My last post, “What Consultants Wished You Knew About the RFP Process,” looked at the Request for Proposal (RFP) process from the consultant’s point of view. In that post, I reference my more than ten years in state government and having sat now on both sides of the table. I’ve been there, I get it. But if you’re a consultant and have never issued a RFP, there are a few things to keep in mind.
The Process is Required and Can Be Cumbersome- Virtually no one likes the RFP process. Not even the people issuing them. They’re likely getting guidance from either a legal department or procurement department and there’s probably a bunch of stuff in the RFP that’s boilerplate that has to be in there. Does it always make sense? No, but that’s what legal or procurement says, so just roll with it. It may not always make sense.
We Don’t Always Know Where/Who to Send the RFP- One of the benefits of the RFP process is that sometimes we get proposals from groups we’ve never heard of. A lot of times that’s a good thing. Depending on the work to be done, we may not know everyone who’s submitting. We will probably post to our website and then an industry website or two and then to maybe the consultants we know. Just because we don’t have an existing relationship with you doesn’t mean we don’t want to see your proposal.
Not Revealing the Budget is Sometimes Political- I went over the whole “revealing the budget” argument in my last post, but for consultants, as much as we hate not knowing the budget, sometimes the people issuing the budgets don’t like it either. That decision is often made above them by a supervisor, board, our council decision. If you decide to not pursue a project because of a lack of information about the budget, try to find a way to politely let them know why. When decision makers learn people aren’t submitting because of the lack of transparency, then maybe it will change.
Pay Attention to the RFP’s Requirements- This seems like a no-brainer, right? It’s not. We acknowledge some of the language is boilerplate but pay close attention to what we’re looking for in the deliverables section and the method of how to submit. Too often consultants will get on a roll writing about what they can do that they ignore what the RFP is actually asking for. Additionally, if there are specific things you need to complete or acknowledge, you better do it. In larger organizations, procurement staff act as gatekeepers. If you don’t complete the basic tasks/acknowledgements/requirements, your proposal may not even be forwarded to the review team.
We’ve Likely Talked to Another Consultant- It would be really hard to understand how much to budget for a service if we didn’t know how much it costs. To figure this out, we usually talk to a consultant or two to figure out a range. The hard part is sometimes we find a consultant we really want to use, but still have to go out for bid because of procurement standards. If you’re thinking sometimes a bid is intended for someone, you might be right. That doesn’t mean we can’t be moved to work with you, but it will be difficult to get us to change our mind.
Sometimes Our Timeline Tells You Something- If we have a short turnaround time to respond to a proposal, either we severely underestimate what it will take to put together the proposal or we already know who we want to work with and giving you a shorter timeline makes it harder for you to put together a good proposal. Either way, this is a red flag.
Reviewing Proposals Always Takes Longer Than You Think- Even we’re too optimistic sometimes. And just because you’ve obsessed about this proposal for the last two weeks doesn’t mean we can’t wait to read it. It’s in the pile and we’ll get to it prior to whenever our review meeting is scheduled. It’s one of many things we’re working on. Be patient. We’ll get to it.
We May Not Know Exactly What We Want – We likely won’t admit this. But when I was on the other side of the table, I almost always hoped we put a decent framework in place, and someone would take it and flesh it out and build on to offer more than I thought we would get. Don’t be afraid to put a little extra in if you can.
Proof Your Proposal- You’d be shocked at the typos and “copy and paste” from previous proposals we see. If you have serious typos, you’re out. Grammar and punctuation count. If you use something from a different proposal for someone else and don’t catch all the changes in the name, you’re probably out. Your proposal should be your absolute best foot forward. If you botch this part, you’ll probably botch the job too.
You’ve Responded to More RFPs Than We’ve Issued- Something for all consultants to remember is that you’ve likely submitted way more proposals than the average RFP issuer has issued. You’re more of the RFP expert than they are. It’s ok. There’s an expectation you know what the hell you’re doing. You’re the consultant, right? Remember there’s a likelihood they don’t know exactly what they’re doing, not out of ignorance, but out of inexperience with the RFP process. Be patient and ask questions.
Hopefully this helps consultants understand the process a little better from the other side. Understanding what the other side goes through can help create a better environment for an imperfect system.
Joe Borgstrom is a principal with Place + Main Advisors, LLC. Place + Main specializes in Place-Driven Economic Development + Destination Storytelling
One of my least favorite parts of being a consultant is business development. I love getting calls or emails from people who are interested in our services because 1) I know we’re developing a reputation for good, professional work that truly helps communities; and 2) It may be a piece of business we don’t have to respond to a Request for Proposal (RFP) for. Now, we’ve been really fortunate and have won some really great projects and made some good friends (both clients and strategic partners) through RFPs. As someone who spent a decade in state government prior to being a consultant, I totally understand the need and requirement of going out to bid. If you work in a public or larger non-profit organization there are likely strict rules in place and boilerplate language that must be used. But after five years of being on this side of the fence and putting together a string of proposals the last few months in particular, I’ve come up with a list of things I wish I would’ve known or thought more about when I was in government. Some of these may be more related to our fields but feel these are pretty universal thoughts from myself and fellow consultants.
Terminology- I think this is one of the most low-key areas that undermine the RFP process. What do I mean by it? I mean terms your industry uses may not be universal. Let’s use an example. Let’s say community issues an RFP for a “strategic plan.” Now as a consultant, I know what a strategic plan is. We do them all the time. But locals may confuse the term with something else they mean. For us, a strategic plan is typically an organizational document that spells out what the organizations mission and vision, what its challenges are, determine its goals and objectives, and develop a plan to address these, generally speaking. What we’ve seen are several RFPs where this type of strategic plan is combined with a fundraising plan, capital improvements plan, market analysis, and basic sub-area plan. Both are strategic in nature and both can be technically correct. One is just a whole lot more complex than the other. But if the local director asks their peers, “What did you pay for a strategic plan?” They may be talking about two entirely different things. As issuers, please realize whatever you call your project may be different from what other people call it and base it on what specifically you’re asking for.
Timeline- Maybe you know this, but the sweet spot for the timing of an RFP is about a month. If it’s something much shorter, like two weeks, we assume you already have a consultant identified and you’re just going through the motions to satisfy whatever purchasing criteria you have, and we won’t bother submitting a proposal.
