Cheeseburgers, Tax Dollars and the Value of an Anchor Store

As West Dempster Street emerges from its economic hibernation the issue of Tax Increment Financing (TIFs) and the impending opening of the new Oberweis store raises numerous questions.  Lets quickly review the facts so we can accurately address the issue.

1.  The Village of Skokie purchased the two parcels of land of land for $1.7 million.  In addition to the purchase price, the village incurred environmental cleanup costs as a gas station once occupied the property.

2.  Oberweis paid $400,000 initially and has agreed to pay 5 percent of on-site sales that exceed $1 million per year.  According to CEO Joe Oberweis, this untested prototype could generate $1.75 to $2-million annualy.  This 4,000 square foot store will pay property tax and generate sales tax as well.  Based on these expected Oberweis sales projections, the village will receive $50,000 per year from on-site sales (based on $2 million/per year in sales).

An "anchor store" is a store that increases the traffic of shoppers at or near its location.  Consumers, attracted by the anchor's name, are likely to visit the location, and thus nearby stores' sales and profits are increased by the presence of the anchor.  (Defined by spatial economists Hideo Konishiy  and Michael T. Sandfortz "Anchor Stores" published Oct. 25, 2002.)

Empirical evidence shows that anchor stores receive preferential treatment in regard to discounted rent or as in the case of Oberweis a deeply discounted purchase price.  

How will Oberweis change the West Dempster Business District, and more importantly how will this benefit Skokie taxpayers?

From Village Hall it is clear that Oberweis will act as an anchor that will generate a positive externality for specialty retailers on West Dempster Street.  Therefore customers who frequent the new retail concept put forth by Oberweis are likely to spend money at other locally owned businesses in the surrounding area.  The long term outcome would be economic growth, an expanded tax base and job creation.

On the other side, many Skokie residents have expressed concern about giving preferential treatment to Oberweis.  Skeptics have argued that giving subsidies to attract private ventures with public tax dollars is both unjust and puts many hardworking business owners at an economic dis-advantage.

I think we can all agree that as concerned Skokie residents we all want a strong and prosperous business climate.  

But where do you weigh on this argument? And will the assumption of the "anchor store" positively affect the West Dempster Corridor? 

Until we meet again, introduce yourself to a fellow resident that you don't know and make Skokie a welcoming community.

Benjamin Goldman
The Economic Dilletante
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