In this section we have provided 10 case studies from an array of cities and communities. While some of the case studies are from comparable-size cities in terms of demographics, industry and tax base, etc., experience has taught us that the most successful benchmarking and "best practice" programs include a diverse participant base to encourage a variety of perspectives and approaches. Using this approach, learning from the success and failures of a variety of other cities, enables the community to be a leader and innovator in the creation of livable neighborhoods, instead of being limited to the use of a more narrowly defined set of programs and initiatives that comparable cities are using.
Cities are applying a variety of state-authorized programs that can be applied to neighborhood commercial areas, especially with incentive tax policies, to benefit commercial growth.
- Enterprise Zones. New Jersey's municipalities listed by the state as distressed may designate Enterprise Zones within which certain tax advantages for new and expanded businesses and construction are offered. Of greater interest to neighborhood commercial revitalization, however, is the reservation of half of the State's six percent sales tax collected within the zones, which may be spent for economic development projects in these designated areas.
For example, 12 commercial and 1 industrial area within the town of Irvington's Enterprise Zone stand to benefit from projects financed by an annual estimated sales tax-derived revenue stream of $1 million. Improved policing, streetscape improvements, and business financial incentives are among Irvington's uses for the funds. Adjacent to Newark, this town is among the State's most financially distressed. It has a population that is predominantly minority, with low and moderate incomes.
- Tax Free. Philadelphia has twelve areas benefiting from Pennsylvania's new Opportunity Zone program. Under this initiative, new businesses are free of all state and local taxes for 12 years. A new technology cluster will be built in distressed West Philadelphia using this incentive.
- Tax Increment Financing (TIF). TIF projects are beginning to include financing for neighborhood economic development activities, including incentives to encourage private investment in new commercial facilities that are designated to attract both chain and "mom and pop" retailers. Under TIF, the anticipated added property taxes from new development are set aside for a specified number of years and are dedicated to financing bonded indebtedness for economic development projects, including site acquisition, infrastructure, and new construction.
TIFs are extremely useful as an additional inducement for property owners to become partners in the revitalization process, including motivating property owners to form a Business Improvement District. For instance, once property owners realize that any value that they collectively create by enhancing the appeal of an area through shared parking, improved appearance, or upgrade of their facades and building will be returned to their area, they are more likely to be inclined to participate. The use of TIFs also gives a revitalization program a boost after the initial wave of activity, helping ensure a sustained effort and critical mass of actively that is generative. One of the downfalls of many neighborhood revitalization programs is that the momentum of early success is not built upon to create enduring improvement of the economic conditions. The use of TIFs is an ideal follow up to the first wave of revitalization initiatives as well as an inducement tool that needs to be widely promoted in order to create enduring economic improvement.
- Urban Energy Discounts. Various utility companies, including Public Service Gas and Electric, offer rate discounts for new enterprises in designated urban areas. Cities such as Newark, New Jersey, have long used this additional financial incentive to attract private investment. "Smart" office buildings, for example, are high consumers of electricity.
- Crime Perception and Reality. The most common point of resistance to opening a branch in an urban neighborhood is concern about the cost of crime to businesses. Costs involve additional security, shoplifting, and lighting. Those seeking a more business-friendly environment have established special police features and have promoted them widely.
Where there is sufficient perception of crime to deter customers and employees, urban commercial areas have established Business Improvement Districts (BIDs) to share the costs of supplementary security personneluniformed, unarmed, radio-equipped men and women who patrol, provide assistance, report problems to police, and reassure pedestrians. The Frankford Avenue BID in Philadelphia services a mile-long commercial strip under the elevated rail line. A predominantly minority neighborhood is its customer base. In Brooklyn, NY, and in Paterson, NJ, BIDs have contracted for nighttime mobile security teams, which successfully deter break-ins and vandalism.
The most effective way to address issues such as crime, violence, and drug dealing is by creating as many reasons to use the streets as possible. Streets need to be self-governing — by creating a web of public surveillance that allows the protection of consumers, residents, and stakeholders. One of a downtown's greatest assets is the ability to bring together people with common interests. When people fear the streets they will use them less, which makes downtown increasingly unsafe. A vibrant downtown creates a safe environment by creating a reason to use the sidewalks, and drawing people along streets that have no attraction themselves, but become activated as people travel to destinations on the main commercial corridor. In addition, people attract people to watch each other. While a strong police presence is critical in Schenectady's downtown, it is more important to create focus on activity in the streets with as many sets of eyes in order to improve the real and perceived safety of the area.