Page Limits- I know some consultants will disagree with me on this, but I secretly love page limits. We consultants can sometimes go on and on about ourselves, our work, and how we would approach your project. Having sat on the other side of the table, I hated getting super thick proposals that looked like books. Forcing us to get to the point and be compelling in 24-32 pages helps focus the conversation.
Digital Submissions > Mailed Submissions- Prior to COVID, we submitted one digital proposal in five years. Since COVID, all submittals have been digital. This is a trend I am hugely on board with. Don’t get me wrong, I love a good, printed proposal. I’ve taken pictures of the end product before because they looked so good. But to be honest, they’re expensive and wasteful. The more copies you request, the more expensive it is for the consultant to produce and mail. Yes, I know it’s a cost of doing business, but what do you do with all of those proposals when you’re done? You throw them out or hopefully recycle them. Keeping proposals in a digital format keeps costs down for us and is better for the environment.
Feedback- No one wants to hear they didn’t get a bid. But providing constructive feedback certainly helps cushion the blow. As I mentioned earlier, proposals are time consuming and can be expensive. We’d at least like to hear either what we didn’t do right or what other folks did better.
Budget- I left the biggest for last. I know this is immediately polarizing with people on the RFP side feeling strongly both ways in terms of revealing a budget or not. When I was in government, I at one time was on the side of not wanting to reveal the budget. Then I went out for RFP. It was for a technical assistance program and we received more than 20 responses. Unfortunately, the best three were twice our budget. Had we just been up front about the budget, we wouldn’t have wasted their time or ours. From that day on, I became convinced in revealing the budget. Now on the consultant side of the table I am even more firm in that belief. Not that we are solely concerned about how much a project pays, but after reading the RFP, understanding how much the client has set aside for it also tells us the level of understanding or expectations of the project. Sometimes terminology is inconsistent (see above), so budget is often one of the orienting factors for level of anticipated effort and complexity. As an example, a client had started a conversation a few years ago with us about a small project to try to get an idea on what they should budget. They came back almost a year later with an RFP with what we talked about plus a few more things. My initial thought was the budget would be in the neighborhood of what we had talked about. After revealing what the budget actually was (four times higher) we were able to go from a small team to a much larger one providing everything they wanted and more. The result was an incredible project they were thrilled with and we were proud to work on.
I know the biggest counter to revealing is something along the lines of “But if they know the budget, how do you know you’re getting the best deal?” This is a fair argument. The problem with this approach is if you’ve budgeted a certain amount and don’t tell consultants what it is, a consultant is forced to do one of two things: 1) Give you the best (i.e., most expensive) option possible or 2) Guess your budget but possibly not give you everything you should get (that you may not know to ask for.) And if you happen to hit the jackpot, good for you. But more times than not, you’re better off revealing the budget and let consultants tell you what they can do for that amount. Numerous times, we’ve been able to offer additional benefits and services the client hadn’t even considered. Let consultants compete on the value they can provide for the budget.
As consultants, we understand the RFP process is necessary. It can also be helpful to make you aware of service providers you might not have known about otherwise. But if you take the above to heart, you will likely receive more and better proposals.
Joe Borgstrom is a principal with Place + Main Advisors, LLC. Place + Main specializes in Place-Driven Economic Development + Destination Storytelling
We’ve all seen them. If you’ve been in the community, downtown, or economic development worlds for more than five minutes, you’ve seen them. The plans that were paid for, agonized over, and proudly presented, only to have them sit in a binder on a shelf in an office. Maybe you dust them off from time to time. They usually have some good ideas but have never been implemented. They just sit there. Useless because they aren’t being done.
An important part of executing a plan is to start with a good plan. Well, no kidding, right? But what do I mean by a “good plan”? The most important thing to us when we write any plan or strategy is understanding how to actually implement the things you recommend. A good plan will be able to tell you what detailed steps (A, B, C, D, etc.) you need to take to go from idea to finished project. We call this an Implementation Plan. Many firms claim they do Implementation Plans. Few do it well. If you’re hiring someone to do a plan, ask for an example of their Implementation Plans. If it doesn’t look like a detailed spreadsheet (or similar format) using many of the tips below, then you know they don’t know how to do a proper Implementation Plan. You may just end up paying for a very expensive coffee table book.
How to Move from Planning to Doing- Be Specific
The key to moving from idea to action is to be specific. The more specific you can be in putting together an Implementation Plan, the higher your probability of successfully executing the plan. Here’s a list of what I affectionately call, The Six Steps to Get Stuff Done.
What- This is simply what specifically you need to do, step by step, to get a project done. If a project required three steps, great. If it needs twenty-six steps, that’s fine too. This “What” becomes a checklist that lets you know you’re making progress on a project. It’s also important to realize what your capacity is to do all of the things mentioned in the plan. If your community doesn’t have the ability (people power, money, political will) to do a project in the plan, it shouldn’t be in the plan.
Who- Who specifically is responsible for executing each step. Try not to put general groups like “Promotions Committee” or “Chamber of Commerce.” Sometimes that is unavoidable, but at a minimum, it should be the chair or staff person’s name on the Implementation Plan for that group. Naming the person in this step is powerful. You are designating them as the person who, from now until completion, will be responsible for the success or failure of the project. The reason you don’t want to name a group is that there is little accountability (more on that below) if a group doesn’t get a project done. There’s much more accountability if “John Smith” or “Sue Jones” doesn’t do what they said they would do. As I said above, this can be the chairperson’s name and the group that gets credit, but that person has to be the one responsible.
When- When does the project (and each step if you want to be “extra,” as the kids say these days) need to be completed. Again, be specific. Don’t put “2021,” or “Fall 2021.” Put “November 1, 2021.” We, as humans, need deadlines. Non-specific deadlines create wiggle room. Wiggle room is the enemy of getting stuff done. This is not to say if things come up you can’t change the deadlines. You can and should if needed. But the change in those deadlines should be discussed and explained as part of the Review/Accountability process.
