Tale of Two Business Districts: Bay, Shorewood Differ on Public Funding

(This article, originally published on Feb. 5, 2013, was co-written by Whitefish Bay Patch Editor Jeff Rumage and Shorewood Patch Editor Jeff Rumage.)

When El Guapo’s closed its doors in late 2010, it seemed to spell trouble for East Silver Spring Drive.

With the loss of Silver Spring’s only sit-down restaurant, Whitefish Bay continued to feel the effects of a lingering recession, as old standbys like Les Moise, Elements East and Zita left town. In a two-year period, Silver Spring continued to see turnover — with nine businesses leaving and another 14 opening their doors.

However, in the past month, Whitefish Bay seems to be on the verge of a revival with news of two new food options — a tapas bar and The Bay restaurant in the old El Guapo’s space. In addition, Erik’s Bike Shop plans to fill the huge storefront vacated by Les Moise last year.

While awaiting the spring bloom of new businesses, Whitefish Bay residents can’t help but look enviously over the Shorewood border and see the explosion of business development that has occurred on North Oakland Avenue over the past two years.

Over that time span, Shorewood has added nearly 30 new businesses like Three Lions Pub, Miss Cupcake and NaNa Asian Fusion, while losing just two. It’s no coincidence two new apartment and retail developments are sprouting up on Oakland Avenue just years after the Cornerstone opened its doors. 

A juxtaposition of the business districts tells the tale about differing business recruitment philosophies in the neighboring villages. 

Whitefish Bay’s conservative approach

While Shorewood has been very aggressive in spending money to recruit new businesses — about $550,000, not including loans or grants authorized for remodeling or renovation projects or larger developments — Whitefish Bay has decided to be more conservative with its expenses and more modest in its growth.

While there are certainly cultural and geographical differences between the villages, John Stuhlmacher, chairman of the Whitefish Bay Business Improvement District, said the two communities’ philosophical difference in business development is just as stark.

"I think you have to let the free market work," Stuhlmacher said of Silver Spring Drive. "Shorewood spends a lot more money to do a lot more projects. Could Whitefish Bay do that? Yes, it could, but we're not really doing that right now. I don't think that's necessarily the best way."

Whitefish Bay is at a crossroads in deciding whether it wants to lure businesses with grants, or take a more free-market approach. Starting with a pot of $200,000 in 2009, Whitefish Bay’s retail incentive grant program recently ran dry with two big grants to Erik’s Bike Shop and The Bay restaurant.

The Whitefish Bay Business Improvement Board on Friday voted to reauthorize another $100,000 in grants over the next five years. The Village Board will soon have the final say on the matter.

In Whitefish Bay, applicants are eligible to receive $20 per square foot, for a maximum payment of $50,000.

Simon Oliver, a men's clothing store, received $10,000 in October 2009, but went out of business in July 2012. The board allocated $25,000 to City Market in December 2009, and the cafe opened with extensive renovations in July 2011. Minoan Intimate Apparel received $10,000 in June 2010. Three Wishes received $12,500 in August 2010.

Late last year, Erik's Bike Shop received $42,500 to open in the former Les Moise storefront, with plans to open as soon as April. Two restaurateurs received $42,500 to open a restaurant called The Bay in the former El Guapo's space, which also plans to open in April.

Grants are 'a great incentive'

"I think it's a great incentive," said Paul Berlin, one of two business partners behind The Bay. "It assisted our business in allowing us to upgrade in the way that we want to run our business....it's allowing us to do additional things that may not have worked if we hadn't had this money." 

The village provides the total $200,000 in grant funds to draw from as needed. Fifty percent of the fund is paid through the Silver Spring tax incremental finance district, and the other 50 percent is funded through special assessments on BID members. 

To qualify for incentive grants, a business must be from outside the business district, must be a desired type of business use and has to prove that it would not locate on Silver Spring if not for the financial assistance. 

Stuhlmacher said the BID has been diligent in looking at past financial records and determining if the business is capable of sustaining itself long-term.

"The biggest question we ask ourselves is whether the business is sustainable once the free money runs out," he said. "It's not just about getting businesses to fill these spaces, it's about getting businesses that will last to fill theses spaces."

The landlords are probably the biggest piece of the business recruitment puzzle. Several potential businesses have cited high rents at the Fox Bay building, which recently lost Hounds Around Town to the allure of cheaper rent on the other side of the street. 

Some landlords have been willing to provide certain concessions on rent or utilities for new tenants. To qualify for a retail incentive grant, those concessions are mandatory.

“The BID’s philosophy is, this is a three-partner deal,” Stuhlmacher said. “We’re only one partner. The tenant and landlord are the others. We should not have a significant burden over any of the others.”

While the Whitefish Bay incentive grants have caught a few big fish, there is a debate on whether it is still a lure or just the necessary price of doing business. Shorewood and Glendale both have retail incentive grant programs, so some businesses have learned to expect a similar program when they come to Whitefish Bay.

