NORTH LIBERTY– The bigger the business, the more attention it garners from the city governors, and the more likely it is to garner financial assistance in the form of tax rebates, forgivable grants and other incentives to locate here.
When it comes to small businesses, North Liberty’s role– as with most city governments– has largely been hands-off, until recently.
Now, North Liberty is beginning to reach out to the small business sector in new ways.
It’s not unusual for cities to leave small businesses to themselves, according to David Swenson, associate scientist in the department of economics at Iowa State University. In fact, Swenson said, there are huge discrepancies even in the definition of small business.
“The national measure of small business is either smaller than 1,000 or smaller than 500 employees,” Swenson said. “You know that’s not a small business; that’s big business. For practical purposes, a small business has fewer than 100 employees, and most by far have fewer than 20.”
Swenson said when referring to small business, most people have a conventional understanding that it’s the mom-and-pop shops– and not even the locally-owned franchises of big national chains like McDonalds or Hardees– that are the truly small businesses in a community.
“We get a distorted sense that most jobs in this country are created by small business. But using a restricted definition, that’s not so true. I like to think in terms of the way folks like to talk on Main Street. We’re talking about one establishment where most everyone can identify the owner(s), and they have fewer than 20 employees.”
According to U.S. Census Bureau figures, there were 259 established businesses in North Liberty between 1999-2008 across all sectors of industry and service. Of those, 141 employed between one and four people, 52 had between five and nine employees, and 33 businesses employed between 10 and 19 people.
All of the 53 business start-ups recorded by the City of North Liberty in 2011, through its issuance of zoning compliance certificates (its only means of tracking new businesses in town) would be considered small by any definition.
But there are a significant number of them, and the City of North Liberty has begun using the information generated by those compliance certificates to launch a new “welcome to the community” initiative. After a new business applies for a permit, Mayor Tom Salm visits each establishment and presents the owners with a plaque of recognition and a welcoming handshake. According to Salm, 20 new start-ups were logged in eight months. (SEE LIST BELOW)
“It is part of our family-friendly atmosphere are trying to portray and want to carry on to the businesses here as well,” said Salm. “First, we are happy to have any new business in town and we want them to feel welcome. But also, small businesses are the often ones that struggle most and need encouragement.”
Salm said the initiative has been met with very positive reactions.
“They are actually a little surprised, thrilled to get the plaque and happy that I take time to stop by. I’ve really enjoyed talking to them as well. It’s just about making contact with business owners and letting them know we are grateful to have them in town,” Salm said.
Small business assistance program
In addition to the wall hangings, North Liberty is also taking steps to put financial resources toward its small businesses.
The conversation began after the city developed an economic development strategy in 2011, which outlines criteria intended to guide decisions when granting incentives to larger companies. Literally, a footnote at the end of the draft document noted that the city had received criticism for its lack of programs for small businesses, so council members directed city staff to explore some.
To that end, City Administrator Ryan Heiar talked with staff from the John Pappajohn Entrepreneurial Center (JPEC), Iowa City Area Development (ICAD), the University of Iowa’s Small Business Development Center and members of the North Liberty Development group (NLD) to seek advice on the city’s first Small Business Assistance Program.
That document is expected to be reviewed at a work session 6:30 p.m. on March 27, just before the council’s regular meeting. The public is invited to sit in on the discussion, and comments from the public will be entertained.
The program is designed to create a low-interest, revolving loan procedure and other forms of assistance to small businesses in town, whether new or existing.
NLD, a board of six members that provide consultation, policy support and advocacy for bringing new business into town, has also been advocating on behalf of established North Liberty business owners since 1974. NLD President Dennis Tallman said he expects NLD to have a role in facilitating the new program, intended to provide some gap financing for small businesses.
“This will provide a little supplemental capital, with obviously different requirements than a bank would have,” Tallman said.
That can be significant, noted Realtor Karla Davis of Gateway Access Realty, as banks overall have been tightening the purse strings on small business loans since the economic crisis began.
“If they need bank support for a start-up business, or need to obtain a small business loan, that is difficult to do right now, as the banking industry is being conservative on their lending,” said Davis, “but that’s what a lot of our businesses need right now.”
The program, once adopted, will still have a rigorous application process, noted Heiar.
“An application would be submitted to city staff, who would review it for completeness, and then forward it to the application committee for review and consideration,” Heiar said. “The committee will determine whether more information is needed and ultimately make a recommendation to the city council, which gives the final approval.”
The program will also provide some assistance in developing a business plan.
“As part of the application, the first step will be for an applicant to contact someone at the John Pappajohn Entrepreneurial Center. We will require a business plan, so if they need help writing one, those services will be provided,” Heiar said.
A business plan is a must-have for anyone considering operating his or her own business, said Paul Heath, regional director of the University of Iowa’s Small Business Development Center.
“We always suggest a business plan and budgeting,” said Heath. “We have some tools to help them compare with industrial averages throughout their peers in the country.” The center provides a number of free and confidential services, including help with market research, financial projections, templates for business plans and sample plans. “We critique business plans, discuss taxes, legal structures, personnel relations; the whole gamut,” Heath said. “But we are not allowed to do taxes and we don’t practice law.”