Budget- If a project needs money to do what it needs to do, this needs to be identified up front. However, this is the one area where you might not need the budget to the penny. But you will know whether or not you need money (and roughly how much) to do a project. If the person named is responsible for getting it done, they have to have the resources available to them to make the project a success.
Success Measurement- How will you know if the project is successful? Defining success gives the person responsible a target to aim for. Be specific and realistic. If you have a façade program you want to implement, pick a number of façades you think is realistic. Maybe that number is one, maybe it’s a dozen. Sometimes the measurement will be “we accomplished X.” But even in that accomplishment include goals and measurables like, “Establish twice-a-week Instagram posts, generating 1,000 followers.” In that statement there are two measurable goals: 104 Instagram posts and 1,000 followers. These measures, like timelines, can be adjusted for circumstances. Lord knows, if we all learned one thing in 2020, it’s we need to be flexible sometimes. If the success measures need to be adjusted, then that should be discussed as well during the Review/Accountability process.
Frequent Review/Accountability- This is the hardest of all. I always tell people, “Everyone loves accountability until they’re held accountable.” Additionally, the number one thing that happens with a plan once it’s completed is that it goes in a binder and then on a shelf. This is where plans go to die. One of the things we do with our Implementation Plans is we put it in an Excel Spreadsheet. The purpose of the spreadsheet, unlike a printed plan, is that it’s a living document. It can be updated and changed if needed. We always encourage our clients to review the Implementation Plans for the plans and strategies we do for them on a monthly basis. The main reason we encourage monthly is if you only review it quarterly or yearly, if you are coming up on a deadline that someone may have forgot, then the project may only get slightly off schedule versus WAY off schedule or ended up getting scrapped all together. The Implementation Plan, if done using the way described above, becomes a checklist for people to check with on the status of specific steps to ensure they’re on a the agreed upon timeline. Reviewing them monthly provides the accountability we all need to make sure a project happens. If there’s a need to adjust the steps, budget, success measure, or timeline, then you can do it. But it has to be in front of people often so that it doesn’t get put on a shelf and forgotten about.
That’s it. If you do those six things with your plans, you will dramatically improve the probability of moving your plans from paper to reality.
Joe Borgstrom is a principal with Place + Main Advisors, LLC. Place + Main specializes in economic development, downtown and real estate redevelopment, community marketing, and public relations.
If there’s one thing we’ve learned during the COVID crisis, it’s that jobs that we thought had to be done in an office can be done at home. A colleague of mine recently said something very profound: “COVID has forced 10 years of change in the workplace into six months.” A recent article in Area Development, a magazine dedicated to traditional economic development, states that as much as 20% of the workforce may remain working from home, full-time. It’s a simple realization, but with massive implications.
Even prior to COIVD, the economic development industry has seen a large shift in the things prospective businesses are looking for. Traditionally, economic developers were concerned about how to build industrial or office parks and using incentives to help keep and attract businesses. (This is an admitted oversimplification, but still the basic gist of what economic developers largely do.) Industry publications, like Area Development, often do annual surveys of corporate executives or site location professionals. Typically, these lists have items on them like “availability of buildings” and “tax burden.” However, over the last ten years, “Availability of Talent” has risen to a Top 2 item (jockeying every year with logistics issues.) In addition, “Quality of Life” has risen to a Top 4 item. Interestingly enough, Quality of Life wasn’t on the survey at all five years ago. As surveys like these go, the higher something is on the list, the more attention economic developers will pay to it in order to best position their community for growth. As availability of talent became a reoccurring theme, economic development organizations have become more engaged in workforce development. We’re starting to see it more in Quality of Life issues, like creating quality downtowns and communities.
Enter Corpus Christi. Corpus Christi, Texas, by most accounts is a very successful region. Located on the “Coastal Bend” of south Texas, along the Gulf of Mexico, it’s the home to numerous corporate facilities, oil and gas companies, major engineering and construction companies, warm Gulf air, sunshine, and just about more sailboats than I’ve ever seen in one place. Economically speaking, it’s what a lot of communities want to be. Official accounts reflect that this region has seen over $52 billion in industrial investment in the last decade, if the region was a state of its own, it would rank 8th nationally in new investment. But they have an interesting problem. Despite the billions of dollars in new investments, they’re having a hard time retaining and attracting talent.
“This community has seen a decades-long process of not retaining young people, especially the brightest and most educated, who have moved to larger communities around the state, most notably Austin, San Antonio, and Houston,” said Corpus Christi Regional Economic Development Corporation (CCREDC) President and CEO Iain Vasey. This puts both talent and place at the forefront of economic development efforts.
In late September, we at Place + Main kicked off a “first-of-its-kind” project in partnership with world renown Place Attachment expert, Dr. Katherine Loflin (aka “The City Doctor”,) the University of Michigan-Flint’s Office of Economic Development and the very economically successful Corpus Christi region, led by the CCREDC. The project, “Our Coastal Bend: Creating a Complete Community for Place and Prosperity,” aims to do two things:
1) Understand what makes residents in the region feel emotionally connected to their community; and
2) Develop a plan to enhance and expand those things about the community that are associated with their connection to help retain and attract residents.
Over the next six months our team will conduct this two-phase project. The first phase is a survey developed by Dr. Loflin during her time leading the groundbreaking Knight Foundation’s Soul of the Community project, which measured residents’ emotional connection to their cities, what drives it, why it matters to local economic development. The Soul of the Community project, conducted in concert with Gallup, studied attachment in 26 different city regions around the country over three years 2008-2010. This same methodology will be used in the Corpus Christi region as it has in other places around the world.
The second phase will focus on optimizing those things found that help optimize that attachment. Improving key areas of community life, like downtowns and commercial districts, beautification, social opportunities, housing options, walkability, and parks, will be planned with organizations around the region. The proven premise being that people who are more attached to the community have a tendency to spend more time and money there, and also will stay loyal to living there which in turn helps the economic development of the region.
Economic development is often characterized by simply chasing after businesses. But this step forward by the CCREDC, changes their focus. Vasey added, “As an economic development organization, we have a strong record as a transactional outfit, working on employment, investment, and industrial deals. We have not had as much of a history as a transformational organization, namely that beyond job-creation and business expansion/recruitment, we have not worked hard at changing the economic culture in the region. It’s time we focused our energy on building our community attachment index and transforming our identity in terms of quality of place. This is something the best and most strategic-thinking economic development organizations have to really lean into.”