"When it first came out, it was a good carrot," Stuhlmacher said. "Now there's a lot more people that do it, so it doesn't make us stand out as much as it used to."

Shorewood greases ‘the economic engine’

With the help of village assistance to the tune of $929,000 in public monies, the Cornerstone apartment and retail development opened in Shorewood in late December 2010. Within a few months, a new bar, Three Lions Pub, and tasting room, Big Bay Brewing Company, moved in across the street.

When you have a catalytic project like the Cornerstone open, it enables a municipality to back off a bit and let things happen, Village Manager Chris Swartz explained.

“Look what happened across the street…we didn’t expect that, it wasn’t planned,” Swartz said of Three Lions, Big Bay Brewing and NaNa Asian Fusion moving into Shorewood’s so-called Kensington Square. “You’ve oiled it and now people are going to want to invest there. We call it oiling the wheels of the economic engine.”

And though the development is still in construction, Swartz said Camp Bar has moved in across from the Lighthorse 4041 (Mandel Group project) — which received financial assistance from Shorewood via a $7.6 million grant and loan package — because the owner sees potential. Swartz said Shorewood has since backed off a bit from offering business grants and loans.

“We’re still doing some loans, but not as many as we once were, because people are now investing without that,” he said. “You’ll always going to need a little bit here and there.”

Shorewood’s different approach to luring businesses dates back to 1995, when village officials began to see a trend in declining value in commercial property, mainly empty storefronts and resale shops, said Swartz.

That’s when the village created a special taxing district to spur development and did some “pretty aggressive things,” Swartz added. Developments including the current Stone Creek, Metropolitan and Shorewest buildings sprouted up on Oakland Avenue.

Then in 2005, there was a change of leadership on the village’s Community Development Authority, in the village manager’s office and shifting of members on the Village Board. That’s when the approach to developing the business district was again re-evaluated.

It meant using new tools including façade improvements programs, expanding the taxing district, imposing design guidelines for buildings and starting a business loan program.

“The concept was creating public space…liven up the street, so when you walk to one end to the other, there’s somewhere to walk to and there aren’t big gaps, and we still have some gaps we are working to fill in.”

In 2009, Shorewood granted its first business loan to attorney Mark Sweet to renovate his new East Capitol Drive law office to the tune of $100,000. The village would later give nearly $200,000 to assist men’s clothing store Harley’s moving down North Oakland Avenue. 

When the Cornerstone development was being vetted, the village agreed to provide more than $400,000 in financial assistance to several businesses that would fill retail space including North Star American Bistro, Thief Wine, Boutique B’Lou and Alterra. Big Bay Brewing was loaned $25,000 when it moved into Shorewood. And  to help renovate its space while the Lighthorse 4041 is under construction. 

However, an unpaid loan has drummed up criticism of Shorewood’s loan program. Open Book opened in November 2010, but, after owners said it was clear it wasn’t going to pan out, closed after just five months.

Yes, Shorewood has loaned out hundreds of thousands of dollars to spur development, but businesses are now flocking to Shorewood.

"We still have a few vacancies in some important storefronts, but the market in Shorewood is red hot and people are interested," Shorewood BID Director Jim Plaisted said.

And in exchange for that investment, Swartz said Shorewood has "created a brand." He said the village’s key to revitalizing the business district goes beyond business development but also relies on a well-executed marketing and branding plan.

“We created a brand, and part of that brand was a vibrant downtown, so we’ve got to deliver on that,” Swartz said. “Just like you have to deliver a product in the private sector, we have to deliver a product so people want to live here.”

Benefits to both approaches

Even though the communities have different philosophies, the real estate community views both corridors as high-demand, attractive areas with equally strong demographics, said Peter Glaser, first vice president of CBRE's Milwaukee office who specializes in retail real estate.

Another similarity: both Silver Spring and Oakland Avenue have dense downtown districts that are receiving new residential developments. Shorewood has LightHorse 4041, Ravenna and The Cornerstone, and Whitefish Bay may soon see a on the north side of Silver Spring businesses. In general, Glaser said new residential developments draw more businesses to a commercial district.

A North Shore resident himself, Glaser has helped businesses locate in both Shorewood and Whitefish Bay, and he said both communities have a good reputation in the development communities.

"It’s positive that both communities have seen new businesses come in despite a down commercial real estate market," he said. "I think it’s a strength to the community leaders — both the municipal leaders and business leaders — in how pro-active they’ve been."

As for the power of public assistance, Glaser said businesses are always open to the help. While bigger companies like Dunkin' Donuts and Penzey's Spices chose not to pursue the money, Glaser said the smaller, independent boutique shops may see public financing as an edge in deciding between two similar communities. 

But while grants are always welcome, public financing may lose its potency as more banks start to make commercial real estate loans again.

"I think with the market we’ve gone through over the last three or four years, it's been important to have those incentives in place, but that's starting to change," Glaser said.