Case Studies in Urban Revitalization
- Baltimore, Maryland: Public Markets
Baltimore, Maryland, has one private and six public markets in neighborhoods that have been the homes of successive waves of immigrants.
- The Cross Street Market is located at 1065 S. Charles Street in the heart of Federal Hill
- Hollis Street Market is located at 26 S. Arlington Street in the heart of Union Square Historic District. The Market is closed on Monday.
- Broadway Market is located at 1640 Aliceanna Street in the heart of Fells Point.
- Belair Market is located at 4760 North Gay Street next to Old Town Mall.
- Northeast Market is located at 2101 East Monument Street, north of Patterson Park.
- Lafayette Market is located at the comer of Pennsylvania Avenue and Lafayette Street.
- Lexington Market (a privately run market) is located at Lexington and Howard Streets in the heart of Market Center.
Public markets can be readily adapted to informal locations, not requiring a special enclosed or sheltered facility. Markets need to be:
- Regularly scheduled
- Well-advertised
- Effectively cleaned
- Regulated with regard to acceptable types of products (e.g., produced by the seller)
The appeal of fresh produce sold by the grower is strong among all income levels and ethnic groups and has become a major focus of community life throughout New York City. Philadelphia's Ninth Street Market functions year round in the out of doors, attracting thousands of African American, Asian, Italian, and Eastern European consumers daily from adjacent neighborhoods.
Food producers pay for the privilege of vending in public spaces and agree to abide by such rules as selling only their own produce. To maintain its identity as a farm-to-market system, care should be taken to restrict participation to only a few additional products, such as food to be eaten on site, flowers, etc. As few as a half dozen regular growers can create a successful market that, surveys show, will draw customers to nearby stores.
- Milwaukee, Wisconsin: Harambee Neighborhood
With widespread private-sector support, an alliance of central-city nonprofit organizations is mounting a major development initiative aimed at revitalizing housing and commerce within 16 square blocks of the city's Harambee neighborhood.
The historic King Drive Cluster Development Project will focus on an area two blocks north of the intersection of West North Avenue and Dr. Martin Luther King, Jr., Drive, hoping to replicate the success of development along King Drive south of that intersection. The plans call for residential and commercial development within the cluster, as well as improvements in public infrastructure and services.
In addition, the project's organizers have identified several sites for new commercial developments to anchor the cluster. They have also enlisted private sector partners to help fund efforts to secure a franchise for a family-oriented, sitdown restaurant for the area, and have earmarked dollars for improvements to existing commercial sites as well.
"This is a project that is music to the ears of the business community," said Robert Milbourne, executive director of the Greater Milwaukee Committee, pledging to help raise funds for the project by opening doors for the nonprofits. "(The project's) planners have thought through very carefully what it will take to improve this neighborhood," he said.
The project was in the planning stage for about 18 months. It is a result of the collaborative efforts of the Historic King Drive Business Improvement District (BID), Martin Luther King Economic Development Corp. (MLKEDC, Inner City Redevelopment Corp (ICRC) and the Harambee Ombudsman Project.
Part of the planning involved taking stock of the 214 residential properties and 86 commercial properties within the cluster. Representatives of the various groups helped identify and contact property owners. They also assembled a database that includes a description of the physical condition of each property.
"Getting input from the residents (within the cluster) was very important to this process," said Sherman Hill, executive director of the Harambee Ombudsman Project. "When you're doing business development, you have to address the housing component as well."
Early on, the project's organizers decided that the best-and fastest-way to achieve sustainable economic development would be to concentrate their efforts on a bite-sized, clearly defined, geographic area. "Scattered-site development doesn't work," said Randy Roth, executive director of the King Drive BID. "You have to take a small and clearly defined area to attain sustainable development."
"The cluster approach is a great concept," said Kathryn Cairney, program manager for the Helen Bader Foundation, a local philanthropic organization that has pledged $55,000 to the project. "It's long overdue."
The Milwaukee Foundation and the Lynde and Harry Bradley Foundation also are considering funding requests for the project. "We're very supportive of the project and like the comprehensive approach they're taking," said Jim Marks, associate director of The Milwaukee Foundation. "We feel the area they're targeting Is critical."
The Milwaukee office of Local Initiative Support Corp. (LISC, a national nonprofit organization founded by the Ford Foundation, has pledged $75,000, including a $50,000 grant as start-up equity capital for securing a restaurant franchise. LISC also will provide technical expertise in working with franchisers, said Robert Schwartz, executive director of LISC's Milwaukee office.
The Wisconsin Housing and Economic Development Authority (WHEDA) and the State Department of Commerce have said they're willing to oblige. Both have programs targeting Milwaukee's central city, including some that are new.
