A Good Question

Those of us who worry about slack, local economic conditions concentrate on a catchy phrase “excess capacity”. What is excess capacity? It means economic resources including people, machines and structures that are not currently being fully utilized. Excess capacity is also at the heart of the current Little Depression nationally and globally.

Capacity was expanded in Arlington Heights throughout the 1990’s and early 2000’s by business and local government officials. The main tool used to expand capacity back then was the TIF (tax incremental financing). In essence this program gave local tax breaks to build new stores, housing or office complexes. As a result Arlington Heights has been in a condition of structural excess capacity even during good times since then.

Due to current economic conditions this structural excess capacity has now been joined by newly created excess capacity. Clearly the past strategy of continuing to add capacity (supply) is not the answer to our economic problems. The local business community and in particular the current administration has to recognize the need for a shift in strategy to the demand side.

In the past community leaders have adhered stubborn to the idea that ‘build at all costs’ will in itself generate business. Or ‘build it and they will come’, to put a movie version on it. Also, local campaign contributions to local politicians has maintained this track of ‘build at all costs’ for the last twenty years.

Therefore our local capacity problem is not one of needing more supply but that of increasing local demand to buy things. The primary problem is that people are not confident enough or have money to spend at local businesses. Of course this largely comes down to jobs, wages or confidence in either one in the future. Job uncertainty is clearly at the low demand problem facing many localities.

We Have to Get Creative

The Village Board has tried several techniques to improve commerce but has again largely settled on increasing the supply of business. They have proposed streamlining the restrictions to open a business like looser sign variations or tax breaks. These strategies might work in a time of stronger consumer buying power, but that is not the case today.

The Board and local business leaders must work on strategies that will generate buying demand. For example:

· Increase real estate taxes on the higher valued homes i.e. McMansions, of our village
· Tax rebates to the remaining residents to be spent locally
· Increase government services to residents that will allow more local spending
· Local government or school districts hire unemployed residents to spend their salaries in the community.
. Owners of vacant business property must lower rents to get tenants.

The days of rote 'building at all costs' are long gone. Innovative demand generating strategies are now needed by agile thinking community and civic leaders.