Some Ideas on Public Deal Making

Deals are really just transactions between two or more willing parties each trying to achieve their own economic ends. For the public sector those economic ends usually are focused on job creation, increased property values (in terms of adding tax revenue) and the resulting incomes for residents generated from the new or retained jobs. States, cities and villages have employed a variety of tools or resources with money in some form usually being at the center of what is brought to the table. A recent example which received statewide notoriety was a state agency offering future state income tax credits to a private company in exchange for retaining and creating new jobs. Aside from what some people feel was an offer made or negotiated outside the public’s purview it appears to have been a measured plan to make an offer of future state revenues in exchange for new private jobs now. There would be no current assets offered so there’s nothing out of pocket on the front end. Usually it’s the other way around; private companies receive benefits now in exchange for jobs and taxable developments to be delivered at some point in the future.
Cities employing loans and grants from federal and state agencies and local tax incremental financing assistance are the usual resources tendered to the private sector. In that environment money is granted or loaned to a private business entity but how much is enough money to make a deal happen without leaving too much money on the table? Good question but no single answer. One problem often befalling many cities is their tendency to compete against one another making an offer richer to entice a new development. Some companies play one community against another or in the worst case threaten to leave a community which is a dastardly form of hostage taking. (Ask one self is that the kind of partner you want your community to do business with?) There usually are few exact formulas for how much money to offer. One federal agency may regulate that no more than $10,000 per job is acceptable and another may expand the offer to $20,000 per job or more in extraordinary circumstances. Due diligence is key to making offers of public funds. How well do you know your private partner? What kinds of jobs are being created? Are the proposed new jobs at the entry level of the workforce or positions requiring formal education and high end technical skills and in what sector will those jobs be created? What wages will be paid? Usually the higher the wage the greater the multiplier effect of money swirling throughout the local economy.
Two basic gauges of public deals are 1) the ratio of public dollars to private dollars committed and 2) the payback period. Obviously one public dollar for every 15 dollars of private investment is a far better ratio than a 1:5 ratio. But there’s no exact acceptable ratio because it depends in part on where communities are on the development spectrum. Cities which are desirable places to live and have a complex economy negotiate from a different position than communities which are just beginning a development program and are struggling to spark economic activity. In the case of the latter an acceptable ratio may be one public dollar for three private dollars. Obviously the more public funds needed to invest in a deal will have an effect on how long it takes for those public dollars to be recovered. If a community offers $1M toward a manufacturing project and private investment is planned to create a facility with a property tax liability of $50,000 per year then the payback period is 20 years (not considering index adjustments or the value of any new jobs created). It’s also important to judge the end use of the public and private funds. Is the investment for an industrial building or is it for equipment? Equipment alone doesn’t contribute to local tax revenues. Going just a bit deeper then, is a public contribution of $1M solely for equipment a good investment? It may be but the question then becomes what is the public benefit? With no new private property tax revenues and no new jobs what is the purpose of the public contribution?
One customary measure might be knowing more about the entire proposal. How much cash is the private company spending and how much is being borrowed? Commercial lenders are invaluable as partners in evaluating deals. The question becomes will a bank make the loan? Another seriously important question: does the business need the assistance? Just because a company requests financial help doesn’t mean they need it. Have the private financials been shared? Don’t be afraid to ask to see numbers on the private side. If private companies worry about sharing their financial information with a public entity for fear of public disclosure then arrange for that data to be forwarded to an agreed upon legal and accounting expert to review the information and make a judgement as to previous company performance and current financial capacity.
There are numerous considerations to be taken into account when public corporations make contributions to private entities. Making a good public economic development investment requires one set of factors under which projects and deals are initially evaluated but the real test comes at the end of the deal when obligations have been met and required goals and outcomes are achieved…or not!
 


Whose Job Is It?

