Their Legacy Layer of Challenges Structure How Our Entertainment and Arts/Cultural Venues Are Coping With the Covid19 Crisis

Posted on April 26, 2020 by DANTH

By N. David Milder

Introduction

These organizations face the same two overarching challenges that all businesses and nonprofits in the nation now face: 1) surviving the crisis and 2) then making any operational changes needed to be successful in the post crisis environment. The legacy layer of conditions for a large proportion of these venues already placed them in grave financial danger that the additional challenges unleashed by the Covid19 pandemic probably will only exacerbate. Their size and business models are two very important variables that impact on their ability to meet these two challenges. The larger organizations are more apt to have or attract the financial resources and staff talent to survive this crisis. Nonprofits usually have a troubling hybrid income model that combines revenues from earned income with contributions from various government and numerous private sector and individual sources. That presents a managerial challenge even for the strongest of them. Another important impacting factor is an industry’s long term trends, as is the case with movie theaters. In many instances, the impacts of the Covid19 pandemic do not have to be all that strong to quickly send financially teetering entertainment and arts/cultural organizations into extremis. Getting them prompt and appropriate assistance will be critical to their survival.

For those that do survive, legal or customer sanctioned adaptions to make them more pandemic proof could pose new operational challenges and financial burdens, especially for those with weaker financial and staff resources. Moreover, the book on what such adaptations might be has only begun to be written, so it is difficult at this time to scope out what the post crisis needs of these organizations might be. However, the more quickly this task is accomplished, the sooner programs can be created to help assure these organizations will operate well into the future.

Downtown organizations should not overlook the needs of these organizations as they also try to help retailers and restaurants.

Looking at Some For Profits

Downtown Cinemas. For many small and medium sized downtowns, their movie houses are one of their strongest assets and their most important entertainment attraction. It is often also a source of considerable community pride. When the conversion to digital projection threatened their local movie theaters, residents in many communities across the nation banded together to raise funds to keep them in business. Saving them unleashed an impressive amount of community action across the nation.

Nevertheless, movie theaters long have been on a rather steady path of decline, and “the totals for both 2017 and 2019 rank as the worst years for movie ticket buying since 1995.”¹Attendance also has been in sharp decline. Over the past 20 years, it has dropped by about 25% nationally, while the population has grown by 15%.² Making things worse for theater owners, 2019 was the strongest year yet in the number and quality of the movies sent either directly or very early to streaming outlets. Netflix, for example, produced and distributed many films. It also “received the most Oscar nominations of any company (24) for films like The Irishman and Marriage Story”.³ Americans, since at least 1994, have preferred by rather large margins to watch their movies at home to seeing them in a theater (see the table below).⁴And they watch more movies per person at home than in movie theaters by a 5 to 1 ratio. Moreover, even the most frequent movie goers prefer home viewing.⁵

Downtown cinemas can spark a lot of community pride

Movie theaters were immediately hurt by their inability to have onsite patrons during the pandemic crisis as long as social distancing measures are required, or they were closed outright by local governments. Many were already badly financially stressed, and they are unlikely to survive a year or longer recovery period. Long term, they were already likely to be hurt at an accelerating rate by increased studio direct releases to streaming, and consumers’ increased online movie going. Their financial and management burdens will only be increased if they are also forced by customer pressures or legal requirements to install anti- pandemic physical and operational improvements (e.g., reducing seating so they are 6 ft from each other, better air filtration, taking patrons’ temperatures, more frequent and more thorough cleaning, customer spacing on entry and egress).

Any downtown EDO that wants to keep its movie theaters should look at the toolbox of programs that was developed by many downtowns to help their movie theaters cross the digital divide and then have their own program ready to implement. Quick action is often needed when a movie theater gets in trouble. Crowdfunding and forming a community owned corporation to buy and operate a cinema were two of the most powerful tools used.⁶ The alternative is likely to be trying to find new uses for these empty large buildings. That may be an even more challenging task.

Professional Sports Events. Major league sports teams, these days, are often fairly large organizations that are worth billions of dollars (see table below) that are owned by people who often are billionaires themselves. They also have very significant annual sales and very high proportions of those revenues come from contracts with cable and tv networks. The NFL in 2019, for instance, had a total revenue of about $14.47 billion, with $452.375,000 the average team revenue.⁷ About 57% of the league’s revenues come from TV and cable contracts, with the remaining 43% coming from fans in the stadiums.

Most Americans do not attend professional sports events with any real regularity. Tickets are just too expensive, or the games/events are too geographically distant. They predominantly watch sports events on TV. Quartz reports that: “The average 2019 NFL regular season broadcast (and there are many of them) was watched by nearly 17 million Americans.”⁸ In contrast, the total attendance for all of the NFL’s regular season games in 2019 was 16.67 million.⁹ One may doubt if TV-based fans really care if there are fans in the stands of the arena or stadium. While social distancing directives are in effect, they might be adhered to, in part, by dispersed seating. That, of course, would mean reduced revenues for the teams and venue owners/operators. Heightened sanitation measures for seats, restrooms, and concession stands would also add to operating costs. The flows of fans entering and leaving these venues, and their use of parking, restrooms and concession stands also will need to be regulated while social distancing is in effect. At the moment, most discussions about resuming the play of professional sports games involve no fans attending them in person, an indication that making the needed adaptions in the operations of arenas and stadiums might be either too problematical or difficult.

However, these professional teams plainly have the on-hand financial resources and the financial and political connections to have a very good chance of getting through the crisis and adapting to any anti-pandemic requirements that may emerge in the post crisis period. The TV and cable contracts provide a very important assured revenue stream. “Fanless events” mean reduced revenues, but may also mean significantly reduced operating costs.

Look Out Fors:

Given that office workplaces are very likely be under pressure to be reconfigured so that they are more pandemic proof, will existing sports arenas and stadiums be as well?
Indeed, will the designs of future arenas and stadiums reflect newfound concerns about coping with potential pandemics?
Will a recovery produce a return of former attendance levels?
Will local governments be as willing to permit or fund proposals for such structures as they have in the past, especially if ticket sales revenues are significantly reduced?
Will the revenues of sports venues be so reduced by Covid19 that existing loan/bond payments are endangered?

Cultural/Arts Venues: Nonprofits

Arts and cultural organizations are being hit hard by the Covid19 crisis. Americans for the Arts on its website claims that these organizations are ”experiencing $3.6 billion in devasting losses.”¹⁰ The organization’s recent survey of artists and craftspeople showed that a very large number of their incomes have been squashed by the pandemic. Over two-thirds reported being unemployed. However, unless these artists were hugely successful or working for a corporation, they have long had very modest incomes that had to supplemented by non-arts and culture jobs. That they have long been on the cusp of financial need is evidenced by how long the phrase “starving artists” has been a part of our culture.

“Word Class” Museums in Major Cities. Pre Covid19, many museums in our largest cities aspired to be world class and followed a strong bigger is better strategy comprised of major exhibitions that would attract lots of the tourists who were visiting their city. The result was often overcrowded galleries that impeded art appreciation, big museum budgets that often totaled in the hundreds of millions of dollars, and attendance numbers in the millions that were overwhelmingly the result of-out of- town visitors. For example, here in NYC, 87% of the Guggenheim Museum’s visitors are tourists and that number is 75% at both MoMa and the Metropolitan Museum of Art.¹¹ The pandemic has shut off the entire tourist spigot, foreign and domestic. The museums for the most part are closed to in-person visits, but many are offering online access. Their visitor income streams have been choked. The Metropolitan Museum just announced an anticipated deficit of $150 million. However, many of their board members are titans of their business communities with records of making large donations and having strong connections to our largest financial institutions. The museums’ real estate properties and art holdings (which they normally should not deaccess), are often worth billions of dollars. They have huge capital assets, though they may not be very liquid. Equally important, they have very valuable political, social and financial connections. These arts organizations have proven capability of raising $400 million (MoMA) to $500 million (the Met).

If they reopen while physical distancing guidelines are still in effect, it will be interesting to see how that transforms the long lines of visitors who in the past entered their buildings, paid admission fees, and then stuffed their gallery rooms? Will they, too, strengthen their sanitation efforts. Can they take advantage of this crisis and treat it as an opportunity to make much needed improvements? Many museums in Europe, such as The Louvre in Paris are limiting access to famous works, such as the Mona Lisa, because of overcrowding. The Guardian has reported that: “The Vatican Museums are considering putting a cap on visitor numbers amid fears among tour guides that overcrowding could provoke a stampede unless security policy is changed.”¹²

***The crowded Vatican Museums have 6 million visitors per years***

A Curmudgeonly Opinion. I think that these museums have holdings that are far too large – most pieces are not even exhibited – and they are far too crowded. They have lost sight of providing an excellent art appreciation experience and instead seem to focus on cramming as many visitors as possible into their buildings as often as possible. The actual feet on the gallery floors are undeniable and prove the veracity of that statement. Consequently, how they operate needs to be rethought. The Met in NYC, for example, has many galleries that are so wonderful they could be very strong museums on their own – something like Ron Lauder’s Neue Galerie. A visitor then can be have a less crushed and more intimate and relaxed interaction with the art. Entry to them could be more appointment based and limited to a tolerable number per hour. This is how the Glenstone Museum in Potomac, MD works and the Barnes Foundation operated in its former home. These decentralized museums could enliven neighborhoods across a city. If they instead were clustered together, that still would decentralize the entry and existing processes, and reduce the density of visitors in the galleries.

