Sustaining the arts and creative placemaking through tax increment financing, Part 2

Some philanthropists like to have their names attached to theaters or museum galleries.  But as far as we know, none of them try to get their names put on an office copier or an accounting position.

One of the things that makes sustaining the arts so difficult is that it is harder to get funding for the back office operations -- that is, general operating support -- than for specific projects.  As a result, organizations that should be spending more time building their organizational infrastructure are instead doing the things that bring them attention from funders.

That's why the arts can benefit from a revenue stream that doesn't rely on a private funder's particular interest.  In the previous essay on this topic, I talked about how Allegheny County and the state of Colorado generated hundreds of millions of dollars for arts through a sales tax initiative.  More interestingly, Allegheny County is able to increase the amount going to the arts because of this revenue model.

I argued that states could develop a funding pool without raising sales taxes.  What states or districts can do is to reserve a portion of taxes above a base for the arts. (This is a model known as tax increment financing [TIF], which is used in most of the country to support big development projects.)   This money can help support creative placemaking activities that not only benefit the arts, but also make communities more attractive for cultural tourism and businesses that rely on highly educated workers.  As the arts improve the quality of place, attracting more shoppers and workers, people spend more money, and more support goes to the arts, and the cycle continues.

This fund can help to support the kinds of activities that are less likely to be supported by private foundations and corporations, including:

• Organizational development and administrative activities that help arts organizations become more effective.
• Place marketing efforts and collaboratives, such as arts councils.  While individual organizations may want to support local arts councils and efforts to market their communities, they need to support themselves first.  Also, the current funding environment (some win grants, others lose) furthers competition that may make it harder for some organizations to work together.
• Arts events and festivals.  Some of the larger arts events generate enormous returns on investments to their communities.  The WaterFire event in Providence, Rhode Island, attracts about 1 million visitors and  $25 million in private spending per year, according to Tom Borrup in The Creative Community Builders Handbook.  But most small festivals need to build their audiences over time to have these kinds of numbers.  The TIF can invest in these events and festivals as they build their audiences.
• Public art and street art activities.  These can help attract people to commercial areas or encourage shoppers there now to stay longer (which can generate more consumer spending.) 
• Interorganizational mergers and partnerships.  There are a number of people -- funders and even arts advocates -- who say there are too many distinct arts organizations.  The TIF can provide incentives for organizations to engage in long-term partnerships or even merge.
• Arts activities in underserved communities.  Some places -- Manhattan in New York City; Santa Fe, New Mexico; and Asheville, North Carolina -- will always get more funding because funders spend more time in these places.  The TIF could be a catalyst for arts-based economic and community development in neighborhoods and towns without large and influential arts organizations or strong advocates.

--Leonardo Vazquez, AICP/PP

Sustaining the arts and creative placemaking through tax increment financing, Part 1

It seems like everybody involved in creative placemaking is talking about funding cuts to the arts.  Well, maybe not everybody.

In Allegheny County, Pennsylvania, (which includes the city of Pittsburgh), the county's Regional Allocation District is planning to increase its allocation to arts and cultural activities by 2%.  This is thanks to a creative way of funding the arts -- through a portion of sales tax revenue.  The District gets revenues from half of a 1% sales and use tax in the county, and distributes it to arts, cultural and entertainment facilities and parks throughout the county.  Though the amount of the tax may seem insignificant to a shopper, it has translated to more than $2.3 billion since 1995. In fiscal 2011, the Regional Allocation District Board is expecting to give $81.1 million.

Colorado does something similar with its Scientific and Cultural Facilities District in the Denver metropolitan area.  This fund -- based on a tenth of a percent of sales tax -- distributes about $40 million per year to around 300 organizations in seven counties.

Sales taxes are a great way to support the arts and creative placemaking.  Governments don't even have to create new taxes to make this funding system work.  Through a process known as tax increment financing, arts and cultural organizations can get a portion of any sales taxes above a certain baseline.

