For the past several years, we have consistently recognized the immense value commercial corridors play in both urban and rural geographies. Commercial corridors are economic engines for communities — they provide jobs that keep money circulating in the local economy, offer goods and services for residents, and power entrepreneurship and wealth building for whole communities. They also serve as valuable gathering places and sources of civic pride. Commercial corridors hold economic and symbolic value, and impact public perceptions of surrounding neighborhoods and the communities.
Many of these places have struggled in recent decades due to shifts in the economy — the rise in online shopping and ecommerce, a lag in entrepreneurship that began during the Great Recession, and consolidation manifesting itself in the form of major online and big box retailers. All of these shifts have contributed to uneven growth and vacancy rates in commercial corridors, downtown areas, and Main Streets. As we documented in 2019, before the pandemic, check cashing outlets, fast food restaurants and Dollar Stores are more likely to outnumber commercial banks, quality food establishments and grocers in the preponderance of corridors located in low-income communities.
The COVID-19 pandemic further amplified these struggles. Many of the businesses hardest hit by the pandemic — retailers, restaurants, bars, etc. — are also the ones that populate and contribute to the dynamism of commercial corridors. Black- and Brown-owned businesses have proven to be exceptionally vulnerable. Early in the pandemic, we worked with Senators Booker and Daines on bipartisan legislation to provide relief to these commercial corridors, which ultimately got stalled in the legislative process. The upshot is that, despite multiple rounds of the paycheck protection program (PPP), these businesses — many of which did not receive sufficient aid from the program — continue to suffer from the pandemic fallout from a reduction in capacity, foot traffic, and hours. Supporting these businesses and tackling retail vacancies is an urgent task, and requires new forms of support, different than early pandemic grant and loan programs offered by the federal government to keep individual businesses afloat. Corridor revitalization efforts should be approached in concert with efforts to incentivize and imagine new uses for commercial office space.
To this end, we strongly believe that it is timely for states, cities and counties to consider investing in commercial corridors. We recommend, in particular, that states use a portion of their remaining American Rescue Plan resources to support a Commercial Corridor Revitalization Grant Program. A sketch of such a competitive program is provided below.
To refresh, the American Rescue Plan awarded $350 billion to the Coronavirus State and Local Fiscal Recovery Fund (SLFRF), of which states will collectively receive $195 billion. The program specifically encourages states and localities to use the funds to support the small business recovery. States can and should use unallocated funds to support Commercial Corridor Revitalization Grant Programs in 2022.
The Center on Budget and Policy Priorities reported in November 2021 that states had collectively allocated $105 billion in SLFRF funds, leaving over $90 billion yet to be allocated. According to the National Conference of State Legislatures, as of January 2022, 22 states have allocated a total of $4.9 billion of their SLFRF awards toward small business and economic relief programs, representing less than five percent of all state spending to date.
States — including Maine, Michigan, North Carolina, and Virginia — have crafted a range of creative programs (see below). However, most state small business recovery programs have so far provided grants to individual businesses based on size or revenue or location within hard-hit areas, or focused on businesses within particular industries and businesses that didn’t qualify for large federal aid programs run by the Small Business Administration (i.e., the PPP or Emergency Injury Disaster Loans). Others have crafted community revitalization programs targeting physical upgrades to commercial districts, but we have not yet seen them combined with targeted supports to help businesses grow.
Examples of State Corridor and Small Business Development Programs Funded by SLFRF
Michigan | Community Revitalization and Placemaking Grants ($100M) PASSED
Per the program, eligible grant applicants “are individuals or entities working to rehabilitate vacant, underutilized, blighted and historic structures and the development of permanent place-based infrastructure associated with traditional downtowns, social-zones, outdoor dining and placed-based public spaces.”
North Carolina | Rural Downtown Transformation Grants ($175M PROPOSED/$50M PASSED)
Gov. Cooper proposed a wide-ranging plan for a range of programs to be offered through the state Dept. of Commerce’s Rural Economic Development Division. It was scaled back, the final bill offers $25M for Neighborhood Revitalization Grants for upgrades to “sidewalks, greenways, lighting, signage, public parking, or other projects to make” commercial districts more inviting, and $25M for Community Development Grants “to support the acquisition of land and buildings, the preparation and development of neighborhood properties and business sites, and the removal of structural and physical barriers to enhance community growth and economic development opportunities.”