Smaller Arts Nonprofits.

Most Arts Organizations Are Small .¹³ Most arts organizations are small, with revenues probably under $28,000. In 2012, about 63% of the nation’s estimated 110,000 arts organizations had revenues below $25,000.¹⁴ A study done in 2017 estimates that there were 39,292 nonprofit arts and cultural organizations in the USA that had revenues over $50,000.¹⁵ This means most art nonprofits will have little or no staff and will very likely either have very few performances or very few hours when they are open to the public. If they rent street level storefronts, when closed, they function as dead spaces that detract from their block faces walkability, while also signaling a lack of vibrancy.

Even when budgets get somewhat higher, the impacts are not likely to be significantly large. For example, the Wyoming Territorial Prison, a museum in Laramie, WY, (population 32,000) reported revues of $90,290 on its IRS Form 990 in 2015, but its annual visitation was about 16,000 (averaging about 2,700 per month) during a season that lasts from May 1^st through October 31^st. To put that attendance in perspective, consider that the Laramie Main Street Alliance around then held seven one-day events that attracted a total of around 8,250 people.¹⁶

There is a real question about whether the positive impacts of these very small arts/cultural venues outweigh their negative ones that is too often drowned out by the advocacy efforts of those who believe that the arts are the engine for economic development in these communities. That is not to say that the arts cannot be a valuable asset, but that knee-jerk advocacy can produce a lot of underperforming or even failing arts organizations that really do little for their downtowns.

A Structural Propensity to Have Deficit Annual Budgets.¹⁷ Roland J. Kushner and Randy Cohen in their National Arts Index 2016 paint a troubling picture of the financial condition of many arts organizations A very large number of them do not have break-even budgets and consequently, raise concerns about their long-term sustainability. According to Kushner and Cohen:

“Arts nonprofits continued to experience financial challenges: The percentage of arts organizations operating at a deficit has ranged from 36 percent in 2007 (during a strong economy) to 45 percent in 2009 (the deepest part of the recession). In 2013, a time of improved economic health, 42 percent of arts nonprofits still failed to generate positive net income—a figure that raises concerns about the long-term sustainability of arts organizations that are unable to achieve a break-even budget. Larger-budget organizations were more likely to run a deficit, though no specific arts discipline is particularly more likely to run a deficit…. (I)t is clear that the budget fortunes of nonprofit arts organizations got worse during the Great Recession and have been very slow to recover.” ¹⁸

Consequently, it would seem very reasonable and very prudent for downtown leaders to expect that large numbers of their arts organizations were long primed for being pushed over the edge by the Covid19 crisis.

The Proven Long-Term Uncertainty of Their Revenue Streams. The hybrid model is based on revenues coming from many very different sources and obtained through different means. According to Americans for the Arts: “Support for the nonprofit arts is a mosaic of funding sources – a delicate 60-30-10 balance of earned revenue, private sector contributions and government support.”¹⁹

Other research has found a slightly different funding mix. The National Endowment for the Arts (NEA), using data from the Urban Institute and Census Bureau for 2006-2010, found that the revenue sources for nonprofit performing arts groups and museums were:

55.1% Earned Income, Interest and Endowment Income
38.2% Contributions From Individuals, Foundations & Corporations
6.7% Government Grants.²⁰

Earlier, pre-Great Recession estimates showed that earned incomes only accounted for about 50% of the revenues of nonprofit arts organizations.

Perhaps it is best to amend AftA’s statement to read that arts organization funding has been a delicate balance of 50% to 60% earned income, 30% to 40% private sector contributions and 10% or less from government support.

In any case, there is general agreement on the types of funding sources and the fact that there are many of them. In a 2012 study of the factors that challenge the financial sustainability of nonprofit organizations, the RAND Corporation’s authors placed at the top of their list:

“Risk of reliance on external funding sources and streams. In contrast to for-profit organizations, nonprofits in the United States depend on diverse sets of funding sources and streams of funding to sustain their operations. Most nonprofits receive funds from multiple sources (e.g., government, foundations, private donors) and streams (e.g., grants, contracts, membership fees). Substantial cutbacks in both government and foundational funds suggest that nonprofits should develop or revisit their fundraising plans to support financial sustainability.” ²¹

The hybrid business model both taxes the skill sets of nonprofit managers in organizations too small to structurally differentiate and staff their earned income and contributed income activities, and bets too much of their financial future on the strong generosity of many others. Consequently, nonprofits were easily badly hurt by the Great Recession and the Covid19 crisis.

Saved by The Feds? Americans for the Arts apparently feels that the recent stimulus program can be of great help to arts and cultural organizations. It cites the following programs that can help them.

The annual appropriation for the National Endowment for the Arts and the$75 million for the National Endowment for the Humanities were each supplemented by $75 million in the CARE Act stimulus package.
The $350 billion for?Small Business Administration?(SBA) emergency loans of up to $10 million for small businesses—including?nonprofits (with less than 500 employees), sole proprietors, independent contractors, and self-employed individuals?(like individual artists)—to cover payroll costs, mortgage/rent costs, utilities, and other operations
$10 billion for Emergency Economic Injury Disaster Loans (EIDL) for loans up to $10,000 for small businesses and nonprofits to be used for providing paid sick leave for employees, maintaining payroll, mortgage/rent payments, and other operating costs.
Expanded?Unemployment Insurance (UI) that includes coverage for furloughed workers, freelancers, and?”gig economy” workers.²²

It will be interesting to see just how many of these arts and culture organizations get enough support from these federal programs to last into the recovery phase. There are about 30.2 million businesses in the US with fewer than 500 employees. To date only about 1.3 million, about 4.3%, have reportedly obtained the SBA loans. Hopefully recent legislations will produce a much higher number.

Looking to the Future. Looking out to the post pandemic phase, the anti-pandemic measures the arts/cultural organizations will have to take and the cost burdens that might add still remain largely unknown, but seem fairly likely to appear.

We have a consumer-based economy, so economic recovery will depend a lot on spending power and inclinations returning to our households. Revenues promise to be a serious problem for these organizations well into the future unless our national economy has an unexpected robust recovery.:

Given their Covid19 induced revenue problems, state and local governments will likely have greatly reduced capacity, other than by passing through fed dollars, to fund arts and cultural organizations well into the future.
During and after the Great Recession, large corporate and foundation givers substantially switched their funding away from the arts to help better meet pressing social and economic needs. If our past is in any way prologue, we might expect something of the same to happen as we recover from the Covid19 crisis, even well into the early part of the post crisis phase.
As for individual donors, a lot depends on who lives in the market area of these arts/cultural organizations and how many households there are with incomes above $200,000/yr. Those with “lower incomes” only account for about 6.3% of the total household donations to the arts!²³

The fact that these arts and cultural organizations continue to have the same problems time after time after time should be taken as a strong signal that the way they have operated is seriously flawed. For me, a major statistical indicator of this is their needed revenue per visitor, which probably is also a good indicator of their cost per visitor since few make any substantial “profit.” Computing from the data in the above table, among those with budgets above $50,000 per year, the revenue per visitor for museums is $72.01 and for nonprofit theaters it’s $56.15. If 50% to 60% of those revenues come from admission fees and other earned income streams, the admission prices of these venues are still probably multiples higher than what local cinemas are charging for their admissions, (a good benchmark for local affordability).

How do these organizations explain the amount of income needed by them that is not market supported? A curmudgeonly explanation are artistic aspirations that are unconstrained by their boards whose members are insufficiently concerned about their fiduciary responsibilities and the long-term well-being of their organizations.

These organizations need a new operational model that should:

Enable them to increase their earned incomes by exploring new revenue streams. They need to stop thinking only about admission fees and museum store sales. They need managers who are more entrepreneurial in non-arts areas. The Red House Theater in Syracuse is one example of this. A lot of other arts organizations should go to school on it. Among other things, it provides paid services to the local school district and is now a landlord with several rental income streams. The Public Theater in Auburn, NY, is another example. While continuing to serve as a theater, it has also assumed more of a role as a community center with a café, mic nights, and classes for yoga, etc.
Set a goal of having earned incomes cover 80% of the organization’s operating costs.
Have their boards exercising greater constraints on costs that cannot be supported by earned incomes.

Some Take Aways

As a result of the Covid19 crisis, downtown leaders and their organizations need to be concerned about the health and retention of their arts and cultural organizations, not just their retailers and restaurants. Assisting them will often be a very challenging task.

These organizations have congenital weaknesses caused by their size and business model that make them prone to extremis even in none crisis times, but that worsen exponentially during trying times.