WHEDA recently launched its "rental rehab program," filling a traditional lending gap by making loans available to income property owners. It also has a smallbusiness loan program that it will market aggressively within the cluster, said WHEDA executive director Fritz Ruf Under that program, qualified businesses can borrow as much as $250,000. "Housing and commerce have to go together if we're going to revitalize the area," Ruf said. "This is a good project. The momentum is there on King Drive."
- New Orleans, Louisiana: Ten Neighborhoods
The Neighborhood Commercial Revitalization (NCR) Program provides funds and services to businesses and property owners in targeted neighborhoods. Currently, ten commercial areas have NCR designation:
- Freret Street from Napoleon Avenue LO Jefferson Avenue
- Magazine Street from the Pontchartrain Expressway to Jackson Avenue
- North Claiborne between Orleans and Annette Street
- St. Bernard between North Villere and North Miro Streets
- Dryades Street between Howard Avenue and Phillip Street
- Chef Menteur between Plum Orchard Street and Read Boulevard
- North Rampart Street between Canal Street and Esplanade Avenue
- St. Claude Avenue between Elysian Fields and Franklin Avenue
- Newton Street from Whitney Avenue to Behrman Highway
- General Meyer Avenue between Tita and Richland Streets
Fixed rate loans for as low as 3% are provided to small businesses in designated NCR Areas. Funds may be used for working capital, renovations, inventory, land and building acquisitions, and equipment. The maximum loan amount at present is $50,000.
- San Francisco, California: Little Tokyo Redevelopment Project
The Community Redevelopment Agency currently has three commercial rehabilitation programs available in the Little Tokyo Redevelopment Project Area. These programs are designed to both stimulate economic development and preserve the historic character of a number of blocks.
Commercial Facade and Signage Grant: This program offers grants of up to $25,000 for rehabilitation and refurbishment of facades and signage, and for the installation of new lighting. They are available to both property owners and tenants, and require that the recipient maintain the improvements in good condition, clean and graffiti-free, for 10 years.
First Time Business Move-In Grant: The Agency offers grants of up to $10,000 for interior renovations needed to attract a new business to the Little Tokyo community. Newly formed businesses and those relocating from outside the area are eligible. A business receiving a grant must agree to stay in the community for a period of 10 years. The agency does not require matching funds.
Replacement of Illegal Signage: This program provides grants of up to $1,000 which cover one-half the cost of illegal sign removal, and its replacement with a sign conforming to the Agency's standards.
Other Services to Commercial Businesses: The Agency provides a number of additional services to business in Little Tokyo, including: assistance in applying for Title I Improvement Loans and Community Development Bank financing, building permit and zoning variance expediting, and project specific financial incentives.
- Newark, New Jersey: CDC
The New Community Corporation in Newark, NJ, illustrates a holistic community development approach that evolved over decades to improve the conditions in a targeted urban neighborhood. New Community Corporation, which was established in 1968 after a series of riots, is one of the oldest and most sophisticated community development corporations in the country.
Initially, New Community focused on providing housing and rehabilitation assistance to residents. Over time, as its organizational and financial capabilities strengthened, it began expanding its services to address a range of issues, such as social services and employment that help determine the health of the community. Today, New Community employs about 1400 people and is the seventh largest employer and the largest employer of minorities in Newark. It provides rental housing, property management services, transitional housing and services for the homeless, home care services, youth services, employment training and placement, and child care services. It has developed businesses, including a Pathmark grocery store, that provide economic opportunities for residents, offer needed goods and services, and contribute to the tax base.
- Newark, New Jersey: Central Ward
Pathmark, one of the nation's largest food retailers, has found considerable success in the urban northeast. In 1990, with an enterprise zone beckoning, Pathmark joined a Newark, NJ, development corporation to open a 43,000 squarefoot store on South Orange Avenue in the City's Central Ward, its poorest district. The outlet quickly became one of the top performers for Pathmark, a chain that posted $4.7 billion in sales last year.
Today, nearly 20% of Pathmark's stores are located in lower income areas, and this number is set to increase. Harlem is one target for expansion; so is the Bronx, already home to one Pathmark store.
Urban expansion is not a simple process. Construction of the chain's Newark site was held up for eight years as the gears of bureaucracy slowly meshed. Obtaining permits and conducting the studies required by most cities can take twice as long as it does in the suburbs. That is where the role of government has become important to the retail revival. The cities that are willing to streamline the approval process seem to be gaining the most new business.
