Nearly a dozen studies have shown that a greater fraction of every dollar you spend stays in the community when it is spent at a local, rather than a national, store. The owner of a local hardware store is more likely than the manager of “Hardware Is Us” to buy local products and services, use local advertising and printing, hire local accountants and lawyers, and keep profits here at home. Money spent in the local economy recirculates and is spent again, enriching Bangor with another cycle of buying and selling. This is the “multiplier effect.”
When money is spent at a chain store owned from “away,” it evaporates from our community like the early morning haze on the Penobscot River. To be sure, some remains for the salaries of the local sales force, but precious little. A study of two bookstores in Austin, Texas, found that 45% of the expenditures of a locally owned bookstore stayed in the local economy while only 13% of the money generated by the national store stayed close to home. Roughly speaking, every dollar spent at a locally owned store contributes three times more to the local economy—three times more income, three times more jobs, and three times more tax benefits.
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These multiplier benefits diminish if the goods and services from a local store are more expensive than those from a nonlocal store. Some assume that this is usually the case. In fact, however, competitive local businesses account for more than half of the U.S. economy. Here in Maine, annual surveys of prescription drug prices have consistently found that independent pharmacies have lower prices than chain stores.
There are a number of ways you can ensure that your money stays in Bangor and supports local jobs—perhaps even your own. You can shop at supermarkets that carry local farm goods and buy local produce at farmers’ markets or roadside stands during the summer. Locally owned and operated clothing and specialty shops downtown and scattered around the region carry full lines of merchandise. Consider reallocating more of your charitable giving to local organizations that not only focus on local needs but also employ your neighbors.
Does a local bank issue your credit card? Retail sales in the Bangor Mall area approach $1 billion annually. Assuming that 50% of these purchases are made with a credit card (probably a low figure) and a 2% merchant fee is charged, the use of credit cards from local banks that process their transactions here would keep over $20 million in our economy. Imagine the impact if all of our mortgages were with local banks—not to even mention lines of credit against those mortgages. Rather then sending your check to New York or South Dakota, the money would stay here in our community.
For investors, how about setting aside a portion of your assets to buy stocks or bonds in local companies? Or how about tax exempt bonds issued by the state of Maine or our towns and cities? On the energy front, why couldn’t some of the capital required to develop sources of renewable energy be raised locally? Aroostook County is working to produce the additives used in biodiesel, a product that can heat our homes and fuel our vehicles. By investing in Aroostook, we can support the president’s call to reduce our reliance on foreign oil and keep part of our energy payments in-state—while contributing to cleaner air.
City Hall in Bangor wrestles with its own spending issues. After years of deliberation and study, the city has decided to build a 500 car parking garage at our airport. This is a big undertaking, costing $10–$12 million to be financed from airport revenues (not taxes).
We recently received several responses to a request for proposals to plan and design this project. One was from the major engineering firm in the U.S. specializing in parking garages. They’ve written a 500 page textbook on the subject, have designed a 12,000 (!!) car garage in Winston-Salem, and their expertise is beyond question. They have already made all their mistakes elsewhere. Unquestionably, they could produce a quality product for Bangor.
The other proposal was from a local engineering firm employing 35 people who live in our area—people who pay taxes, buy groceries, and go to the movies here. This firm has done a great deal of work for the city, its principals are well known to us, and their initial bid was similar. In 1990, they designed the current downtown parking garage, a successful structure although not without some problems.
This posed a dilemma for the city council: Should we hire greater expertise from away or keep our financial resources local? After a long and spirited discussion, we eventually chose the local engineering firm. We believe that it can produce a quality product, and we want to keep your tax money in our community.
In some ways, this was an easy decision. The bids were close and it was reasonable to look at other factors. But what if the bids were farther apart? Should the city give preference to local business?
The city’s current bidding process is careful, straightforward, and scrupulously honest. When the city needs something, our purchasing office sends out a request with exact specifications, sealed bids are opened in public on a specified date, and the lowest bid gets the business. This helps ensure that tax dollars are used to maximum advantage and allows little room for chicanery, nepotism, or corruption. Bangor does not have the municipal scandals that seem to plague some other cities.
But there are other approaches that work well while prioritizing local purchasing. San Francisco gives its business to a local firm if its bid is within 5% of that of an outside firm. Two dozen other cities have similar local preferences. The rationale is that they prefer their money go to local dealers, insurance agents, contractors, and workers. If a $100,000 bid from a nonlocal firm leads to $1,000 in extra tax revenue, and a $102,000 bid from a local firm leads to $5,000 in tax revenue, which one is more sensible?
In Bangor, we need to take a closer look at the local-preference bidding systems that San Francisco and other cities use. We should study what they have done to insulate elected officials from undue local business influence, how they define “local,” and the advantages these approaches confer on the community. We must also see if this can be done without overly restricting competition and increasing city costs and taxes.
The economic health of our community rests with each of us, within our own pocketbooks. With each of our purchases, we must balance the conflicting needs of choice, convenience, quality, and jobs for our neighbors and our children. While keeping the purchasing process transparent, we must ask our city to do the same. Creating a resilient local economy is too important a task to be left to others. We must take on this task ourselves.
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Geoff Gratwick is a Bangor city councilor. The views expressed here are personal and do not reflect official city policy.
