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Municipalities Court Retailers

For a time, it looked as if small downtown retail was heading for the endangered species list. Well, that time is over. Municipalities around the country are refusing to stand by and watch their once-vital retail cores perish. Instead of letting the Mabel's Diners and the Giovanni's Barbershops of the world fold, savvy municipalities are putting up a fight by devising smart redevelopment strategies and wooing new retailers. Among these retail courters are Alameda, Calif., Red Bank, N.J., Richland Hills, Tex., and Lima, Ohio.

Future vision The city of Alameda, in a quest to revitalize its retail district, recently completed a series of community meetings, dubbed "visioning." These meetings were held in order to define future retail needs and discover how to improve shopping options, service residents better, and ratchet up sales tax revenues. The 10-sq.-mi. island, across the bay from San Francisco, is in the early stages of its retail redevelopment plan.

The purpose of the "visioning" was to determine the likes and dislikes of the community, the kinds of stores and businesses residents would patronize, and what kind of shopping district they envisioned. "We worked with the community, who defined key factors - for example, broadening the retail mix, overall aesthetics, and parking - that will play a big role in our ultimate success," says Bruce Knopf, manager of economic development for the City of Alameda.

The community meetings also allowed the city to identify gaps in the retail mix and determine which items residents left the city to buy elsewhere. "The community meetings were extremely important," says Marc Fontes, the city's retail recruiter. "It's a way for us to be sure we're on track and know what residents want, and make the community feel good about how the city is designating financial resources." The city also worked with a consultant to assess the viability of the strategic plan.

The focus of the retail plan is a four-block district - Park Street - listed in the National Register of Historic Places. Part of the vision involves creating a new mix of retailers, while recapturing some of the charm of a small-town atmosphere. Other key goals include restoring the Alameda movie theater and increasing the attractiveness and pedestrian-friendliness of Park Street.

After talking with some national retailers, it was decided that the city wouldn't chase big nationals. Given the historic nature of the buildings, the building footprints aren't large enough to provide the requisite space for, say, The Gap or Pottery Barn. Thus, the plan is to draw regional retailers that will broaden the merchandise selection in several categories, including apparel, food, discounters and specialty retailers (electronics, home appliances, and housewares, for instance.)

Fontes is reaching out to regional commercial brokers and potential tenants with a pitch that spotlights the retail areas in which the community is underserved and the fact that 200 research and development firms in high- and bio-tech companies call the city home and make up a powerful customer base. Although there are no blanket incentive plans, development incentives will be considered on a case-by-case basis.

Red Bank slides into the black Recent headlines about Red Bank are clever: "Right On Red Bank" and "Rebirth In Store." A few years ago, however, a more likely headline would have been "Red Bank Drowns in Red."

The city is enviably situated about an hour from New York City at the base of a peninsula along a scenic river. Despite this, in the late 1980s and early 1990s Red Bank's five-block commercial district featured a parade of 100 empty storefronts, which worked out to a 35% vacancy rate. Retail space could be had for a song (between $8 and $10 per sq. ft.), buildings were suffering from deferred maintenance, and the city watched its tax base erode.

"It was a desperate time, and there was no evidence that things would improve," says Tracy Challenger, executive director of the Red Bank RiverCenter, an alliance created in 1991 between the business community and the Borough of Red Bank to revitalize downtown. "Like most small towns, we'd been practicing no management at all. Shopping malls were popping up everywhere-multimillion-dollar assets with huge budgets, management and promotional engines behind them. Towns had no staff, no marketing and no one to oversee them. Red Bank went completely unmanaged for the better part of its existence."

Business owners and civic leaders, reasoning that things couldn't get worse, took a leap of faith by forming a business improvement district to resuscitate the city. Property owners agreed to pay 28 cents on every $100 of their property's assessed value, to hustle private donations and to run fundraisers-music fests, holiday sales and sponsorship of downtown benches.

"The fact that it was private money and people felt they had a stake created passion, and they showed up at meetings and participated. It provided a foundation for other initiatives - a base from which we could create consensus," recalls Challenger.

Red Bank RiverCenter's agenda included developing and publicizing a plan, performing community outreach and establishing a grant program. To stimulate reinvestment, community leaders approached property owners and said, "If you put $30,000 into renovating this building, we'll match it." By the third year three significant building renovations were underway, by the fourth year 32 were under construction, and in the fifth and sixth, more than 25 were undergoing major overhauls each year.

Challenger likens the process to an EKG. "It starts out with a flat line, and there's a blip and some windows have displays. There's another blip and a few vacancies are occupied. The next blip, and more stores are filled, and you're suddenly attracting visitors and shoppers," she says.

Another key to successfully redeveloping Red Bank was attracting national stores, one of which was Corte Madera, Calif.-based Restoration Hardware. The city wooed the retailer by emphasizing the spending power of the region and the untapped customer base it could capture, and also pointed out Restoration Hardware wouldn't be entering the market solo. Other nationals -coffee shops and frozen yogurt stores-were already in place. In addition, the group showed Restoration Hardware that no one was selling unique furniture and home gifts, either in Red Bank or in nearby malls. The clincher: Trotting out the ideal building for the store and providing an investor willing to pony up the money for tenant improvements.

