Arlington Heights resident spending incentive with Village 10% coupon

This letter was sent to Mr. Michael Mertes, Arlington Heights Business Coordinator, after presenting the 10% coupon spending incentive program for Arlington Heights residents to the Village Board meeting on November 2, 2015.

November 13, 2015

Mr. Michael Mertes

Business Development Coordinator

Department of Planning and Community Development

Village of Arlington Heights

33 S. Arlington Heights Road

Arlington Heights, Illinois 60005

Re: Arlington Heights' resident consumer spending incentive

Dear Mr. Mertes,

Thank you for the opportunity to discuss the 6b Tax Abatement Program on Thursday. As we discussed, a program that provides an incentive to Arlington Heights residents to spend locally could be a good supplement, or substitute, for existing subsidy funds.

To begin with, there are two general categories of taxpayers in Arlington Heights: businesses and homeowners. The Village promotes economic growth by offering subsidies to businesses as opposed to homeowners.

The difference between business subsidies and homeowner subsidies:

A business subsidy is a supply-side stimulus:

Programs that subsidize businesses are considered supply-side, or trickle down stimulus, for local economic growth. According to those theories, once you get a business into town it will magically produce consumers who may have money to spend, thereby supporting that business.

For example, programs the Village uses to subsidize businesses are the Zero Interest Loan Program, Retail Small Business Incentive Programs, TIF districts and Metropolis Theatre subsidies.

A homeowner subsidy is a demand-side stimulus:

Village programs that would subsidize homeowners are considered a demand-side stimulus. We look to our neighbor, Mount Prospect, for examples of demand-side stimulus programs. That municipality provides free leaf pickup to all residents and Property Tax Relief Grants. Both programs are designed to put money that could be spent to support local businesses back into the pockets of homeowners .

Along comes the 6b Tax Abatement Program:

The 6b Tax Abatement Program could be tailored to develop a demand-side or consumer incentive program. Under that program the Village could collect $50,000 per year from the 6bProgram that is set aside for the Zero Interest Loan Program. If, for example, no business qualifies for up to the maximum $20,000 loan, the $50,000 6b funds would remain unused in that Village loan account.

So instead, the Village could structure a 10% coupon program for tax-paying residents to spend at targeted new, small or midsize businesses. If the total $50,000/yr is reimbursed to those targeted businesses, as a 10% coupon, that would translate into $500,000/yr of income to those businesses or $2.5M/5 years.

Advantages to the demand-side homeowner stimulus:

Supports existing local businesses: This supports businesses in a manner they truly appreciate: customers through their door. This would also tend to stabilize the business turnover in Arlington Heights.

A spending multiplier effect: In our example, $500,000/yr is recirculated throughout the local economy.

Village collects additional sales tax: The Village would collect sales tax as the subsidy circulates throughout the Village.

More efficient use of subsidy funds: Residents would vote with their demand to support existing or new businesses. Also, the public-relations effect that homeowners are finally appreciated for once would result in more local area shopping.

Unique marketing opportunity on the 'Discover Arlington' website: The Village could market to potential businesses as 'Arlington Heights supports your customers'.

The program could be tailored to any business segment in town: For example, the entire subsidy could be directed to the Metropolis Theater to attract local residents.

The cost and management of a customer incentive program does remain an open question. We concede the devil is in the details here. There are consumer incentive programs in other municipalities that could serve as an example, but these logistical obstacles seem minor compared to the many benefits of having such a consumer incentive program on the books.

As details are worked out I might suggest a presentation to the Economic Alliance to discuss supply-side versus demand-side subsidies.

I look forward to your comments and thoughts. Thank you for your time and attention to this matter.