With the importance talent and place have on a community being driven by a prominent regional player like the CCREDC, placemaking, innovative applied survey research, and community development are taking center stage in one of the most well-resourced industries. This can only lead to better outcomes for communities like Corpus Christi and other communities and regions who realize it’s time for a different approach.
As someone who has spent their entire career in one sector of economic development or another, from industrial recruitment to downtown redevelopment, I’ve had the good fortune to see communities do some really astonishing things. Many have been outstanding. But many more have been awful.
Economic development is one of the most broad and misused terms that has been bent to mean a lot of different things over the years. At its core, economic development is (or should be) about building local wealth. But somewhere along the way it became bastardized to mean “business friendly at all costs” to many local leaders.
It’s in this vein of “business friendly at all costs” that communities began very self-destructive behavior of not considering what the community wanted or needed in lieu of what a developer or business wants. Because if a community put their needs or wants first, they were not being business friendly. The relationship between a community and a developer or business doesn’t have to be combative for both sides to benefit. A community merely needs to have standards it deems important and then, and this is the hard part, stick to them.
Keeping a community’s character is often used as a rallying cry for the NIMBY (Not in My Back Yard) crowd, but a community can improve itself without completely changing its character.
But why is character important? Simply put, character is a community’s uniqueness. Character is what makes your community what it is. The physical character of a community is a signal to potential residents and businesses who the people are who live there and what they value. Before any marketing brochure, website, or ad campaign, the community’s character is its first and most important economic development message.
Let’s look at what I think are the biggest killers of character and what your community can do to stop it.
Killer: Strip Malls
I think it’s too general just to say “sprawl,” but strip malls are the epitome of sprawl. These cheaply built, commercial only properties are highlighted with their parking in front of the building to allow “easy drive up access” to the commercial tenant inside. Strip malls are devoid of any design character as their main goal is to provide a commercial space as economical as possible. They’re ability to generate sprawl is only overshadowed by their ability to ruin urban fabric if they are shoehorned into a downtown parcel.
Fix It: Density, Design + Reuse of Existing Buildings
Outlawing single use properties in your business districts is a good first step. Not only is sprawl unattractive, it’s expensive to maintain infrastructure with limited income from a single use property. By diversifying a property’s income stream (commercial and office/residential) and increasing density, a community helps create a more profitable piece of real state both for the owner and for the unit of government. Design standards can also help address a lack of character. Material use and specific character enhancing features can be required though these design standards. Most importantly, encouraging the reuse of vacant or underused property to limit the amount of new infrastructure that needs long term maintenance.
Killer: Car Focused
Communities who assume the only way people get around is by car are often bereft of character. Making everything as easy on cars as possible (no need to slow down/stop, car access prioritized, and above all, plentiful free parking) communities waste land and create greater space between buildings, not to mention making it dangerous for anyone not in a car. This space is expensive to maintain and is often left as barren as possible to keep costs down. This lack of “stuff” also creates a lack of character. It makes one community look like everywhere else.
Fix It: Pedestrian and Multi-Modal Friendliness
Acknowledging and prioritizing pedestrians as well as accommodating alternative forms of transportation, including bicycles, helps generate character. How? When a community prioritizes pedestrians, or “people not in cars” for non-planners, they make investments in the things that allow people to walk freely and safely. This means things you would expect, like wide sidewalks, but also other things like bump outs that allow people to cross the street without feeling like they have to cross five lanes of traffic. People walking and biking are a sign of character. That a place is safe. There’s two things people in cars don’t do a lot of that’s important to communities: 1) People in cars don’t spend money. And 2) People in cars don’t deter crime. Cars try not to stop unless they have to. People walking stop all the time. They are closer to the community around them. They stop and make impulse purchases, partly because they don’t have to find a spot to park. They deter crime because people are going slower and more likely to see something wrong and notify authorities.
Killer: Demolishing History
I’m not talking about confederate statues. Those definitely need to come down. I’m talking about historic buildings. In particular, multi-story historic buildings that are demolished and replaced with low density, single-use commercial, like strip malls. Or even worse, parking lots. One of the things we have to realize about historic buildings is they are impossible to replace. One, because of the history that actually took place there. But in an even more real sense, because they were built with such quality and detail, replacing them and their construction methods costs too much to do it with the same quality. Why? Well, a few decades ago there was a fundamental shift in real estate investing. It used to be the normal return on investment (or how much and how fast an investor could get their money back plus interest) would be between 20-30 years. This has been shortened over time to the now industry standard of seven years. This shortening of the investment cycle put dramatic pressure to produce much cheaper buildings as rent rates grew so the amount of money needed to satisfy investors was able to shrink to the current seven years. The result is often lower quality properties with life spans of 30-40 years instead of 100+ years as we see with historic buildings. Furthermore, this architectural design and attention to detail adds a significant amount of uniqueness, and thereby character to the communities they’re in.
Fix-it: Historic Preservation
Typically, when people hear historic preservation they get some bad stereotype in their head of a group of little old ladies who want to tell everyone what color they can paint their house, or something equally off-putting. But historic preservation is an effective economic development tool that can help prospective building owners to finance the appropriate care and redevelopment of a property. There are several financial incentives to do these types of projects, namely the federal Historic Tax Credit which offers up to 20% tax credit for eligible expenses. Numerous states have the ability to tax on an additional 25% state tax credit which help preserve these buildings and can prepare them for the next 100 years. Preserving these buildings and their character give a community more authentic personality.
Killer: National Chains
The idea around a national chain retailer or restaurant is to provide the customer with a consistent and dependable shopping/dining experience. From store layout to product to service, these businesses insist on sameness between their stores. This also is reflected in their architecture if they can build as they want. This sameness kills a community’s character. If every business is designed to look and act like the rest of the businesses, there becomes no difference between the communities they are located in.