Here's how it works.  Let's say in 2011, ABC County collects $100 million in sales taxes.  That $100 million is the base.  In 2012, because of an improving economy, ABC County collects $110 million in sales taxes.  That additional $10 million goes to support arts and cultural activities.  A government agency wouldn't have to wait years for the money to pile up.  It could float a bond that could be paid for by increased sales tax revenues.

Most states have tax increment financing programs (TIFs).  But, like in New Jersey -- where it is called a Revenue Allocation District -- TIFs usually go to support big development projects.  So in New Jersey, a TIF could help build a big performing arts center, but provide no funding to support its operations. This is a big problem -- not just for arts organizations that struggle to keep the lights on, but also for the municipalities and leaders who sometimes use a lot of political capital to get these big projects built.

And of course, most arts activities happen outside of big theaters and cultural centers.  Some, like public art and street art, generate no or little money.

New Jersey uses a form of tax financing. A portion of the tax that guests of hotels and motels pay goes to the New Jersey State Council on the Arts, which distributes revenues to arts organizations.  (Arts Build Communities is one of many grantees supported by this fund.)

Why should the arts be singled out for special treatment with a portion of sales tax?  Because arts and cultural activities are proven generators of economic activity. According to several economic impact reports, the arts bring people to downtowns and other places,  where they will spend $8, $10 or $20 per person on top of the ticket prices.  As you can imagine, this is good for nearby restaurants and stores (especially the smaller businesses that have little money for marketing.)   And it's also good for high-tech and information industries, such as pharmaceuticals.  They want to attract the best educated and most creative people to come up with the next product to generate billions of dollars.  And what do creative people like?  To be in places and with other people who are creative.

It's a virtuous circle: more arts activities and artists tend to generate more money for restaurants and stores.  And all of these provide a windfall benefit to companies that want to attract educated and talented employees.

That's why a hotel/motel tax is a good start, but not enough.  A portion of sales taxes from businesses that benefit from arts and cultural activities could be used to support the arts and creative placemaking.

How the money is distributed, and for what purposes, determines whether the sales taxes generate a good return on the investment.  That's the subject for the next part of this essay...

--Leonardo Vazquez, AICP/PP

To learn more:
About the Allegheny Regional Allocation District
About the Scientific & Cultural Facilities District
About the New Jersey State Council on the Arts

Arts Build Communities and the Bloustein Online Continuing Education Program offer several courses on creative placemaking, including economic development through the arts, programming cultural uses, and cultural heritage tourism planning.  Learn more about our upcoming courses.

Do you have the right personality to market through social networking?

In today's economy, being smart is not enough to get you interviews, contracts and opportunities. A lot of your competitors know many of the same things -- or more -- than you do. To stand out, you have to show that you bring a distinct quality that your clients value.

Social networking can help.

Sites such as Facebook or LinkedIn make it easy to create a place on the Internet for yourself or your organization. The hardest, and most important parts of this work are in how you establish yourself online.

Determine a persona for your site. What makes you distinct, and why would someone want to connect to you? You may want to do some competitive analysis before you start. For example, if you're smart about an unusual but valuable topic such as transfer of development rights, see if anyone else is actively writing about it in a blog or a social networking site. If they are, how could you write about it differently? (Maybe you could take a different approach to the same, or you could write from a different angle. If the other writer is casual, you could be more academic, or vice-versa)

Give that persona a personality. How do you want your readers to think of you? As the smartest person in the world on a subject? As someone who just tells it "like it is?" As edgy and not afraid to be controversial? Think about who you want to be your clients, and what kind of voice they would respond to.

If the site is for a division or organization, talk with the other members of the organization about what the shared voice of the group should be. This will make it easier for different members of the organization to contribute to the site.

Communicate early and often. Figure out things to talk about to stay on the radar screen of your readers. Don't have anything to talk about this week? Check out a news site, such as Planetizen, and offer your thoughts on what you read. If the topic is interesting enough to talk about it with a colleague, it's probably interesting enough to put on the Internet. Writing can be a lot of work, so if you're not used to writing often, try posting once a month. Then do more as your schedule allows.

--Leonardo Vazquez, AICP/PP