Why Should You Care If the Business Down the Street Closes?

Let’s say there’s a restaurant down the street from your house.

You’ve never eaten there.

Maybe it’s not your kind of food. Maybe you think it’s too expensive. Maybe you’ve driven past it a hundred times and never given it much thought.

Then one day it closes.

Why should you care?

You didn’t lose your favorite restaurant. You didn’t lose your job. Your house is still there. The roads still work. The sheriff’s department still answers the phone.

From your perspective, very little changed.

Except something did.

Another business that helped support your community’s tax base stopped doing business.

And eventually, somebody has to make up the difference.

Somebody Has to Pay for the Community

Local government isn’t free.

Roads have to be maintained. Police officers, firefighters, and emergency personnel have to be paid. Schools need funding. Parks need maintenance. Trash has to be collected. Infrastructure has to be built and repaired.

The list goes on.

There are really only two sides to that equation.

There is what a community spends, and there is the revenue available to pay for it.

We spend plenty of time arguing about the first one.

I don’t think we spend nearly enough time talking about the second.

Local governments collect revenue from a variety of sources. Property taxes are obviously a big one, but they’re far from the only one. Depending on the locality, revenue can also come from sales taxes, meals taxes, lodging taxes, business taxes, admissions taxes, fees, and other sources.

Every dollar generated from one of those sources is a dollar that doesn’t have to be generated somewhere else.

That’s where economic development begins to matter to someone who has never owned a business and never intends to.

That Restaurant Is Doing More Than Serving Dinner

Go back to our restaurant.

Every time someone sits down and buys a meal, economic activity occurs.

The restaurant purchases products and services. It employs people. It occupies commercial real estate. Its customers generate tax revenue through their purchases.

And those customers may do something else while they’re in the area.

They may stop at a store.

They may get gas.

They may grab a coffee.

They may visit another business.

The restaurant’s value to the community isn’t limited to whether you personally like what’s on the menu.

It is part of a much larger economic system.

Now multiply that by dozens, hundreds or thousands of businesses.

Suddenly the health of the business community becomes very relevant to the people who live there.

What Happens When Businesses Disappear?

Imagine a community with 1,000 businesses.

Now imagine that over a period of years it loses 100 of them and doesn’t replace them.

The community still has roads.

It still has schools.

It still needs law enforcement.

It still needs fire and rescue services.

It still has parks, buildings, and infrastructure to maintain.

Many of those costs don’t disappear just because businesses do.

What disappeared was some of the economic activity helping support them.

That’s the part of vacant storefronts we don’t always see.

We see the empty window.

We don’t see the lost transactions that used to happen behind it.

And while the closing of one small business isn’t going to suddenly cause everyone’s property-tax bill to increase, the cumulative health of a local economy absolutely matters to the tax base supporting the community.

A shrinking tax base eventually creates choices.

Cut services.

Delay investments.

Find new revenue.

Or place more of the burden on the remaining taxpayers.

None of those choices are particularly attractive.

Economic Development Isn’t Just About Businesses

This is why I’ve never particularly liked the idea that economic development is simply about “helping businesses.”

Businesses certainly benefit from it.

But that isn’t the ultimate goal.

The goal is creating enough economic activity to support the community we want to have.

Think about two hypothetical communities.

Both have the same number of residents and roughly the same cost of providing government services.

In one, commercial buildings are occupied. Restaurants are busy. Hotels have guests. Retailers are making sales. Employers are hiring. Visitors are spending money.

In the other, storefronts are empty. Hotels struggle. Commercial properties deteriorate. Businesses close faster than new ones open.

Which community would you rather be a taxpayer in?

That’s why economic development matters.

A strong commercial economy broadens the base supporting the community.

“Shop Local” Is Only Part of the Answer

This is also why I think “shop local” is a good sentiment but an incomplete economic-development strategy.

Residents can absolutely support their local economy by spending money at local businesses.

But there is only so much money already inside a community.

If I normally spend $50 at Business A and instead spend it at Business B, I’ve helped Business B, but I haven’t brought another $50 into the local economy.

We’ve mostly moved existing spending around.

Growing an economy requires something more.

We need to create new economic activity.

We need businesses selling outside the community.

We need employers bringing payroll into the community.

We need visitors spending money here.

We need investment.

We need entrepreneurs creating things people want to buy.

And yes, we need residents choosing to spend locally when local businesses provide the products, services, and experiences they want.

Economic development is ultimately about making that entire system larger and stronger.

More Business Doesn’t Automatically Mean Lower Taxes

There is an important distinction here.

Opening another business doesn’t mean your property-tax bill automatically goes down.

Government spending matters too. Tax rates are policy decisions. Different revenues have different rules governing how they can be used.

There isn’t a simple equation where ten new restaurants equal a particular reduction in your tax bill.

But there is a larger principle that absolutely matters.

A community with a growing economy has more options than one with a shrinking economy.

If commercial activity generates more revenue, local government has more resources available before looking elsewhere for that revenue.

If the commercial tax base deteriorates while the cost of providing services continues to rise, those options become much more limited.

Economic development isn’t a guarantee of lower taxes.

It is one of the tools that can help prevent an increasing share of government costs from falling on residents and their property.

That’s an important difference.

You Don’t Have to Love Every Business

There will always be businesses you don’t use.

Restaurants you don’t like.

Stores that don’t sell anything you want.

Hotels you’ll probably never stay in because you already live here.

That’s okay.

You don’t have to shop at every business to recognize the value of having a healthy business community.

You don’t have to stay in the hotel to appreciate the visitor who does.

You don’t have to eat at the restaurant to appreciate the customer who buys dinner there.

You don’t even have to understand everything an employer does to appreciate the jobs and economic activity it creates.

Economic development isn’t about asking residents to become cheerleaders for every business that opens.

It’s about recognizing that all of us have a stake in the economic health of the place we call home.

So the next time you drive past a busy restaurant, a full hotel parking lot or a store you’ve never stepped inside, don’t assume it has nothing to do with you.

And when a business down the street closes, don’t assume that has nothing to do with you either.

You don’t have to shop at every local business.

You don’t have to eat at every restaurant.

You don’t have to stay in the hotels.

But you should probably hope somebody does.

Because every time they open their wallet, they’re helping support the community you call home.