City money used for economic development is in the spotlight in this issue, with the short sale of a property on Dempster Street on which the City held a second mortgage and the City-initiated possibility of a loan to a restaurateur who said he is on the verge of bankruptcy and recently closed his restaurant after more than 40 years in the business.
Over the past several years, City money has gone to several businesses, either to attract them to come here or to entice them to remain. It has offered loans, including some secured by second mortgages and some which were forgivable loans; it created and extended tax-increment-financing (TIF) districts; it has given money from TIF funds with no obligation to repay; it has supported changes to reduce property taxes; and it has shared sales-tax revenues for a specified period of time.
In many cases the businesses have succeeded and repaid their loans, sharing their gains with the community that gave them the opportunity. In some cases, the City was burned.
Some of the decisions to use City money were sound; others, less so. What is disturbing about too many of them over the past few years is what appears to be a trend of favoritism rather than uniformity. City staff or Council members have encouraged certain businesses to apply for economic development funds, rather that ensure that all businesses here or thinking about coming here were aware of the availability of City money.
This can make the City look in some cases like it is selectively distributing largesse rather than seeding economic opportunity.
A recent example came before the City’s Economic Development Committee on April 27 in connection with proposals from businesses to lease different parcels of City-owned property on Howard Street. The City now owns a number of storefronts on Howard Street, and while businesses seeking to lease the City-owned properties must comply with zoning codes, the City’s decision to lease gives the City subjective decision-making power which is not governed by any objective standards.
One proposal was for Good To Go Jamaican Cuisine & Catering, an established dine-in/carryout restaurant located on the Chicago side of Howard Street, looking to expand into larger quarters. This restaurant reported a nearly 30% increase in sales in 2015. The owners are Evanston residents, and they have received a letter of intent from a local bank for an SBA loan to finance the move and operation with more than a quarter of a million dollars, indicating financial stability. The owners also provided a sketch and a basic architect’s rendering of the upgraded space.
The second letter of interest contained a proposal for a new restaurant and jazz-blues music venue, Evolve. Much of the information was more than three years old. There was also a projection of about $1.3 million in initial costs and about $150,000 in equity capital.
The staff recommended moving forward with the new business, which they said is a “desired use,” but not with the established business, which did not receive such a ranking. According to staff, the space desired by the existing business might be needed on a temporary basis by Strawdog Theatre Company, which the City is helping to finance. There was no documentation, however, that Strawdog Theatre asked for the space, or that it agreed to pay an option to reserve the space.
Additionally, what, in fact, is a “desired use” for Howard Street? And what makes a use undesirable? The regulated use of a property should be governed by the zoning code, not by the City’s subjective whim. In addition, why should the City reserve space for a speculative use by a business, if the City is not being paid an option fee to reserve that space?
Without a standard to hold up or fall back on, the recommendation to pursue the one business and deny another looks arbitrary.
We leave that to City Council to consider and address.
While they are at it, we think Council should adopt some standards to govern loans and grants to promote economic development in the City. Should the business be required to demonstrate that it has a viable financial plan to succeed? If a business cannot obtain financing in the private sector, should the City be making loans and grants to that business?
We want businesses to come here, stay here, and succeed. But the City should not be the last best hope for a business wishing to remain or to gain a foothold here. City money should be the icing on the cake.
We want Howard Street to thrive. We want all business districts in the City to thrive. We want entrepreneurs to locate here who will work hard and become part of the community. But we also want assurances that our money is being put to fair and prudent use.