Author Archives: DANTH

Downtown Friendly Store Formats, Facades and Signs

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Over the years I have seen downtown developers, landlords and store owners propose retail store formats, facades and signs that are appropriate only in a highway or shopping center setting. They invariably claim that the retail chain demands exactly what they are proposing. Sometimes they go on to claim that their way is the only way the chain does things. Consequently, I have tried to accumulate photos that can be used to disprove these assertions. I have tried to find examples that are “downtown friendly,” i..e., that have appropriate scale and acknowledge and encourage pedestrian activity. I have also included some that I just plain like — as well as examples of some things to avoid.

This posting is an elaboration of two earlier postings on this subject. More photos will be added periodically over time. A slide show on this posting is provided below.

Learning From Las Vegas

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I don’t gamble, but I love to go to Las Vegas. For a downtown revitalization specialist, it is a working laboratory that is intellectually provocative.

How to move people efficiently and effectively is an apparent concern of casino owners and local government officials. The responses have ranged from hotel elevators with nil wait times to a monorail and a pedestrian mall.

Double click on the photo to access the photo album.

Downtown Friendly Garages

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This collection of photos aims to show that a downtown garage does not have to be a hideous, massive structure that visually violates the surrounding area while creating a dead space that severely dampens pedestrian activity. These garages are all mixed use. Most have ground floor commercial activity. Some have residential units. Some are completely hidden from the street, except for their entrances and exits.

Paying “Premiums” For Downtown Redevelopment Projects

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A wave of public indignation and anger against the use of eminent domain for economic development purposes now threatens the renewal of our nation’s downtowns, Main Streets and neighborhood shopping areas. However, evidence suggests that the use of eminent domain for economic development purposes can be salvaged if universally acknowledged abuses are avoided AND the property owners and tenants dislocated through the use or invocation of eminent domain are paid a meaningful “premium.” The characteristics of the premium may differ case by case, with resulting variation in cost. However, it can be anticipated that the cost often will be significant, with considerable consequences on the financial feasibility of downtown redevelopment projects. Savvy downtown organizations will be finding ways to finance these new redevelopment project premiums.

Kelo’s impact. The reaction to the June 2005 decision of the U.S. Supreme Court in the Kelo v. New London case has put the use of eminent domain in jeopardy in a growing number of states across the nation. Though the court, in a close 5 to 4 decision, affirmed the use of eminent domain, legislation has been introduced or passed to reduce its use in Alabama, Delaware, Texas, Ohio, Minnesota, Colorado, Michigan, Pennsylvania, Florida and New Jersey. California also will hold a referendum on eminent domain in November 2006.

Though these legislative initiatives fall into a number of descriptive categories, their underlying objective — except possibly for clearly blighted situations– is usually to make it difficult or impossible for eminent domain to be used to increase tax revenues or for economic development purposes such as to enable real estate projects that putatively will significantly improve an area’s economic well-being.

Downtowns obviously cannot wait until blighted conditions appear before undertaking serious redevelopment projects. Doing so just makes redevelopment riskier, more costly and burdensomely complex. A way to make the use of eminent domain again palatable must be found. The future of America’s cities and towns is at stake.

Fair market value and the case for premiums. While the Kelo decision focused on the issue of public purpose, in my view the real challenge with eminent domain projects is political rather than legal and centers around the issue of fair market value. As things now stand, an eminent domain project will usually have potential victims from the getgo — the people who must give up the properties they own and who have not asked for the project to be initiated. While the project may indeed have results that will enhance the general good, the best that the property owners can do is get “fair market value.” Such victims can politically nullify a project’s public benefits and become the rallying point for political opposition.

HUD standards are often cited as exemplary when it comes to the use of eminent domain. They are based on an appraiser determining a property’s fair market value, which according to one of HUD’s publications can be understood in the following manner:

“Fair market value is sometimes defined as that amount of money which would probably be paid for a property in a sale between a willing seller, who does not have to sell, and a willing buyer, who does not have to buy. In some areas a different term or definition may be used….The fair market value of a property is generally considered to be ‘just compensation.’ Fair market value does not take into account intangible elements such as sentimental value, good will, business profits, or any special value that your property may have for you or for the Agency.”

Associate Justice Samuel Alito of the US Supreme Court went through his confirmation process around the time that the Kelo case was before the court. In a TV interview Alito was asked about the case and he uncharacteristically expressed a fairly clear view on the issue at hand — the use of eminent domain would be OK, if owners were paid a premium over fair market value for their properties, with the clear implication that such a premium is to compensate for the sort of “intangible elements” that are denied in HUD’s definition of fair market value and/or a share in the economic wealth generated by the project.

Such a legal position appears consistent with the claims of many redevelopment advocates who, in the vortex of debate that built up around the Kelo case, argued that the vast majority of property owners receive more than fair market value when their properties are sold under the threat of eminent domain. Redevelopment advocates also argued that commercial and residential tenants who are forced to relocate by eminent domain related redevelopment projects usually receive very favorable financial considerations. Unfortunately, there is no rigorous research to substantiate these claims, only a thin array of verbal anecdotes.

