Development Impact and Strategies

A. Economic Impacts

The following is an analysis of the potential economic impact of new and improved cultural facilities making up a new cultural district in downtown Cary.

The key to comprehending ﬁscal and economic impact work is ﬁrst understanding the deﬁnitions of terms used in the analysis. Here are the deﬁnitions to use herein:

Economic Impacts: There are two types of impacts: economic and ﬁscal. Economic impact means that something has happened to increase economic activity, which includes new sales, new earnings, and new jobs in the local economy. These are divided between the impacts of construction (which are counted as one-time impacts) and the impacts of operation (which are counted as an annual impact). Then the impacts of the operation are divided again. First, there are the impacts of the operating organization, a new entity making expenditures in the local economy. Then there are the impacts of all those new audiences, spending money in association with their attendance at events.

Direct Impacts: All economic impacts are also split between direct and indirect impacts. In 2002, Americans for the Arts authored a seminal report entitled Arts and Economic Prosperity, which has been a great resource to all in the ﬁeld. That report deﬁnes direct impacts as the measure of the economic effect of the initial expenditure within a community. The three types of direct impacts are construction, operation and ancillary spending.

Construction: Here the costs of construction are estimated and then impacts over the term of construction are also estimated.

Operation: The expenditures made by the organization running new facilities is estimated, as is the impact of those expenditures on an annual basis (typically the estimate is for the base year of activity). A “bill of goods” approach is often used, which means that an organization spends within a series of deﬁned industry groups is estimated in order to project new sales, earnings and jobs created within those industries.

Ancillary Spending: The trickiest and often most important element of economic impact is the spending of audiences when they attend events. Arts and Economic Prosperity establishes how much people spend when going to an event on food, drinks, shopping, transportation and so on. These inputs and outputs are then able to be calculated based on projected attendance. The tricky part is that only attenders that come from outside the market area who were not attending the arts before the Center opens can be counted. Current attenders and people inside the City and County would simply be shifting expenditures from one place to another, so it is not a new impact. People love to debate this point, but from a purely economic perspective, the only activity that counts is new attendance that comes from outside the market area under consideration.

Indirect Impacts: Each time a dollar changes hands, there is a measurable economic impact. When people and businesses receive money, they re-spend much of that money locally. Indirect impact measures the effect of this re-spending on jobs, household income, and revenue to local and state government. It is often referred to as secondary spending or the dollars “rippling” through a community. When funds are eventually spent non-locally, they are considered to have “leaked out” of the community and therefore cease to have a local economic impact. Indirect impact is the sum of the impact of all rounds of local spending. Sometimes there are references to “induced impacts,” but these are closely associated with, if not the same as, indirect impacts.

Multipliers and the Input/Output Model: The way one gets from direct impacts to indirect impacts is to employ multipliers that are developed by the Bureau of Economic Analysis in Washington, DC. These translate an input (say a dollar spent on food) into an output (the total impact of the spending and re-spending of that dollar on the local food industry in terms of new sales, new earnings for people associated with that industry and new jobs created in that industry). The challenge is ﬁguring out all of the various inputs, ﬁnding the right multipliers and then adding up the outputs. Multipliers are purchased for a deﬁned market area, with counties as the smallest geographic area for which distinct multipliers are available. For this analysis, the multipliers are for Wake County.

Now each of these types of impacts can be analyzed.

Construction

The following chart shows the sum of construction expenditures (a very preliminary estimate) and resulting impacts.

Ninety-three million dollars spent on construction will yield, over the course of the construction projects, new economic activity (i.e. sales) of $180 million and new earnings for County workers totaling $46.2 million, as well as 1,492 person-years of new employment in the market area

Operations

The following chart shows how operating outputs are calculated based on a series of estimated expenditures by the organizations running the Cary Community Arts Center and the new Cary Center for the Arts. The difference between the sum of these expenditures and the total operating budgets for the two facilities is that wages, nor funds spent outside the County on touring programs are accounted for.

Using the Wake County multipliers, the three types of impacts are added together to indicate that new annual expenditures in the base year of $1.2 million will annually yield new economic output of $2.1 million, new annual earnings of $1 million and 20 new jobs in Wake County.

