Are we regulating local retailers out of existence?

Photo: Jonny. Source: Granola Shotgun

There’s a recent story about a family in California that bought an old fire station for $250,000 with a view toward converting it into a bakery and micro-brew pub. This could be a very attractive retail business that would help revitalize a blighted part of their town. They were surprised to learn that they would have to spend almost $350,000 on sidewalks, curb-cuts, parking, storm drains, handicapped access, landscaping – and that’s before they even started bringing the interior up to code. They ended up using the space for a small-scale print-shop.

The official line was that these people were foolish. They should have known that you can’t just do what you want with a property. We have development codes for good reasons: public accommodation, fire safety, stormwater management, and so on. It’s hard to argue against any particular rule. But in sum, the rules end up stifling local retail development. The family’s print shop is profitable, but it adds nothing to the town’s social or cultural life, employs far fewer people, and generates fewer taxes. In the meantime, over 200 cities across North America are falling over themselves to court Amazon, vying for their second headquarters.

There’s a big gap when it comes to retail development. Large companies can afford to file environmental studies and traffic studies and neighborhood impact studies. The Sacramento Kings recently received streamlined environmental requirements for their new stadium. And they got a large subsidy and tax-exempt financing. But small-scale operators get nickeled and dimed by parking requirements, zoning codes, noise ordinances, and various other regulations, often enforced by opaque, unresponsive bureaucracies.

Source: Granola Shotgun

There’s more than one reason for the growth of Amazon and our digital economy. Smartphones and social networks are convenient, and an app is a lot smaller than a car. But they also benefit from restrictions on local development. Community-based businesses need and want to be good neighbors. After all, they have skin in the game. They won’t survive if the local community doesn’t look on them favorably. We need to find ways to encourage them. The alternative is continued decline of local enterprise and a blighted landscape.

As someone said, it’s not one thing, it’s everything.

Douglas R. Tengdin, CFA