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Did Village Err By Lending Money to Failed Community Bookstore?

Two years after its closing, questions linger about Shorewood's decision to lend $35,000 to the Open Book co-op, a debt that village officials have written off as "uncollectable."

April marks two years since organizers slammed the book closed on Open Book, leaving an empty shell on the busy North Oakland Avenue block.

The bookstore co-op opened in November 2010 and occupied the space that previously housed the Harry W. Schwartz Bookstore.

With high community energy and backing, including a $35,000 loan from Shorewood, Keith Schmitz and hundreds of other Shorewood residents, through a grassroots effort, hurried to open the store before the holiday season.

Schmitz said the store was something that created a buzz in Shorewood and the community rallied behind.

“This was something that the community needed and wanted,” he said. “We had 40 volunteers that got involved to make this thing happen.”

Those involved in the effort envisioned a place that not only sold books, but was a spot that strengthened Shorewood's sense of community.

"We want it to be a community gathering place where friends and neighbors meet for coffee, and small groups hold meetings," bookstore manager Lisa Zupke told OnMilwaukee.com in June 2009. "That's something the community sorely needs."

They saw huge support in its opening months, but Christmas came and went — and so did their customer base.

After only five months, they were forced to close up shop.

“It just became clear it wasn’t going to pan out,” Schmitz said. “But if you ask most of the people who were a part of this, they say, 'Yeah, it failed, but at least we tried.'

“It was something we felt we needed to do for the community.”

The failed bookstore has recently resurfaced as the focal point of a discussion among Patch readers and at a recent candidates forum, mainly because $25,000 of the $35,000 loan from the village remains unpaid. Residents question the village's process for vetting loans to businesses.

”Sometime these things work, sometimes they don’t. That shouldn’t discourage you from taking risks."

Schmitz, who generated the idea for the shop and helped attract residents to join the cooperative, said they paid back $10,000 — the store's profits over its five months — and put it toward their loan balance. Schmitz handed over everything from the store over to the village, but those assets couldn't be resold.

The village wrote off the loan in late 2010 and is no longer attempting to recoup the money, said Village Manager Chris Swartz.

“It was uncollectable,” he said. “We sent them a letter. You can’t leave it on your books if you know you can’t collect it.”

Schmitz said the co-op had financial and marketing professionals on board with the bookstore and felt members could find success in the new upstart. But as the village debated whether to give the $35,000 loan to Open Book, many officials felt differently.

Trustee Jeff Hanewall said that the village’s Community Development Authority knew the loan to Open Book was a little more risky than ones they had granted in the past.

"We decided to go forward with it because there was a huge amount of the public coming to us and saying, 'Do this,'" Hanewall said at the candidates forum.

The $35,000 was funded through the village's special taxing district, and Hanewall said the CDA knew that if it wasn't able to recoup the loan, the taxing district could cover it.

"It was a risk we were willing to take," he said.

Swartz echoed Hanewall’s comments, saying village officials were bombarded with community support and felt compelled to grant the loan.

“It was more of a community loan than a business loan,” Swartz said. “There was a lot of energy in the community; a lot of support in the community for it."

Schmitz said the co-op was sorry it failed and couldn’t pay back the loan.

“It was something that was different, and bold, and it didn’t work, but sometimes you have to try something out of the ordinary,” Schmitz said. "Sometime these things works, sometimes they don’t. That shouldn’t discourage you from taking risks."

Roundy's currently owns the Open Book store, in addition to Walgreens' current location, and village officials have said .

