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City budget eliminates small business support

Representatives of community-based economic developments groups will testify at the City Council’s hearing on the budget tomorrow (Wednesday, November 3, 11 a.m.), urging restoration of their funding in the mayor’s proposed 2011 budget.

The proposed budget entirely eliminates the allocation for its economic development delegate agencies program — $3.4 million, about the size of many individual developer subsidies from the city.  But that funds 112 neighborhood chambers of commerce and other groups that support small businesses in the city’s neighborhoods.

“More than half of the delegate agencies could be in danger of closing without city funding,” said Ellen Shepard of the Andersonville Chamber of Commerce.  “And the city has no plans to replace these programs.”

On shoestring budgets, the groups play a key role in nurturing small businesses and neighborhood vitality, helping new businesses get off the ground and existing businesses grow, and helping them access city programs and navigate often-burdensome city regulations.

They offer training programs, marketing initiatives and special events to promote local businesses.  (For a closer look at the work of delegate agencies across the city, see last year’s Newstip.)

When the city offered an amnesty program on fines and fees for business sign permits this year, it was delegate agencies that “went door-to-door and talked to every business that’s out of compliance,” said Kimberly Bares of the Rogers Park Business Alliance.

And although the city pays an outside contractor to administer its Small Business Improvement Fund, it’s the neighborhood groups that hold meetings to inform local businesses about the program and go out to solicit applications, said Bares.  “Without delegate agencies there would be no applications to process,” she said.

They work at a level of efficiency and cost-effectiveness that the city could never replicate on its own, Bares said.  A recent survey of 30 neighborhood economic development groups showed they’d assisted 9,700 businesses and impacted 75,000 jobs, Shepard said.

The groups met with officials of the city’s Department of Community Development this summer and received assurances that they’d recommend full funding in the next budget.

But when the budget came, funding was completely eliminated.  “There was no communication, no warning, no preparation,” said Bares.  “And the aldermen had no idea this was coming.”

The cut comes on top of an 11 percent funding reduction last year (down from a proposed 23 percent reduction) and a 7.5 percent cut the year before.  “The city doesn’t seem to understand the value of our services,” Bares said.

Budget planners are wrong if they think local businesses can step up to support these groups, Bares said.  Among their biggest donors are community banks and realtors, which have been among those hardest hit by the recession.

After objections from aldermen at a recent budget committee hearing, budget officials have said they’re “working on” restoring funds, “but it’s all still very vague,” said Doug Fraser of Alderman Mary Ann Smith’s office.

Using TIF funds

The city is planning to shift funding for 19 delegate agencies that support industrial retention to local TIFs.  “Given that the city’s in a budget crisis and these delegate agencies do TIF-eligible work” including site preparation and job training, “it makes sense to think about using TIF to fund us,” said Mike Holzer of the LEED Council, which has helped bring thousands of manufacturing jobs to the North River Industrial Corridor.

But not all industrial retention groups are located in TIF districts, and those that are often assist businesses outside the district; and not all of the groups’ activities are eligible for TIF funding, Holzer said.  In addition, he points out that TIFs have 23-year lifespans, and many are approaching expiration.

There are also indications that consideration is being given to funding other delegate agencies through TIF.

“They’d have to do some fancy footwork,” said Jacqueline Leavy, former executive director of Neighborhood Capital Budget Group.  Under state law TIF is not supposed to support operating expenses.

She recalls the effort by nonprofit job training groups to get funding under the TIF Works program (see 7-15-03 Newstip); the city argued funding could only go to training groups that were under contract to employers within a TIF district.  On the other hand, the city takes money off the top of TIFs to pay for salaries in the Department of Community Development.

One option would be hiring local nonprofit community development groups to administer TIFs, she said.

Bares points out that one TIF district in Rogers Park is in its last year of existence.

Shifting funding for neighborhood groups to TIF “would be a very complicated and temporary fix to address a tiny portion of the city’s corporate budget,” said Bares.

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Category: city budget, development, economy, retail

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