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The Changing Role of Municipal Downtowns

By Dr. Norman Walzer and Mim Evans, Center for Governmental Studies at Northern Illinois University

In the past, downtowns have often been the centers of economic activity in many municipalities including retail shopping as well as entertainment and governmental activities. These areas have had extensive public investment in parking spaces, telecommunications and other facilities used for multiple purposes during the day and evening. A result is that the downtown area represented the heart of the community and its health or condition symbolized the status of the overall municipality. The retail sales taxes generated in this area also became an essential source of local revenues for many municipalities.
With the growth of large retail centers and discount stores in the 1970s and then growth in Internet shopping since 2000, the roles of downtowns have changed and probably will continue to do so in the future. Small and mid-size communities, especially in rural areas, have had to weather competition from retail centers in surrounding larger metro areas and, more recently, the growth in Internet shopping that provides more convenient access to larger selections, lower prices and less time commitment for two-wage earner families. More recent buy local campaigns, especially related to food products, have altered some of these shopping approaches and provide new opportunities for local businesses.
Changing lifestyles and buying preferences brought substantial changes to downtowns in many, if not most, municipalities, and local public officials and development practitioners are struggling to determine the most appropriate use of existing facilities in the future. The Millennial generation (age 20 to 35 years) is quickly replacing the Baby Boomers as the largest population segment. These two groups have different buying preferences, which add to both the complexity and opportunities to refocus downtowns. While the downtowns of earlier eras are not likely to return to most municipalities, other options are arising that could stimulate local activity.
This article reports on a 2016 survey by the Center for Governmental Studies in conjunction with the Illinois Municipal League to identify trends in downtowns and actions by municipal leaders to repurpose and revitalize them. A total of 148 Illinois municipalities responded to the survey. This article, one of two, describes conditions in the municipalities and the various roles that downtowns play in local economic development. A future article will describe strategies and actions used by municipalities to enhance or revitalize the downtowns.
Changing Economic and Financial Conditions
Overall, nearly half of municipalities (48.5%) reported that the city economy had largely recovered from the economic recession, but 55.9 % indicated that housing prices had not regained their pre-recession levels even though the market is active. Municipalities with more than 50,000 population were more likely (71.4%) to report a recovery than those smaller than 10,000 population (38.8%). Smaller municipalities also more often reported having fewer local jobs or jobs that pay less, but there were relatively few differences by size of municipality, so this issue affects municipalities of all sizes.
Similarly, a majority (69.8%) of respondents reported that expected FY17 municipal revenues may be sufficient for current services, but there will be no extra funds for additional programs. Of some concern is that nearly one municipality in five (18.7%) reported inadequate funds for current services but with no immediate employment cutbacks. An additional 4.3% reported that cutbacks are under consideration. These responses were fairly common among all sizes of municipalities.
Conditions and Importance of Downtowns
Responses about the current status of the downtown varied sometimes by size of municipality. The largest number of respondents (56.0%) reported a traditional downtown around which the community had developed in the past (Table 1). Municipalities with populations larger than 50,000 more often (55.9%) reported this status compared with 51.0% of those smaller than 10,000, but the differences are relatively small.

The second largest response (39.7%) was that the central business district is stable with 10% or fewer vacancies in commercial buildings. Not all is well in some municipalities, however, with nearly the same number (39.0%) reporting one or more significant “white elephant” buildings with no apparent current interest or buyers. These responses were highest in the smallest and largest municipal groups. One in four respondents (23.5%) reported that the retail functions are nearly gone and 24.3% reported retail buildings converted to other uses.

