The real retail issues

analysis by Mike Kroll

While economics always seems to creep into every Galesburg political issue, all too often what is left out is an appreciation of the lessons of history and, that most precious commodity, common sense. Spurring this discussion is the apparently sudden interest in retail expansion taking place currently in Galesburg. Let us step back and apply a bit of analysis to the dilemma as I evaluate some choices facing the Galesburg City Council.

The controversy of the day concerns the proposal for a new shopping center (Galesburg Commons) by the First Rockford Group to be located in the currently empty field immediately north of Route 34 and south of the Lincolnshire subdivision. It should come as no surprise that the residents of that relatively upscale subdivision are opposed to the proposal; this is Galesburg where NIMBY (Not In My Back Yard) is a second language. Just as those neighboring the location of the Horne Properties proposed shopping center on North Seminary Street between Carl Sandburg Drive and Route 34 similarly objected before that project won City Council approval. But this proposed project is simply a symptom of a much bigger question: what is the proper role of retail sales in Galesburg's economic development picture?

Recent years have seen the closure of a number of medium- and large-sized industrial employers (Briggs, Butler, Maytag, National Seal) as well as significant cutbacks at others (notably Gates Rubber). Many in our community have forecast nothing but doom and gloom in the wake of these admittedly disconcerting events. The evidence suggests that Galesburg has been hurt far less than most believe.

While Knox County unemployment is slightly higher than the state average, it didn't skyrocket as expected. Most of the best workers who lost their jobs reacted quickly to find other work — frequently out of town — but most remained Galesburg residents. Many found jobs even before their plant closed. They are now working for good wages at the BNSF railroad or at Deere or Caterpillar.

The city's population hasn't dropped like a stone as predicted. While some families left in search of better employment prospects, Galesburg once again became a magnet for retirees as well as residents of rural Knox County. It is my prediction that when the next census is done, Galesburg's city population will have fallen only slightly while that of Knox County as a whole will drop as much as six or seven percent. The biggest losers have been the smaller towns and unincorporated areas of Knox County and Warren County as a whole.

Most of us have long since given up dreams of one or more large manufacturing plants coming to Galesburg to replace the lost industry. That just isn't going to happen. The self-delusion that has taken over many is that a bunch of smaller manufacturing or “logistics” operations will soon arrive instead. The problem with this vision is that we have literally had decades of “effort” by local economic development groups like the former EDC or Galesburg 2000 or the current Galesburg Regional Economic Development Association without a single attraction success (accounting for 100 or more jobs). We need another plan. We need a broader definition of economic development and we need some home-grown successes.

This is where the current surge in proposed retail activity gains the mindset of many in Galesburg, including most of the city council. Many believe that there are lots and lots of talented and motivated potential workers unemployed and looking for anything with a paycheck. This viewpoint sees the prospect of new retail jobs as better than no new jobs at all even if the wages are a far cry from those once available with local industries and typically offer little or no benefits. This is clearly the mindset of GREDA officials who boast of a large, able workforce willing to work cheap as one of Galesburg's benefits to companies considering relocating here.

The fact is this workforce-in-waiting simply doesn't exist. Those who lost good jobs fall into four categories. The best educated, most energetic and talented have— by and large — already found new jobs elsewhere. A portion of these folks were hired by the BNSF and are doing better than ever (after they adjust to the irregular hours). Some of these folks now commute daily to John Deere or Caterpillar or Komatsu or other plants in Peoria or the Quad Cities. Others have sadly moved away from Galesburg.

A second group of workers was older with their best working years behind them but with grown kids, relatively good health and savings for retirement just a few years off they have adjusted their expectations and retired a bit early. Many of these people might be happy to take on a retail job for a few extra bucks to help maintain a comfortable lifestyle but they aren't about to chase after a new job or career at this point in their lives.

A third group is younger but not as well-educated as needed today. Time once was where even without a high school diploma one could earn a comfortable living in a local factory, raise some kids and retire in a middle-class lifestyle. They probably still have children at home, some are single parents and most have little savings. Not only are there no longer substitute jobs for these people in Galesburg, those jobs basically don't exist anywhere any longer. In this same group are those workers who always had hoped to get out of factory work but couldn’t afford to quit their job to go to school. These are the workers best situated to benefit from the subsidized educational programs offered by Carl Sandburg College — if they are up to the academic rigors and sufficiently motivated and if appropriate jobs exist by the time the training and funding are completed. The two-year time period is running out now for some of those in this group. For many who complete the training, too few jobs exist locally to capitalize without relocating. Another commuter is born.