Virginia | Industrial Revitalization Fund & Main Streets Program ($53M PASSED)
Offered supplemental funding to existing programs.
Maine | Maine Jobs & Recovery Program ($1B) PASSED
This state program broadly supports programs not just focused on the immediate recovery, but also long-term economic growth and infrastructure revitalization. While Maine’s program doesn’t specifically target commercial corridors, certain innovative investments could be pulled together in service of corridor-focused programs. Those include $58M for small business loan guarantees, $40M in R&D spending, $8M for grants to new businesses and start-ups that formed too late to qualify for other COVID aid programs, $3M for TA, capital access, and entrepreneurial support programs for diverse entrepreneurs, and $15M for a domestic trade initiative to train local businesses on how to expand their markets.
Despite seismic changes afoot in downtowns, residential real estate markets, and central business districts, federal policy doesn’t explicitly target interventions to help corridors respond to these changes in their ARPA programs, but that doesn’t mean corridor-focused programs aren’t an allowable use. The Treasury Department’s SLFRF program encourages support to individuals and businesses in Qualified Census Tracts, defined as those with certain thresholds of residents living in or above poverty line, to target aid to disadvantaged communities, but practically speaking, this does little to incentivize investments in specific corridors given that QCTs encompass a majority of zip codes in some cities. As a result, few cities, counties, or states have designed programs to strategically support new and existing businesses co-located in targeted commercial corridors, despite such a program being an allowable use of funds.
The bottom line: Much opportunities remain for states to innovate and adapt how they use ARPA funds to support the small business and commercial corridor recovery in the years ahead.
If funded through SLFRF dollars, these programs must align with Treasury’s official guidance. Applications may NOT be used for general economic development purposes. Successful applications MUST identify negative economic impacts of the pandemic and how their project proposal will respond to those impacts and help the target community or businesses recover.
A Proposed Model for a Commercial Corridor Revitalization Grant Program
We propose that states consider creating a competitive program to support the development and recovery of commercial corridors. The program we propose is designed to invest in the infrastructure, capacity building, and resources that will help a state’s commercial corridors recover from the pandemic and thrive well into the future. This program can easily build upon the Main Street efforts that already exist in most states and many cities.
The program recognizes the unique ability of community partnerships to lead large-scale change and revitalization in commercial corridors. It would offer two forms of funding:
- Planning and capacity building grants for organizations in the process of establishing a partnership to focus on commercial corridor revitalization, and;
- Capital and programmatic support grants for existing partnerships to fund projects within commercial corridors.
Successful applications for both categories would demonstrate the importance of a particular commercial corridor to their community and illustrate how state investments will support job growth, minority & women-owned businesses, and the built environment within that commercial corridor.
Planning Grants: This portion of grant funding recognizes both the importance of planning to achieve sustainable results in commercial corridors and the role of community-led partnerships in this work. Any organization focused on commercial corridor improvement (nonprofit organizations, universities, municipalities, chambers of commerce, etc.) would be eligible to apply for a grant.
Strong applications would demonstrate the existence of a partnership with a government entity and other local stakeholders, or would document commitment from local groups to build a partnership using grant funding. Applications would also need to demonstrate how planning efforts will work to strengthen or build this partnership, while mitigating the negative economic or public health impacts of the COVID-19 pandemic. Examples of potential eligible projects include:
- Planning initiatives focused on the development, revitalization, or enhancement of a discrete set of targeted commercial corridors in a neighborhood or set of neighborhoods, including comprehensive plans centered on commercial corridors or downtowns or economic development and diversification plans;
- Consumer or data analysis that will sharpen economic recovery efforts;
- Capacity building work designed to grow nascent or existing partnerships focused on commercial corridors; and
- Efforts to engage local community members around the revitalization of commercial corridors.
Planning grant awards would not exceed $1 million.
