"I couldn't agree more," Mitchell replied. "What's going on across the country is a massive overdevelopment of retail. Retailers find that consumers will drive out to the biggest thing around." The result is a series of ever-bigger stores, each eating the ones that came before it. "I'm hoping that what will come out of this is a policy discussion."
Ann Christophersen agreed. "The notion that all we need to do is to maintain our little strip is such a small view," she said. The Uptown Borders is a mile away, but she says her store is already feeling its effect. She says she won't know the full picture until after the holidays.
"It's very easy to think that what you're getting is competition," said Mitchell. "But if you've got a video store in a neighborhood that's saturated and a Blockbuster opens across the street, all they've got to do is peel off enough customers to put the independent in the red. The independent can keep 70 percent of their business. They can win the popularity contest. But they'll still lose, because they can't operate in the red for as long as a chain can."
On October 25, 48th Ward alderman Mary Ann Smith and the groups that sponsored the study met with the Metropolitan Planning Council, a citywide planning organization, to ask for help putting together what they call a "vision plan" for the neighborhood. They wanted an outside group, says Greg Harris, Smith's chief of staff, because there are so many different constituencies involved. "We don't want anybody to be able to come back and say it was biased."
Even if all the proposed solutions to the neighborhood's worries have "unintended consequences," Harris and Smith are hoping the MPC will have some bright ideas. The problem with a city ordinance barring chains, Harris points out, is that if rents rise past the point that local merchants can afford, "you end up with a vacant storefront." Shifting property tax burdens off of resident commercial-property owners is "like squeezing a balloon," he says. "You squeeze on one end and the other gets bigger." Reduce property taxes on one group, and somebody else's go up. Not to mention, says a local who didn't want his name used, that independence in itself won't keep a neighborhood healthy if there's nowhere to buy toilet paper. "I've seen a lot of these neighborhoods develop and the stores that are needed are gone, and all you're left with are boutiques and coffee shops."
Art accompanying story in printed newspaper (not available in this archive): photos/Bruce Powell.