The Central Business District AKA the Downtown of any community, urban, suburban or rural, is critical to the economic success of a region as Downtown is a center for commerce, arts, and mixed use developments that attract attractive younger, Millennial workers. The redevelopment of Downtowns center on creating a comprehensive land use plan and aligning incentives and project financing strategies to retain and attracting high-wage jobs, support arts and entertainment projects, and develop residential and retail projects that transform even small Downtowns into economic centers where people live, work and play. A dozen prime strategies exist to revitalize any Downtown.
Transit Oriented Development (TOD) districts combine land use zoning strategies with incentives to create developments built around mass transit networks or stops in that network. A TOD creates communities with an average 2,000 feet walking distance to a transit stop and core commercial area. The ultimate goal is to increase density along transit corridors by locating residences, jobs, and retail destinations close to public transit facilities. TODs promote mixed-use developments within walking distance of residential areas and multimodal, interconnected transportation network through land use regulation. TOD follows urban design guidelines and encourages a more pedestrian and walkable community. By establishing transportation corridors and concentrated urban centers, TODs encourage residents and workers to walk, ride bicycles, or utilize public transit rather than the automobile as a means of transportation. This land use strategy lowers congestion on surrounding roadways and reduces detrimental effects on air quality and balances the distribution of land uses to concentrate development around transportation nodes within developed areas, thus preserving rural, open space, agricultural, and environmental lands.
Many communities utilize tax incentives to promote economic success. Many communities also use tax incentives to attract jobs to their community such as a rebate of municipal income taxes for office projects or the use of property tax abatements to encourage the development of residential projects. Special Improvement Districts (SIDs) are another Downtown redevelopment tool used to address infrastructure, public service and public safety issues for Downtown residents and workers. A SID is an area of land within which property owners agree to pay an additional tax or fee designated for specific services or improvements within the district’s boundaries. State economic development incentives can often drive high-wage job related projects to a Central Business District. These state incentives can be loans, tax credits, or grants to address workforce, capital or infrastructure expenses.
Tax Increment Financing (TIF) is an important public finance tool used for the development of infrastructure in Downtowns across the United States. TIFs are an economic development mechanism available to local governments in Ohio to finance public infrastructure improvements and, in certain circumstances, residential rehabilitation by capturing the growth of future taxes, usually property taxes, to fund infrastructure at a specific site. The federal government’s new Opportunity Zone will create substantial economic development opportunity for Downtown related projects in targeted census tracts. While the rules are still being developed, Opportunity Zone’s permit the substantial deferral of capital gains taxes in census tracts recommended by state Governor’s and certified by the U.S. Treasury Department as an Opportunity Zone. Certain states such as Ohio provide funding for community projects every two years through the state of Ohio Capital Budget. In even numbered years, the Ohio General Assembly enacts a state of Ohio Capital Budget bill that provides for state funding for agencies, universities, schools and community projects tied to the arts and economic development. Capital budget community projects are often tied to the redevelopment of historic structures in Ohio such as theaters, museums, office and university buildings, and the most recent capital budget provide $150 M in Community Project funding.
Again, some states, such as Ohio, enacted an Idle Property Tax Abatement Program to support Downtown redevelopment. The Ohio Idle Property Tax Abatement program provides a six year property tax abatement on pre-development stage projects for vacant property and it authorizes but does NOT require a municipal corporation, township, or county to approve a property tax exemption for increases in the value of a parcel of land while it is in the pre-development stage. States like Michigan and Ohio offer cities the chance to redevelop historic properties through a Downtown Redevelopment District Program. Cities can create downtown redevelopment districts (DRDs) and innovation districts to promote rehab of historic buildings if a city has a certified historic structure, creates a district as large as 10 contiguous acres around that historic structure and develops a DRD economic development plan.
Six Steps to Redevelopment Historic Property using DRDs
State and federal Historic Preservation Tax Credits offer another important source of funding for historic preservation projects. The federal Historic Preservation Tax Credit proves a 20 percent tax credit for the rehab of certified historic structures, 10 percent federal tax credit for non-historic structures. Many states offer a 25 percent state tax credit for historic structures through a highly competitive state process. A 2011 Economic Impact Study of the Ohio Historic Tax Preservation Tax Credit showed for every $1 million in tax credit allocated by the state $8 million of construction spending and 80 construction jobs are created.
Federal New Market Tax Credits provide a funding source for projects located in federally designated low income areas. New Market Tax Credits are a powerful economic incentive as, from 2003 to 2012, New Market Tax Credits investments generated nearly $118 billion in economic activity creating 744,267 jobs in low-income rural and urban communities. The Federal New Markets Tax Credit provides a 39 percent Federal Tax Credit Over seven Years for real estate investments in poor communities through complex transactions involving retail, office and manufacturing projects. New Market Tax Credit projects involve the gaining of an allocation of the federally awarded tax credit from an awardee of the credit.
Encouraging tourism and the arts have a major economic impact on most Downtowns. The creative industries have a major economic impact on a region. As an example, the Central Ohio’s Creative Economy sector generates over $3 B in business receipts each year, employs 25,000 people with $932 M in employee wages; and pays $67 M in state and local taxes. Arts and entertainment can be encouraged through the use of incentives and Downtown Redevelopment Districts and Historic Preservation Tax Credits.
Addressing Downtown redeveloping does not involve a quick fix but a long-term strategy to support and finance projects by using multiple programs to encourage the development of office, retail, residential and arts and entertainment projects.