- Roanoke, Virginia: Rehabilitation of Existing Structures Tax Credit
A real estate tax exemption is available to businesses for increasing by $50,000 or more, through substantial rehabilitation or renovation, the assessed value of an existing commercial or industrial building which is 15 or more years old. The amount of the exemption from real property taxation is an amount equal to the difference between the appraised value of the structure immediately before rehabilitation or renovation and immediately after rehabilitation or renovation, as determined by the Director of Real Estate Valuation. This amount only, on a fixed basis, constitutes the exemption, notwithstanding subsequent assessment or reassessment. New construction of additional square footage does not qualify toward the tax exemption, as the purpose of the incentive is to encourage renovation of existing structures.
The exemption remains with the building, not with the owner of the building, for a period of five years and begins on July 1 of the year following completion of the rehabilitation or renovation and approval of the application for exemption. The maximum tax abatement for any additional building over the five-year period is $75,000. A $50.00 application fee is required. The types of substantial rehabilitation or renovation improvements considered as increasing the assessed value are limited to those made to the actual qualifying structure. Other improvements, fees, or costs are not considered.
- Roanoke, Virginia: Job Training Grants
Job training grants of up to $1,000 are available per each newly created, permanent, full-time position for Enterprise Zone Two or Hershberger Subzone residents and up to $500 for newly created, permanent, full-time positions for residents living outside these areas. Businesses must create at least 10 permanent, full-time positions and invest at least $250,000 in real property and/or machinery and equipment, within the same calendar year, to be eligible for grants. Only newly created, permanent, full-time positions will be considered for the one-time grant. Grants will be awarded with documentation of creation of the tenth position and the minimum investment. A business creating 10 permanent full-time positions would receive one grant, 11 positions two grants, 12 positions three grants, etc.
The maximum amount in the program is $25,000. Should approved applications for grants exceed the $25,000 maximum, grants will be prorated based on the total grants approved for that particular year. Seasonal, temporary, leased or contract labor positions, or positions created with a job function shifted from an existing location in the Commonwealth to a business firm located within the Enterprise Zone or the 581/Hershberger Subzone, shall not qualify as permanent full-time positions. Companies qualifying for state job grants are not eligible for the local, one-time job training grants.
- Baltimore, Maryland: America's First Community Benefits District
The Charles Village Community Benefits District (or CVCBD) is a 100-block area in Baltimore City that receives resident-supported security and sanitation services, along with other programs to promote and stabilize the community.
The CVCBD was created by resident voter referendum in 1994 in an effort to make neighborhoods safer, stronger, and better places to live, work and shop.
The CVCBD embraces five neighborhoods: Abell, Better Greenmount Alliance, Charles Village, Harwood/26ers and South Charles Village.
Nearly half the district's first year budget of $435,000 went to pay for additional security. The police department believes that investment has paid off. Robberies are down 21%, from 145 to 114; commercial burglaries down 20%, from 60 to 48; larcenies down 13%, from 640 to 556; and auto thefts down 24%, from 119 to 91.
The marketing & economic development program produced the following:
- Managed a committee of 35 volunteers
- Held a tax dollar-free grand opening event attended by over 300 people
- One year pro bono advertising services from Callahan & Co. to develop a logo raised funds to hire a full-time Business Development Coordinator to provide technical assistance to businesses
- Obtained commitments from the Baltimore Development Corporation for a staff person to be assigned to the CVCBD
- Contracted a nationally known marketing analyst to do a marketing study of the three business districts
- Completed a master plan for the community
- Sponsored five town meetings attended by more than 100 people on the redevelopment of the 25th Street corridor
- Held focus group meetings resulting in the commitment of the owner of Eddie's grocery store to invest $150,000 into renovations
- Instrumental in bringing well-known restaurateurs Henry Pertman and Jeff Pressman to the Homewood Deli site
- Increasing number of businesses choosing to or eager to locate in district Received national publicity and ongoing positive coverage
The Benefits District can assist in the following ways:
- Augment marketing and advertising strategies to achieve maximum exposure Assist in developing a formal plan for your business
- Act as a "one-stop shop" information clearinghouse to provide up-to-date, accurate information about City rules and regulations
- Provide application information as to how best to access City, State, and Federal business development programs
- Maintain a catalog of available properties in the Charles Village area
- Function as a liaison between your business' concerns and the other services, such as sanitation and security, the Charles Village Community Benefits District can provide
- Aid in approaching leaders to fund your business' expansion
- Keep abreast of local market trends and developmen
- Coordinate community-wide commercial events such as sidewalk sales or neighborhood festivals
New businesses that have opened up in the Charles Village Community Benefits District: Above All Advanced Hair Salon, Inc., Charlie's Deli and Pub, Donna's, Ko Hyang Restaurant, Nationwide Insurance, New York Fashions, Quantum Health Shop, Teranga African Restaurant, J.P. Henry's, Heritage Playhouse, PPHS Electrolysis, Images Café, Friendly Fried Chicken, Bravo Pizza, Charm City Men's Clothing, Blue Nile Restaurant, African Clothing, Lisa's Coffee House, Just Cut It, J&J Photocopying, and Cafe Iota.