How many vacant storefronts do you have in your community? How many blighted buildings mar the picturesque downtown your community could have or used to have? Do you have any commercial real estate “For Sale” or “For Rent” signs in your central business district?  Questions we have heard repeatedly over the last several months are, “Whose responsibility is it to fill those vacant commercial spaces?” and “Whose job is redevelopment?”. Is the private sector responsible? Is the public sector ultimately responsible? When no one entity takes ownership of these important revitalization issues, who is left holding the bag in the end?
We work with communities who have neglected to enforce zoning codes on downtown commercial properties and now have vacant blighted buildings, which on their own are worth next to nothing. Taken in context with the rest of the neighborhood or business district, these properties detract from commerce, decrease the value of surrounding properties, attract more blight and crime and create public safety hazards.
In triage mode, public safety is the first priority. It is the building owners’ responsibility to make sure their properties are safe. If the building owner is absent or has refused to remediate the dangerous conditions the municipality has several options for fixing the issues including but not limited to the following:
1. Repair the property and bill the building owner
2. Repair the property and acquire it via tax deed (if delinquent) or condemnation
3. Acquire the property through a Redevelopment or Community Development Authority
4. Following acquisition, demolish and redevelop or remediate
5. If redevelopment or remediation is the course, make sure the property cash flows when redeveloped.
6. Sell or lease to recapture investment
When extreme blight is not the issue but your central business district is plagued by vacant storefronts, filling them with thriving businesses becomes the focus. Responsibility for progress on this front again lies with a variety of entities. Ultimately the building owner is responsible, but effort toward establishing and maintaining a thriving downtown can be contributed by a Mainstreet organization, a Business Improvement District (BID) or the municipality.
In communities where that organizational infrastructure is not in place or is dysfunctional it comes down to who has the most passion. We’ve seen communities where a small band of private sector citizens who are dedicated to their community rally support and effort to save the downtown. They may or may not ever formally organize, but the power of continued focus toward a goal almost always brings results.  We have worked in one community where a single alderman has made it his goal to get to know and recruit as many retail and commercial businesses as possible. After several years, he has established himself as the go-to person for information and retail/commercial recruitment, all as a volunteer!


There’s no free lunch in Downtown Redevelopment

Years ago there was plenty of money at federal and state levels for communities to use for revitalizing, redeveloping and helping to re-energize downtowns. The CDBG program began when President Ford signed the Housing and Community Development Act in August of 1974 and the program continues to serve communities and low and moderate income clients each year. For several years after 1977the Urban Development Action Grant or UDAG program was a source of money available to support specific urban developments wherein everyone pleaded their case for the now well-known Gap financing. In fact, the UDAG Program was sponsored by Wisconsin’s own U.S. Senator William ‘The Golden Fleece Award’ Proxmire. The Economic Development Administration (EDA) was really the nation’s lead job creating agency with their Title I Program. And there were federal regional commissions supporting development as well. States had money too, so communities never really (in the larger picture) had to spend local dollars on urban redevelopment projects.

So many communities are stuck in that same era where spending money on their downtowns is considered 2nd or 3rd tier priority behind law enforcement, emergency responders, streets/bridges, utilities and staffing costs in all departments. However, if we all believe that approximately 80 percent of new jobs are created by small business and 80 percent of job growth comes from existing businesses, then the aggregate of small downtown businesses really (when taken as a whole) may be the largest corporation within one community (considering retail and service provider job numbers and wages paid). If city halls extend themselves to support and finance single companies employing 2,000 residents, why then wouldn’t city councils and village boards support their downtowns?
Whatever the history and the economics are no redevelopment projects (large or small) come cheaply. Many communities get by with making small contributions for hanging flower baskets, benches, banners, bicycle racks and a variety of terrific downtown events. These are, indeed, needed amenities but most every practitioner would have difficulty categorizing those investments as ‘redevelopment investments’.
Acquiring property, environmental testing, demolition, real commercial rehab of the downtown building stock, constructing new public facilities, investing in private developments and preparing fully-improved sites for immediate development are all expensive activities. Spending money is completely necessary to have a successful job-creating, visitor- attracting, revenue- producing vital downtown. There are fewer and fewer of state and federal funds available now than in the past 20 years and TIF funding in many cases is only utilized when common councils and village boards have a deadlock tight agreement ensuring a committed and immediate private payback to an initial TIF investment. There’s not much risk in that deployment of TIF dollars and usually not much payback either in terms of supporting the largest corporation in your community.
Nothing is free. If one wants his or her community to flourish then one has to spend money. If money isn’t invested, then that downtown will fall further and further behind other communities which are using all sources of redevelopment financing available to them including general revenues. That’s right. Local tax dollars need to be invested to initiate and sustain the type of redevelopment investments that will make a downtown vital and a long time serving contributor to the overall community and economy. It goes to the notion of… If you don’t invest, you’ll always just be staying one day ahead of yesterday.


Do Something!