Art and cultural organizations have the potential to be more important than ever to our downtowns, as that of retail subsides. However, their financial fragility means that there will be substantial churn in the actual organizations that are present. While some downtown BIDs and Main Street programs have retail and restaurant retention programs, they now may also need one for their arts and culture organizations.

Downtown stakeholders and their leaders should definitely explore using the arts to spark more economic and community development, but they should do so with adequate awareness of and knowledge about the fragility of the organizations they will be working with, and the tendency of artistic aspirations to lead to financial shortfalls and organizational failures.

If appropriate lessons are not learned, then post pandemic, a lot of our arts and cultural organizations may be in worse shape than ever.

ENDNOTES

1) Dade Hayes, U.S. Movie Ticket Sales Dip Nearly 5% In 2019, Reflecting Competition Deadline ,January 17, 2020, https://deadline.com/2020/01/movie-ticket-sales-2019-decline-domestic-box-office-1202834469/

2) Brooks Barnes and Nicole Sperling, “Movie Crowds Stay Away. Theaters Hope It’s Not for Good”, New York Times, March 15, 2020 https://www.nytimes.com/2020/03/15/business/media/movie-theaters-coronavirus.html

3) Same as endnote 1.

4)Paul Taylor, Cary Funk and Peyton Craighill. “Increasingly, Americans Prefer Going to

the Movies At Home: Home “ticket sales” dwarf theater attendance 5-1”. Pew Research Center, May 2006. https://www.pewresearch.org/wp-content/uploads/sites/3/2010/10/Movies.pdf

5) ibid

6) See: Downtown Formal Entertainment Venues Part 4: Movie Theaters post to the Downtown Curmudgeon blog in 2014.

7) See: https://www.statista.com/statistics/193553/revenue-of-national-football-league-teams-in-2010/

8) Adam Epstein. “In the age of streaming, the NFL is the last refuge for traditional TV.” Quartz,

January 30, 2020. https://qz.com/1793242/the-nfl-and-the-super-bowl-are-tvs-last-weapon-against-streaming/

9)See; https://www.statista.com/statistics/193420/regular-season-attendance-in-the-nfl-since-2006/

10) “FEDERAL ECONOMIC STIMULUS RELIEF FUNDS PROVIDE ENCOURAGING SUPPORT TO THE NATION’S COMMUNITY-BASED ARTS AND CULTURE ORGANIZATIONS EXPERIENCING $3.6 BILLION IN DEVASTATING LOSSES” https://www.americansforthearts.org/news-room/press-releases/federal-economic-stimulus-relief-funds-provide-encouraging-support-to-the-nations-community-based

11) See: N. David Milder .“Bryant Park Part 2: a comparison to other entertainment venues on attracting tourists, user frictions and costs to create or significantly renovate” Downtown Curmudgeon Blog, September 27, 2014 https://www.ndavidmilder.com/2014/09/bryant-park-part-2-a-comparison-to-other-entertainment-venues-on-attracting-tourists-user-frictions-and-costs-to-create-or-significantly-renovate

12) Angela Giuffrida, “Vatican considers limit on museum visitors amid safety fears.” The Guardian, Nov. 2, 2018. https://www.theguardian.com/world/2018/nov/02/vatican-considers-limit-on-museum-visitors-amid-safety-fears?CMP=twt_gu

13) This section is taken from: N. David Milder. “Let’s Get Real About*: The Arts As An Important Downtown Revitalization Tool — Redux. Part 1.” Downtown Curmudgeon Blog, June 18, 2017 https://www.ndavidmilder.com/2017/06/lets-get-real-about-the-arts-as-an-important-downtown-revitalization-tool-redux-part-1

14) Andy Horwitz, “Who Should Pay for the Arts in America?” The Atlantic, Jan 31, 2016. https://www.theatlantic.com/entertainment/archive/2016/01/the-state-of-public-funding-for-the-arts-in-america/424056/

15) Zannie Voss and Glenn B. Voss, “Arts and Culture Are Closer Than You Realize: U.S. Nonprofit Arts and Cultural Organizations Are a Big Part of Community Life, Economy, and Employment —and Federal Funding Enhances the Impact.” National Center for Arts Research, SMU. Pp.7. https://sites.smu.edu/Meadows/NCARPaperonNationalArtsandCultural%20Field_FINAL.PDF

16) Information kindly provided by Trey Sherwood, Executive Director of the Main Street Alliance in 2016.

17) See endnote 8.

18) 2) Roland J. Kushner and Randy Cohen. National Arts Index 2016, p.2; Americans for the Arts. http://www.americansforthearts.org/sites/default/files/2016%20NAI%20%20Final%20Report%20%202-23-16.pdf

They did not look at arts organizations with annual revenues under $50,000 so their finding that larger arts organizations are more prone to having deficits should be treated with caution.

19) See: http://www.americansforthearts.org/sites/default/files/ArtsFacts_ArtsOrganizationRevenues2014.pdf

20) NEA. “How the United States Funds the Arts.” 2012. P 1. https://www.arts.gov/sites/default/files/how-the-us-funds-the-arts.pdf

21) Lisa M. Sontag-Padilla, Lynette Staplefoote and Kristy Gonzalez Morganti. RESEARCH REPORT. Financial Sustainability for Nonprofit Organizations: A Review of the Literature. Rand Corporation, 2012. http://www.rand.org/content/dam/rand/pubs/research_reports/RR100/RR121/RAND_RR121.pdf

22) See endnote 12.

23) See endnote 12

THE AMERICAN DOWNTOWN REVITALIZATION REVIEW (THE ADRR)

Posted on April 7, 2020 by DANTH

FOR IMMEDIATE RELEASE

Online version available at: www.theadrr.com

Contact:
N. David Milder, Editor
The ADRR — The American Downtown Revitalization Review
718-805-9507 [email protected]

THE CREATION OF THE AMERICAN DOWNTOWN REVITALIZATION REVIEW (THE ADRR)

There currently is no real professional journal for the downtown revitalization field. For many years, that has been strongly lamented by many of the field’s best thinkers. To remedy that situation, a band of accomplished downtown revitalization professionals are creating The ADRR. It will be a free online publication, appearing four times each year. The target date for the debut issue is now set for the June 1-15, 2020 timeframe, with the second issue aimed for the Sept 7-14, 2020 timeframe.

This ADRR is intended to be a lean and mean operation, based totally on the availability of free online resources and the time, energy and elan contributed by its authors, advisory and editorial board members, and its editor.

How to Subscribe to The ADRR

Those interested can now visit The ADRR’s website, www.theadrr.com , where, on the home page, they can sign up to become subscribers. This enrollment places the subscriber on a MailChimp mailing list so that they can receive New Issue Alerts (see below).

How Issues of The ADRR Will Be Distributed.

New Issue Alerts, containing the Tables of Contents of issues and links to their downloadable pdfs of articles are sent to subscribers via a MailChimp email blast and posted to the ADRR’s website. Each issue’s pdf files initially will be stored in a folder in ND Milder’s Dropbox account from which they can be downloaded. Subscribers can download only those articles they want to read and whenever they want to read them. The ADRR also can be found via Google searches.

The Content We Are Aiming For.
Only manuscripts about major downtown needs, issues and trends will be considered for publication. They will be thought pieces and not just reports about a downtown’s programs and policies that its leaders want to brag about. Articles must have broad salience and their recommendations broad applicability within the field. The “voice” of The ADRR will be anti-puff, and very factual, evidence driven, though not dully academic. Discussions of problems and failures will be considered as relevant as success stories if, as so often is the case, something substantial can be learned from them. The ADRR will not avoid controversial issues.

Also, the focus of The ADRR will not be overwhelmingly on our largest most urban downtowns, but also provide a lot of content and relevant assistance to those in our small and medium sized communities, be they in suburban or rural areas.

Who Will Write the Articles?

Hopefully, they will be from people in a broad range of occupations – downtown managers and leaders, municipal officials, academics, developers, landlords, businesspeople, consultants, etc. — who have significant downtown related knowledge and experience.

Curated Articles and Wildflowers. Initially, the ADRR will solicit articles to prime the content pump. Once The ADRR is up and running some articles will continue to be solicited on topics deemed a high priority by the editorial board members. Each board member can select a topic to curate an article on and seek the author(s) to write them. However, there still will be a continual traditional general call for submissions (wildflowers) focused on subjects selected by their authors. All submissions, curated or wildflower, must demonstrate sufficient merit to warrant publication in The ADRR. All submitted articles will be reviewed by board members. We hope to see many submissions!

Article Length and Author Responsibilities.

There will be short reads and long reads. Articles of 1,500 to 5,000 words will be considered. Multi-part articles of exceptional merit and salience will also be considered. What counts is their quality, not their length. Authors must have their articles thoroughly proofread prior to submission. Poorly proofed manuscripts will be rejected. Guidelines for submissions may be found on The ADRR website.

