Economic Development Doesn’t Need to be a Zero Sum Game – We Need Win-Win’s

Disregarding the propensity for the US Federal Reserve to print new currency through debt issuance, a tenet of economic theory is that money is the basic component of a Zero Sum Game.  Wikipedia defines a Zero Sum Game as “a situation in which a participant’s gain (or loss) […] is exactly balanced by the losses (or gains) of […] other participants.  If the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero”.

So why the mini lesson in economics for my blog this week?

Because I think it is essential that Simsbury elected and appointed officials involved with our Town’s economic development and land use begin to pay more attention to Zero Sum Game concepts.  They must keep these economic dynamics in mind as they apply the Plan of Conservation and Development, the Town Center Charrette, the 2008 Simsbury Town Survey, the Route 10 Corridor Study and the Simsbury Zoning Regulations to development proposals being proposed by ambitious land owners and real estate developers.  They should also be very aware of Town census demographics and psychographics (habits, desires, likes/dislikes, etc).  And this is not just a local town issue but also a regional issue.  Because if we all spent more time tumbling the numbers assessing the probability that proposed developments will be financially successful, we might have less vacant build-out that generates nominal tax dollars and, when not well maintained over the years, contributes to a blighted image and ultimately to reduced tax revenue through a decline in property market valuations.

Let’s discuss some basic demographics.  Here are US Census population numbers for Simsbury and some towns in our area.

Census Year

Now let’s zoom in on Simsbury’s population numbers.

1980-1990 – 3.91% increase

1990-2000 – 5.21% increase

2000-2010 – 1.18% increase

As you peruse the growth of other nearby towns, you will notice more growth than Simsbury but still relatively modest growth numbers in our immediate area.

Why focus on these facts?  Because our town isn’t growing much in population – it’s a fact.  Area towns aren’t growing much either which means little growth in commuter pass-thru traffic or area shopping traffic.  And Simsbury is not currently attracting enough new business growth which means low growth in day-time workers.  Are we happy with these facts?  Some are and some aren’t, but that doesn’t change the reality.  As Daniel Patrick Moynihan famously said, “everyone is entitled to his own opinion, but not his own facts”.

Going back to the Zero Sum Game theme, if our Planning and Zoning officials continue to allow development for duplicative “commodity” type goods and services, then all that new development is doing is poaching consumer purchasing spend from another location in town or from an adjacent town.  This does not produce aggregate growth but does produce winners and losers.  What it does most is create a dilution of a relatively fixed amount of available dollars that consumers spend on a particular good or service.

Let’s discuss some local examples of this Zero Sum Game effect:

• Recently Andy’s Market closed down and the owner stated in a February 13, 2012 Simsbury Patch article that grocery competition was part of his reason for his store’s demise.  He continued stating that “you can buy groceries everywhere from CVS to Job Lot to the Christmas Tree Shop”.  Of course there is also a Super Stop & Shop a few miles north, another Super Stop & Shop a few miles South, Fitzgeralds down the street, Kanes up the street, Big Y in Avon, Shop Rite in Canton, Fresh Market in Avon and numerous specialty food stores within a 5 mile radius.  But as we all know, our households typically have a fairly fixed amount of grocery spend per year.  So as town demographics change (e.g. aging households) and more shopping choices emerge, we are spreading our household grocery spend out among the store options and our spend per store decreases.  So we should not be surprised when winners and losers emerge from this commercial process – nor should we be surprised by more empty buildings.
• About a year ago, Simsbury saw a new Dunkin Donuts built on the South End of town on Hopmeadow Street.  Some people on the South End of Simsbury who never or rarely bought donuts before may buy at the new Dunkin Donuts or some current buyers may increase their “donut spend” a bit for convenience reasons.  But in general because there are so many similar purchase options in the area (facetiously you can buy another donut at another store before you finish eating your first purchased donut), the total donut spend of Simsbury and the surrounds will likely stay relatively constant.  So again, we shouldn’t be surprised by more empty buildings.
• Simsbury’s land use officials are currently contemplating a pre-proposal for a gas station and mini-mart at 155 Hopmeadow Street.  As we know, there are already at least 10 gas stations within just a few miles of this location.  It is obvious that whatever business this potential gas station generates is just going to take away from another nearby station.  Similarly, the mini-mart serves to dilute the market for convenience items in the area as well as taking some of that business from the grocery stores previously mentioned.  So again, we shouldn’t be surprised by more empty buildings.

As a result of the Zero Sum Game dynamic created by these developments, Simsbury will continue to see winners and losers emerge.  While this is inherently normal in our country’s economic system, it is not necessarily the best way to build out our town and may not be favorable for the town to have vacant properties up and down our streets.  Vacancies breed more vacancies which over time breeds economic decline.

I am absolutely a free market guy.  I believe in business competition and survival of the fittest.  As a management consultant, my career is predicated on helping my clients win in a competitive marketplace as well as in zero sum games.

However, in a regulated controlled municipal economic development environment, Simsbury does have the opportunity to try and optimize the Town’s economic climate by facilitating construction of a healthy, sustainable and advantageous mix of business.  While zoning can’t regulate tenants (except for special types of tenants), zoning can regulate usage which, when balanced with other area and regional planning, can regulate business mix.  To better grow Simsbury’s tax base and business mix, Town leaders should focus more on allowing non-dilutive uses and Zero Sum Game dynamics.  More optimal business mixes should include more offices, medical facilities, light manufacturing, engineering and design professionals, insurance and financial services, tourism, etc.  All of these businesses generate greater tax revenues per square foot, lower town expense burden per square foot, and better quality jobs that bring new residents, new commuters and new customers to our local businesses.

From stimulating development and the avoidance of dilutive development, Simsbury could grow more accretively which would be a net positive for all constituents – residents, landowners, developers, retailers, business owners and the Town’s revenue needs.  Our land use officials should be focused more on this.

Feel free to comment on this blog entry or email me at JohnLucker@comcast.net