Sunday, October 14th, 2012
This article is part of the State of Chicago.
Chicago is a tale of two cities when it comes to the business climate. If you are a high profile Loop business, things are great. The city will move mountains for you, permits won’t be an issue, and a healthy heaping portion of TIF dollars might even be coming your way. If you are a small business or someone without connections, it’s a different story. Improving business conditions, especially for small business and especially in the neighborhoods, is critical to the city’s economic future. I’ll outline here a few thoughts on how to do this.
1. No more kryptonite. What I’m talking about here are things that may not matter much on substance, but send a high profile message that Chicago is not friendly to business. Fighting to keep Wal-Mart out for so long. Having Gov. Quinn walk the picket line at the Congress Hotel. Alderman Moreno and Mayor Emanuel saying Chick-Fil-A isn’t welcome in Chicago. Alderman Burke speculating on using eminent domain to seize mortgages from banks. All of these send a very powerful message to prospective investors: you are only welcome in Chicago if you do what we tell you to – don’t forget who your masters are. Who wants to put up with that level of political risk?
2. Curtail aldermanic privilege. Speaking of political risk, everything from zoning to sidewalk cafe permits to garbage collection are under the control of the alderman. Having someone responsible for service coordination in a ward isn’t necessarily a bad thing – Jane Jacobs suggested something similar – but when routine permits needed to operate can be denied at the whim of the alderman, that’s a problem. It’s also a clear recipe for corruption, which is why so many alderman have gone to jail. And even for those who don’t engage in quid pro quo, you can believe many small businesses consider political donations to the alderman and the ward Democratic organization a wise insurance policy. Whenever a developer comes in and wants a zoning change, either a) it happens under the radar so fast nobody knows what’s up or b) the neighbors go ballistic and the whole thing is only resolved by negotiations by all parties with the alderman. When getting things done in the ward requires a sit down with the alderman, that’s bad. The city really needs to figure out how to make most permitting decisions via a transparent, predictable administrative process. Not, as is the case now, by having the alderman introduce a one-off ordinance at the City Council. Not only is this bad for business, it’s bad for the city as the City Council shouldn’t be spending over 95% of its business on so-called “ward housekeeping” tasks – but it does, per a Chicago Reader investigation.
3. Red tape reduction. I talked about this in my City Journal piece, so won’t go into details. But what has struck me about the reports of red tape problems experienced by businesses like Day Frog, Logan Square Kitchen, and Scooter’s Frozen Custard is that these are high end business catering to Chicago’s “creative class” – they are right down the rails of the upscale global city Chicago wants to be. Yet even they get caught in a quagmire of regulation. If these folks struggle, I can only imagine what a Latino entrepreneur on the Southwest Side must go through. Mayor Emanuel already announced some reductions in permitting, which is excellent. But this is something that needs major focus. If you want to get just a small taste of what it’s like to be a small business in Chicago, read this article on awnings. Among the reforms I’d make is looking at minimum parking requirements – which has led to the strip malling of Chicago – and radically reducing the scope in which you are required to get a Public Place of Amusement license. (This should apply to only very large venues). Also, the health code needs revising to be more rational. Elotes stands shouldn’t be illegal. Neither should limited use of home kitchens.
4. Bureaucratic Efficiency. Even during the depths of the housing crash, it still took two months to get a zoning meeting with city officials. It apparently now takes two years to process a foreclosure in Cook County. Friends who have done work on their homes have told me about having to hire “permit expediters” to get a building permit. Even if you assume this isn’t about corruption (which I wouldn’t assume, btw), the fact that there are people making a living doing this is crazy. There shouldn’t be a job for permit expediters in Chicago or any other city. The administrative machinery of the city needs to function effectively.
5. One Stop Shop Permitting. Wouldn’t it be nice if a business could go to one office and get all the permits they needed to operate? Maybe that’s too much to ask in the short term. However, some sort of an office where you could get a written statement from the city on the exact list of permits you need to operate would be a good start. If you comply with this list in good faith, then you should have safe harbor protection against citations for not having a permit if it wasn’t on that list the city gave you.
6. Permit Pricing Rationalization. Permit fees should be set equal to the cost of administration. Fines should be equal to the cost of enforcement plus reasonable deterrence. (If there is a scarce resource involved, then pricing should be set to allocate capacity according to value). Permits and fines for businesses shouldn’t be used for revenue raising purposes. The city sticker/parking ticket model is a bad one.
7. Deferred Licensing. Most small businesses fail. A lot of them don’t make it a year. Why make it harder and more risky by making people pay for expensive licenses and permits up front? How about making license fees and permits free for the first year? If you’re still in business at that point, then you start paying. Let’s lower the barriers to getting new businesses off the ground.
Obviously items like crime and schools matter to business as well. Business doesn’t thrive in unsafe areas or where the workforce isn’t educated. But I wanted to focus in on more business-specific items. Many of these are under the effective control of the mayor. Unlike say pension reform, they don’t require a lot of outside help. Thus these problems are in theory addressable.
While Chicago has a lot of barriers for small businesses, there’s also good news: New York City is even worse, and California is world-famous for its business hostile regulatory environment. Chicago is actually positioned to be a leader in business friendliness here.
In my piece “Detroit as Urban Laboratory and New American Frontier,” I noted how the collapse in city government effectiveness led to an environment where creative people can actually make things happen. Imagine if a place that has more effectively delivered services made a deliberate choice to nevertheless make it easy to do things. That could be a game changer.
Rather than internalizing the vices as virtues rhetoric of the global city (i.e, high costs and regulatory burdens are signs of health because it shows how in demand our city is that people are willing to put up with this stuff), instead seek to make Chicago the global type city where it is easier to do something new and creative than any other comparable city. Bring the pro-business mode of Houston to the urban environment of Chicago and you could create something really special.
The specifics I mentioned are some ideas. There are certainly more. But what’s really need to change is the overall attitude to business – again, especially small businesses in the neighborhoods. Instead of “Here’s what you’ve got to do if you want to do business in our town” there should be a big neon sign out saying “Welcome businesses – and what can we do to help?”