Publication Schedule:

Published four times per year, with a minimum of 5 articles in each issue. Given that this is an online publication, from a production perspective, the number and length of the articles is not a particular problem. However, from an editorial and content management perspective, the number of articles and their lengths can quickly become burdensome.

How It Will Be Organized.

The ADRR will be published by an informal group for its first year, with no person or group having ownership.

Editor. During the ADRR’s first year, N. David Milder has volunteered to serve as its editor.

The Advisory/Editorial Board :

Jerome Barth, Fifth Avenue Association
Michael J Berne, MJB Consulting
Laurel Brown, UpIncoming Ventures
Katherine Correll, Downtown Colorado, Inc.
Dave Feehan, Civitas Consulting
Bob Goldsmith, Downtown NJ, and Greenbaum Rowe
Stephen Goldsmith, Center for the Living City
Nicholas Kalogeresis, The Lakota Group
Kris Larson, Hollywood Property Owners Alliance.
Paul R. Levy, Center City District, Philadelphia
Beth Anne Macdonald, Commercial District Services
Andrew M. Manshel, author
N. David Milder, DANTH, Inc
John Shapiro, Pratt Institute
Norman Walzer, Northern Illinois University

Articles in our first issue that will be published in June 2020

Michael Berne, MJB Consulting, Working Title, ” Bringing Downtown Retail Back After COVID-19”
Roberta Brandes Gratz, “Malls of Culture.”
Andrew M. Manshel, “Is ED Really a Problem?”
N. David Milder, DANTH, Inc., “Developing a New Approach to Downtown Market Research Projects – Part 1.”
Aaron M. Renn, Heartland Intelligence, “Bus vs. Light Rail.”
Michael Stumpf, Place Dynamics, “Using Cellphone Data to Identify Downtown User Sheds”.
The Spotlight: “Keeping Our Small Merchants Open Through the COVID-19 Crisis”
- Katherine Correll, Downtown Colorado, Inc.
- David Feehan, Civitas Consulting
- Isaac Kremer, Metuchen Downtown Alliance
- Errin Welty, Wisconsin Economic Development Corporation.

Quality of Life (QofL) Retail Recruitment Update

Posted on July 16, 2019 by DANTH

My Article

Back in 2017, I published “Quality-of-Life Based Retail Recruitment” in the IEDC’s Economic Development Journal (1). Among its main arguments were that:

Many of the new retail shops in our smaller and medium-sized downtowns are being opened by new or returning residents (boomerangers).
These new and returning residents are most strongly drawn by the town’s quality of life.
There are a lot of talented people who prefer the lifestyles offered in our small and rural communities, many of whom are now residing in other locations.
Many will not need new jobs, or they can bring their current jobs with them, or they will create their own new jobs.
They represent a substantial market segment that should be targeted by downtown EDOs in our smaller and medium sized communities. Such a program might be the most cost effective way to attract high quality independent retail operators to these downtowns.

New Data

Over the past year, I have had consulting assignments in a number of communities that are relatively rural and have populations under 35,000: Auburn, Cortland, and Oneida in Central NY, and Vinalhaven in ME. In the last few months, I also came across some research done in Minnesota, Nebraska and nationally that, I am embarrassed to admit, I should have found years ago, but that somehow eluded my earlier internet searches. These studies were done back between 2007 and 2015. They and my consulting assignments both provided new data and arguments that support the analysis I presented in my QofL retail recruitment article and expanded my understanding of many of the points I had made.

Rural Areas Have People in Creative Class Occupations, But Fewer of Them. a study published in 2007 of the creative class in the nation’s rural counties by David McGranahan and Timothy Wojan found that: “While in metropolitan counties about 30.9% of the workforce were in creative class occupations, in rural counties it was just 19.4%” (2).

People Being Drawn to Small and Rural Communities by Their QofL Assets Is Not a New Trend. The Buffalo Commons survey of the Panhandle Region of Nebraska as well as research led by Ben Winchester in northwestern Minnesota found that these rural areas had “brain gains” as well as “brain drains,” and that the incoming migrants were overwhelmingly attracted by a town’s QofL assets. For example, the Buffalo Commons survey found that migrants into the Panhandle’ counties were motivated by the desire for:

A simpler life, 53%
A less congested place to live, 50%
Being closer to relatives, 50%
Lower housing costs, 48%
Lower cost of living, 45%
A higher paying job, 39%
Living in a desirable natural environment, 37% (3)

Winchester’s study found that “There were a number of factors that were important in the newcomer decisions to move:

To find a less congested place to live , 77%
A better environment for raising children, 75%
To find better quality local schools, 69%
To find a safer place to live, 69%
To lower the cost of housing, 66%
To find a simpler pace of life, (66%
To find more outdoor recreational activities, 63%
To be closer to relatives, 62%
To live in a desirable natural environment, 60%
To lower the cost of living, 53% (4)

Additionally, the study by McGranahan and Wojan found that:

” The present analysis of recent rural development in rural US counties, which focuses on natural amenities as quality of life indicators, supports the creative class thesis”.
In the rural counties of metropolitan areas, “ The creative class moves into less dense metropolitan counties in search of a higher (more rural) quality of life; the building of a creative class (then) creates an environment for job growth; and this leads to further in-migration” (5).

The In-Migrants Are Often Quite Skilled. Both the Minnesota and Nebraska studies found that these migrants “have significant education, skills, connections, (and) spending power” (6). The Buffalo Commons survey found, for example, 45% of them had skills in the management, business, financial and professional fields. Many of them would be considered members of the “creative class”.

However, findings of the McGranahan and Wojan study suggest that the skill sets of rural and metropolitan creatives might differ in important ways. For example: more metropolitan creatives had college degrees, 56.2% than the rural creatives, 36.8%. while 21.4% of the rural creatives were self-employed compared to 17.1% of the metropolitan creatives (7).

Rural Innovation. A topic one might hypothesize is strongly related to workforce skill sets is innovation. One useful definition of innovation is: the introduction of “new goods, services, or ways of doing business that are valued by consumers” (8). A research report written in 2017 by Tim Wojan and Timothy Parker, of USDA’s Economic Research Service found that:

Urban establishments in nonfarm tradable industries were more likely than rural establishments to be innovators.
Innovation rates in urban and rural manufacturing industries are very similar.
In the service industries, the innovation rates of rural establishments are lower than those of the urban firms in the same service sector.
The manufacturing industries with the highest rate of innovators in rural areas were pharmaceuticals, chemicals, computers, plastics and textile mills.
The only tradable service-providing industries with a high share of substantive innovators in rural areas were telecommunications and wholesale electronic markets.
About 30% of metro establishments could be classified as substantive innovators, while only about 20% of the nonmetro establishments fell into this group. Importantly: “The metro-nonmetro differences in innovation are considerable but less than commonly assumed” (9).

Artists Havens. Another study published in 2007 by Wojan, Lambert, and McGranahan, “The Emergence of Rural Artistic Havens: A First Look” focused squarely on the issue of the ability of rural counties to attract the artist subset of the creative class in 1990 and 2000. Counties meeting some minimum employment levels and with more than 40 people in artistic occupations were deemed to be artistic havens. Functionally, the existence of an artistic haven occurs when “a minimum critical mass of artists or performers” has been established so that “members of the community benefit from substantial interaction among themselves and the group is large enough to affect culture of the wider community” (10).

The authors identified two kinds of artistic havens. “Existing havens” were those identified using 1990 census data, while the “emerging havens” were identified with 2000 census data. Altogether, only about nine percent of our rural counties then had such havens.

However, what was noteworthy in their findings was that the number of havens had doubled over a decade. (See table above).

The table below is based on the pooled responses for the American Community Surveys for the years 2007-2011. It was constructed by USDA researchers. Their results should be viewed as describing the situation during that time period. However, the ACS’s investigation of the number of “artists” is problematical because the average standard error on its estimates of the number of artists in each non-metropolitan county is about 45%. Nevertheless, the data may still be useful if we try to make some adjustments for that strong margin of error and treat the results as ‘directional” rather than definitive. To that end, instead of looking at the number of non-metro counties having more than 40 artists, I bumped the magic number up to 60. There are 668 non- metro counties that the ACS found having more than 60 artists, or about 35% of all non-metro counties. That suggests that there was probably a very substantial increase between 2000 and 2011 from the number of artistic havens, 199, Wojan et al identified in their 2007 paper. Prudence suggests refraining from claiming an exact number, such as 489 (668-199=489), but very substantial growth seems very likely.

Wojan et al explain that the strong relationship they found between the emergence of new artistic havens and the presence of large numbers of 25-44 year olds with college degrees is based on the highly educated workers being viewed as a very powerful proxy for quality of life” (11). They go on to state that: “The implications of these findings are that counties that have been unable to retain highly educated workers are less likely to attract artists in sufficient numbers to constitute an arts community”(12). That all sounds very Floridian, but the unstated implication is that a lot of these highly educated workers is necessary. There are several problems with that. Richard Florida is quite adamant in his argument that it is the type of work people perform, not their education levels, that is the defining factor of creative class members.