The final group are those remaining out of work or working at jobs paying far less than their previous employer. They never really broadened their employment search sufficiently or suffered by comparison to other available workers and couldn't land a job with BNSF or Deere or Caterpillar. Most of these people aren't close to retirement age and either weren't sufficiently motivated or prepared to take advantage of training opportunities. Many would be happy to get a retail job as their options have narrowed greatly. Fortunately, the cost of living in Galesburg is comparatively attractive, particularly housing costs, and these compose much of the potential workforce anxiously awaiting a GREDA success.

A fact not uttered in polite conversation around GREDA is that if they ever are successful in bringing an employer with more than dozens of jobs it will almost surely be necessary to import workers from outside of Galesburg and Knox County. The attractive and readily available workforce they boast about is a myth unless you truly broaden to a regional view of a 50-mile or more radius around Galesburg. Interestingly this is the reverse of what many workers and shoppers from Galesburg already do, they commute to Peoria or the Quad Cities to work or shop right now.

A sizable amount of Galesburg's payroll originates outside of town and a good portion of our shopping dollars are spent out of town. This is exactly the kind of analysis that has led developers to look seriously at Galesburg for retail development. While there are many in town who fear that there aren't sufficient consumer dollars to support these proposed developments, the ratio of sales tax generated per capita in Galesburg is well below state and national averages. In addition, the recent surge in gas prices makes shopping locally more attractive. That means if a retailer can capture the money currently spent in Peoria or the Quad Cities by Galesburg shoppers, they expect to do just fine. In a nutshell, that accounts for the interest of Horne Properties and First Rockford Group.

That said, both are counting on the same major anchor, a Wal-Mart Supercenter, and only one is going to win that battle. Most probably Horne will be the victor. The Horne development makes much more sense and from the city officials' perspective must be more attractive. As was pointed out during the Plan Commission meeting, the Galesburg city council can literally control where the new Wal-Mart Supercenter goes by their decision on pre-annexation conditions for the First Rockford property. Without Wal-Mart the First Rockford plan seems a very long shot despite the company’s claims.

While most of the neighbors’ objections aren't worth the space to rebut here, the single entrance/exit should be a major (and apparently uncorrectable) deficiency in the First Rockford plan. The extremely limited access to this parcel combined with an already bad intersection has to be seen as a major stumbling block to retail development of this parcel. Interestingly, I have been told that over the last few years a number of retail projects have been quietly proposed for this space but all fell through when the IDOT refused to approve the traffic plan. One can only guess what has motivated IDOT to suddenly do an about-face and indicate their willingness to approve the First Rockford plan.

The often raised issue of “buffer” zones has really become a joke. History has shown that there is no such thing as an acceptable buffer to those who object to development. The most commonly cited buffer alternatives are multi-family or office zoning yet these seldom win over the objectors in practice. In the case of the parcel in the First Rockford Group proposal, were there a current need for either offices or apartments in Galesburg I am absolutely sure that the residents of Lincolnshire would still object to placement next to their homes. Personally, I think the best use of this property would probably be apartments, if there were a demonstrated need for such a development.

Another factor that is never mentioned but is key to the economic realities of these developments is the cost of land. While most would assume that affordable land would be a Galesburg advantage, that is hardly the case. The owners of much of the vacant large parcels in and around Galesburg want a premium price for the land. It would be very difficult to make the numbers work for a typical single-family residential development given the purchase price of the land involved. Any such homes would be compelled to sell for a substantial premium price. Furthermore, given the rental market pricing in Galesburg, most apartment construction would be financially untenable here even if it were welcomed by the current residents of Lincolnshire.

The cost of land has also been an issue in attracting industrial development. It wasn’t a small factor in GREDA’s purchase of the acreage for their Logistics Park even though they had no serious prospects. They had been burned by greedy landowners before and wanted to lock in a price they could offer a prospective business.

Perhaps the time has come where we must begin to consider retail development and the sales tax it generates as a component of economic development. From a revenue standpoint, there are few other new sources of city tax money short of raising property taxes. For most Galesburg shoppers the added revenue gleaned from new retail would not amount to increased taxation. Rather it would be reclaiming sales tax dollars currently lost to Peoria or the Quad Cities. In this way, such new retail development is a good thing even if it offers only comparatively low wage jobs. Ironically, it has been demonstrated elsewhere that an influx of competing retail or fast food vendors frequently results in upward pressure on wages as they compete for the limited number of good employees. Each of the stores and restaurants will also have at least one or two management employees with decent wages and benefits.

The downside is that the economic vitality and future of our community has to depend also on the creation of new good-paying jobs that won't occur in any substantial number with retail development. Without a diverse range of employment opportunities there will be little reason for the best of our children to return to Galesburg as adults to raise their own families. Galesburg may manage to survive on retail and retirees but we can only thrive if we do much better.