Absolutelyfabulous April 12, 2012 at 11:50 AM
More backpedaling by the Village. Really, they had all these professionals in place and yet they didn't have enough monies to even fully stock the store when it opened. They didn't have cash reserves to carry them over the long haul. They didn't obviously have the right product or price their product accordingly because no one was buying. Oh & let's not forget about never officially registering as a C0-0P which is what they presented themselves to the public and solicited funds for. Hmm..they were also receiving a huge break in rent in a prime location in Shorewood in the heart of it's business district. How much traffic alone is generated by Walgreens & Pick N Save on Oakland Ave?..The 2 businesses it was situated right in between. Half Price Books, located on 78th & Brown Deer..out in the boonies and in a dying commercial corridor does a booming business w/ people coming from all over to shop. Yet, Open Book couldn't even get people in their doors to buy whatever product they may have had. So, the Village listened to all the people who wanted this and that is what they went by. That's funny, because on just about everything else where you are handing out monies, the residents are shut out. $200,000 to Harleys..free & clear, $150,000 to North Star Bistro to move across the street & yet months later they seemingly are in a position to buy into the operations of 2 other restaurant locations. Nice try and I can only imagine the vetting process on this one.
Absolutelyfabulous April 12, 2012 at 12:04 PM
BTW, once again, if anyone is interested..The village has rationaled the many millions in grants/TIF's for the latest developments as being a catalyist raising raising the property values/ASSESSMENTS of the residences surrounding them to generate more tax revenue for the Village. (Still waiting to read in the paper what the $10,300,000 TIF that has been reccomended for Pick N Save redevelopment encompasses. Roundy's must be hurting, especially since they dominate and just went public on the NYSE.) Yet, if you read the 3 posts + articles from the following link, the ones who are benefitting from all these $$$ and this economic climate are the apartment developers themselves. The homeowner is getting hit from all sides and that is shown in sales of houses throughout the village or at least the ones that I was able to post. So, how are you going to raise assessments even more for properties that are selling $50-60-70-80,000 below current assessments? Also, assessments on these properties have not changed since 2007-08 and yet the sales prices are going down. Unless there has been a change in the MIL rate, which may have happened, there is a reason why Shorewood is not that appealing or affordable to 1st time homebuyers and if one reads the articles/links..that's not going to change anytime soon. Preparation is The Key to Selling Your Home http://foxpoint.patch.com/blog_posts/preparation-is-the-key-to-selling-your-home
Mr. Wonderful April 12, 2012 at 12:09 PM
Yes. This was a bad business idea. Any investor would have asked this question: So, you are going to open a book store where a book store went out of business after being in the industry for 82 years? And as far as Mr. Schmitz talking about taking risks...you weren't taking a risk because it wasn't your money! I'm surprised there isn't some form of personal guarantee for these loans. That would get people to really think about what they want to do. Also, with so many people behind it why couldn't they generate the 35k among themselves. We're talking less than 1k each. And this 'huge backing' - again, they should have been able to raise the funds among this huge backing. I appreciate the fact Mr. Schmitz cares about Shorewood and wanted to make an impact, but I see this as a few years of my property taxes down the drain that could have been put back into the schools. I'm not totally against the TIF financing either, I think the north end development has made Shorewood a much more attractive community in order to draw people in - more retail, dining and entertainment. While there have been some issues, I think the overall impact will be positive.
Nick Poulos April 12, 2012 at 01:02 PM
I am not as intimate with the details perhaps as some , or even most of you; yet I think it was a great idea to try to use that space as a bookstore. Frankly, however, I have always believed that "the business model" put in place was highly flawed and thus doomed. If it could be used again for a bookstore, I think the village would support it. The Business Model of course would need to be reworked completely.
Absolutelyfabulous April 12, 2012 at 01:34 PM
In addition, the loan was given knowing that the owner of the property could kick out the bookstore at any time as long as they gave them 60 or 90 day notice. You knew all along that Roundy's was going to redevelop the property. I wonder if all the donors were aware of this condition as well and what Roundy's near term plans were? Actually, all one has to do is buy their house in WFB and take advantage of everything on the border in Shorewood and still live in a community that is rated #1 and receives statewide/national acclaim. Can't tell you how many people I know did that years ago and stayed when they moved up and continue to do so today. At least in WFB, the residents have an actual say in what gets developed/how monies are used and are invited to meet w/ the developers before the project has been approved and released via the media.
The Donny Show April 12, 2012 at 02:01 PM
Is this a serious question? Was it a good idea? HELL NO! A bookstore had been there for generations and they could not make it. A corporation who EVERYONE knows had plans to develop owned the property. Then we gave a gift to Schmitz and Friends? It was not a loan; it was a gift. ALL the risk was on Shorewood. If Schmitz and Friends made it big they pay back the $35K. If not they say, "Oh well, too bad. Poor us couldn't make it" Who DIDN'T think this way going to happen? Maybe Keith ought to pay it back over time?
Vicki Bennett April 12, 2012 at 02:03 PM
