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SOME TOWNS GET IT…SOME TOWNS DON’T
THE ART OF BEING “BUSINESS FRIENDLY”
Trying to do business in the various cities and villages in McHenry County and nearby Counties allows the commercial real estate broker to have a unique perspective. Some towns are what you would call “business friendly” and some are not. Some towns say publicly that they are business friendly, but their actions do not stack up with their words. With all the advantages that businesses bring to a community, it’s hard to fathom why any community would be anything other than friendly. For the record, what benefits DO businesses bring to a community?
First and foremost, some businesses generate sales tax revenue. Nearly all towns covet the revenue from this source. An extra $2-10 million a year into the town coffers helps fund a lot of overhead. This type of revenue is generated one business at a time. A lot of small businesses can add up to a lot of revenue! If you lose that potential business to another community, all the sales tax that you would have received goes out the door to someone else.
Second, businesses generate JOBS! Businesses hire people to work there. People with jobs earn income and they turn around and spend a large portion of that income back in the community. This creates a trickle down effect that bolsters the economic health of the community.
Third, business owners who buy real estate to house their businesses, pay real estate taxes. A portion of these taxes go to the municipality.
Fourth, businesses add to the quality of life for the residents. A community is desirable if it contains a good mix of businesses providing good and services that the residents need.
So with the above advantages, why is it that some communities find it necessary to throw up obstacles that make it hard for businesses to get established? Let me give you some examples without badmouthing any town in particular (I’m trying to be nice).
- Obstacles to the permitting process. You typically need a building permit to build or remodel a building or a particular space in a building. Architectural drawings are often required (a great expense) often requiring review by the village’s outside consulting engineers (paid for by the prospective business). Plans are submitted to the Building Department, the Building Dept. submit the plans to their outside consultants who come back with pages of critiques or corrections that comport to the Building code. The business applicant takes care of the items on the checklist of critiques, resubmits the plans for approval and the consultant comes back with ANOTHER list of critiques? Why those new critiques were not on the original list, we’ll never understand. More time and more money. A smart community would not allow their outside consultants to MILK the poor business owner in this way. Find a way to streamline this process and avoid a lot of ill will.
- Special Use Permits-Certain uses are sometimes not considered PERMITTED without a special use permit. Examples are a gymnastics academy or a doggie day care that wants to locate in an industrial park. The prospective business owner has to fill out a petition, pay a large fee, place and pay for an ad in the newspaper, attend multiple meetings (many time paying for an attorney to handle this). This all takes time (2-3 months) and money. A prospective landlord has to keep his building vacant and lose rent while this is playing out. I believe local governments can put their heads together and figure out how to “move at the speed of business” rather than clog up the process with burocracy. Create some reasonable guidelines and give your Building and Zoning Dept. authority to make decisions (like would be done in the business world).
- Maxing out utility taxes-municipalities are allowed by State law to approve a 5% tax on gas, electric and telephone usage. This hits businesses the hardest , especially the industrial sector who uses a lot of electricity or gas in their process. Most of the local towns tax to the max when it comes to utility taxes because they can and because it is a legitimate (but not business friendly) revenue source. Residents also pay this tax.
- Excessive landscaping requirements and burdensome tree replacement ordinances. If a vacant commercial lot happens to have trees of a certain diameter, a builder must pay the village a prescribed amount of money per their ordinance for the privilege of removing the trees. Of course this runs up the cost of any particular project.
SOME TOWNS “GET IT”
Like a breath of fresh air, some communities have realized the multitude of benefits by encouraging businesses to locate there. Hare are a few examples of what is being done locally:
- No permit fees for erecting commercial for sale or for lease signs.
- Low interest loans for façade improvements
- Matching loan funds for business start-ups and expansions
- Grants for signage costs
- Streamline process for zoning, variance or building or building or special use permits (giving staff administrative decision power without requiring a meeting)
- Sales tax rebates for businesses generating high sale taxes
- Reduced fees for building permits, tap on fees or impact fees
- Customer service attitude from the first point of contact. “How can I help you VS “You wanna do WHAT!?”
- Tax Increment Financing Districts
- Surveying your business constituents how you can better serve them on a regular basis
- Invest in an active Economic Development team
If you’re running a local town, maybe it’s time to take a good look at yourself and ask “are we being as friendly to business as we could be? What could we do better?” It’s competitive out there and your attitude may be costing you.
By Bruce Kaplan, Senior Broker Associate, Premier Commercial Realty
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