I Don’t Believe You

July 27, 2006 Economics Comments (0) 1012

Yesterday Chicago’s City Council – known primarily for outlawing multitasking (cell phones while driving, smoking while drinking, foie gras while dining) – passed a living wage ordinance for big-box stores by a veto-proof majority. There are political implications (they went against the Mayor, oh my!) and of course the Retailers Association and various big-box spokespersons predicted that the stores won’t locate in the city, depriving it of tax revenue, non-living-wage jobs, convenience, etc..

The next chapter in this story was suggested by another news item buried deeper in the paper. It seems that the Berwyn City Council has 17 offers for the re-use of the historic Berwyn Bank Building, a fact that allowed it to reject an offer from Applebee’s restaurant to rehab the building, spending $2.5 million. The Berwyn Development Corporation touted the emergence of developer interest caused by media attention and preservationist word of mouth.
That’s a big turnaround from 1998 when it was on Landmarks Illinois’ 10 Most Endangered List, and from 2003 when Berwyn aldermen favored a plan to demolish the building, and even from the first Applebee’s proposal, which was demolition. The building was saved by pluck and luck, notably when the alderman pushing the demolition got caught in the bathroom accepting bribes.

Tell the developers they have to save the landmark, remove the corrupt pols, and all of a sudden you have 17 deals on the table.

The point of all this is DON’T BELIEVE THEM. Dire predictions have a pleasant habit of not coming true. The economics are fairly obvious: There is a threat (tear down old Berwyn bank; build slave-wage Wal-Marts in Chicago) and that means THERE IS A MARKET. Just because a local government suddenly grows sack and decides to put parameters on the development does not kill the market.

Theoretically, the rules you place on a development could be so onerous that they would stop the development. But these arguments, made yesterday in Chicago, are heard 150 times for every 1 time they come true. Developers always threaten to walk away if they don’t get what they want and they ALMOST NEVER DO.

Of course, any good retail or real estate industry shill will look for the best deal possible, and in some guileless communities, they will get buried in incentives – but often those are the places they abandon after a few years, because the market wasn’t there.

Neither Chicago nor Berwyn’s City Council would have NEEDED to place parameters on development unless the MARKET was there.

I have actually seen developers walk away when they don’t get what they want, and it is AN EXTREMELY RARE OCCURENCE.
“I don’t believe you. You’re a liar.”


Adler and Sullivan’s Harvey House saved! (Go back a couple of blog entries for the story) Turns out the divorce that was pushing the redevelopment in more amicable and the house will continue to be used by the owner. Saves the big embarrassment of spending Louis Sullivan’s 150th birthday (Sept. 3) mourning yet another lost Sullivan.


News from Oak Park – two of my SAIC colleagues (Don and Tim) were on opposite sides of a two-house demolition in the historic district – which prevailed. I wanted to save one of the houses, so I guess I fit somewhere in the middle– like lukewarm water.

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