Shifting Economic Development Downtown

New Construction vs. Rehabilitation

Reinvesting in the infrastructure we already have is a more sound and pragmatic approach to economic development. Considering increased construction costs and limited government budgets, it is financially more responsible to reuse the buildings that have already been built. Building on raw land also requires the construction of new roads as well as new water, sewer, and electric lines. These costs are generally undertaken by the municipality. Taxpayers underwrite the cost for multinational corporations when malls and big box centers are developed. The new infrastructure is a heavy burden for buildings that can be considered disposable as they typically do not stay in use longer than 25 years. American cities and towns are filled with great buildings that have stood the test of time but remain vacant.

“If a city area has only new buildings, the enterprises that can exist there are automatically limited to those that can support the high costs of new construction." Author Jane Jacobs

Urban planning pioneer Jane Jacobs, author of The Death and Life of Great American Cities, stated “If a city area has only new buildings, the enterprises that can exist there are automatically limited to those that can support the high costs of new construction.” There is a reason most independent businesses are located downtown, because this is the only area they can afford to exist. Locally owned business are integral to the health of local economies as a much larger portion of their operating expenses stay in the community. This is because independent businesses tend to use local accountants, attorneys, printing, advertising, etc. To keep more money from leaving our communities we must maintain affordable commercial spaces available for rent. Simultaneously communities benefit significantly from locally owned businesses in less direct ways. These business do not have the rigorous requirements of national chains and have the ability to get creative with their business model and use of space. Locally owned businesses contribute significantly to a communities sense of place by offering a unique mix of products and services, individualized customer service and add to the overall character of a district.

Tools for Downtown Development

The renovation and restoration of older buildings creates more jobs than new construction. New construction relies heavily on the purchase of new materials. Typically these materials are produced and purchased from out of state companies and don’t benefit the local economy. Preservation projects require 50% more labor, which is a local resource, than new construction. There are also a number of great tools that can help make downtown renovation financially comparable or even more desirable than new construction.

• The Federal Historic Preservation Tax Credit program administered by the National Parks Service offers a 20% credit for qualified rehabilitation expenses on contributing buildings in historic districts listed in the National Register of Historic Places as long as the work meets the Secretary of the Interior's Standards for Rehabilitation.
• A number of states offer similar programs that can be coupled with the Federal Historic Preservation Tax Credit program. In states such as Virgina and Iowa this can reduce the total project cost by up to 45%.

A tax credit is a dollar-for-dollar reduction of an individual's or company's liability. These credits are also transferable and can be sold to companies seeking to reduce their own liability. These programs have made an incredible difference in downtowns and neighborhood commercial districts across the county and have been demonstrated to pay for themselves in terms of increased construction spending, new jobs, and increasing the tax base.

Urban Planning for Healthy Cities

We must shift our focus to quality-of-life issues and creating a sense of place. These investments have proven time and again to be a better value and more sustainable. If we look at cities with healthy urban cores, they inevitably have a high quality of life and a healthy economy. Looking at the inverse, cities that have dilapidated downtowns with high vacancies tend to lack a sense of community, have a poorer quality of life, and weaker economies. This is because as we have become a more mobile workforce, those with the skills to derive an income in multiple locales choose a place that offers those aforementioned qualities. A healthy downtown is a great indicator of the larger issues such as quality of life, sense of place, and a feeling of community.

Real estate development, like water, will follow the easiest course. If municipal governments continue to make downtown development difficult, they can expect investment predominantly on the fringes where it has the least impact. Policies must adjust to guide development where it benefits the community the most, by reducing barriers and fees for downtown projects. Cities should use their limited resources to invest in projects that utilize existing infrastructure, add to a sense of place and quality of life, reduce dependence on cars, and make our communities more environmentally friendly and sustainable.