More importantly, there are small towns and cities like Auburn in NY where the percentages of college graduates, 20.7% , are quite lower than the nation’s, 30.9%, yet they are attracting between 50 and 100 artists who represent less than 0.5% of their town’s population. Nevertheless, they are able to build a sense of there being a recognizable artistic community, or “haven” in their communities.

Also, McGranahan et al reported that about 63% of rural creatives lack college degrees. Does that mean they lack the magnetism of other creatives? That seems highly unlikely.

If the highly educated workers are a strong proxy for QofL, then it would appear that more precisely investigating what the components of that QofL are is essential. The Buffalo Commons and the northwestern Minnesota studies give some strong indications about what some of them are. My own discussions over the years with creative types living in smaller towns and cities suggests that, while they certainly like having other creatives nearby, and appreciated the beauty of their area, also very important are such factors as being closer to family, a slower pace of life, having a stronger sense of community, affordable housing costs, having active social places such as eateries, bars, public spaces and arts and cultural venues . In other words, they appreciated central social district type venues and the activities associated with them.

Getting back to the table, some of the data in it are presented in ranges determined by + and – 45% of the original estimates. For example, the mean number of artists per non-metro is between 41 and 107. When the error factor was 8% or less, just the estimates are reported in the table. This mostly occurred with the data on creative class occupations. As night be expected, these data show that the non-metro counties will have far fewer creatives and they will represent a lower proportion of those employed than in the metro counties. However, these levels are not negligible.

While Young Adults May Be Leaving, 30-49 Year Olds May Be Returning. In both NE and MN, in-migration appears to have resulted in a surge in the populations of residents in the 30-49 years old age group in some rural locations (13). Of course, their populations in the young adult cohort show a consistent loss. This suggests that a significant amount of boomeranging may be occurring. The youths leave for better job prospects and a more urban life style, and many then return to small and rural towns later in life with more skills and resources that strengthen their new communities. For example, the Buffalo Commons survey found that 38% of the respondents and 32% of their spouses had lived in their current community prior to returning to it. Winchester found, though with a much smaller sample of 53, that 43% of the “new” residents has previously lived in or near their current community.

Boomerangs Are Important. One analyst has argued that boomerangers are not that important because they only account for 30% to 40% of the new migrants. To the contrary, it might more convincingly be argued that they are very important because no other prior residential location has anywhere near those numbers. Additionally, from the perspective of developing a business recruitment program that targets QofL prospects, there are several obvious possible networking opportunities with potential boomerangers that are completely absent with other prospects. Moreover, there have been several successful “Return Home” campaigns launched in communities such as Ann Arbor, MI, Scranton, PA, and Superior, NE from which much can be learned (14).

QofL In-Migrants Can Have Impacts Larger Than Their Numbers Might Indicate. My assignments in the Central NY communities was on a project led by the Lakota Group to assess the feasibility of establishing arts/creative districts in their downtowns. In each community, well-attended focus groups were held for local artists, arts leaders and business people. In each town, a strong majority of the creatives were either not natives of the town or boomerangs. When asked, most explained their reasons for moving to that town In terms of the QofL assets it offered.

Auburn. The situations in Auburn and Oneida are very revealing about the impacts these QofL migrants can have on the local business community. In Auburn, in recent years they have opened a number of shops that are very highly regarded by local leaders and shoppers. They are certainly viewed as much better operators than those who previously occupied their storefronts. Their current number is below 10, but their presence suggests that the downtown is now in a much more upbeat place on its revitalization arc. It can be reasonably argued that their positive impacts on the downtown far exceed what their small number might suggest. Moreover, even If they keep coming at a rate of only one or two a year, in a few years there will be a substantial bolus of them with more than ample customer magnetism and image making power. They are successful because they are bringing in strong skill sets that are even relevant if they do a career reboot, as well as significant financial resources.

It is interesting that when interviewed, these QofL migrant entrepreneurs say that the presence of a significant arts community in the Auburn was an important factor in their decisions to live and work in their new communities. Since the Finger Lakes area is filled with numerous scenic places, outdoor recreational opportunities, vineyards, charming restaurants and inns, and historic sites, Auburn’s arts assets probably helped it compete successfully with other towns in the region to attract these new merchants.

The leader of a local artists organization estimated that there are about 75 to 100 local residents who are artists of one form or another. That means that the city of Auburn, with a population around 26,000, today seems to be an artistic haven: it has besides its resident artists, nine major arts and cultural attractions that have a combined annual attendance of about 199,000 that brings about $6,273,356 in spending power to the city that local merchants can capture (see table above).

Auburn is now on the path of creating an arts/cultural district to help provide a support structure for its arts community and to help it have stronger marketing and promotional capabilities. According the Americans for the Arts, there are now over 300 culture districts in the US (see the map below). They are proliferating, though only a small proportion our 19,000+ villages, towns and cities have them. The number in smaller and rural communities is unknown, but they are not scarce: e.g., Peekskill, NY; Paducah, KY; Ridgeway (900 residents), Salida and Crested Butte in CO. As a point of comparison, BIDs started to appear in serious numbers in the early 1980s and today there are over 1,000 of them across the nation. The culture/arts districts have not yet had 39 years to grow in.

**The 300+ Cultural Districts in the US (Source: Americans for the Arts)**

Oneida. Downtown Oneida is now in the initial stages of its revitalization arc. Consequently, I was happily surprised to find in its struggling downtown a small group of independent merchants who are among the most marketing and internet savvy retailers I encountered in the overall project. While the old downtown retailers were dead or dying, these merchants were internet savvy and knew they had to tap consumers well beyond the town’s borders. One operates a vendor mart that brings a considerable variety of merchandise into town and provides some business incubation functions. Together, this group of operators formed a marketing campaign that targeted the visitors to a gambling casino located about an eight minute drive from the downtown. Two of these operators are boomerangs, and the spouse of one telecommutes on his job with a Fortune 500 corporation. Though the group is now small in number, it is modeling business behaviors for other merchants in the community, be they new or old, while bringing a badly needed perspective into the town’s decision-making about economic policies and programs. They are, consequently, helping to change the business culture in Oneida along several important dimensions as well as the way the downtown business community should be seen within the whole city. Moreover, I’ll bet their presence will attract more businesspeople who are like them.

Vinalhaven. This beautiful island is located about a 75 minute ferry ride off the coast of Maine. It’s roughly the size of Manhattan. It has a year round population of about 1,400 that bulges to about 5,000 in the peak tourist summer months. Lobster fishing and tourism are it major economic engines. Home-owners who are part-time residents and relatively longer stay home rentals are the most important components of its tourism. These renters are often annual visitors. The thing that binds the year round residents, the part-time residents, the long-stay renters and the fisherman is the island’s highly venerated quality of life. They are quite overt in their awareness of this. The community is also united in its concern that any growth in tourism should be balances so as not to endanger their strongly appealing QofL.

The island’s downtown is relatively small, with relatively few storefronts, yet it is still the community’s economic and social hub. On a recent visit, I found that several of its merchants were QofL migrants with impressive previous careers elsewhere in the nation. They opened their shops on Vinalhaven to provide themselves with some income and/or to keep busy. This often meant career reboots. Some of the more recent arrivals wanted to live and work on Vinalhaven so much that, because the of very high costs of flood insurance, they had to pay cash for their new business locations. On Vinalhaven, if you subtract the QofL migrants who opened businesses there, the downtown would be deader than a doornail!

Vinalhaven is also an artists haven. A local gallery reported that about 70 artists are associated with it who spend at least some part of the year in Vinalhaven. These artists have displayed an attraction to Vinalhaven’s QofL. The gallery not only provides the artist with a marketing channel, but also serves as the artists main local social venue. Robert Indiana was a longtime resident. His estate may be opening some kind of museum in the downtown.

BOTTOM LINES

The ability of small and medium sized communities in rural areas to attract talented new and returning residents because of their QofL assets is not a new phenomenon, but it has not been significantly strategically leveraged.
Rural QofL assets have traditionally been mostly as natural amenities. However, more recently, a high quality of life” is seen as being more broadly defined . That means that newcomers being able to perceive the presence of an ample number of people like themselves, strong central social districts humming with some vibrant restaurants and watering holes, and strong public spaces are increasingly the assets smaller communities will need to pull in talented new residents and boomerangs.
“Brain Gain” and “Brain Drain” can happen in the same towns, with the young adults leaving and mid-life adults, many of whom are boomerangers, moving in from larger, more urbanized communities.
Simply stated, the underlying challenge for small and rural communities is to have the brain gain be larger than the brain loss.
Some of these new and returning residents will open downtown businesses. Though early on their absolute numbers may be small, say just two to five, their influence on the downtown’s revitalization can be exponentially greater. The ability to even recruit 1 or 2 of such QofL entrepreneurs annually could have very profound positive impacts on a downtown. Smaller and rural communities do not have win hordes of new residents to see meaningful positive changes.
Potential boomerangers are an obvious market segment that a recruitment program should make a high priority target.
However, anyone visiting the town, especially on a recurring basis, should also be targeted – e.g., visitors to local hotels/motels, restaurants, parks, museums, theaters, etc.
Smaller communities are, well, small, so you do not need to attract hordes of creative class members — or their artist subset — to spark significant economic development.