I'm no expert on urban planning. I do have questions that I'd like answered. My first question is, 'Why is Shorewood giving loans at all?" Second, "Why are my tax dollars being used to attract businesses through subsidies?" Third, "Shouldn't these issues be decided at the ballot box?" I personally do not want to pay taxes to subsidize business loans. I don't mind new stores where I can shop in moderation, but I'm not thrilled about the new apartments and condos that the village is subsidizing through loans. They just create more traffic and create the need for services (road construction, etc.) that Shorewood is NOT performing now. This action has certainly not gone to lower the property taxes. With an already non-functional sewer system in our village, why are we adding more users and creating possible disasters through new construction? The urban/suburban lifestyle of Shorewood with the ability to walk everywhere within the village has always been the number one selling point for the village with the exception of its excellent schools. If you've walked in Shorewood lately, you know it's being challenged. I'd like to have a more open, honest village board who makes decision at the ballot box with consideration for the average tax payer and not the unrealistic, grandiose dreams of making our one square mile village into a shopping and apartment living mecca.
CowDung April 12, 2012 at 02:14 PM
I think that having to hold a vote on every issue like this is a bit excessive. We elect village board members to represent our interests. Bringing in new businesses will tend to bring dollars in to our community--I see that as a good thing and something that the village board should be encouraging. Unfortunately, the goal of making Shorewood more walkable and less drivable is working against that. I agree that the condo projects and such do not seem to be an effective use of our tax dollars. Perhaps the better move would have been to have sewer upgrades tied to that funding as part of the condo projects. This would address the potential problems from the increased sewer loading that the new condos and apartments would bring.
CowDung April 12, 2012 at 02:22 PM
Harry W. Schwartz didn't seem to be able to make it at that location, so I'm not sure why anyone would expect different from any other bookstore in that location. I agree that the book business is getting pretty tough these days for the smaller shops. Since e-readers are gaining in popularity, it seems that the best bet would be to deal in collectable books or old stuff that is out of print, kind of like the Renaissance Books business model.
Vicki Bennett April 12, 2012 at 03:07 PM
Not every issue has to be decided at the ballot box. However, when it is a decision for business loans that affect my tax bill, I want a say. If they are spending money for the general good of the community such as for street or sewer improvements, I'm not so concerned. But when they are lending money to businesses that have an ability to fail, I'm very concerned. Our elected Village Board is not a board of urban planning and business geniuses. It's a board of men off the street who say that they want the job (that alone should make you wonder). Then we get into the issue of hiring experts (more of our tax dollars down the drain). It's a never ending cycle without the voters having a say. Shorewood should remain a walking community. Do you want your children to be able to walk to school safely? We are not large enough or have enough parking or have enough traffic control to make it into one big strip mall. We're dealing with some pretty big traffic issues from UWM's implosion. Now we're going to have to deal with the extra traffic issues from the new apartments, etc. We need a voice.
Absolutelyfabulous April 12, 2012 at 03:17 PM
"It's a board of men off the street who say that they want the job (that alone should make you wonder)" Off the street, not exactly. Most are/were involved w/in the business community. In addition to their overwhelming desire to do what's right for the Village, I'm sure it also comes down to expanding those business connections and networking. Village Trustee Jeff Hanewall's employer is architectural design firm Engberg Anderson. The company that has been behind the 3 most recent apartment developments: Cornerstone, Mandel's Lighthorse & Ravenna. One hand washes the other.
CowDung April 12, 2012 at 03:33 PM
Vicki: Who is to say that business loans aren't good for the community? Is it better to have the decision made by board members who have all the information (business plans, marketing studies, financial statements, etc.) or by uninformed citizens? I don't see how making Shorewood a more drivable community (or at least more 'parkable') would make it so unsafe for kids to walk to school. We already have a business district along Oakland and Capital with plenty of car traffic. The crossing guards do a fine job at the crossings on Capital Drive and Oakland Avenue to keep children safe. The UWM 'implosion' is more about parking than about traffic. Adding a parking structure in a strategic location along Oakland Avenue would be great for every business in the area as people from outside Shorewood could park their cars and walk to the restaurants and stores. It would be much safer than the current model of street parking or having individual parking lots for each business. I see more potential for bad things to happen when people are circling the block several times looking for parking spaces instead of watching for pedestrians...
Cricket April 12, 2012 at 05:37 PM
I can't pay my property taxes this year. I wanted to - I tried - but I can't. It has become clear that it won't pan out but hey it was a good idea that I wanted to. Can my taxes be forgiven please? I'm sorry I've have failed but I tried. By the way - where did all the books I donated to the place go?
Absolutelyfabulous April 12, 2012 at 06:04 PM
Maybe they took them to Half Price Books and got whatever $$ they could.
Jack April 12, 2012 at 08:33 PM
