Not In My Backyard: Zoning Restrictions Crack Down on Financial Institutions
Cities and towns typically fall over themselves seeking to attract new businesses. But some are now taking down the welcome sign when it comes to branches of financial institutions.
The trend has been most pronounced in the suburbs of Chicago, where Buffalo Grove has become the latest to join a string of communities to ban financial institutions from building or opening new branches within the city limits. The reason: branches don't generate sales taxes for the cities.
Members of The Credit Union Journal's panel of facilities experts said they have seen similar actions taking place across the United States (see related story pages 12 and 13).
"Yes, we are seeing an increase in zoning restrictions all over the country as communities try to balance the need for their growth with the challenges associated with new development," said Tom Lombardo of HBE Financial Facilities, St. Louis. "Typically, restrictions tend to be greater in high-growth markets, and less so in slower-growth communities."
While the primary concern tends to be about drive-up windows at fast-food restaurants, noted Bob Saunders of RWSaunders, Pittsburgh, these zoning restrictions can hamper credit union branching, but there are usually ways to get around some of these issues.
"The municipalities that object are not necessarily objecting to a financial institution. They are objecting to the drive-ups, which typically require a conditional use permit," said Ralph LaMacchia of LaMacchia Group, Milwaukee, Wis. "Seemingly, they may object to the traffic impact to the area, i.e. hundreds of cars a day, headlights shining on residences, etc. How we overcome this type of conflict is from traffic impact studies to the city's streets. We identify the long-term plans for the area, past problems, Department of Transportation plans, bypasses, and traffic lights. We offer solutions to the problem from the onset and before we purchase the site."
Not Simply Drive-up Lanes
But sometimes, it's not simply an issue of the drive-up lanes, and it really is specific to financial institutions. In Naperville, Ill., the Illinois Credit Union League officials said that recent moratoriums on new financial branches has had little impact on credit unions in the state-so far.
But, said William R. Wille, ICUL public relations specialist, "We will continue to keep an eye on this issue and evaluate its possible impact on credit unions.''
The Village Board of Buffalo Grove unanimously approved a six-month moratorium on new branches, time that will be spent discussing whether it should change its zoning ordinances.
Board trustees expressed concern about the "over development of banks and other financial institutions'' and said they would rather see retail businesses that generate tax revenues for the village occupy its remaining commercial space.
As it stands, Buffalo Grove has 22 financial institution branches, none of which are credit unions, according to a spokeswoman at the Buffalo Grove Village board office.
In 2003, Lake Forest, Ill., a community 30 miles north of Chicago, passed a moratorium on opening any "non-retail" establishments in its central business district. Since then, about a dozen Chicago suburbs have explored ways to stop bank expansion in their communities.
Jim Roche, CEO of Premier Credit Union, said his CU opened a branch office in Highland Park not long before its community leaders placed restrictions on "new non-sales-tax-generating'' uses in street-level spaces downtown.
The community-chartered PCU with $97-million in assets is the only credit union to serve Highland Park. Lake Forest reportedly has only one credit union as well. It's staff could not be reached for comment.
CU In The Suburbs?
Roche's reasoning for such a small CU representation in these particular suburbs: "These are very rich communities, not the kind of communities that credit unions generally reach out to serve.'' He noted, for example, that Premier's Highland Park branch recently handled an $85,000 car loan.
Roche said Premier acquired the branch when its previous owner merged with another CU in a neighboring community.
"We bought the loans and the physical equipment but not the liability,'' he said. "They relinquished their community charter and subsequently merged with another credit union.''
Roche said he understands the concerns of community leaders that imposed the moratoriums.
It's A Sales Tax Issue
"It's a sales tax issue,'' he said. "The banks don't generate sales tax and these communities are concerned. They have a number of financial institutions there already and they are taking up prime real estate.''
Roche pointed to Washington Mutual, which has aggressively moved into this market with plans to open 78 locations in the Chicago area in one year, 44 of them in a single day.
That said, Roche has no plans to leave Highland Park."We have to grow into what Premier has invested,'' he said. "We plan to be here for a number of years.''
While some communities are banning financial branches outright, others have established informal policies that have denied special-use permits to developers proposing new banks along prime retail stretches. Bank One has filed a lawsuit against one of those suburbs, Plainfield, Ill., about 35 miles southwest of Chicago, for rejecting its bid to open a branch there.
Washington Mutual ran into similar opposition when it tried to build a thrift branch in the first floor of an office building in Elmhurst. The suburb that is 22 miles west of downtown Chicago has an ordinance that prohibits retailers that don't generate sales tax from setting up business in projects partially funded by the city. A separate request by Washington Mutual to participate in a public-private development in Geneva-40 miles west of Chicago-was also rejected.