ENDNOTES

1) See: https://www.iedconline.org/clientuploads/directory/docs/EDJ_17_Summer_Milder.pdf

2) David A. McGranahan and Timothy R. Wojan, “Recasting the Creative Class to Examine Growth Processes in Rural and Urban Counties”. https://naldc.nal.usda.gov/download/41989/PDF

3) See: https://unlcms.unl.edu/center-for-applied-rural-innovation/community-marketing/buffalo-commons-survey

4) See: Ben Winchester: https://extension.umn.edu/economic-development/rural-brain-gain-migration

5) See endnote 2

6) See endnote 3

7) See endnote 2

8) Tim Wojan and Timothy Parker. “Innovation in the Rural Nonfarm Economy: Its Effect on Job and Earnings Growth, 2010-2014.” USDA Economic Research Service. Economic Research Report Number 238, September 2017. https://www.ers.usda.gov/webdocs/publications/85191/err-238.pdf?v=0

9) Ibid.

10) Timothy R. Wojan, Dayton M. Lambert, and David A. McGranahan, “The Emergence of Rural Artistic Havens: A First Look.” Agricultural and Resource Economics Review, April 2007. https://pdfs.semanticscholar.org/fe36/86db666b2f5e0890e1898a80c844132aba1a.pdf

11) Ibid.

12) Ibid

13) See: Randy Cantrell, “Nebraska’s Rural Population: Growth and Decline by Age”. Rural Futures Institute at the University of Nebraska https://www.unomaha.edu/college-of-public-affairs-and-community-service/center-for-public-affairs-research/documents/policy-briefs/pb2015-nebraskas-rural-population.pdf and https://extension.umn.edu/economic-development/rural-brain-gain-migration

14) See for example: Dana Crater, “The talent competition, part 2: “Return Home” campaigns”. Posted to IEDC website on July 24, 2014.

Is Your Downtown in an Arts Archipelago? If So, Here’s How to Benefit From It?

Posted on March 8, 2019 by DANTH

By N. David Milder

Introduction

Across the nation over the past decade or so, the idea of using the arts as an engine for downtown and Main Street economic growth has attracted a growing number of adherents. One outcome of this advocacy is that arts districts, a.k.a. creative districts, are appearing across the nation. Colorado, for example has at least 26 of them, all formed under a state statute. These districts either cover a designated part of a downtown district or all of it.

However, very often, arts event venues and/or artisan work spaces in a small town or big city are mostly dispersed beyond the downtown’s borders. The town’s arts/creative assets then are much like an archipelago where the arts islands may have some smaller clusters, but overall there is a good deal of separation among them — as well as from the downtown’s businesses. Some of these arts assets can be 3+ miles from the downtown. In these communities, the downtown district only occupies a portion of the islands in the complete arts archipelago.

The notion of a geographically bounded arts district that only includes the downtown, or just a portion of it, consequently may not appear to make much sense in communities with arts archipelagoes. The objectives of this article are to:1) provide examples of such archipelagoes and 2) try to stretch the arts district concept to fit arts archipelago situations. The keys to achieving the needed conceptual stretch will be the presence of mutual interests and complementary assets among downtown arts and business stakeholders and the arts venues in the rest of the archipelago.

Reasons for the Dispersion

Since about 2010, our field observations in many smaller communities revealed that the dispersion of their economic and arts assets into numerous commercial nodes and individual locations started when they were even smaller and much younger. Consequently, it should not have been surprising that when we started working on a project in some of these archipelago communities, we found a high degree of long standing dispersion of economic and arts assets. In many small towns, for example, the former homes of illustrious people that were located in the residential part of town have been turned into museums. Many art and entertainment venues, such as museums, concert halls, PACs, casinos, stadiums, arenas, etc. did not locate in downtowns because they were so large and required so much parking that they did not easily fit into available downtown development sites. Downtown sites were also often much more expensive to develop because of land acquisition and demolition costs. Sometimes, too, community leaders wanted their prestige arts venues placed in park-like settings that could only be provided away from the downtown.

Individual creatives often find that downtown rents for residential and work spaces are too expensive or soon became so after they have pioneered improvements in the district. As a result, they frequently take cheaper places beyond the district, and in smaller towns, even in rural settings. Often, too, these creatives simply prefer working and living in a rustic rural setting.

Some Examples of Arts Archipelagoes

1. Manhattan, in NYC. Downtowns are one contiguous area, without any separations. For example, the Midtown CBD in Manhattan runs east -west from the East River to the Hudson River, and north south from about 30^th Street to 59^th Street. In contrast, Manhattan’s arts, cultural and entertainment institutions are more like an archipelago running from the Battery at the southern tip of Manhattan to the Cloisters near its northern edge. Yes, Midtown has the theater district, MoMA, the Morgan Museum, Radio City Music Hall, City Center, Town Hall and lots of movie theaters. But:

The large and powerful Lincoln Center is just north of the Midtown CBD
The Museum Mile – the Met, Guggenheim, Neue, Jewish Museum, Museum of the City of NY, Cooper Hewitt, and El Museo Del Barrio — runs along Fifth Avenue from about 82^nd street to 104^th street. The Breuer annex of the Met is on Madison at 75^th St.
Chelsea to the south of the Midtown CBD has tons of art galleries, the Joyce Theater (a favored venue for dance companies), the DIA Museum and the Rubin Museum.
Further south are the new Whitney Museum, the New Museum of Contemporary Art, the Museum of Jewish Heritage, the National Museum of the American Indian. There are several smaller museums in this area, too.
There reportedly are a total of 32 Museums in Manhattan and vying counts of 83 and 100 for all five boroughs.

Many, if not most, of Manhattan’s strongest and most important arts and cultural venues are not located in either the Midtown CBD or the Downtown Financial District CBD. Some of them are in clusters that might merit the term arts district being used to describe them (like the theater district).

2. . Cleveland, OH. Downtown Cleveland has some venerable and wonderful cultural institutions. Save for The Rock and Roll Hall of Fame, the most important ones are in two clusters about one-mile from the downtown core (Playhouse Square) and about three miles away (Severance Hall. the Cleveland Museum of Art, and the Cleveland Arboretum) near University Circle.

3. Auburn, NY (population around 26,704). This town in Central New York has an impressive number of arts-cultural-entertainment venues. The table above shows their annual attendance. They are sorted into three groups. At the bottom are those located in the downtown: the 16 restaurants and bars that have live music, the Auburn Public Theater, the new NYS Equal Rights Heritage Center and the Seward House Museum. Together, they have an estimate annual audience of 110,484. Above it is a cluster of venues that are about 0.5 miles from the downtown, containing the Schweinfurth Arts Center, The Pitch Theater and the Cayuga Museum. It has a total annual attendance of around 23,688.

At the top are three venues that are farther away from the downtown. The Harriet Tubman National Historic Park is about 1.3 miles away. On a different road, the Merry-Go-Round Playhouse and the nearby Ward O’Hara Museum are about 3 miles from the downtown. These three venues account for about 47% of the arts-cultural-entrainment audience in Auburn. It’s downtown business operators, especially those in the hospitality and entertainment industries, would be foolish to not try to capture the expenditures of the audiences of those three “distant” arts-cultural venues.

4. Cortland, NY (population 18,698). In Cortland, a relatively small college town, a very interesting, if complicated situation exists. First, the downtown lacks a strong formal arts/cultural/entertainments venue as can be seen in the above table. The Cortland Repertory Theater has a branch there, but only attracts 2,000 to 4,000 patrons annually, mainly in non-summer months. Its main theater is in Preble, a 17 minute drive away, and it attracts 18,000 to 20,000 annually. The venues that draw the largest audience are the cluster of six restaurants/bars that have live music, though the Courthouse Park with events there run through the Youth Bureau may have an unreported significant audience. Other downtown arts entertainment venues report annual attendances of 3,500 or less.

The town’s movie theater has the largest audience and it’s a 5 minute drive from the downtown. The other venues with relatively large audiences are not even in the city – they are in nearby Homer, a 7 minute drive, or a more distant Preble, a 17 minute drive.

The Importance of Nearby Areas

It is critical to recognize that the downtown arts district concept ignores the fact that the people and firms who are most likely to visit and use the downtown and companies who are likely to have business transactions with downtown firms are usually located not only in the downtown, but also nearby. They are the real core of the downtown’s traditional trade area.

How Near is Near? In dense urban areas, “near” usually means within about one mile of a downtown. But in less urbanized areas, where walking is less important, and autos are a necessity, the area within about a five-minute drive can be considered “near” – but what is considered an easy drive varies considerably geographically. In parts of Wyoming and Montana, for example, residents will drive for two hours to get to a major retail center.