Ancillary Spending

The analysis has taken the total projected annual audience for both the Cary Community Arts Center and the new Cary Center for the Arts, estimated how much of that audience is new (as opposed to re-located from another Wake County facility) and then broken down the balance as coming from inside the County, from the region surrounding the County, and then from further away; that latter difference is deﬁned as people who come to the area to stay overnight at least partly because of the opportunity to attend a performance.

These estimates then allow expenditures to be projected by new outside audiences (estimated at $1.4 million in the base year) that lead to new outputs of $800,000, another $228,000 in new earnings and 14 jobs created.

The last chart is then a summary of the construction impacts and the sum of the two types of operating impacts.

Summary of Economic Impacts
One-time Impacts
Construction	Output (Sales)	$165,044,500
	Earnings	$42,347,000
	Jobs Created	1,369
Ongoing (Annual) Impacts
Operation	Output (Sales)	$2,083,922
	Earnings	$552,188
	Jobs Created	20
Ancillary Spending	Output (Sales)	$782,444
	Earnings	$228,595
	Jobs Created	14
Total Operating Impacts	Output (Sales)	$2,866,366
	Earnings	$780,783
	Jobs Created	34

B. Economic Development Strategies

Finally, observations and a general approach on the matter of economic development strategies for the District are offered. Since the beginning of this study, the Town has stressed the importance of integrating the studies recommendations with broader efforts to craft an economic development strategy for Cary. On that basis the work done by The Sanford Holhouser Business Development Group was reviewed and the team met with their staff in January.

Economic Development Potential: in their article Cultural Districts and Urban Development (International Journal of Arts Management - Winter, 2001), AC Brooks and RJ Kushner state the following:

Success (with respect to increased cultural activity, urban revitalization and economic growth) depends on leadership. Effective leadership comes from:

§ Political and civic figures: provide—both directly and indirectly—moral persuasion and access to policymaking tools

§ Philanthropic and not-for-profit figures: provide administrative expertise and marshall private resources for development

§ Business leaders position the district as a top priority for firms either through donation, participation or verbal support.

Leadership in the form of pure investment financing by private business is also key. This form of financing ranges from large-scale infrastructure investment to more small-scale investments made by entrepreneurs in businesses within a cultural district.

Economic Development Goals: Given this potential, the consultant team agreed with the Town and the economic development consultants that the development of a Downtown Cultural District should be pursued with two goals in mind:

1. The economic development of downtown Cary as an active and vital area supporting residential, commercial and public uses.

2. The broader economic development of Cary itself as a community offering destinations, amenities and a quality of life to support the recruitment of attractive industries and their workers.

The Challenge of Developing Downtown Cary: The great challenge of developing downtown Cary is that it is so unlike other downtowns in a redevelopment mode. Cary does not have a large inventory of empty structures in an urban environment that might catalyze redevelopment. What it does have is a series of businesses and property owners who already imagine great value in their properties. Thus, the Town must approach district development carefully, working with existing property owners and businesses as partners to pursue a plan that supports cultural and commercial development at a cost (and over a period) that is reasonable.

A Pro-active Approach: Previous planning efforts for downtown Cary have been fairly slow-moving. Recently, Town staff invited developers to come forward with ideas for projects, which led to a series of discussions but not much else. It is now clear that the Town, or a group acting on behalf of the Town, must take a more pro-active approach to commercial development, finding partners and funding with which to move the project forward.

Mixed-use Development: As already mentioned, mixed-use development is both desired and preferred. The cultural development recommended in this study should be flexible enough to incorporate and support residential, retail, and office projects. Specifically, market rate housing is a critical addition to the project, and therefore the cultural components and their challenges (e.g.: pre-performance traffic and a monolithic stage-tower) must not deter housing developers.

Parking: Parking is an absolutely critical element to these plans. If approached correctly, parking might serve as a catalyst for the development of the district. In the short term, the Town must work with current groups in the area to come to terms with short-term parking needs and how those might be resolved in such a way that long term goals are supported.

A General Approach: Here then are the next several steps as the Town moves from the development of plans to their execution:

1. The Leadership Group: The Town should soon organize a group to take leadership of the development of downtown, including the Cultural District. This group might come out of an existing department, or be created as an outside group. In either case, the group must be given responsibility for the project and be accountable for its progress, especially limiting obstacles for developers that offer plans worthy of support.

