According to an article in the News and Observer (7/19/06) big retailers – like GAP or Banana Republic – are not likely to rush to open stores downtown. Why? There are not enough people living downtown to make the stores profitable.

But the Downtown Raleigh Alliance – which serves as downtown Raleigh’s unofficial booster club – has proposed a solution. It wants banks to offer special low interest loans to businesses that open stores downtown.

Of course, if banks want to do that it’s their business. But, generally, stockholders prefer banks to make loans where they earn the best return. So is there a catch? Maybe.

The head of the Downtown Alliance, Nancy Hormann, helped organize a similar loan program in Dallas several years ago. She told the News and Observer “that program received public funding, which would greatly enhance a similar effort in Raleigh.” And, in fact, her group already has city officials studying subsidizing loans to businesses downtown.

Let’s forget, for a moment, the wisdom of the city subsidizing a store that might lose money without a low interest loan; and, let’s overlook the fairness of the City subsidizing businesses downtown to give them an advantage over their competitors at North Hills or Triangle Town Center. Instead, let’s ask a practical question:

These loans are based on a simple theory: that downtown’s population will grow. And if it grows, in time those businesses will become more profitable. But what if downtown doesn’t grow? What if the businesses subsidized by the city don’t survive? Who gets stuck with the bill? The taxpayers ?

The Downtown Alliance ‘projects’ the population downtown is going to almost double – to 10,000 people – in just three years. Maybe, before the Mayor and the City Council start subsidizing loans, they should wait to see if that really happens.

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