Several years ago Redevelopment Resources partners were responsible for administering several areas of municipal government including economic development, housing and downtown redevelopment . Over that time staff worked to revitalize the downtown area and we did so; starting out with streetscaping improvements, installing banners, benches and flowers, coaxing owners to fix-up their old buildings, planning, worrying about sign ordinances, organizing committees and talking a good line about the importance of revitalizing a downtown area.

We focused on all the usual start-up elements that contribute to a nicer downtown than what had existed for decades. But after awhile those kinds of hit-‘n-miss basic improvements just weren’t enough to energize or elevate our program to the next level.

After years of following and promoting these modest-styled activities one of our community leaders told me very directly during one of our many conversations to just… “Do something!” After all of our initial efforts, I felt scolded for not having done enough. So staff began to take a bit of a different approach:

• used both local and federal funds to acquire railroad property and other vacant or underutilized land;
• supported new events;
• capitalized a $750,000 commercial rehabilitation program and renovated historic buildings;
• conducted environmental studies and remediated contaminated property;
• our Mayor and Common Council approved purchase of an entire block of buildings to create a town square
• placed more emphasis on business development and recruiting the right mix of developments.

Ultimately our downtown was fortunate for a local group of investors (who had been participating in and supporting all our previous programs) would acquire a division of a local company and constructed a 100,000 sq foot office building bringing several hundred jobs downtown. From that point on more investors began to view our downtown as something more than the proverbial “The Little Engine That Couldn’t”. Indeed, we could do more and the community (both public and private) responded with investing in more developments. Over the past 10 years this Wisconsin community has invited over $100M+ of rehabilitation projects and new developments in office, medical, hotel, housing and retail business into its downtown.

In this case the success in revitalizing our downtown was that the community listened to that earlier encouragement to “Do something”! For communities everywhere, the message might be that there’s no time to waste. If you have any role in your community, “Do something” and do it now!

[Thank you Bart Kellnhauser for your support, encouragement and contributions].


Where’s the Love for your Community?

For a Christmas gift this season I gave my business partners Peter Kageyama’s book, “For the Love of Cities: The Love Affair Between People and Their Places”.  Peter was a featured speaker at WEDA’s Governor’s Conference on Economic Development, February 9 at the Monona Terrace in Madison, WI.  He gave a dynamic presentation and got some great reviews at the conference.

I read the book in preparation to hear him speak at the conference.  Kageyama covers a lot of ground (from functional to emotional relationships, and what can be done to foster all) and I found myself more than once saying, “Yes!”  in agreement with a point he was making.  As practitioners of economic development and/or as citizens of our community, we can contribute to the loveability and the connection others feel with our community.

Many of the examples in the book relate to large cities but the same can be applied to small cities and even the smallest of communities.  Is your city pet friendly?  Does it have a nickname?  Does it have great food?  Does it have fabulous events?  Is there a “green” effort?  Does your community have popular public gathering spaces?  Are there active social media vehicles?  Are there co-creators in your community?  If there is a passion among business owners, elected officials or employees for your community, how can that be exploited for the good of the whole so others can fall in love with your community too?

You don’t have to overhaul and redevelop the entire downtown, but a few strategic efforts can do amazing work at getting the ball rolling.  One redeveloped façade leads to another.  One planted flowerpot, one public bike rental facility, one active Facebook page, one pet friendly event, one group of inspired small business owners…….. it all gains momentum and pretty soon your community is picking up steam and creating (and feeling) the love!

This book emphasizes something the team at Redevelopment Resources has been overheard saying and blogging about:  Do something.  Quoting from page 215 of the book:  “Start small.  Make a simple gesture.  Then another.  Then another.  Make it easier to make your imprint.  Open your hearts and make up new things.  This is our work, and frontiers are all around us.”

 


What Comes First in Downtown Revitalization?

As unique as communities are from one another with respect to their special geographic locations and cultural heritage, communities are also common in many respects by their infrastructure, provision of services to residents and keeping an eye on their budgets and spending.  As community economic development advisors, we are often asked what downtown things should communities invest in first with the available downtown dollars they have.

The answer: It depends…..on where your community is on the revitalization continuum.  It generally follows that an early assessment, organizational and planning phase is essential to revitalizing a downtown, but beyond that what’s the initial step communities can take to move forward?  Improve basic infrastructure, examine the conditions of commercial building inventory, create urban amenities, attract an interesting mix of retail and commercial business, eliminate blighting influences (including environmental remediation), and the list goes on.