2. Funding: The leadership should quickly focus on the pursuit of funding sources to support the development of the downtown and the Cultural District. This might mean the creation of a quasi-government authority able to create a tax increment financing district or similar funding vehicle.

3. Community Input: The study has made clear that there are many people in the community who have strong ideas and opinions about the future of downtown. Thus the new leadership team should stay in touch with the public and channel their ideas and energy in such a way that the project is made stronger and is widely supported.

C. Commercial Development Strategy

Of particular interest to the Town is the encouragement and fostering of commercial development within the proposed cultural district. And so, in addition to the general strategy for economic development in the previous chapter, more speciﬁc comments and recommendations relating to commercial development should be added.

Lessons from Comparable Projects: Following are quick notes from a series of successful cultural districts on commercial development impacts.

Avenue of the Arts, Philadelphia The districts’ construction has spawned development in initiatives in adjacent neighborhoods. The University Community Homes, Inc., offers home and business ownership initiatives for African-Americans in the area. A developer purchased 20 properties to adapt for retail use. Fourteen other buildings were purchased by another developer to create a pedestrian district similar to New York’s SoHo, with boutiques, restaurants and loft-style	Worchester, MA The City’s Cultural Development Officer believes that once you identify yourself as an arts and culture district, this designation makes for a self-selecting group of retailers. Real estate prices in Worcester rose almost as soon as the district was declared an arts and culture district, affecting the type of retail the district is able to attract.
apartments. Pittsburgh Cultural Trust, Pittsburgh Formed by concerned commercial developers, investors and owners to support existing commercial development initiatives and to inspire increased developments. The Trust now promotes spaces within the district to developers and businesses. Commercial facilities within the cultural district now include CNG Tower (ofﬁce building), Lazarus Department Store, Roosevelt Building, Fulton Building, the David L. Lawrence Convention Center, 5th Avenue Place, Joseph Horn Company Department Store, Vista International Hotel, Federated Investors Ofﬁce Tower and residential buildings. Fort Worth Cultural District, Fort Worth The district is inspiring adaptive re-use of spaces for residential areas at districts’ edges to deﬁne a “frame” to the district. The district now includes 20 commercial ofﬁce buildings and over 250,000 square feet of ofﬁce space; 45 separate retail spaces and over 293,000 square feet of retail space; and 118 residential units.	Lowell, MA Seven years ago, none of Lowell’s mill space was occupied. Now, over 75% of the mill space is either renovated or under construction. There are even new housing units planned for the downtown, including high-priced loft spaces. Peekskill, NY As Peekskill was beginning efforts to revitalize the downtown area, rising real estate prices in New York City were driving artists to move further away from even the outer boroughs. Peekskill took an active role in pursuing displaced artists by taking out advertisements in SoHo art magazines and offering low interest rates. This helped artists buy buildings and convert them into useful spaces. In addition to occupying once-vacant spaces in the downtown, artists have brought businesses into the area. Several restaurants, coffee shops and boutiques have opened up downtown since the arrival of the new artist tenants. Landlords in Peekskill are offered tax incentives, grants, facade improvements, and loans to renovate buildings that can be used as live-work spaces by artists.
Chattanooga, TN Independent of central planning, the Bluff View district was created by entrepreneurs who perceived a market demand and made private investments to ﬁll it. These entrepreneurs own and operate the majority of the district’s businesses and buildings.	Syracuse, NY Downtown residences are now 100% occupied, which has not been the case in the past. New residences have also been built. New local businesses are opening downtown. And, Syracuse has been able to maintain its existing businesses, including its corporate ‘giants.’

Bloomington, IL

Together, 2002 and 2003 saw signiﬁcant developments in residential and commercial developments in the downtown area. Civic leaders see this as a turning point. A sign of that is the new businesses that have joined the downtown in 2003, including two wine shops, a jewelry shop and a massage studio. Downtown churches have also been credited for their commitment to their current location.

The previous discussion about the potential of commercial development within larger cultural districts, together with this anecdotal review of results in similar communities, makes it clear that the Town of Cary Cultural District could well become a catalyst for the type of mixed-used development of ofﬁce, retail and residential uses that the Town desires. The question then is whether to follow the Worchester approach of letting commercial developers “self-select” based on the designation of a cultural district, or to follow the Pittsburgh model of building a strong leadership group and organization that plays a more pro-active role in directing development.