Create an Organized Arts/Entertainment Community Instead of a Downtown Arts District

Basically, it is an arts district with flexible geographic boundaries that are defined by local economic, and sometimes political, realities. It is focused on and around a downtown district and combines in a formal organization:

The downtown’s EDO
Major downtown non-arts/entertainment stakeholders.
Representation from the local government.
Major arts/entertainment venues within an area that includes the downtown, but extends beyond it, much as the downtown’s residential trade area does (but the two will not be congruent). That extended territory might be called the Area of Mutual Interest (AMI). The extent of the AMI will vary by community and be determined by the existing and/or potential relationships between the downtown and the arts venues in the AMI. The AMI in most instances probably will extend one to two miles from the downtown, but in other, rarer, instances it could extend five miles, or even more.
Broadly defined creative micro and small businesses within the AMI: e.g., visual artists, crafters, tattoo artists, entertainers, chefs, brewers, makers, etc.

The objectives of the Organized Arts Entertainment Community are:

For the arts and downtown business communities, aware of how each can help the well-being of the other, the prime directive is to formally work together in planned endeavors for their mutual benefits. These benefits for the downtown might include: more downtown residents; more people employed downtown; more people visiting the downtown; higher property values and rents, and higher sales revenues for downtown businesses. For the arts organizations the benefits may be: better marketing; increased revenues, higher attendance; greater availability of technical assistance, and stronger cooperative advocacy programs.
For the creatives, the Community would aim to help increase their incomes by facilitating the more effective marketing of their products and helping their business operation become more productive. It would help these businesses grow to the level of the owners aspirations. The downtown would provide for the creatives physical places where their wares can be marketed or where they can perform, as well as places for social interaction like a White Horse Tavern or Cedar Tavern. It also would be the place where they are connected to technical and financial assistance providers. It also can be the place where their creative supplies are purchased, and their wares are fabricated.

What such an Organized Arts Entertainment Community might do:

Create a very place-centered marketing campaign focused on attracting more visitors to the AMI. It would feature multi-faceted opportunities to have rewarding and entertaining experiences not only in arts and entertainment establishments, but also in dining, drinking and pampering establishments.
For arts organizations, it would, for example, also provide:
- A marketing campaign that “tells the stories” of the arts at the overall AMI area level as well as at the level of the individual art organizations.
- Links for arts organizations to funders and assistance to improve grant proposal development
- Information about best practices, especially re marketing and how to increase earned incomes.
For the creatives, it would, for example, also develop and maintain a downtown entrepreneurial environment that will:
- Enable them to have their products more effectively marketed
- Help their business operations become more efficiently executed
- Provide social spaces that can stimulate social and business networking.

Why Members of an Arts Archipelago May Want to Work Together

Shared Common Interests. All benefit from:

Attracting more people to live and work in the AMI.
Attracting more people to visit the AMI, including trade area residents, day trippers, and overnight tourists.

Complementary Assets. Working together they become stronger attractions:

Every downtown and non-downtown organization that can offer enjoyable experiences adds to making the area of mutual concern more magnetic to residents, workers and visitors.
Non-downtown arts venues often lack nearby hospitality establishments for their audiences who travel significant distances, while the downtown may have a relatively large cluster of hospitality venues. Conversely, the non-downtown arts venues might bring in large audiences from distant places that the downtown hospitality venues could not by themselves attract.

The Downtown Benefits as It Meets Arts Community Needs. By doing the things that downtowns have long done, but with notable focus on the arts, downtown businesses can become more prosperous:

Assets of the community’s entrepreneurial environment that are located in the downtown
- Social meeting places for artists and artisans – e.g., bars, restaurants, libraries, co-working spaces. This can create magnets drawing non-artists.
- Offices and meeting rooms for arts organizations
- Technical assistance providers officed in downtown
- Financial services and assistance providers officed in downtown
- Affordable workspaces for artists and artisans – studios, rehearsal spaces
- Affordable downtown living spaces for artist and artisans
- Retail channels for artists and artisans; retailers have unique ,local products to sell, some new arts businesses may be started.
- Incubation spaces for arts related start-ups and micro businesses.
- Marketing and promotional opportunities
  - Arts presented/exhibited in public spaces such as parks and gov’t office buildings; this helps activate those spaces.
  - Arts presented/exhibited in private sector spaces such as restaurants, retail shops, office building lobbies; this makes them more physically attractive with more magnetic pull on potential users.
  - Arts presented /exhibited at arts shows, crafts shows, festivals; this increases their magnetism

Some More Specifics About Small Town Entrepreneurial Environments (STEEs)

Posted on December 17, 2018 by DANTH

By N. David Milder

Introduction

Back in October of 2017, DANTH, Inc posted my white paper “Toward an Effective Economic Development Strategy for Smaller Communities (under 35,000)”(1). A central concept in that strategic approach was the STEEs (Small Town Entrepreneurial Environments). I then stated that: “Though I strongly suspect that such environments exist today somewhere in the USA, to date, I have not encountered one.” I then proceeded to outline what I then thought the major components of s viable and effective STEE might be. Since then, I have done additional research and visited and worked in a number of smaller communities and learned a good deal more about possible STEE components. The objective of this article is to detail those recent findings.

Viewing STEEs as Informal Business Incubators.

For a number of years now, I have been arguing that small town downtowns could be informal business incubators. My recent work made me realize that STEEs function much like informal business incubators. They are informal in the sense that all the elements of a business incubator are not in one building operated by an organization tasked to do incubation. Instead, they are dispersed within a downtown in different locations, and each may have a separate management organization. An interesting blog post by Jim Metcalf on the SCORE blog argues that incubator functions may be spread beyond the downtown and be found in the whole small town (2).

Formal business incubators have long been a fairly widely adopted economic development tool. I would argue that they will always have a vital role to play for firms that have substantial growth aspirations, that yearn to be big in terms of revenues, profits and employees, that want to be the next Apple, Facebook or Amazon. However, that usually means that the formal incubator will nurture a relatively small percentage of the businesses in a smaller community. For example, the well regarded Wyoming Technology Business Center operates incubators in the cities of Laramie,Sheridan and Casper and:

In Laramie ,the incubator has 8 clients and there are 657 residents who are self-employed, but have unincorporated businesses in the city (see Table 1).
In Sheridan, the incubator also has 8 client sand there are 340 people who are self-employed, but have unincorporated businesses in the city.
In Casper, the incubator has 12 clients and there are 1,567 people who are self-employed, but have unincorporated businesses in the city.

Informal incubation functions can help the micro and very small businesses that are usually fairly numerous even in smaller towns, as is evidenced in Table1. Their operators very often have more modest aspirations, mainly focused on how to have more stable and/or higher annual personal incomes and the steps that might help them to achieve those goals.

Many of these micro business operators work from their homes. Back in the 1990s, these home-based operators were not deemed of interest by many economic development experts, because it was thought that their numbers were few and that they seldom if ever hired any employees. More recent research, however, suggests that their numbers are far from insignificant and, at least in some instances, can be very significant (3). As Dave Carlson, the administrator of Lancaster. WI, has noted, these micro businesses, in aggregate, can equal the number of jobs provided by his town’s largest employer. Also, recent research indicates that these home-based entrepreneurs may indeed hire some employees (4).

My recent work in a few smaller communities in Upstate NY confirms Metcalf’s view – the towns had many incubator components, and many were frequently being performed in the town, but not in the downtown. The downtown obviously will be stronger if it’s the location where the vast majority of these functions are performed.

STEEs Do More Than Micro and Very Small Business Incubation

STEEs are very much related to the nurturing of creative endeavors within our smaller communities. However, they can also be a huge asset in the retention of a town’s current creatives and the attraction of more of them from other towns and cities. Those in large central cities within a 2.5to 3.0 hour drive are where the best prospects now live and work.

As I have demonstrated in several other articles and as noted in a recent article in the New York Times, a significant number of big city creatives are being drawn to rural local communities either as second homeowners or in complete, year round relocations (5). These relocations are being motivated primarily by quality of life considerations. While many create new jobs in their new towns, others bring their old jobs with them or create new jobs because the local broadband pipe allows them to telecommute. More affordable housing , a lower cost of living, family, great scenery, and a stronger sense of community are other Q of L lures.

Table 2, below, presents 12 STEE functions that are in bold and underlined type. The more of them that are present in a town, the stronger will be the town’s ability to attract and retain creative enterprises. The more of them that are in the downtown, the stronger it will be economically. Under each function are “tools” that can be used to perform that function. Here, the question is not how many can be used, but the strength with which they perform. Better to have one thing that really works than several of marginal utility. Yes, it’s better still to have several that really work well.

Many town and downtown STEE assets are not recognized or properly appreciated by local leaders. This matrix can be used by downtown leaders to assess their STEE assets. This should help them to then determine:

The elements they may want to think seriously about adding.
How the existing elements can be organized so that they are better known and more easily utilized.
How these STEE assets can be marketed to attract more creatives to move and do business in the community and the downtown.