An initial downtown assessment and planning phase will outline strengths and needs and also offer suggestions on priorities.  But to begin actually implementing plans and ideas, how do you move from where your downtown is currently?

Maybe you focus first on improving existing strengths in your downtown; maybe you work with properties which are currently available, affordable and ready to be redeveloped (the low hanging fruit opportunity); or identify and work first with an interested entrepreneur who wants to open a downtown business; or work with an investor who wants to in-fill, build or buy and renovate a building.

Other answers to the question, “What should my downtown invest in first?” include: evaluate the entry to the downtown (improving your gateway); concentrate on renovating one historic or other prominent building based on budget and scope; work with local business to create excitement in one (or a group of) retail storefront(s) (others will follow!), acquire and raze one blighted property, create and market a downtown event.

The answer to the question, “Which comes first?” is: All of the above!  Ideally a community should work simultaneously on as many opportunities as practical, but in the alternative…. at least do something!

 

 

 


In Search of Excellence, or Beyond Mediocrity

In so many of the communities Redevelopment Resources has worked, there is a desire to be excellent. We see it across the communities and organizations where projects begin and either proceed or become stalled. Many economic development practitioners, municipal employees, Main Street employees, board members and volunteers have a desire to do the best work they possibly can.
So why are there communities with incomplete projects, struggling downtowns, languishing industrial parks, a glut of vacant commercial real estate? And at the same time other communities are thriving with “NOW HIRING” signs on many of their businesses; have vibrant downtowns; and business owners are expanding?


It could be said that a lot of it has to do with attitude. The desire to be excellent, even in uncertain times is a force to be reckoned with. To excel at something means to be better or greater than another. Mediocrity on the other hand is the state of being neither very good nor very bad. In this challenging economy, there is no room for mediocrity. One must ask him/herself, “What else can be done?” “How can this problem be solved?” “How can this project be moved forward?”
It would be easy to say, “There isn’t money for that”, or “there is nothing we can do until the economy turns around”. Another common excuse is that a project won’t get the required votes from a council or committee.

1. Be encouraged to push beyond those excuses. Brainstorm solutions with coworkers.
2. Research like projects; chances are the same challenges have been met elsewhere in the world!
3. Find the money: consider non-traditional sources including private foundations or individuals in the community who have money and want to invest it in the right project. Put together an investor group of junior investors who want to get started developing projects and portfolios in the community.
4. Succeed in spite of the economy. Don’t be swayed by the reports in the media hype about the negative economy. Somebody’s doing well somewhere…… make it be your community!
5. A solid project needs a champion and a majority of votes, not unanimous support.
6. Be as clear and concise about your project, highlighting (and focusing on) the benefits to the community.
7. Look for financial and technical support in nontraditional places. Take on private sector advocates for projects like local bankers, real estate agents, utility representatives, private foundation representatives, attorneys, accountants, other stakeholders standing to benefit from the project (directly or indirectly).

Be BOLD, and be diligent! Your community will benefit from your efforts!


Vacant Storefront Makeovers

No one gets uplifted or inspired when passing a vacant storefront. It’s depressing. It doesn’t bode well for the image of the community, and certainly isn’t fun for the adjacent business owners. So what can be done to bring some life back to these dark voids? If you can get permission from the building owner, here are some quick tips:

For those buildings with window displays:
Post a calendar of community events on an easel in the window and illuminate it well. If track lights are not an option, buy a floor standing light fixture that allows you to position the spot light(s). [see photo attached]

Create a fun window display using merchandise from neighboring stores. Place a sign acknowledging the merchants and where they are located. Illuminate the display and sign.

Buy some temporary paint and have an artist paint a large seasonal graphic on the window. Change the graphic monthly.

With all of the above suggestions, be sure to make room for a sign that describes the benefits of the space to entice passing pedestrians. You never know who might be interested in leasing the space, or who KNOWS someone interested in leasing a space like it.

For buildings without window displays, round up volunteers in the building trades and:


Remove ripped or damaged awnings. No awnings are often better than old tattered ones.

Paint window and door trims an attractive color that coordinates with the rest of the building.

Get an exterior light working and on a timer so the façade is not dark during the evening hours.

Post a weatherproof sign on the outside that describes the space for lease and/or contact information.