Fix-it: Help Locally Owned Small Businesses
This is tough, as so many local governments seek out national chains either for local sales tax revenue or for ego. But helping create and expand local small businesses add character and uniqueness to your community as well as builds local wealth. These locally owned businesses vary in experience, product, and design. Owners who are present also have more responsive businesses to customers needs. In addition, helping local residents capture money that might normally leave the community through purchases at chains builds the local economy. Instead of sending profits off to Bentonville, Arkansas (Walmart) or Minneapolis, Minnesota (Target, Best Buy) those profits stay local with their owners. In turn, those owners help support other local businesses either through services or possibly even through direct purchasing of product.
Killer: Megablock Projects
Megablock projects are almost like the supervillains of community character. They take almost all of the killers above and wrap it into one project. If you’re not familiar with the term “Megablock” these are projects that on the surface seem like good ideas: multi-story, mixed-use, usually in a downtown. The problem comes in implementation. The reason they’re called “Megablock” is because they often take up an entire city block and are far taller than the other buildings in a community. To do this often demolishes a historic building or buildings in the name of density. In addition, these mammoth projects create new commercial spaces that often sit empty as lease rates that can only be afforded by national chains. Furthermore, the large-scale nature makes them extremely expensive, and developers seek to have as cost effective of exteriors (cheap) as possible. The result is a block of blah character with a national chain anchor. As these projects progress, and as developer see what they can get away with, more and more spring up and start to kill massive swaths of a downtown’s character.
Fix-It: Incremental Development
To be clear, this is not a post about being against growth. But management of the growth in a way that helps a community keep its character without being overrun by sameness. One of the best ways to manage growth and do it in a collaborative way with the community in mind is through incremental development. The philosophy of incremental development is not big swing projects like megablocks. But on a building by building approach, as our communities were originally built. If a community has an entire block they want to redevelop, they should look at their historic assets and see how those can be best utilized. After that, prioritizing specific sites for redevelopment and addition of density. Then lastly, looking to the community for developers and assisting them in creating new quality buildings that offer differences in appearance and target audiences. Creating blocks made of individual buildings allows for small mistakes instead of large ones and allows the market to absorb new housing and commercial space at a rate that will aid in its success. I’m sure there’s more and I’d love to hear what you think are the biggest killers of your community’s character. Let me know in the comments section below.
It seems overly simplistic, but following the money is a basic rule economists follow. If you want to know people’s motivations for things, especially in the world of public policy, follow the money.
Before we get to why policy decisions are made, let me back up a step and talk about how national chains screw our local economies.
Market Data Flags Your Local Economy for Extraction
A standard practice in economic development for downtowns and main streets is doing a market analysis. A big part of a market analysis is something called retail gap or leakage. This calculates how much people in a geographic area spend on products and services (demand) and compares it to the amount of those same products and services in the same geographic area (supply.) If there’s more demand than supply, then there’s leakage. This means if people don’t have access to the goods and services they want, they likely go somewhere else farther away or online to get it and money leaves the local economy. Chain retail looks for a large amount of retail leakage in their particular sector. If the amount of leakage reaches a certain point, they will consider locating in an area. Every chain has slightly different criteria, but there is an entire sector of the real estate industry that calculates these leakage rates and criteria, and flags them for developers to plop in a nondescript (aka cheap) building on the cheapest land and markets the building to the chain. I personally have sat through demos of these large database firms who brag how with one click, they can give you a list of every national chain who would consider locating on any site you choose. Most small independent businesses have no idea where to even get this data or that it even exists at all.
Chains are Gold Diggers
The most common defense of chain retail is “they employ people and pay taxes.” That’s true. They do. But even with hundreds of employees per store (most making minimum wage) and paying taxes, they are still extracting millions of dollars from your community. Want to know how much? There are two numbers you need to understand. The first is Net Operating Margin. This number is basically the percentage of a store’s sales that are straight profit being shipped back to headquarters, whether its Bentonville, Minneapolis, or wherever. The other number is the average sales per store. If your community charges a local sales tax, you can probably find your specific location easily at City Hall. If not, you can use specific chain averages. These two numbers multiplied show you how much leaves your community every year. If you have several big boxes (which many communities do) then there are tens of millions of dollars leaving your community every year, which you can document like I did below.
Avg. Sales Per Store (National)
Avg. Annual Extraction
Sources: The Motley Fool, Statista, Corporate Filings, 2019
This is a huge transfer of wealth from your local community to the corporate headquarters and shareholders of each of these companies. Assuming locally owned stores would carry the exact same products, this is the most defining difference between chains and locally owned businesses: where the profits end up. As a quick aside, the margin for online retail giant Amazon is only 3.5%, but they lack the overhead of brick-and-mortar stores. And unless you have an Amazon fulfillment center in your community, NONE of that money stays local or employs local residents. Whether its chains or online, money leaves your community making other people rich, but your community poorer.
Chain vs Franchise vs Locally Owned
It would be easy to just say your choices are national chains or locally owned. But there’s another option that muddies the water a bit. These are franchises. Franchises are often locally or regionally owned stores or restaurants, like McDonald’s, but are part of the national corporation. The benefit to local owners is they buy into a proven business model and get support in the form of suppliers, marketing, store design, and in some cases, financing. In these cases, the profit of the store (or stores) is kept locally or regionally. However, these franchises still must pay an annual franchise fee to the national corporation as well pay the suppliers the chain mandates (not from your community.) Remember the national marketing support? Yup, none of that is local either. That goes to firms in New York and other big advertising agencies. The main differences between national chains and franchises versus locally owned boils down to local suppliers, support services like advertising and accounting, and most importantly the local owner who lives in your community. In the end, franchises are slightly better than national chains, but locally owned businesses still retain far more money in the local economy because they use other local businesses.
Paid to Corporate HQ
Why Don’t Local Leaders Care
I do think local leaders care…a little. I believe they see a successful small business and want more of those but have a fundamental disconnect between seeing that business and their policies and priorities. There are three main reasons local leaders pursue national chains over locally owned businesses. These are:
Validation + Vanity
Let’s take a closer look at these…
Validation + Vanity- The sad truth is local leaders often see big national chains as a status symbol. That a big national company would want to come their town says something about their personal leadership. THEY made that happen. But it’s more like the sugar daddy or momma who believes the young, attractive gold digger is there because they see what a truly great person they are and not because they have millions of dollars they want. I once had a local council member come up to me after a speaking engagement and attempt to brag that he and his council, “got together and gave Home Depot $100,000 to come to” their town. It was the first time I had to tell an elected leader they just wasted taxpayer money. He seemed confused at my response. But for them, the fact Home Depot was coming to their town meant more than the fact they were going to put the locally owned hardware stores out of business. He likely either didn’t know or care they were also helping facilitate the extraction of approximately $7 million is wealth transfer out of their community.