Capital and Programmatic Support: This portion of grant funding would support project-specific costs to revitalize a commercial corridor or incentivize future development. Strong applications would demonstrate the importance of a project to the commercial corridor and, if applicable, the ability to leverage additional capital (private or public). Applications would need to indicate how the funded program or project will address negative economic or public health impacts of the COVID-19 pandemic. Examples of potential eligible projects include (but are not limited to):
- Rehabilitation costs and tenant improvements for vacant buildings, commercial properties, and façade improvements;
- Placemaking projects, such as arts initiatives or transformation of vacant or underutilized spaces;
- Recruitment of new tenants in vacant buildings or mitigating the negative impacts of vacant buildings;
- New business entrepreneurial support and training programs, technical assistance programs, business incubators, business retention and recruitment programs;
- Grants for start-ups or new business expansion costs;
- Support for micro-businesses; and
- Tourism, promotion, and branding efforts for targeted corridors.
Capital and programmatic grant awards would not exceed $10 million.
Target Geography: This grant would support commercial corridors, downtown areas, and Main Streets. Though there is no strict definition of commercial corridor, successful applications will effectively describe the area (using specific boundaries), its importance to the community, and how the program would support the area and mitigate the economic impacts of COVID-19. This may involve the inclusion of maps, lists of businesses, or other narrative elements that demonstrate the importance of the commercial corridor and proposed project to the community.
- This grant program is intended to support both rural and urban communities in the state.
- Rural communities are defined as:
- A city with a population of less than 50,000 according to the latest decennial census of the United States
- An urbanized area contiguous and adjacent to a city that has a population of less than 50,000 inhabitants
- An area determined to be rural in character by the under-secretary of agriculture for rural development within the United States Department of Agriculture. [1]
Applicant Eligibility
- Applicants for both types of grants would need to demonstrate the existence of a partnership between local or regional organizations. The partnership could include nonprofit organizations, municipalities or other government entities, chambers of commerce, development finance agencies, local businesses, business improvement districts, economic development organizations, and other entities with relevant ties to the grant’s focus area.
- The partnership would not need to include government officials, but would have to demonstrate support from local government.
- The partnership would need to focus on commercial corridor development and revitalization (but would not necessarily need to be exclusively oriented around this).
Partnerships seeking to apply for capital and programmatic support would need to demonstrate the existence of a plan to guide the project work.
Successful Applications to this Program Would Include
- A clear articulation of how the program or project will mitigate the negative consequences of the COVID-19 pandemic.
- A focus on supporting minority and women-owned businesses.
- Demonstrated commitment from partnership members (where applicable). The application should identify a primary project lead and list additional stakeholders, and clearly identify all roles, responsibilities, and what each member contributes to the partnership. The primary lead organization would need at least one paid staff member.
- Clear outline of how grant dollars will be used to support future commercial corridor revitalization.
- A description of the commercial corridor and its importance to the community (including images, a list of notable businesses, institutions, and other notable features).
- Demonstrated support from local government (either as a participant in the application or through a letter(s) of support).
- Demonstrated need for state funding to leverage additional capital (if applicable).
- A clear description of how the project will support women and minority-owned businesses.
- A clear description of how the project will support and invigorate low-income neighborhoods.
Conclusion
We’ve proposed one approach to using funds from the American Rescue Plan SLFRF to support commercial corridors during this massively uncertain period of American economic life. What’s clear is that as cities and metros emerge from this pandemic they will look different from the past — how different and in what ways is still up for debate. Many commercial corridors, especially those in rural areas and low-income urban areas, were struggling to adjust to economic changes before the pandemic. COVID only made matters more extreme for them.
State leaders have a tremendous opportunity at the moment. They can provide funds that allow commercial corridors to recover from the pandemic and position themselves to be dynamic and vital nodes of local commerce, building out markets within states and metros, in the coming years.
[1] https://dced.pa.gov/download/rural-jobs-investment-tax-credit-guidelines/?wpdmdl=85744
Bruce Katz is the Founding Director of the Nowak Metro Finance Lab at Drexel University. Colin Higgins is the Deputy Director and Karyn Bruggeman is a Senior Research Fellow at the Nowak Lab. Michael Tolan is a 2nd year student at the Kennedy School of Government at Harvard University; he was a summer intern with the Nowak Lab in 2021.