The poll lacked a simple "Yes," without the "and the village should still try to collect that money." The last part is an exercise in futility. The first part is absolutely correct. If HWS couldn't make the bookstore 'go,' who'd think this was a good idea? For the last 20 years bookstores have tumbled. We're loaning money when Border's is slipping into chapter 11. Even as HWS, the place wasn't exactly 'homey.' Who had the idea that in its gutted form it would become a gathering place for the community...a place to meet and have coffee? Isn't that already across the street? And that said, don't we already have a library...another institution that's slipping into obsolescence? We can bemoan the loss of bookstores, libraries, and even books as they lose their positions to technology, however bemoaning is one thing, investing in them is another. It's not the loss of the 35 grand that bothers me on this, it's the fact that the city viewed this as a plausible venture.
Kelly O'Brien April 13, 2012 at 04:29 AM
Tr. Hanewall made the motion to approve the loan even after the significant risks were itemized. What burns me is that the Board of Trustees did not vote to write off the loan. That was decided by the unelected CDA. The Board has given the CDA the authority to write off any loan under $25,000. See you at the next Board meeting.
maurice johnson April 13, 2012 at 01:23 PM
As you read these comments ain't you glad Absolutely Fabulous, "The Donny Sow" and Bob McBride don't live in Shorewood? They and the rest of their ilk forget that this was a coop. Unlike Schwartz they didn't need to turn a profit or make a big payroll. It was worth the attempt at keeping this community gathering place in Shorewood.
CowDung April 13, 2012 at 03:33 PM
It's pretty sad if the place really didn't need to turn a profit or make a big payroll and still failed...
CowDung April 13, 2012 at 03:35 PM
Is there really a shortage of 'community gathering places' in Shorewood?
CowDung April 13, 2012 at 03:46 PM
To be fair to Hanewell, there seemed to be strong constituent pressure for a vote to approve. Should he have just ignored the 'will of the people' and voted against it? It seems that he was in a no-win situation that was bound to upset people no matter how he voted...
Sara Conrad April 13, 2012 at 05:18 PM
First of all, there is no such thing as an "uncollectable" debt. I've been involved in the debt collecting business for over a decade...sure it takes some gusto and patience...but it can be done. Second...I opened up a gift shop on Brady Street in 2007 because we thought it was something the street was lacking, but further, it was a dream of mine as well as my business partners. Our shop closed in 2009, just as the economy was imploding. We could've held on for a few more months...but we knew what the smart play was. Opening a store at that exact same time, especially a book store with ALL that overhead (inventory...holy heck....that's a lot of inventory) funded by the tax payers who are also your customers? Bad, bad, bad move. There's a reason why banks are stingy with their lending. The government should seriously follow suit. Like Open Book, we can also say that yes, our business failed, but at least we tried. Pat ourselves on the back for chasing down and tackling one of our dreams. However we didn't use a penny of borrowed money to do it. The thought of asking the BID or any other taxpayer base to help fund our dream never crossed our minds. We did not spend what we did not have on hand--we crunched the numbers and we were prepared to work with what we had. We were able to walk away from our business, as hard as it was, with dignity and peace of mind. Peace of mind an article like this one will never be written about us or our little shop o' dreams.
Sara Conrad April 13, 2012 at 05:21 PM
Shorewood already had a gathering place with books that benefits the community. It's called a library.
David Tatarowicz April 13, 2012 at 06:49 PM
Interesting conversation here. For the record I was against the village giving the Co-op money, as I was against it giving money to Harley's and paying to move restaurants across the street, etc. However once the village did give the Co-op money and they were in business, I did join and tried to help to support it. For background information I recall that the village did nothing to help Schwartz's and some folks questioned why other businesses were getting help and Schwartz's was not. It is interesting that at least some of the loans and money that Shorewood gives businesses can be used for "operational expense" !!!! That to me is a Huge Red Flag --- but if I am correct, Harley's money can be used for those kinds of expenses. Using that as a precedence is why some folks were wondering why Shorewood did not do the same. At the time that the Co-op requested funding, I recall Ellen Eckman saying that "we (the board of trustees) blew it with Schwartz's, so we better support the Co-op. All around there were enough bad decisions made for everyone to take some fault. As for Keith, he did NOT borrow the money himself, the Co-op did --- asking him or any other members to repay the money would be like asking stockholders in GM to personally pay the costs of a lawsuit --- I am not an attorney, but I believe there is a corporate veil. It is history and a lesson that should be learned. But as the board still spends money like drunken sailors -- Watch OUT!
Absolutelyfabulous April 13, 2012 at 09:28 PM
CowDung- So, Hanewall just voted for future votes.
Absolutelyfabulous April 13, 2012 at 09:30 PM
maurice- It really is sad that Open Book is now gone. Just one less spot for us to rendezvous.
CowDung April 13, 2012 at 09:31 PM
Don't they all? Isn't the idea of electing representatives supposed to involve voting as most of your constituents would like you to vote?
Absolutelyfabulous April 13, 2012 at 09:41 PM
Not if you are able to identify "significant risks" as Mr. O'Brien mentioned Hanewall did. If there were such significant risks and the board/Mr. Hanewall were so adamant about pushing this thing forward, then they should have attached more conditions/sought collateral so they don't get caught on the short end of the stick like they did. Obviously, the professionals that Open Book had on board missed or didn't care about these significant risks because it wasn't their money.
oak creek resident August 28, 2012 at 02:58 PM
I applaud Keith's failure. That is all.

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