While anchors, like Restoration Hardware and The BonTon, are important to Red Bank's vitality, what makes the city unique are local restaurants, stores and galleries that provide interesting, unique shopping experiences. "The anchors help support those independent businesses, but we have specialized, highly colorful entrepreneurs. All the stores are different and wonderfully quirky in their own ways," says Challenger.

The Red Bank RiverCenter also made the development process easier through Turbo Resolutions - a one-day approval process to speed up permitting and allow renovation projects to start as soon as possible.

Once building improvements were well underway, Red Bank RiverCenter launched a beautification program and made streetscape improvements. Today, Red Bank's vacancy rate hovers around 1%, and street-level retail space is going for $18 to $20 per sq. ft.

Baiting the big boxes Richland Hills isn't trying to make itself a tourist destination, overhaul its downtown or court trendy coffeehouses. Its plan is much humbler, although critical to the vitality of the four-square-mile town tucked between Dallas and Fort Worth.

Richland Hills' biggest retailer-Sam's Club-recently announced that it was packing up and pulling out this year. In its wake, the city will be left with a huge void in its tax base: The retailer represents 40% of Richland Hills' sales tax revenue and 14% of the city's entire operating revenue. Given the municipality's small size, it doesn't have a substantial downtown where it can refocus its attention and create a town center, so it's critical to fill the 125,000 sq. ft. space Sam's is vacating.

Through its one-man economic development show, the city is trying to fill the impending tax revenue loss by chasing big box retailers. "As opposed to the nearby communities that are fighting big boxes, we're willing to court them and make it a pleasant experience," comments Thad Chambers, director of the city's economic development.

To land a big box, the city is willing to offer a number of incentives. They include property tax abatement, sales tax rebates, loans and grants and the waiving of permit application fees. It will also provide personnel and municipal services to facilitate the right deal and provide free infrastructure improvements.

What does the city have to offer? Chambers says the Richland Hills Sam's location was a top performer - among the top five - in the 1,850-store chain. In addition, a strong mass transit system could help both shoppers and employees. An on-demand bus system picks up riders at their doors and drops them at their destination, and Richland Hills is getting a rail stop on a new line connecting Dallas and Fort Worth, which would allow prospective retailers to tap work forces in both major cities.

The site itself is situated near two freeways and is easily accessible. And equally important is the fact that residents have gotten used to driving to the 11-acre site to shop for the last 14 years.

"Getting a tenant needs to happen. We can survive quite well for a number of years, but if the site stays vacant for the long-term, there would be a serious drain on the community," says Chambers.

Sales tax revenue equals economic health When retailers and developers crunch numbers to hunt new markets, Lima, Ohio is almost always overlooked. It's population numbers 155,000, but what's missed is that Lima is the seat of an eight-to-10 county region, within a 30-minute drive of 450,000 people. The city is equidistant from four metro areas-Columbus, Dayton, Toledo and Ft. Wayne, Ind. - which potentially elevates its attractiveness to prospective retailers.

"We'll see $2 billion in retail sales this year, but the only way for us to get noticed is to reach out through advertising and attend meetings like the ICSC's Spring Convention," says Jerry Good, vice president of development services for the Allen Economic Development Group (AEDG). This public/private partnership is comprised of local counties, cities, and townships, as well as private organizations, companies, and individuals that ensure the economic health of Allen County. The group is trying to change the perception of the area among prospective retailers and developers by marketing the city and its advantages to them.

Although Lima has a healthy retail base that includes two regional malls, AEDG has identified several holes in its mix - a movie theater, a big bookstore such as Barnes and Noble, and a discount retailer such as Kohls or Target - that it would like to fill.

One aim in broadening the retail offerings is to maintain the community's overall economic vitality. The sales tax rate is 6% and1% of that stays with the county, which uses it to stoke another economic engine - the area's industrial base.

"The sales tax recently enabled us to leverage $13 million in sales tax revenue to buy 450 acres of industrial ground for new manufacturing or distribution," comments Good. Beyond using retail as an economic development strategy, boosting retail opportunities also contributes to the quality of life for residents-an important element in attracting newcomers to the community to fill industrial jobs.

To sweeten the deal, Lima is courting new players through the development of community reinvestment areas, where new developers and retailers can benefit from real estate tax abatement.

It will also assist them in slashing through red tape during the permitting process, and will perform free demographic analyses of individual sites or a side-by-side comparison of two sites. "By far, the biggest incentive for retailers is that they can make money here," says Good.

Tracy Challenger, executive director of the Red Bank RiverCenter, Red Bank, N.J., says there are several ingredients to launching a successful downtown redevelopment program.

1. Accept the redevelopment as a process, and know that year two won't be the same as year four. You may not see significant improvements in year two, but by the time you hit the fifth year, your efforts will probably be noticeable.

2. Boost occupancy rates before making capital improvements-expensive streetscape projects, for instance. "There's nothing more depressing than spending $2 million on the streets and seeing empty stores," comments Challenger.

3. Ensure a stable enough political environment to make sure that retailers' permits and other issues that are crucial to getting their operations underway aren't affected by political in-fighting or bogged down in a Byzantine bureaucratic system.

4. Develop a network of key business and civic leaders to support a redevelopment program. Look for those committed enough to lend their time, passion, and expertise for the long haul.

5. Create a sense of "enlightened self-interest" in the community. That is, everyone's individual agenda has to be second to the greater agenda, and there has to be an atmosphere of cooperation for the benefit of all.

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