June/July 2005

Virginia Review

Trends in Downtown Revitalization

BY MATTHEW M. DUGAN, TIMMONS GROUP

Local government officials should be happy to hear that Main Streets are making a come back. According to Kennedy Lawson Smith, Director of the National Main Street Center, at a recent presentation for the Virginia Main Street Program, “there are some threats to downtowns, but also some of the best signs I’ve seen in over 20 years of working at the National Main Street Center.” Healthy downtowns generate more sales, property and other tax revenue for local governments than a deteriorated and vacant downtown and provide an important place for people to live, work and enjoy.

The Virginia Main Street Program, managed by the Department of Housing and Community Development, hosted Ms. Smith’s presentation on the latest downtown revitalization trends because of her recognized expertise and experience in downtown revitalization. Virginia Main Street works to revitalize the state’s historic downtowns by providing training and technical support to help Main Street communities improve and beautify their downtowns and encourage private investment, business development, and tourism.

Smith began her presentation by outlining the Main Street “circle of investment:” (1) the first step in the circle is to help businesses sell more; (2) businesses can then afford higher rents; (3) this leads property owners to rehabilitate their buildings; (4) the district then looks more attractive; (5) more people visit the district, and then the cycle starts over again. Here’s what Kennedy Smith sees for the future of historic downtowns:

1. Life on the Streets—24/7

Downtown housing is starting to increase, which has led to an increase in foot traffic and purchasing on Main Streets before and after work hours. While each new downtown employee spends between $2,500 and $3,500 downtown each year, each new downtown resident spends anywhere between $7,500 and $14,000 annually in the downtown. Therefore, local government strategy for economic development should include attracting residents to downtown in addition to recruiting new businesses to downtown. Residents living downtown help encourage neighborhood–oriented development such as commercial services and retail.

Communities are seeing a growth in upscale upper story housing, and retirement and assisted living housing is also slowly opening up in downtowns. Movie theaters are making a comeback to Main Street. Theaters that show movies in the evening help increase the number of customers and energy in downtowns. Catering to working professionals, small retail businesses are increasingly open during evening hours.

Smith mentioned an exciting new addition to the Federal HUD program, HOPE VI, which will likely bring more housing to downtowns in the coming years. The HOPE VI program was created in the early 1990s, with significant input from the Congress for the New Urbanism. The program's sole focus has been to provide funds to demolish substandard public housing and replace it with mixed-income, mixed-use communities. The results have generally been very positive. However, because HOPE VI is directly tied to existing public housing, smaller cities, which generally do not have either public housing or a public housing authority, have not been able to take advantage of the program.

A new "Main Street" provision has been added to the regulations that will fulfill the intent of HOPE VI, by providing high-quality affordable housing (“affordable” housing could also include housing for the elderly, artists, et al.) in a mixed-use environment. This is a departure from the way HOPE VI has worked in the past in that it will allow smaller cities to use HOPE VI funds to create affordable housing in existing buildings, such as upper floors, in downtowns. This means that HOPE VI could be used under the new "Main Street" provision even in very rural communities that were not eligible before. For more information about HOPE VI, visit www.hud.gov/offices/pih/programs/ph/hope6/index.cfm.

2. National Retailers

Another sign of the success of downtowns is that national retailers are starting to open stores downtown. Smith commented, “National retailers are trend followers, not trend leaders.” This is an indication that Main Streets are accepted as economically strong areas, worth moving into. Culpeper and Warrenton, two Virginia Main Street communities with less than 10,000 residents, have an Orvis store located downtown. Furthermore, most of these retailers are not tearing down historic buildings; instead their stores are respectful of the architectural context of downtown.

But as many national retailers are coming back downtown, Smith expressed concerns that U.S. Post Offices were pulling out of Main Streets – a trend that should be monitored in the coming years. Local business leaders and government officials need to be prepared if building stock downtown becomes available.

3. Promote History and the Memory of Place

There are currently 4,500 dead or dying shopping malls in America and some are getting redeveloped into developments that look quite similar to historic downtowns. Smith believes this could cause problems for Main Streets by confusing what is historic and what is not. She believes Main Street communities will need to make a point to distinguish themselves by promoting their rich history and the special memories that their historic downtowns hold in the minds of local consumers.

4. The Importance of Incentives

Smith discussed the need for Main Street communities to offer and promote incentives to potential developers. Local government plays an important role in developing and promoting economic incentives. The Old Town Development Board of Winchester, another Virginia Main Street community, published a guide to help businesses start-up and expand. The guide, Doing Business In Old Town Winchester, contains information on ten different financial resources available from local, state and federal sources. Currently it is easier to develop outside of traditional downtowns because there are fewer hoops to jump through. Incentives such as tax increment financing districts, local technology zones, enterprise zones and various types of tax credits make locating in downtown attractive.

One tax credit program Smith specifically mentioned was the New Markets Tax Credits Program, which is targeted to low-income areas. The New Markets Tax Credits Program permits investors to receive a credit against Federal income taxes for making qualified equity investments in designated Community Development Entities (CDEs). In simplest terms, this program makes it attractive for investors to provide capital for community development projects in low-income areas because they receive a Federal tax credit. Without the incentive of the tax credit, it’s unlikely that investors would front capital for many of these projects. In Lynchburg, a Virginia Main Street community, the Lynchburg Neighborhood Investment Fund received a $70,000 award to make affordable housing loans to low-income individuals. For more information, visit www.cdfifund.gov.

Positive Signs for the Future

In her conclusion, Smith stated, “there are some threats to downtowns, but also some of the best signs I’ve seen in over 20 years of working at the National Main Street Center.” The strength of Main Street is the commitment of local governments and volunteers across the country to save buildings and revitalize downtowns.

To learn more about the Virginia Main Street Program and downtown revitalization resources, visit the web at www.dhcd.virginia.gov/mainstreet or call (804) 371-7030.

Matt Dugan is a Land Planner with Timmons Group and can be reached at 804-200-6455 or matt.dugan@timmons.com. Before joining Timmons Group, he worked on a variety of downtown revitalization projects as a Program Assistant with the Virginia Main Street program. He holds a masters degree in urban and regional planning from Virginia Commonwealth University and a bachelors degree in economics from the University of Texas at Austin.

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