Over regulation

Local entrepreneurs bite the hand that feeds them

DYPEPSIANA | James Krohe Jr.

Court and Karen Conn are peeved. In the current issue of Compass, the magazine of the libertarian Illinois Policy Institute, they air several gripes about their problems doing business in the capital city. The IPI celebrates the free enterprise system as one of “the greatest force[s] for good ever created in history,” and in the Conns’ view, enterprise in Springfield isn’t nearly free enough. They had things to say about the permitting process (“every department of our business is over-regulated”) and licensing that echo similar complaints about development incentives they made to this paper in 2009 (“Conns speak out: TIF process needs overhaul,” March 18, 2009).

The Conns, of course, are the serial entrepreneurs responsible for making la vie in Springfield a little more bonne by means of Obed & Isaac’s microbrewery and the Inn at 835 on Second Street. I’m inclined to be sympathetic to their plight. I’m a small businessman myself. (I used to live in a town that charged me 75 bucks a year for a license to sit in my room and type.) I have dined at their pub and drunk their beer with pleasure; Springfield could use a couple of hundred more entrepreneurs just like them.

By lending their voices to the IPI’s antiregulatory agenda, the Conns have made themselves part of a larger policy debate about how and to what extent the public has an interest in private business decisions. The Conns have criticized permitting and licensing, two important regulatory matters that I might address at some future date. I here want to look at their experience with City of Springfield development incentives, and the city’s general attitude toward new businesses.

As many readers will remember, the Conns’ adventure began in 2008 when they kidnapped a nice 1850s house to save it from the clutches of the Springfield Clinic with the hope of moving it and converting for commercial use. To accommodate them, the Springfield city council declared the salvage to be an emergency, then unanimously agreed to allow the 19th-century building to be moved from near the clinic on Seventh Street to a lot the Conns owned a block from Lincoln’s home.

It turned out that the house was a foot wider than Seventh Street itself, so city crews “trimmed” street trees along the five-block path (they remain disfigured today) and the piles of severed limbs were hauled away in government trucks by government workers. Said Karen Conn to an SJ-R reporter at the time, “The city has been so cooperative with this project.”

The emergency deal with the city gave the Conns $55,000 in government money for the move and another $60,000 to demolish the house already on its new lot. Aldermen balked, however, at the Conns’ request for $822,000 in TIF funds to restore the gutted house. A subsequent request for a smaller grant just to pay for the foundation work, about a third of the original $822,000 request, was initially denied, but the aldermen paid out more government money to put the home on temporary supports while the matter was being argued; they later approved the smaller grant, and the house was finally installed on Seventh. The Conns complained to IT at the time that their halfmillion in free money came at a price – in this case confusing paperwork and a prevailing-wage requirement that forced them, they said, to overpay tradesmen.

Local government proved more generous than banks, however. The Conns could not raise the funds to make the Maisenbacher House fit for the restaurant/microbrewery they now wanted to put in it, so they bought the Booth-Grunendike house next door. That house was probably still standing only because the City of Springfield in 1991 lent another local entrepreneur government money to rehab it for office use. Then state regulators made the pair (using a phrase of Compass) “jump through more hoops” to get a liquor license because the existing rules did not quite cover the setup that the Conns’ proposed. (It’s complicated.) Said Karen Conn to Compass, “We felt like we were running around in circles.”

The Compass article summarized their experience: “The Conns faced a monumental obstacle to business success. And that obstacle remains today: working with state and local governments.” Obed & Issac’s was only one of dozens, maybe hundreds of enterprises city and state regulators have to midwife every year. The Conns submitted a project that was unusually complicated, and it took city and state officials an unusually long time to find ways to make it work. But they did make it work; the Conns got their building permits and their liquor license and are deservedly making money by the keg – some of which, I am happy to say, is mine.

Much as I hate to dispute the IPI – since they’re Right they must be right! – without the obstacles to business success that government put in the way of the Conns, their microbrewery would never have found the capital to open during a credit contraction. The inefficient administration of needful regulations usually owes to overworked or undertrained staff, not to bad policy. It is crucial to distinguish between the two, or neither can be improved.

Contact James Krohe Jr. at [email protected]