Dad Says Publicly Subsidized Thrift Store Unfairly Competes

Last updated on 2012.07.07

My dad Jim is working his way toward retirement at 72. When he finally gets tired of the factory, maybe I can get him to crank out guest columns.

On our drive to Watertown for siding yesterday ("Hey, look! There's Kristi's house!"), Dad offered two useful insights on the proposed publicly funded thrift store and competition. First, we talked about how much money the thrift store might make. I noted that the thrift store organizers are deriving their financial projections from comparisons with a comparable non-profit thrift store in Milbank. That store, run by the Christian Service Council of Grant County, broke $100K in net revenue for the first time in 2010, allowing the CSC to hand out just about $87,000 in community assistance.

That's great, said Dad, but how many other thrift stores does Milbank have?

Excellent question, Dad. Under "Discount Stores," the Milbank Chamber of Commerce lists an Alco, a Dollar Store, and the Community Thrift Shop. I don't know if there are any competing thrift or consignment stores in town, but the evidence online suggests that the Christian Service Council may have looked at their community, identified a business need not being met by the market, and built a thrift store to fill that gap and generate their revenue. And they did it with no tax dollars.

Meanwhile, Madison's leading business minds conclude that the best way to generate ongoing revenue for charitable purposes is to spend over a million dollars, including at least $300,000 in tax dollars, to create a thrift store that replicates the market function already performed by a raft of secondhand stores, including the Four Seasons Flea Market, Second Closet, Unique Boutique, and the Pawn Shop. If the thrift store boosters were really interested in generating revenue for charity and strengthening Madison's business climate, they'd create a non-profit business that diversifies downtown and offers something folks can't already get here.

Then Dad turned his economic chops to another facet of unfair competition. He noted that if you sell a business, the buyer usually negotiates for a non-compete clause. I'm no fan of non-compete clauses in the labor market. But Dad made an interesting point: suppose a schemer sells his housepainting business to a new entrant for a million bucks. The new guy is probably paying off his purchase for a few years. The schemer could use that million bucks cash in hand to start a new business without the same debt burden, scoop up all of his old customers, and out-compete the buyer of his old business. In essence, the schemer uses the new guy's own money to compete against him.

Dad compares that to what the thrift store organizers are trying to do. The existing secondhand shops all labor under the normal burdens of debt, taxes, and operational costs. The thrift store organizers want to avoid debt by paying for their new building with donations and tax dollars, including sales and property tax dollars that Four Seasons, Second Closet, et al. pay even as they cover their own mortgages or rents. The thrift store avoids taxes as a non-profit, leaving their competitors to pick up the tab. The existing secondhand stores essentially pay for the pleasure of having a non-profit competitor.

From Dad's business perspective, our city and county commissioners will be committing political suicide if they approve spending taxpayer dollars to compete with so many local businesses. He can't vote in any city referendum or recall election. But he's ready to vote down any such ill-advised appropriation the county commission may make.

And if the city can't use our tax dollars frugally, I'll be happy to help Dad take his sales tax dollars to towns that compete with Madison for common sense.