The study takes the position that the Pittsburgh model is more appropriate, on the basis of the following:

Previous attempts to simply invite and inform developers of opportunities in Cary have not been particularly successful.

With other downtown redevelopment efforts underway in the region (i.e. Durham), Cary must approach the opportunity from a competitive perspective, having something to sell and a target audience in mind.

The Chesapeake Downtown Assessment: To come back to the issue of what commercial development should be encouraged in downtown Cary, the 2001 Chesapeake Downtown Assessment was referenced, which included a comparative assessment leading to the identiﬁcation of gaps and opportunities in the regional marketplace.

Following are the types of commercial outlets under-represented in Cary that might be found in traditional downtown areas: Clothing, furniture, carpet, draperies, house-wares, electronic equipment and supplies, eating and drinking establishments, insurance agents, real estate offices, hotels, cleaners, photographers, beauty salons, barbers, shoe repair, wedding consultants, advertising agencies, commercial artists, computer services, decorators, business brokers, embroidery, health/legal/educational services, and accounting & tax services.

After then deﬁning the size and attractiveness of primary, secondary and tertiary market areas, the report then proposes a direction for downtown retail development that includes the following ideas:

Downtown Cary will ultimately be limited by land mass and access issues, but aided by its character and charm. Nevertheless, an additional level of activity is required to develop greater synergism in the commercial core.

Not all retail is desirable from a character perspective, including automotive services.

It then suggests additional retail that could be supported at the present time (2001):

Gourmet Food: 9,500 (square feet)

Eating and Drinking: 75,000

Women's Apparel: 15,000

Miscellaneous: 25,000

Total = 124,500

On the ofﬁce development side, the Chesapeake report suggests that the Cary Market could support an additional 2.5 million to 2.9 million square feet of space over the next ten years, with much of that marketable at present (2001). It then suggests that the central core area could capture as much as 500,000 square feet of that space, but noted that a minimum capture of 100,000 square feet is required as critical mass to foster redevelopment.

Opportunity Sites: The proposed cultural plan, in keeping with Cary’s Town Center Plan, identifies nine Opportunity sites where mixed use development can and should occur.

In reviewing the overall plan, along the size, conﬁguration and location of the various opportunity sites, it is clear that some sites will best be candidates for residential development, some for mixed use with retail and residential development, some for pure retail some for a combination of ofﬁce and retail. Assumptions have been made about each of these sites in order to compare potential demand against order-of-magnitude supply of space. This analysis allows that the commercial development components of the opportunity zones should be well-supported by the market in 2006, given:

§ Demand levels in 2001 did not reﬂect plans for a train station in downtown Cary.

§ The types of retail enterprises recommended in 2001 are in sync with the kinds of development that usually emerge around new cultural facilities and districts.

Development Tools: Finally, in support of these development activities the importance of three tools should be stressed:

1. Promotion of the Plan: The overall plan itself represents a powerful tool with which to recruit commercial development and residential developers to downtown Cary. Included information on projected week-end and nighttime activity, attendance estimates and ancillary spending potential is credible and compelling.

2. Parking: Probably the single most important element of the plan likely to drive commercial development is an effective response on the Town’s part to the challenge of parking. Developers and business operators will see parking plans as real, meaningful efforts to attract and support new customers and workers in the downtown area.

3. Improvements to the public realm. By installing new streetscape, making needed traffic/circulation improvements, and creating a new park in the heart of downtown, developers will recognize the ongoing commitment the town has to this area, and will thereby be encouraged to make similar private investments. The ﬁrst step in the realization of the Dallas West-End project (now a booming success with converted warehouses into lofts and ofﬁce space, multiple entertainment venues, dining establishments, etc.) was the City’s commitment of $5 million in streetscape and traffic improvements.

4. Partner with existing projects and initiatives, most importantly the proposed Economic Development Organization, to provide the staffing and infra-structure that helps advance these ideas.

5. Tax Incentives: Finally, there are the traditional tax incentives and zoning provisions available to the Town to attract new commercial activity. Here again the importance of using these tools selectively and pro-actively to drive the development of the district in a direction that best serves the long-term goals of the community should be stressed.