Municipal Finance- Municipal financing systems (and therefore motivations) are jacked up no matter where you go in the country. This is where we follow the money. There are two primary drivers from a taxing perspective that fund a lot of municipalities across the country: local sales taxes and property taxes. Local sales taxes are exactly like they sound. A small percentage of tax charged on the item sold. How does this promote chains? The simple math is the more retail sales that occur in a municipality, the more revenue they generate. Therefore, the motivation in this financing model is to help facilitate as many sales as possible. Who is set up to generate a lot of sales? National chains. They do national advertising buys and have easily recognizable brands. The bigger the box, the more sales and sales taxes they generate. In this model, overbuilding big box retail to become a regional hub is rewarded and where the profit goes is of no consequence. The other big taxing mechanism is through real property taxes, or taxes levied on real estate. In this model, the more real estate that is built, the more revenue. This results in a windfall of new cash every time a new building goes up. The fact infrastructure must be extended (and often initially paid for by developers) is largely ignored. The net result in the short-term is this windfall, regardless if the market data supports new construction. The long-term costs increase pressure for new revenue results in, you guessed it, the need for more development to pay for the last round of development. This creates a vicious cycle of growth and debt until the municipality either A) runs out of land or B) creates such a large blight problem from development leap frogging into new construction and leaving previous iterations behind.
It’s Easier- Recruiting big boxes stores is fairly easy. As I mentioned earlier, the market data is half the battle. Freeway access is the other. And there are huge associations like the International Council of Shopping Centers (ICSC) who act as a sort of a Tinder for chains and locations. After that, inertia takes over. Helping start successful small businesses is hard work. Really hard. You have to find people who are motivated to be their own boss, quit their job, put their life savings on the line, find financing, and be able to function for at least the first year at a loss. The success rate isn’t terribly high either. So, it’s messy too. Lots of small businesses don’t make it past the first year. As a former local economic development official, I will also tell you that people (especially economic development professionals) don’t want to be associated with failure. Small business development takes a ton of time and energy and doesn’t always pan out. Why spend all that time, frustration, and money when it’s easier to recruit big retailer. On top of that, your local elected leaders really like it when you bring them a retailer their constituents know and love, and they provide some of your funding. If you’re a developer, you really want a national chain to fill your commercial space, even in a mixed-use and/or downtown project. Because of the high failure rate of small businesses, developers want to know they can count on the rent from those spaces. National retail chains are considered, “blue chip tenants.” This means they can sign long-term leases that make the developer and property managers life easier, can help them secure financing for their projects and provide revenue that makes the building more valuable.
Now that you know how and why the chips are stacked against small businesses, what do you do now? Well, acknowledging you have a problem is the first step towards recovery. The first step is telling dad his 20-something year old girlfriend isn’t into him for his good looks. You will have to connect the dots for your local leaders on how much money leaves the community. Even then, the power of the existing municipal financing model will be hard to break. The goal of economic development should be the creation of local wealth. If that’s the case, then a municipal funding model should follow suit. Shifting from local sales tax or property tax to a local income tax makes the municipality vested in seeing its residents financially succeed. But this is difficult to do alone because if a local government institutes a local income tax and the neighboring one doesn’t, the immediate reaction is high income residents will move to the taxing jurisdiction that doesn’t. They might. But if it’s coupled with lower property taxes or lowered sales tax, it becomes more palatable. Also, while some people might move, there will not be a mass exodus because of a local income tax. And if a local income tax isn’t sellable where you live, you at least know what the problem is and may be able to address it with more of a locally driven idea. I’m not here to handcuff your creativity.
As for addressing the vanity and economic development aspects of this, talking up the importance of locally-owned businesses (and finding great examples in other places) and putting an emphasis on how attractive they are to other locals, and even to visitors if it helps make your argument. Creating unique places isn’t just about architecture and public space, but the impacts unique businesses have on the quality of life and ability to keep and attract residents is a growing factor in economic development as well.
To change the way our local governments value small businesses will not be an easy or fast process, and ultimately you may not even win. But it’s the fight that needs to happen if we want to fix our local governments and help local residents have ownership of communities.
Joe Borgstrom is a principal with Place + Main Advisors, LLC. Place + Main specializes in economic development, downtown and real estate redevelopment, community marketing, and public relations.
“Nothing for us, without us.” – Jermain Ruffin, Host and Founder, “The Streets Are Planning” podcast
There seems to have always been winners and losers in community redevelopment, especially in larger cities. In these big cities, the winners were the “smart” developers, mostly white, who would swoop in and purchase a beautiful and historic, but unused and blighted property in an “up and coming” part of town. The losers were those community members, often black, whose neighborhoods were bought up by these smart developers and were relocated somewhere else. The developers were seen as the saviors by our industry because the community “had let” their neighborhood get to a dilapidated state.
For many of us in this field, and let’s face it, it’s mostly a white field, this narrative rings true though it makes us cringe a little. It might’ve made us a little uncomfortable, but in the end, a wealthy developer did keep a building from crumbling and added something beautiful to the neighborhood. The fact that the inhabitants of the rehabbed building weren’t people already from that neighborhood, but young white 20-somethings often being called one of the most ignorant and racist names, “urban pioneers.” Pioneers, mind you, were white settlers who were (and still are) celebrated for taking over native American land, and either killing the local tribes or forcing them to relocate to vastly smaller chunks of land at the hand of the federal government. Applying this to the city meant saying essentially cities were unsettled places because only people of color lived there.