In addition to initial advice, on-going mentorship is huge in creating a successful business, said Matt Zacek, a resident and former city council candidate who previously owned a wireless cell phone company with 11 locations, including a store in North Liberty.
“I would like to see the city offer a mentoring program, where a successful small business owner in North Liberty can sit down with prospective owners, walk them though the ideas they have, give them their two cents’ and be there for them when the new person has questions,” said Zacek.
Troy and Lora Miller, who opened Naomi’s Kitchen in 2004 and expanded with Isaac’s Creamery in 2008, also credit the mentors who gave them great advice at the outset: as an owner, don’t pay yourself too much; put money back into the business, especially at the beginning; take it slowly until you really get your feet on the ground.
However, said Troy Miller, to keep existing businesses not just thriving, but growing and moving forward, North Liberty might need something more.
“North Liberty is getting to the size that it might be fruitful to have a full-time development director, not necessarily to recruit new businesses, but to help new business get off the ground, and support existing businesses to get them plugged in with like-minded people,” said Troy.
Troy has been involved in the Cedar Rapids Vault, a co-working and collaboration concept where entrepreneurs can share office space, bring in various speakers and thrive off each other’s ideas, similar to ICAD’s Jelly sessions and CoWrk Iowa City. Troy would like to see a similar concept come together in North Liberty.
“North Liberty has an opportunity to step up and start building a supportive business and entrepreneurial culture,” he said. “There is such an energetic base here, busy and diverse and focused, but how do you harness that? I don’t think it will come about by accident. In North Liberty, I think it needs a catalyst and a vision behind it.”
Of course, business also needs a chance at financial growth. NLD tries to help foster connections that may lead to new resources, when hosting two informal networking events per year, Tallman noted.
“It’s an opportunity for business owners to learn what other businesses are out there, and try to put them together so there is more business-to-business being done locally,” said Tallman. “If you meet even one or two people who can shift from doing business with a firm in Des Moines to doing it locally, that’s a huge help.”
North Liberty City Council member Chris Hoffman feels the course to continuing vitality also rests– at least in part– with city leaders, whose role in economic development is both far-reaching and short term. Financial incentives, including Tax Increment Financing (TIF) to make tax rebates, are well-used when they serve the overall good of the community.
“Unlike national or sometimes state government, local government owns the decisions it makes,” said Hoffman. “We work with and live in the city of North Liberty and see the impact each day.”
For example, he noted, in the tax levy rates set each year.
“We strive to be as efficient, yet effective, as possible with the current tax rate. And, as every commercial property owner knows, their taxable rate is based upon 100 percent of their assessed value (whereas a residential property is rolled back around 45-50 percent). So, obviously, a business’ success or failure has an impact on the city budget.” Furthermore, keeping a diverse tax base keeps the city’s annual tax revenues more consistent from year to year. “So, it behooves city government to be as prudent with tax receipts as possible,” said Hoffman.
But those decisions should be made with an eye on the big picture, Hoffman believes.
“The local government (city staff, with the help of city council, planning and zoning commission, and other city boards) is most influential and helpful in economic development by having a quality land use plan and zoning plan in place,” said Hoffman. “Over the past 12 months we have conducted thorough public discussions regarding the proper zoning and land use within the city limits. This process allowed us to talk openly about the vision we have for future development.”
When landowners approach the city to ask for rezoning, he noted, the council and Planning and Zoning Commission consider each request in the context of an overall vision for the city.
City Planner Dean Wheatley helps provide that context in North Liberty.
“When developers say we have too much commercial land, if we look at absorption rates, or how much commercial land has been developed in the last decade, then yes, there is a great deal of commercial and it would take a lot of years to be developed out.”
On the other hand, the city’s view is much more long term.
“We are in the business of protecting the viability of the city for years to come,” Wheatley said. “We look at it from the standpoint of what we want the city to look like years down the road.”
And from his city planner’s chair, he knows where North Liberty probably won’t go any time soon.
“I think it’s fair to say for the most part, we don’t want to be another Coralville, with a lot of heavily-subsidized commercial development. But Coralville is setting itself up to be a regional commercial center, and I don’t think North Liberty sees itself there at this point.”
Rather, he said, North Liberty’s decisions have been more oriented toward family values and quality of life.
“We are really pleased with the way things are looking, we have a good distribution of residential types, strong neighborhoods that are going to stay strong, and good patterns developing for commercial land use. I feel really good about North Liberty’s future. It’s going to be, in the long term, a great place.”
Business owners like Lora Miller agree, as long as the city, its business community and its residents have each others’ backs.
“Opportunities come from the idea of working together; we cannot just look out for ourselves anymore,” said Lora. “If we are going to turn our economy around and make our city strong, we have to work together.”
It’s a concept that Karla Davis has seen in action, and wants to see continue here.
“Clearly, this community has been built by local residents, developers and business people,” said Davis. “They have invested in commercial buildings and have provided space for more businesses to locate. Homes and condominiums have been built by local builders. So in order to keep growing commercially, we need to create an environment that encourages new businesses to open. We can only accomplish this if our community continues to support our local businesses.”