First the Chicago suburbs put the clamps on new bank branches, and now the city is trying to do the same.
The Chicago City Council is expected Thursday to approve an ordinance sponsored by Alderman Vi Daley, D-43d Ward, that would prohibit bank branches from being built within 600 feet of one another along 30 specially designated pedestrian streets.
Ms. Daley said she was approached several months ago by a group of merchants in her ward who were concerned about the mushrooming number of branches in the city. The merchants complained that the branches were driving out stores by bidding up rents and property prices.
In an interview Wednesday, she said that with the city trying to make its neighborhoods more inviting, it is important for the council to take action.
"Why would anyone want to come to our community because we have all these banks here and all the little shops are disappearing?" Ms. Daley said.
Viewed as one the nation's most attractive banking markets, the Chicago area has been a hotbed of branch-building in recent years. The number of branches in the metropolitan region increased by more than 7% between June 30, 2003 and June 30, 2004, to nearly 2,750, according to the Federal Deposit Insurance Corp. Banks - both national and local ones - have proposed building as many as 400 more over the next few years.
But the activity has created a backlash of sorts from retailers, and some local governments have responded by taking steps to limit branch-building.
In Buffalo Grove, Ill., for example, the village board approved an ordinance in August that requires any business that wants a drive-through to get a special-use zoning permit. Also, the village - concerned that banks do not generate much tax revenue - is considering creating a district along two streets where a certain percentage of the businesses would have to be retail ones.
Other Chicago suburbs, such as Lake Forest, Batavia, Plainfield, and Highland Park, also have adopted ordinances meant to control branch expansion.
Ms. Daley initially wrote an ordinance that would have prevented bank branches from being built within 660 feet of one another and capped their size at 2,500 square feet. But banks complained that the proposal was too restrictive, and several other aldermen protested that it would discourage banks from moving into their communities, she said.
"The first one, I was doing citywide. I found out a lot of aldermen would love to have any kind of business, bank or otherwise, in their ward, so it wasn't fair," Ms. Daley said.
The version likely to be passed next week changed the minimum distance between branches to 600 feet - about the length of a city block, Ms. Daley said. The size restriction has been dropped, and the ordinance would only apply to streets designated as pedestrian/retail streets. Also branches in grocery stores or other retail outlets, or in the rear of a building or on a second floor, would not be subject to the ordinance.
The pedestrian street designation was created when the city enacted a new zoning code Nov. 1. It applies to streets that have a high concentration of stores and restaurants with entrances on the sidewalk and storefront windows. The goal of the designation is to make parts of Chicago more pedestrian-friendly.
A spokeswoman for the Illinois Bankers Association said it would work with Ms. Daley to make sure the industry's needs were met along with those of the city. However, the spokeswoman would not discuss any specifics of the ordinance until after the council votes.
Tom Kelly, a spokesman for J.P. Morgan Chase & Co., said Bank One Corp. (which JPMorgan Chase bought this year) was part of the negotiations. This year Bank One has built 60 branches in the Chicago area.
The process of fashioning the ordinance was a good example of banks' speaking up for themselves and helping to write a law that would benefit the city and the industry, he said.
"While we would prefer that there are no restrictions, we think this is a much better version than when it started," Mr. Kelly said.