Calling Bullshit on the Current System
I’m not here to vilify developers who seized an opportunity. But the opportunity was there because of a long and sorted history of racism that goes back hundreds of years in our country. Without rehashing all those hundreds of years, one only needs to look back at the last 100 years to see how whenever a neighborhood of color in a large city started to become successful it was either violently destroyed (Tulsa Race Massacre of 1921), plowed over (every interstate created in every large city in the 20th century), or systematically destroyed through practices like redlining. Redlining, if you’re not familiar with the term, refers to a practice banks, insurance companies, and even cities would literally mark on a map with a red marker areas that were primarily owned by people of color. The people and businesses within these areas would be denied loans to purchase homes or invest in businesses. On the public side, infrastructure investments would be minimized, and police presence treated these areas with particular suspicion. By denying the people in these neighborhoods the same resources their counterparts in mostly white neighborhoods could get, not only killed off their ability to build wealth, but in many cases limited those folks who did own a home from using the equity in their home to make improvements over time. Those who could afford to move from these spaces often did, but many could not. These policies over decades created large swaths of blighted property. Over time, these blighted properties have been scooped up by mostly white landlords, many putting little to no investment into these properties earning the title “slum lord,” further exacerbating the problem. The systematic denying of capital to these neighborhoods have manifested numerous other issues as well such as underfunded schools due to lack of revenue from property or local sales taxes, lack of overall educational attainment, and earning potential are just a few. There are numerous pieces of literature on the topic and I encourage everyone to read them. For a quick primer, I would start with this 2017 article form National Public Radio, “A ‘Forgotten History’ Of How The U.S. Government Segregated America.”
It’s hard to fix hundreds of years of fucked up practices in a few simple steps and I won’t pretend to. But we can at least do better. There’s a handful of things we can do in the planning and economic development professions to begin to bridge the divide that has been created between the development haves and have nots. There are three main areas we should focus on related to economic development: Education, Finance, and Opportunity. While these efforts can and should be targeted to communities of color first, the beauty of these areas are they can be applied to any size community and values and prioritizes local residents over outside people.
There are numerous financial literacy programs that exist to help people how to manage their personal finances. But few communities have used resources like the Incremental Development Alliance, let alone marketed them to communities of color. Helping aspiring developers to understanding the development process, constructing financial pro formas, affordable development options, and creative financing are what programs like Incremental Development Alliance is about. Providing access to this education should be a community’s highest priority if they want to create local developers. Likewise, Small Business Development Centers also exist and offer small business planning for free but are often located on university campuses and gear themselves towards college students. These offices should be located in more accessible areas like downtowns or neighborhood storefronts. Burying them in potentially intimidating settings like administration buildings on college campuses limits who can easily access them.
While redlining was outlawed over fifty years ago, many of those practices have continued. Furthermore, the effects of the redlining, like a lack of homeownership equity a person could use to leverage for financing a business or development project, still very much exist. Obviously, continuing to fight redlining policies to encourage home ownership is a critical first step to creating local wealth. In addition, access to capital remains one of the largest barriers for prospective business owners and developers in the black community. Larger cities can use their annual Community Development Block Grants (or CDBG) to create what are called section 108 loans, that can serve low income individuals and help them start businesses. They could even appropriate money from general funds to match various federal programs from the Small Business Administration and others to create specialized loan pools. But in my opinion, the greatest potential tool to enable local developers and create local wealth in the surrounding neighborhoods is for-profit crowdfunding, which was made legal by the JOBS Act of 2012, but has gone largely unused. Crowdfunding is not a new term. In its short history, crowdfunding has typically been used by non-profits to raise funds for a project. It’s largely been used as a donation model. However, with changes that occurred in 2012, small businesses and developers can solicit investment from their neighborhoods. There are several companies who do this type of work (MainVest,WeFunder, Republic, and MicroVentures are a few) but many potential small business owners and developers have no idea they exist.
This is where our communities really need to put up or shut up. It’s one thing to provide education and financing tools. But if you don’t proactively provide opportunities, you really aren’t doing a whole lot to create systemic change. From a commercial perspective, local institutions (cities, hospitals, universities) could provide either local business set aside or local supplier preference (where bids within 10% of lowest cost are accepted if the business is local or minority owned.) These institutions spend millions of dollars a year and helping to level the playing field can go a long way in making small businesses successful. From a real estate perspective, the opportunity to buy, renovate, and rent or flip tax reverted properties is the other low hanging fruit. Typically, communities sell tax reverted properties in one of two ways. The first is through public tax auction. This is where slum lords come and buy up properties to add to their portfolio and is designed to quickly get properties back on the tax rolls regardless of intent of the buyers. The second is through land banks. Land banks are state legislatively created and take tax reverted properties and can hold on to them and are given wide latitude in redevelopment. A standard practice with land banks is to take a tax reverted property and either renovate it themselves and flip it or they will sometimes see if an adjoining property owner wants to buy a vacant lot it for a nominal fee and join the lots as one big yard. If we were to couple training like Incremental Development Alliance’s small developer boot camp, financing tools like crowdfunding, and provide these small developers with opportunities in their own neighborhoods then we are killing several birds with one stone. We could build wealth, remediate blight, and build stronger neighborhoods without displacing residents.
There’s a lot more that could and needs to be said and changes that need to happen. But these are a few pragmatic steps that communities can take to start to bridge the gap and help to create more locally owned businesses and small-scale developers in communities of color. We must do better.
It’s hard not to read those words and hear R.E.M. front man Michael Stipe’s voice. It’s also hard to realize there will be no “getting back to normal,” but here we are. I’m here to tell you though, this isn’t all bad. Yes, this virus has claimed thousands of lives and left many families with one (or more) seats empty around the table. It would be insensitive and cruel not to acknowledge and empathize this fact. It’s also led to the highest unemployment rate since the Great Depression with millions of people worried about their economic future, including hundreds of thousands of small business owners who’ve risked their life savings to live the American Dream. ALL of this sucks. HARD. But in times of rough waters, I’m the type of person not to curse the storm, but to adjust to the changing winds (but seriously, fuck this storm.)
In that light, I want to share what I see are the emerging opportunities for those of us who live and breathe small business development, downtowns, and real estate redevelopment.
