It's now mid-2008. That "event of events," the Alltech FEI World Equestrian Games, descends upon Lexington in just a few months shy of two years from now. That's not a lot of time to take advantage of this major happening as leverage to transform our city's central district - downtown - into the talent attracting and retaining asset so many other competing medium markets long ago created and now enjoy.
But it's become an even a taller order in the midst of a housing bust, a credit crunch, shrinking consumption, rising unemployment and faltering business investment.
Leading private sector economists are now predicting a $90 billion dollar swing --from more spending to less-- by city governments in the forthcoming fiscal year, clear evidence that municipal revenues are stretched thin. Lexington certainly is no better off in that regard than most other struggling cities across the country.
Still, our "big break" looms on the calendar. What can we do with available resources?
Downtown Lexington remains a very diffused marketplace with small clusters of stores, bars and restaurants scattered distant from one another throughout the district. Some sort of "medal of valor" should be bestowed upon existing downtown businesses for their tenacity through years of neglect, waiting and hoping.
The present environment limits sales potential by leaving significant physical and psychological gaps between these clusters, robbing the district of the daily synergies it takes to survive. Although there are early signs of important improvement, particularly along the North Limestone corridor, there still is little reason to spend much time lingering downtown to explore; enjoy the presence of other people doing interesting things; absorb art and music; shop and dine -- all of the ingredients that when combined, add up to that much sought-after energizing "vibe."
The sales activity and volume needed to attract more retailers just isn't there. To assume the financial risk of opening a new business, owners are looking for specific demographic criteria. A strong enough demographic profile allows them to appropriately project the sales volumes needed to ensure their business objectives can be met. Currently, those numbers are not strong enough.
The challenge for property owners and developers is to convince potential retailers and entertainment venue operators that they can make money downtown -- and make more money than they could in other places offering space at competitive rates.
In the interest of spurring serious discussion and decision-making in what little time remains before the Games --not to mention the completion of work on the Urban County Government's next budget-- we offer some ideas. There is no pride of authorship here. These proposals are intended to provoke debate with the aim of getting us to some solutions - quickly.
Instead of "building it in the hope that they will come," we might want to think about just "building it for ourselves." There is something discomforting about a place that obviously has tried too hard to please everybody, while there is something very seductive about a place that nurtures and continually celebrates its own local character.
Why not enable the growth of a downtown economy that actually expresses through locally-owned, independent retail anad entertainment commerce the authentic ingenuity and character of our city?
A well managed Downtown Retail Recruitment Program such as those implemented by cities from Poughkeepsie and Dallas to Corpus Christi and San Jose could foster the rapid infill of vacant street-level spaces with eligible (carefully defined) retail and entertainment business ventures.
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At an average $17 per square foot (NAI Isaac), downtown floorspace is priced far above the reasonable affordable limits of most small, independent, local businesses - particularly while in startup phase and especially music venues which rely solely on admission and alcohol sales to realize even a marginal profit. Yet it is those very types of businesses that, through commercial enterprise and social activities, express the genuine nature of a place. Such a downtown can then be marketed --credibly-- as a place that draws people looking for the enjoyment of the arts, entertainment and unique retail experiences unlike anything found elsewhere in the Greater Lexington market.
Why should arts-related venues be included in the eligible mix? We have only to look to the experience of a city that reinvented itself from dark, sooty, uninviting steel town to a thriving cultural metropolis: Pittsburgh, where as mayor, Thomas Murphy led the renaissance. "I don't know what you're doing for the arts and culture for downtownÖ but we found that to be hugely important for generating and supporting retail," he recalled.
We hope the hardworking members of the Urban County Council can find a way to fund such a program, placing responsibility for its administration under the city's Office of Economic Development or its Downtown Development Authority.
The options might include a $2 million fund providing documented need-based incentives of $50,000 - $100,000 for each of 20 to 40 new retailers to set up shop in the downtown district. Pause for a moment and imagine the appearance of 20 to 40 new retailers in downtown Lexington. This would not be mere incremental change, but an urban revolution.
The retailer could choose to receive this subsidy for which he or she qualifies all in year-one to cover costs of fit-up, or they could choose to apply it to rent, spread out over several years.
For example: consider a 2000 square foot female-owned local women's dress shop that hypothetically can only afford to pay $12/sf. But the rent in the Class A space she has chosen as appropriate for the motif of her store is $20/sf. That means she can afford to pay $24,000/ yr. But the landlord requires $40,000/yr. That leaves her in need of $16,000/yr in rental assistance, so a $50,000 subsidy would more than carry her through her first three years. If she can't get the business grown to a point of being able to support $20/ft in three years, then it may not be a viable retail business.
Or, perhaps she should consider applying for assistance in creatively fitting up a less costly class B or class C space.
The fund could be replenished, at least in part, by recapturing payroll and other local taxes generated by these participating businesses operating within a specifically defined district.
Now, we realize that important and difficult questions remain. For example:
- Who would be affected by this and how?
- What about suburban retailers who are struggling in this economy?
- And what about those established downtown businesses?† What do they get, if anything, as a reward for "hanging in there?"† If nothing, what if they are competing in the same business as a new venue that receives assistance? Haven't we just given their competition an unfair advantage?
A more equitable option might be a low interest loan fund available to anyone who applies.† Perhaps there could be a system of levels on how much could be borrowed under such a program based on the number of jobs created or the amount of investment in project.† Given the pressing need created by the soon-to-arrive Games, downtown could serve as a pilot for this approach and as the program progresses it could be offered to other specific areas of town - perhaps designated Business Improvement Districts and other focused areas of revitalization.
And, what about a system of† "fees" associated with chronically empty spaces?† An incremental "property assessment" realized from underutilized space could fund a revolving loan fund while creating a sense of urgency among owners to either sell the space or do something with it.
We believe the development of a thriving and interesting downtown is more than essential to the economic development of Lexington and Fayette County, an urban-county community that relies heavily on payroll taxes to fund much demanded public services. Keeping the lights on requires the creation of more and better jobs. Creating more and better jobs requires a concentration of intelligence and capital. And in today's world, winners and losers among cities and regions are sorted out according to which has the goods to attract and retain the most bright, innovative and entrepreneurial people.
In his new book, "Who's Your City," Richard Florida states that "Ideas flow more freely, are honed more sharply, and can be put into practice more quickly when innovators, implementers and financial backers are in constant contact with one another, in and outside of work."
Those talents need to be given powerful reasons to choose Lexington as the place where they cross paths and trade thoughts both in and outside of work, instead of any number of cities that already are years ahead of us in establishing and nurturing attractive urban lifestyle environments.
We hope Mayor Jim Newberry and members of the Lexington-Fayette Urban County Council will give serious consideration to these suggestions.
We believe the results might just amaze us all.