“Milwaukee panel considers moratorium on gold”

Milwaukee panel considers moratorium on gold

Posted: 01 Jun 2010 09:22 PM PDT

Posted: June 1, 2010 11:14 p.m. |(0) Comments

Milwaukee aldermen, overwhelmed by the number of businesses seeking to buy used gold jewelry, are proposing a four-month moratorium on granting licenses for the firms and a revamping of city zoning rules and state laws that govern them.

The initiative, in a measure scheduled to come before the city's licensing committee Wednesday, is aimed at coming to terms with a major boom in gold-buying, as the price of the precious metal hovers in record territory, at more than $1,200 per ounce.

The moratorium measure also calls for a task force of officials from the Milwaukee Police Department and other city agencies to come up with better ways to regulate the businesses.

Ald. James Bohl, chairman of the Common Council's licenses committee and a co-sponsor of the moratorium, says that the number of applications for precious metals and gem dealer licenses has shot up recently.

"Two, three, four, five years ago, we would go years upon years and never have an application in front of us," he said. "Now we're seeing them every meeting."

Or as Chuck Fletcher, a Greenfield police detective assigned to track second-hand jewelry buyers, put it: "A lot of people are hopping in the covered wagon looking for gold."

The gold-buying business is booming throughout the area, says John Barnes, an Oconomowoc jeweler who is president of the Wisconsin Jewelers Association, in a way that it hasn't since the last big spike in gold prices, back in 1980. And the poor economy of the last year has led many established jewelry stores to enter the field, he said.

"Everybody has been forced to become buyers, even jewelers who, two years ago, rarely would they even touch scrap gold," Barnes said - citing Kesslers Diamonds as perhaps the area's major buyer.

Whom it affects

The lead sponsor of Milwaukee's moratorium proposal, Ald. Terry Witkowski, argues that gold-buying businesses threaten neighborhoods with increased burglaries by people looking to sell stolen jewelry, and drive down the quality of the business strips where they locate.

The movement for a moratorium initiative comes after the licenses committee, in a hearing May 10, denied a city precious metals and gem dealer license to an outlet on S. 27th St., in Witkowski's 13th Aldermanic District, of a large Illinois-based gold-buying firm.

Representatives of eight neighborhood groups in the district showed up to oppose the outlet. One, Christopher Kuester, even said he feared that S. 27th St. would look run-down if too many businesses similar to that were allowed to locate there.

There are already two gold-buying businesses along S. 27th St., but beyond the Milwaukee city limits.

Witkowski testified that burglaries in the 6th Police District, the city's southernmost, dropped sharply since police cracked down in 2009 on south side jewelry stores in the business of buying gold, making undercover buys of what they said were stolen jewelry items.

The stores were accused of violating city rules that required them to get identification from sellers and keep the gold on hand for 15 days.

Three of the stores surrendered their licenses in January; the fourth had its license suspended.

Police Capt. Carianne Yerkes of the department's Criminal Investigation Bureau said that burglaries had dropped by 29% in the 6th District in 2010.

Large operator tests market

The firm at the May 10 hearing, Midwest Gold Buyers, is owned by twin brothers from the Chicago area who launched their company 2 1/2 years ago, when gold hit about $950 an ounce. The company says its outlets are reputable and professional, have security cameras, and pay for gold with checks, not the cash that might draw criminals.

Besides buying gold jewelry out of storefronts and shopping mall kiosks, the firm also sponsors Tupperware-like "gold home parties," where the host or hostess earns 10% commission on what the company buys, according to its website.

The firm is already operating 48 outlets, said Jake Sadoff, one of the firm's owners. Most stores are in the Chicago area, Sadoff said in a telephone interview, but there are also Wisconsin locations in Brookfield, Franklin, Greendale , West Allis and Kenosha. At the May 10 meeting, he described the firm as the biggest gold buyer in the Midwest.

Sadoff said in an interview that he and his brother Jordan, both 32, first got into business when they were in college, buying and selling Beanie Babies on the secondary market - a business they stayed in for 12 years.

Tony Colvin, a broker for Mid-America Real Estate who is handling site selection for Midwest Gold, said all but the Southridge site opened this year, and he added that the two City of Milwaukee locations the company applied to move into were the most difficult it's experienced.

The second Milwaukee outlet, at 3171 S. 76th St., was granted a license, but still faces an appearance before the city's Board of Zoning Appeals.

"Don't you think an occupied storefront that doesn't generate a ton of traffic should not be viewed as problematic to the community?" he argued.

Jake Sadoff put it another way: "Ald. Witkowski has been an absolute thorn in my side."

A moratorium, meanwhile, might give the city time to redefine its zoning rules for these businesses, and petition the state for changes in the law.

One change, suggested by Chuck Fletcher, a Greenfield detective who appeared at the May 10 hearing, is requiring jewelry buyers to feed a statewide database with images of the second-hand jewelry purchased by these outlets, as well as images of the person who sold the item to the store.

Such a system has been put in place in Greenfield, he says, and he's already solved more than 40 burglaries and recovered $184,226 in stolen property as of Thursday.