More positive is that 43.4% reported streetscape and public spaces have been significantly improved in recent years, and 14.0% said that the central business district is growing with demand for additional commercial space. A more detailed examination of the strategies used for downtown enhancement shows changing activities at least partly reflecting changing consumer preferences. More emphasis on entertainment facilities was reported along with a greater focus on locally-
produced products such as arts, crafts and food items. These changes can attract more tourists and possibly help replace the outflow of dollars spent on Internet sales or larger retail centers.
The past importance and changing nature of downtowns in many municipalities are clearly evident in the survey responses. Overall, mayors reported that stabilizing or enhancing the downtown areas is either important (24.3%) or very important (71.0%) in the overall local economic development efforts. All survey respondents see the downtown as creating a sense of community and positive image with 91.9% rating it very important (Table 2). More specifically, 78.4% reported it as very important in attracting new businesses, and 75.4% consider it very important in retaining current businesses. This view extends beyond downtown businesses to other potential employers as well (72.7%).

In addition, respondents rated the downtown as very important (72.1%) in attracting visitors as well as in attracting and retaining residents (69.4%). A later article will demonstrate that each municipality is unique in local assets, so options available in revitalizing or enhancing the attractiveness of the downtown area vary by location and size of municipality. Consequently, the mayors responding can use help in sorting through these options to attract businesses.
Issues of Concern in Downtowns
The importance of downtowns in local development strategies is clear, and in many cases, the downtowns are stable, if not doing well. Nevertheless, issues of concern were expressed. By far, the most often reported concern (62.6%) is the impact of non-retail uses, especially on the first floor of the main commercial street. The growth in these activities may be of concern for several reasons, including that not all generate retail sales taxes. In some cases, these uses can reduce the overall attractiveness of the area and discourage potential shoppers.
Sometimes empty storefronts in low demand areas can attract less desirable uses. Respondents specifically cited tattoo parlors, gun shops, discount tobacco, storefront churches and similar uses as concerns in their downtowns (50.5%). Relatively few respondents (14.1%) said that locating franchise businesses in the downtown area is an issue. However, nearly one-third (29.3%) are concerned about the balance between increasing population density in or near the downtown and maintaining the traditional downtown character. Given the growing preferences for a walkable downtown, more entertainment options and other uses, these issues may increase in the future. Municipalities wishing to encourage a new mix of uses and flexible building usage may consider new types of zoning.
General Observations
The survey responses are clear that while changes are underway in many, if not most, downtowns, these areas still play an essential role in building community, attracting or retaining residents and stabilizing business activity. Municipalities already work with small businesses to help them market over the Internet, and these efforts are likely to continue as the mix of downtown stores changes in response to changing demands by customers regarding where they live and shop.
However, responding mayors also face issues in the downtown that may require changes in policies and strategies. Changes in population composition and buying patterns mean that different types of activities will be needed to keep downtown areas attractive in the future. These downtowns will probably have a more entertainment, services and residential focus that appeal to both young adults and elderly residents. Some changes may require different strategies and policies involving zoning and regulations.
Nevertheless, the survey responses demonstrate that downtowns are still seen as essential to an overall municipal development strategy, and efforts are underway to renew and revitalize the area. These actions involve finding ways to attract businesses, non-retail in some instances, but also create an area that a changing population will find attractive to live, entertain and purchase basic items in light of a growing preference for the convenience of buying online and in other ways. A new environment is developing to which community and business leaders have to adjust. In some instances, this is new and unfamiliar territory, and they are looking for assistance.
Survey respondents provided examples of innovative actions underway, and there seems to be a growing interest in collaborating and sharing best practices for downtown enhancements on a statewide basis. In some instances, this means planning strategies for further downtown enhancement. In other cases, it means technical assistance in working with entrepreneurs and business investors to find new uses for downtown properties. The next article in the Illinois Municipal Review magazine will discuss these strategies and activities.
Dr. Norm Walzer is Senior Research Scholar and Mim Evans is Research Associate in the Center for Governmental Studies at Northern Illinois University. They thank IML staff for assistance with the survey that generated these results and Andy Blanke, CGS, for help with data analyses. Dr. Walzer can be contacted at nwalzer@niu.edu.