Banks - Ledger - Morristown wants to limit number of branches downtown

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Published in the Star-Ledger, Sunday, June 4, 2006

OP ED: Fran Wood

Trouble ahead? Bank on it

Sunday, June 04, 2006

A small but growing number of New Jersey municipalities is considering limits on the ominous growth of a particular type of business in their downtown areas -- establishments that, in the minds of many officials and respectable retailers, make the climate less inviting for everyone.

No, I'm not talking about strip clubs.

I'm talking about banks -- which you, as I, probably always considered to be among the most solid and respected occupants of any downtown. On the face of it, they would still seem to be ideal tenants -- clean-living, solid citizens who pay their rent and provide a service everybody needs.

So what happened? How did these pillars of the community manage to plummet to a standing only marginally above adult bookstores?

Here's how: They multiplied wildly.

In Morristown, where town officials are discussing whether to introduce a bank-limit ordinance, the number of banks has doubled in the past five years and several more are proposed.

The problem, say some officials, is that each new bank branch means one less space for retailers -- a real concern for downtowns ever since malls began luring retailers away from Main Street more than 50 years ago.

Sure, people use banks. But they don't drive downtown to browse banks the way they will park and browse a street of retail stores. Nobody says, "I'm going to the ATM, and while I'm there I think I'll stop for lunch." It works the other way around.

Morristown Partnership, a non-profit organization responsible for revitalizing Morristown's central business district, wants to limit the number of downtown banks, and it has sympathizers on the Town Council.

"We have 19 banks from one end of South Street up to the Green," says Councilman Richard Tighe. "My gut says that's overkill."

Landlords, however, are less easy to persuade. For them, banks are golden tenants.

"Banks will pay $50, $60 even $70 a square foot, and will undertake the entire fit-out cost," explains Tighe, "where retailers are able to pay only $30 to $35 a square foot, and want the building owner to share in the fit-out."

Morristown is far from the only place wrestling with this dilemma, which tends to arise in affluent areas.

Ridgewood has been talking about limiting the number of banks for two years, and some action now appears imminent.

Red Bank recently prohibited new bank branches in a four-block zone on Broad Street, an area primarily occupied by stores and restaurants -- although, as zoning officer Donna Barr notes, banks are permitted elsewhere in town.

Princeton was way ahead of the curve, limiting the number of banks back in 1986 and prohibiting established branches from expanding.

So far, Westfield's 14 banks haven't alarmed retailers, says Sharon Cronin, executive director of Downtown Westfield Corp. "But I suppose that could change," she says, "when the new Citibank branch opens."

Tom Margetts, a former director of Red Oak Bank, which was bought last year by Union Center National Bank, says banks have a legitimate reason for adding branches in convenient places like downtowns.

"It makes sense for community banks to have branches," says Margetts. "Red Oak did not get enough branches; we were too conservative in finding ideal locations. You need to build up the franchise, build your asset base."

For a branch to be successful, he explains, it needs about $40 million in assets. "All of them want the (local) deposit money so they can loan at a pretty good rate."

Money is certainly a big business of its own these days. But I can confirm that I have never -- not once in my entire life -- driven to any town with the objective of browsing its banks. Nor do I ever expect to.

I have, however, made countless trips to specific towns to visit retail stores -- baby boutiques, shoe stores, electronics stores. I'd rather go to an interesting downtown than a mall any day, which is why I've been increasingly frustrated by the inescapable realization that bank branches now occupy many of the buildings that used to hold those stores.

So I'm in favor of limiting bank branches in primary shopping districts. I don't dispute that their presence reflects a town's prosperity. I just don't think they need to be smack in the middle of the shopping district to make that statement.

"In spite of Epstein's (department store) closing, Morristown retail is relatively healthy," says Tighe. "We still have a fair presence. But if it gets out of kilter -- well, like Macy's and Gimbel's, one retailer creates foot traffic for another."

Fran Wood is a Star-Ledger columnist.

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