My own family’s experience indicates that property owners do not always feel that they have received a munificent amount of money from the governmental entity taking their property — or threatening to do so.. Furthermore, the whole experience can be quite complex and its true impacts may take years to emerge.

Back in the early 1950’s, the New York City Housing Authority used the threat of eminent domain to purchase a brownstone and tenement owned by my maternal grandmother in order to build a high rise “housing project.” My grandmother, four of her children and their spouses and children occupied apartments in these two buildings. We all lived in a warm and closely knit family environment. While the neighborhood was changing and family members had considered moving, there was a lot of inertia caused by the fear of the family being dispersed. When the city invoked eminent domain the family could not really judge whether the financial offer was fair or not. Most importantly, the family felt that it did not have the power to fight the city. Family members felt they had no choice but to make the moves to other neighborhoods that they had long contemplated. The money might have made things a little easier, but it was not viewed as a bonanza. The fact that we were forced to move left a somewhat bitter taste. I wonder how we would have reacted if the city had showed that it was paying us 25% above fair market value and explained “We are forcing you to move and the extra money is our way of trying to make up for it.”

Ironically, the diverse manifestations of redevelopment premiums are amply demonstrated by the types of final settlements made by the families involved in the Kelo litigation.

A state official involved in the negotiations claims that giving the property owners more money was a key to the settlements. Also, according to an article in the New York Times, one of the settling owners said “When you look at my property, put these on,” as he fiddled with a pair of sunglasses with dollar-sign holograms on the lenses. Susette Kelo, a lead plaintiff, agreed to have her house moved to a new lot. Another homeowner said the difference was a number of small concessions the city made:

  • While his house will be torn down, his family has an option to buy property in the new development at an agreed price.
  • The city also agreed to move the rhododendrons, yews and other plants his father planted 30 years ago and to install a plaque in the development to honor his mother, who fought the condemnation of her home until she died in 2003.

Successful redevelopment premiums will stimulate property owners and tenants to settle with the developer or development agency and avoid legal actions. Redevelopment premiums are more likely to succeed if they:

  • Provide the property owner or tenant with some of the increased wealth that the new redevelopment project will generate. This will require the involvement of a shrewd financial deal-maker

  • Compensate, financially or otherwise, for “intangible elements” lost by the relocation (e.g., the rhododendrons, yews and plaque mentioned above). This will benefit from a negotiator with superior inter-personal skills.

Where is the money going to come from? The relatively high costs of downtown land already require that financial incentives such as tax increment financing, payments in lieu of taxes, land write-downs, etc., be made available if many redevelopment projects are to be financially viable. The costs of redevelopment premiums — especially in small and medium-sized projects having limited density and hence limited income potential — may require the use of new financial tools.

One of these may be giving current property owners equity stakes in the redevelopment projects that will be built on their properties. The ability to reach a timely agreement on the current values of their properties will likely be critical to the success of such ventures.

Many downtown districts have the capacity to issue bonds through their municipality which are paid off from the districts’ assessments. For example, a district paying about $45,000/yr for 20 years might bond for about $500,000 at a 6.5% interest rate. While $500,000 is not a princely sum, it often can be leveraged and might help make three or four redevelopment projects viable.

Also, there are what some call “exactions.” A community might find that hefty redevelopment projects capable of generating large revenues and big increases in municipal tax revenues are occurring along the municipality’s periphery or in very solid sections of the downtown. The local government might negotiate for such a project to donate $50,000/yr for 20 years — which adds up to $1,000,000. For a shopping center with annual revenues over $100,000,000 a $50,000 exaction should be more than affordable.

The Often Meandering Path of Downtown Innovation

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Change Agents. Good downtown managers assume the role of “change agents.” After all, revitalization is a process that results in positive changes and downtown managers are charged with stimulating, cultivating and guiding the revitalization process. Very frequently, the downtown change agent role is seen as involving the linear implementation of a sound plan or strategy. However, in my experience, successful downtown innovations very often follow a path that meanders a fair amount from the original plan with the results, though very acceptable, emerging in a form that is not exactly what was initially intended.

The relatively simple addition of slot cars to the Bayonne Town Center’s Car Show clearly demonstrates this point. When a new hobby shop presented the Bayonne Town Center Management Corporation (BTCMC) with an idea for a model train exhibition, the BTCMC worked with the shop and ultimately was sufficiently flexible and patient to find that a slot car exhibition promoted through an existing car show event was a more viable plan. Persistence and an open-minded and flexible approach led to a successful downtown innovation.