This seems kind of counterintuitive in a down economy, but hear me out. In a recent survey of small businesses conducted by Main Street America, since the outbreak, found that nearly two-thirds of small businesses don’t have a selling function on their website, or that they DON’T EVEN HAVE HAVE A WEBSITE. I’ll repeat that: TWO THIRDS OF SMALL BUSINESSES IN OUR DOWNTOWNS ARE NOT SELLING ONLINE. People are more than willing to shop local. Especially, Generation X and Millennials. But if your brick and mortar business doesn’t offer the ability for your customers to support your business when the “open” sign isn’t on, you are giving them permission to shop online with someone else. These same business owners (shockingly enough) are seeing a decrease of over 75% in sales during this time. If you can’t be bothered to figure out how to do a website that sells your product when you’re not physically in your store in the year 2020, maybe you shouldn’t be in business by the year 2021. Just because these businesses aren’t able to sell, doesn’t necessarily mean what they’re selling isn’t in demand. If they die, this will create opportunities for new businesses who are willing to adapt to customer preferences, like websites and staying open later. The lesson here isn’t “small business is dead,” it’s “dinosaurs go extinct.”
Real Estate Ownership
In the coming shit storm, thousands of potential bankruptcies will become a glut of bank-owned property. This has the potential to make the Great Recession of 2006-2012 look like a birthday party. The last thing banks want is to take control of property and manage it. They suck at it and they know it. Real estate stands a good chance of declining in value based on the banks’ willingness to unload it combined with being dependent on retail sales, which in many markets have tanked. This will open up the potential of a lot more buildings and property to be purchased. Tough economic times may also force that third-generation property owner who thinks the building is worth a million dollars (when it’s actually more like $100,000) finally look to unload it to get cash. Groups who want to leverage the situation should look to join forces in order to stockpile property to be controlled for future redevelopment. The largest hurdle in the redevelopment of a downtown is often one (or a small handful of) property owner(s) who don’t want to play ball. This may be the once-in-a-lifetime opportunity to gain control of a building or property.
Real Estate Management
If you are lucky enough to own a property but lost a retail tenant, especially due to poor business practices (like a lack of online selling or later business hours) you have the opportunity to influence these behaviors. As my good friend Ben Muldrow of Arnett Muldrow and Associates has pointed out during one of our many conversations, there is no reason downtown property owners can’t offer “discounts” to business owners who follow best practices, like having a website or staying open until 7pm. This discounted rate would likely just be the normal rate and a higher rate would be charged as a premium to account for the higher risk of failure for those who don’t use those practices. There’s a great line often attributed to John Wayne, but is actually from the movie Jackie Brown, “This life’s hard man, but it’s harder if you’re stupid.” Think of it as a shitty business owner tax. You’re a bad business owner? Well, you pay extra. These types of commitments (common hours and days of operation) for retailers are often enforced in shopping centers and malls all over the country. The drastic changes this virus has brought to our shopping habits can also be used as a force, and justification, for making these changes to our respective property management techniques. The key to success though, will be the adoption of a core group of property owners in a downtown and enforcement of the lease agreement conditions. It doesn’t take a lot of courage to do this, just applying common sense and standards that are seen in other areas.
Public Space + Parking
One of the best things to come out of this pandemic has been the openness of so many people to rethink parking, especially to benefit restaurants. There’s about a billion reasons to rethink parking, but leaders and many business people have refused to hear them. Until now. In light of the need for increased social distancing, we’re seeing a drastic reduction, either by government mandate or customer preference, in capacity. The most logical answer given the warmer summer weather is to allow restaurants to spill out onto the sidewalks and even parking spaces in front of these businesses. In my opinion, sidewalks are, and have been, a no-brainer. Do it and do it now. The harder conversation has been about parking. Some cities, like Tampa, have closed entire streets to help restaurants. But let’s stick with parking spaces right now. If there is a parallel parking spot in front of a restaurant, that one car may provide anywhere from 1-4 patrons (assuming the car that’s parked is intending to go to the restaurant, which it might not be.) That same space could allow for two socially distanced tables of four. This could seat anywhere from 2-8 people. Now, this one space where at a minimum has one person parking, who may or may not be going to this restaurant, now magically has the ability to at least double the number of people served by that space, AND is guaranteed to be dedicated to that restaurant. Add the space next to that and the number doubles again. Where the conversation gets even more real is when we suggest looking at shutting down the street. There are several factors there, chiefly local control followed by local political will. State trunk lines will be far more difficult than local roads. But at this point, no stone should go unturned.
This one is the hardest for me as this will be the most drastic and painful of changes. Virtually every downtown organization will be financially hit by this. Whether these groups get their revenue from tax increment financing, special assessment, sales tax, bed tax, donations, or just revenue from events they produce, they are going to see either a direct drop or be cut in a budgeting process. Even the most resilient form of funding, special assessments (or a small tax levied for the specific task of funding improvements), will see significant political pressure to reduce or eliminate in the name of providing relief for property and business owners. (If you’re fortunate enough to have a special assessment, stay as strong as possible during the political fight.) For many downtown organizations in mid-size and small communities, there is usually a decent chunk of revenue provided by their local government. They should be prepared for that funding to be at least cut in half, if not eliminated entirely. With increased social distancing and federal guidelines still banning group gatherings in many states, major events, that often produce half a year’s income or more, will be gone. Those who rely on one event will be done. For years, Main Street organizations in particular have complained that they’re only seen as party planners. These next six months will prove whether your organization is a party planner or an economic development organization. Those who will survive will have done so because they were able to successfully communicate and prove their economic value to their funding partners. But even they will likely take a hit, but not anywhere near as bad.
So, where’s the opportunity? The opportunity will be like many businesses, in the diversification of revenue. How does that happen? Painfully to start. Putting all of your eggs in one revenue basket isn’t just unwise, it’s potentially deadly for your organization. Downtown organizations have several relatively unexplored areas of revenue. These are: property development, rental income, fee for service, and special assessments. In my next article I will go into these areas in more detail. But for now, know there are other ways for downtown organizations to fulfill their mission while diversifying your revenue. In the meantime, be an advocate for your businesses and property owners. Help them communicate to a larger audience of their availability. Help property owners fill vacancies or sell their properties. Do everything you can to be of help. Now is the time to prove how valuable you can be.
The changes we’re experiencing, and will continue to experience, will be the most challenging and difficult any of us have ever faced in our professional lives. We will see businesses and organizations we love go out of business. But these awful situations will give way to opportunity. Be ready to seize the opportunity.