- Kenosha, Wisconsin: Revitalization Strategy
A comprehensive and targeted strategy for commercial revitalization has recently been undertaken in the Uptown district of Kenosha, Wisconsin. Uptown exhibited many of the traditional problems of older commercial districts: physical deterioration, high vacancy rates, and declining business conditions. Within the last decade, the district has lost such key anchor tenants as A&P, Ben Franklin, and True Value Hardware, and has experienced the relocation of several independent comparison goods outlets. The district's poor image and limited selection deter shoppers, inhibit the attraction of new businesses, and discourage investment not only within the district but in the surrounding neighborhood as well.
Kenosha residents' dissatisfaction with current shopping alternatives is vividly illustrated by the significant retail sales leakage (over $50 million) and the corresponding loss of income and employment opportunities to nearby cities. The 100 or so businesses employ well over 500 people and generate $700,000 in annual sales tax and $225,000 in property tax revenues. Consequently, revitalization of the Uptown commercial district is considered equally important as the retention of any other significant employer.
Neighborhood Housing Services (NHS) of Kenosha, Inc., and the City of Kenosha joined forces to halt the disinvestment. This was accomplished through the use of a Task Force whose members were strategically recruited for their skills and vested interest in the future of Uptown and the surrounding community.
In the process, merchants learned to evaluate market opportunities available to their individual businesses as well as the potential market synergies of the entire district. The lenders' and property owners' participation enabled them to more fully evaluate credit risk and investment returns and thereby increase their confidence in the Uptown investment climate. The strategy specifically identifies opportunities for the redevelopment of three vacant or substandard parcels, the rehabilitation of 65,000 square feet of retail space, and the attraction or expansion of approximately 15 new retail businesses.
Strategic business recruitment efforts are aimed at achieving an optimum commercial mix that is unique from nearby discount strip centers. It should offer a wider range and more specialized selection of goods than other intown shopping centers, and, combined with the district's convenience, it should be able to compete on some levels with the out-of-town regional malls. The strategy's physical improvement component includes a development facilitation system, incentive financing, design assistance program and limited public improvements, The management component calls for creating a special tax assessment district designated as a Business Improvement District (BID).
Strategic recruitment efforts involve comparing existing commercial offerings with retail types not typically provided at strip commercial centers. In this effort, they seek branches of independents, rather than national chains, including such offerings as florists, jewelers, cleaners, take-out and sit-down food, gifts, antiques, hardware, and others often among business types listed under the miscellaneous subcategory in the Census of Retail Trade.
The aim is to fill strategic gaps in the cost and availability of financing to property owners and merchants who assume the risk and investment in accordance with the development plan. The need for a gap financing system is temporary. However, the need for centralized management within the district is permanent and the Business Improvement District annual revenue will provide an ongoing financing vehicle for district management function.
The merchants and property owners within the district gave the development strategy their vote of confidence when they unanimously passed the tax assessment district legislation last December. Revenues are already being generated and a governing board for the district has been appointed. In addition, the participating lending system encompassing NHS, Marine Bank, and GKDC (SBA 504) has been designed and is fully operational.
Since the NHS began its commercial revitalization efforts, seven new businesses have been attracted to the district and one business has undergone a substantial expansion, providing much needed full-time and part-time employment opportunities. In addition, at least six retail stores have undergone conventionally financed rehabilitation and the NHS is currently considering its first loan fund application for the rehabilitation of an eight-unit, 30,000-square-foot commercial building in the heart of the district. This latter renovation will be made possible through a creative participation loan package that ties debt service payment to the lease-up schedule of the largely vacant building.
The creative participation loan package means that the lender anticipates debt service payments as the project is leased and the borrower has resources to make payments. Such phase-in payments tied to project revenues are especially important for developers with limited capitalization.
Neighborhood commercial districts can only survive if they establish strong local partnerships, target specific market segments, and implement comprehensive development strategies that carve a secure niche in today's highly competitive retail environment. All too often, this market niche is not the most immediate or obvious one, but instead may require a major redevelopment effort, including remerchandising, aggressive business development, and new management systems.