The Initial Plan. When Pastime Hobbies opened in Bayonne, NJ about two and a half years ago, the BTCMC, a special improvement district, was very pleased. Hobby shops have very large market areas and their customers often make large dollar purchases. The BTCMC’s district could benefit from this drawing power.Furthermore, the BTCMC’s revitalization strategy called for establishing the district as the community’s central social district and envisioned the development of an entertainment niche as an important means of achieving that objective. The district currently has a number of strong restaurants and popular fast food operations. Unfortunately, it is without a movie theater, legitimate theater or concert hall , though redevelopment plans call for the eventual construction of such venues. In the interim, the BTCMC’s management is using events such as a film festival, car show, poetry contest and various Christmas activities to grow the entertainment niche. It is always looking to strengthen this niche, especially with activities where visitors can be both participants and observers, e.g. playing chess, riding a carousel, sailing a model boat, playing bocce, etc.

The BTCMC’s staff and Vinny Margiotta, the owner of Pastime Hobbies, began talking about a very large and sophisticated model train layout in Carlstadt, NJ, which regularly attracts lots of visitors. The initial plan was for the BTCMC and Pastime to work together to create a similar attraction in the Town Center. Pastime had helped form an embryonic model railroad club that would operate the venture, while the BTCMC would help find a location for it as well as lending a hand with promotions and marketing.

A field visit to the Carlstadt model railroad operation provided a reality check. It occupied a large amount of space — far more than the 450 SF to 1,000 SF that might be made available for the Bayonne model railroaders at the marginal amount they would have at hand for rent. In addition, the Carlstadt setup had taken years to build and was run by a strong club of avid adult model railroaders. Young people were mostly visitors.

While many toddlers are heavily into train sets by such manufacturers as Thomas, Whittle Shortline and Maple Landmark, interest in model railroading seems to diminish as children pass through their preteen years. Adult men have the greatest interest in electrified model trains.

Adaptation 1. With space being a constraining variable, Vinny came up with the idea of slot car racing, which would require a much smaller setup board than the model railroad. The model racetrack board also could be put together and then taken down with comparative ease. Depending on the gauge of the cars, a good racing board can vary in size from 4’ by 8’ to 7’ by 12’. The costs are also reasonable, ranging from $400 to $800.

From the BTCMC’s standpoint the slot cars offered several advantages over the model trains. It would attract pre-teen youngsters and teenagers as well as adults, which would reinforce the district’s Kids Row niche. It also would be easier to find venues for the slot car setup board.

The BTCMC suggested “a test of concept” — the BTCMC would arrange for a community center located in the district to provide space for the slot car racing on a Sunday afternoon and promote the event through newspaper ads and fliers. Pastime Hobbies would form a slot car racing club that would put together the racing board and manage its use at the event.

This event had mixed outcomes. It did not attract as large a crowd as hoped. But, those who did attend really enjoyed it. In addition, the racetrack board worked and it was put up and taken down with comparative ease. The overall assessment was that the “product” was good, but a way had to be found to tap a bigger audience for it.

Adaptation 2. Rich Martin, a BTCMC board member, attended the event. He remembered fondly that when he was younger there was Dobbs, a store in Bayonne where kids and adults raced slot cars. He also was motivated to build his own slot car racetrack in his basement. He became very committed to creating a successful BTCMC event around the slot cars.

Then, talking to the BTCMC’s staff about how to find this wider audience for the slot cars, he stimulated Cathy Jakubowski, the BTCMC’s executive director, to come up with what turned out to be a very viable idea — Rich and Vinny would setup their slot car racetracks at the four old car shows the BTCMC runs over the summer. As can be seen in the photos , the slot cars attracted lots of people, including both kids and adults. Many of the adults also remembered Dobbs.

The BTCMC is considering looking for a location for a more permanent installation of these slot car racetracks. However, their ease of installation and consequent mobility suggests that plugging them into other events held in the district may be more cost effective.

Some Observations.

  1. The BTCMC was persistent in trying to leverage the potential assets provided by Pastime Hobbies to achieve its strategic objectives.
  2. The BTCMC’s staff did not quit: it continued to provide motivational and advertising support even when plans fell apart or appeared somewhat disappointing. It played a catalytic role in this process. It also was flexible and not committed to just one idea, e.g. a permanent model railroad setup.
  3. The innovative ideas did not come just from the BTCMC’s staff, but also from other key players the staff involved into the process. The staff’s prime role was to keep “stirring the pot” until something viable happened.
  4. Using the BTCMC’s car shows as a venue for the slot car racing strengthened both
  5. In this innovation process the adaptations were made to fit with the district’s characteristics (the unavailability of large spaces) and to take advantage of one of its assets ( the car shows).
  6. This approach is reminiscent of the way great chefs behave. They prefer to use the best possible ingredients and base their recipes on them. When some ingredients are unavailable they do not leave the kitchen, but adapt their recipes to take advantage of those that are on hand. This is precisely what Vinny Margiotta, Rich Martin, Cathy Jakubowski and the rest of the BTCMC’s staff did in this case study.
  7. The BTCMC has not given up on the idea of creating a model railroading setup and continues to look for a venue where such an installation would be possible, afforable and visitor friendly.