Place a large urn on the sidewalk with seasonal flowers/greens in it. Make sure it is well maintained.

You’ll be surprised how much these improvements/enhancements can help boost community morale and expedite getting the space occupied.

Now, if the owner is not open to these ideas, and no amount of sweet-talking will change his/her mind, then there is a bigger problem at hand and one that needs a different kind of attention. This is when some serious negotiating needs to take place regarding the future of the building. And if all attempts meet staunch refusal to move forward in any matter, then it’s time to surrender the fight and wait. Eventually, the scenario will change. In the mean time, you can find comfort in the fact that you’re not alone. All communities have a curmudgeon or two in their mix. It’s what makes the world go round.

Lyn Falk
Registered Interior Designer
Consultant – National Main Street
Strategic Partner – Redevelopment Resources
President – Retailworks, Inc. www.retailworksinc.com
lfalk@retailworksinc.com
262.238.1860 ext 101
414.840.1244 cell


Where is Your Commitment?

I’ve recently had the opportunity to see inside a few organizations to understand just exactly where the commitment lies. It’s been eye-opening, and has caused me to really understand how people are motivated differently, and how effective, or ineffective it can cause the organization to become.
Commitment to the organization, its mission, vision, goals and objectives should be expected from all members of the organization. As an organizational leader, it’s important to make sure you provide a clear aiming point. Be specific about explaining the standards of commitment you are personally adhering to, and you expect them to adhere to. This commitment should be communicated to board members, city council members and other stakeholders as well. If you clearly outline your commitment to established goals and objectives, stakeholder buy-in is much easier to attain.
Focus on the possibilities that are created with the goals and objectives you’ve developed and behave consistently, demonstrating your commitment through your actions. Many times it seems so much organizational focus is placed on putting out fires, solving problems, or dealing with naysayers or negative attitudes. To quote a line from a book by Price Pritchett entitled, “Firing Up Commitment During Organizational Change”, “Too much respect for problems kills our faith in possibilities.”
Problems come up, sometimes daily, but by focusing on the problems and not the possibilities generated from achieving your goals and objectives, you will spend an extraordinary amount of time spinning on those problems, and often will lose sight of the direction you’ve set for the organization, community or business.
If you are dedicated to the organization and demonstrate that through commitment, holding your standards high for your employees, colleagues and external stakeholders, behavior starts to matter. Attitude and performance begin to make a big difference to the people involved. It’s then that you must reward your people for their commitment, or the commitment will start running on empty. In an effort to legitimately expect more commitment, make sure they have a true vested interest in the results. Provide an opportunity for shared recognition, a psychological paycheck so to speak, or other tangible or intangible reward. A sense of ownership in community revitalization work goes a long way to a shared feeling of pride. Being able to stand back and see the skyline or landscape changed and see people enjoy and appreciate the changes is very rewarding.


Develop a Network and Learn from Friends

Redevelopment Resources is encouraging you to attend our upcoming half-day seminar, Tough Love and Downtown Revitalization, Tuesday June 14 in beautiful downtown Neenah. The event has been carefully crafted to meet your needs as a practitioner of economic development, community development and downtown revitalization. We are going to focus on issues facing your community in today’s economic environment, and what you can do to spur interest from developers, retailers, service related businesses and especially your elected officials.

Don’t miss the most helpful half-day session on downtown revitalization available! Learn from experienced practitioners, what you can do TODAY to start revitalizing your business district and other areas of your community. Sometimes it takes tough love to deal with a challenging city council, absentee or myopic property owners, and local business owners facing challenging times. Learn how to shift mindsets and incorporate transition.

Do you have vacant storefronts in your downtown? Do you have absentee landlords who don’t share your concern for the community? Do the business operators in your downtown need a spark of excitement? Learn techniques to exploit your assets and minimize your liabilities.

Attend “Tough Love and Downtown Revitalization” and learn how to approach business recruitment aggressively to fill your vacant storefront. You’ll hear approaches to dealing with blighted property that you can take back to your community and implement immediately. Discover how to be bold and deal with absentee property owners in an impactful way. Gain ideas for sparking enthusiasm and ownership in the downtown among small business owners.

If you cannot attend, send someone from your community. We will be announcing a very special giveaway at the event that you won’t want to miss! Visit our Events page on our web site and sign up today! Space is limited.


Develop a Network and Learn from Friends

Sign of for Redevelopment Resources Updates