The matrix includes such typical incubator functions as providing a work space, technical assistance for business operations (e.g., marketing, bookkeeping, human resource management, etc.), networking opportunities, and help with financing. It also includes such things as affordable housing, accessible broadband, and an existing cluster of creatives – important factors in recruiting creatives. Additional elements listed are the presence of an organization tasked to maintain and grow the STEE and someone to manage the provision of technical assistance. Downtown EDOs have typically avoided like the plague the latter two types of endeavors, but one may reasonably argue that, under the new normal, cultivating a strong, vibrant STEE will need to be a growing part of their missions.

Some Observations About Specific Types of STEE Components

While in the past few years I have come across some co-worker spaces and a few incubators that are located in in small towns, they were not the STEE components that impressed me the most. Here are some that impressed me as being far more important.

Libraries. In more and more small towns, the public library has become – or is becoming – an anchor component for its STEE.Libraries are changing big time. As one blog has described it, many libraries are now “in the process of transitioning from a content collection-only facility to a content creation-inspired makerspace” (6). Not only do they provide spaces where “makers,” a term that is often broadly defined, can meet, learn from each other, and network, but they also provide a wide range of equipment the makers can use in the library. A few are even assembling an inventory of maker “kits” that are loaned out to makers for their use off site. Some librarians are arguing that libraries need to become “creative spaces.”

The Phillips Free Library in Homer, NY (pop 6,200) is a good example. It has two writers clubs, a film making club and a significant Makerspace, filled with a lot of equipment (see Table 3).

Arts Coops. In many of these small towns there are a fair number of artists and artisans. Few are likely to get all their incomes from their artistic endeavors, so many will need additional employment. As one artist in Small Town X told me, and several of his artist friends then concurred: “Small Town X is a great place for artists – except for those who want to earn a living.”

Most lack business related skills and want help in marketing and getting exposure. Unfortunately, it is often difficult to get these small town artists and artisans the technical assistance they need and often want because the assistance simply does not exist and/or the artists’ great need for independence, that they share with other small businesspeople, makes them resistant consumers.

In these small towns, getting say 20 artists and artisans the technical assistance they need may be a daunting and resource burning task.For that reason, coops are an appealing concept. When they are functional, they substantially diminish the needs of the participating artists for technical assistance. The coop can handle a lot of an artist/artisan’s marketing and bookkeeping needs, while creating a social network among the coop members.

However, coops are often unstable and short-lived. In recent months I have found one that closed, another that was reorganized and a third that appears to have some long-term stability. Even the venerable Torpedo Factory in Alexandria, VA, had a recent organizational and financial crisis. Someone, who was involved there on the management side, noted that managing artists was like trying to herd cats. Coop leaders very likely to face a similar challenge.

The questions that comes to my mind are:

Can the management of a coop be improved more easily, efficiently and effectively than improving the business-related skills of their 15 to 30 artist/artisan members? Getting them to individually attend an eight-to-ten month course comprised of four 10-hour workshops and up to six two-hour interim sessions, as a highly regarded program in Montana does, requires a significant amount of commitment from the artists/artisans.
The Montana program is indeed interesting and useful, as well as a model for similar efforts in other states. In Montana, it has improved the entrepreneurial skills of 400+ artists over 5 years, resulting in impressive increased net sales of 397% with a 44% increase in out-of-state sales, on average, since participating in the program. Nevertheless, I still find myself asking: could the development of a program aimed at making coops more successful be a cheaper and more productive way of meeting the technical assistance needs of artists and artisans (7)?

I do not know of anyone who has addressed the question of how to make arts coops more stable and successful. Someone perhaps should take a stab at it.

Vendor Marts. I have long been familiar with antiques malls, but somehow vendor malls, their kin, had not been on my radar until I recently came across one in a smaller community in Upstate NY. However, I had seen one in a downtown in NJ a few years ago that was being pitched as a retail incubator in the owners attempt to win support from the downtown’s EDO and city officials.

Indeed, my recently aroused interest in vender malls is precisely because of their incubation and STEE capabilities:

They provide small, maybe about 150 SF, and comparatively affordable spaces, maybe about $2,700/yr, for aspiring retailers, artists and artisans.
The vendors must “mind the store” and be behind the cash register for at least a few days a month, so they can get some retail experience. For many artists and artisans, whose primary concern is creating, not selling, this can be a very attractive feature.
Vendors that do well then can “graduate” and lease a regular storefront elsewhere in the downtown or town. The vendor mall I recently visited in Upstate NY had just had such a graduate.

Any competent downtown EDO should be able to set up a vendor mart in an empty storefront. It could increase the incubation capabilities of the vendor mart by helping the vendors learn about available technical assistance providers and then helping the vendors to connect with the TA providers. Of course, if the downtown already has a vendor mall, it could similarly increase their incubation capabilities.

Project Generated Local Investment Groups. A few years ago, in the twin cities of Scottsbluff and Gering in Nebraska, I came across informal investment groups that were formed within the local business community. One such group, for example, has helped the development of a new hotel in downtown Gering. I recently heard of similar type group being formedt o help fund the significant expansion of a local craft brewery in a smaller community also located in Upstate NY. The town may well have lost the craft brewery had not the local investment group emerged and taken action.

These groups usually are formed in response to a public need that has been identified by local officials or by well-known private sector needs.

Opportunity Zones (OZs). Recent congressional action has significantly increased the capital investment incentives that can be offered in OZs. While many in the economic development community are waiting to see how those incentives are used and the positive impacts they produce, there now is a hopeful optimism that those incentives can be powerful.

I have come across a number of downtowns that are entirely or partially covered by OZs, but do not tout them very much. Perhaps their new incentives are just too new for local leaders to figure out how they can be used. It also may be that the incentives go to Qualified Opportunity Zone Funds:

“A Qualified Opportunity Zone Fund is any investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in qualified opportunity zone property (8).”

Many REITs and other commercial real estate investment funds are making OZ investments. For smaller towns to attract these big time investors, they will have to market the opportunities offered in the OZs and compete for the available investment dollars.

Might it be better to have the local residents and businesspeople who participate in the informal investment groups form their own QualifiedOpportunity Zone Fund?

Some Final Comments

Since I published the white paper I have been repeatedly impressed by what I have found in the smaller towns I have visited and read about. (See especially: “Our Towns: A 100,000-Mile Journey Into the Heart ofAmerica” by Deborah Fallows and James Fallows). I certainly recognized that they have significant challenges, but I also found a large number of capable and inventive people and capable organizations. Together, they are often building communities rich in their quality of life, if so far not in household incomes and corporate profits. There are often substantial human, organizational and economic resources in these communities that go unnoticed by outsiders and locals alike. Rather than disappearing, I expect that within the next 10 years or so our smaller communities, especially those within a three-hour drive of a major city, will become “hot” and attract many new residents and jobs. And that’s the view of a dyed in the wool New Yorker, who may like to visit smaller towns, but would never live fulltime in one – unless he has to.

Endnotes

1) See: https://www.dropbox.com/s/tnwdomfzwrkv5i1/White-Paper-Toward-an-Effective-Economic-Development-Strategy-for-Smaller-Communities-1.pdf?dl=0

2) Jim Metcalf. “Small Towns as Business Incubators.” SCORE Blog, March 29, 2018. https://www.score.org/blog/small-towns-business-incubators

3) “According to the 2012 GlobalEntrepreneurship Monitor (GEM) Report, 69 percent of all businesses are started from home and 59 percent are still operating from their homes three years later. Additionally, ‘only one-fourth of the entrepreneurs surveyed stated they had no employees working for their businesses. Given the high prevalence of entrepreneurs operating at home (two-thirds of Total Entrepreneurial Activity),this finding suggests that many actually had employees in their home-based businesses.’” Melissa Davidson. “FOCUSING ON HOME-BASED BUSINESSES: The Forgotten Sector. IEDC EconomicDevelopment Journal, Volume 17 / Number 1/ Winter 2018, pp.11-18, p 11.

4) Ibid.

5). N, David Milder, “Quality-of-Life Based Retail Recruitment: CommunitiesWith Populations Under 35,000,” IEDC Economic Development Journal, Volume 16 / Number 3 / Summer 2017. Seealso: Brooke Lea Foster. “Forget theSuburbs, It’s Country or Bust “ New York Times, Dec. 14, 2018 https://www.nytimes.com/2018/12/14/realestate/forget-the-suburbs-its-country-or-bust.html

6) There’s even a librarian guide to makerspaces. See: https://oedb.org/ilibrarian/a-librarians-guide-to-makerspaces/

7) For the Montana program see: https://art.mt.gov/map. “Artists in the program (2009-2014) report increased net sales of 397% with a44% increase in out-of-state sales on average since participating in the program, proving that the program works. The Montana Artrepreneur Program has earned national acclaim and has impacted nearly 400 artists across Montana.” “FY2019Activities

8) See: https://www.wellsfargo.com/the-private-bank/insights/planning/wpu-qualified-opportunity-zones/

N. David Milder at DANTH, Inc.

Downtown Revitalization Specialist

Category Archives: The Arts

Some More Specifics About Small Town Entrepreneurial Environments (STEEs)