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.

Talking points for connecting the arts and sustainability

Two big trends in urban placebuilding today are arts-based planning and sustainability.  Here are some talking points to help leaders and community understand how they connect.

But first, let’s get on the same page: “The arts” and “sustainability” are two of the most vague concepts in placebuilding. If your audience thinks the arts are just a bunch of weird stuff that only rich people enjoy, or that sustainability is about protecting every blade of grass, you’re not going to have much luck trying to promote either idea.

—  The arts are all activities related to the creation, distribution or consumption of products or experiences that are valued for their aesthetic qualities.  In other words, if someone is willing to pay more for some object or experience because of how it looks or makes them feel, that “thing” is some form of art.  That means that the opera and the classic car show are both artistic experiences.

—  Sustainability is a set of practices by people or groups designed to promote the long-term sharing of resources with future generations.  This includes reducing demands on the environment, promoting economic opportunity, and increasing social equity.  (Remember the 3 E’s of sustainability: Environment, economy and equity.)  If you run into a deep ecologist just wants to focus on environmental protection, let them know people decide whether to go or stay green.  If you don’t take care of people and you don’t enhance quality of life, they’re not going to be too worried about protecting trees.

(Presentation tip: Show a pie chart or triangle to show the relationships among the 3 E’s.)

How the arts (and artists) can contribute to local economies

—  The arts attract wealth (arts patrons, visitors, theater-goers, etc.). Wealth attracts businesses;  businesses attract more wealth, and so on and so on in a virtuous circle. (Presentation tip: Show a flow chart or one of those diagrams with the big arrows running in a circle.)

—  The arts help to diversify the business and employment mix.

—  Artists contribute their skills to many businesses outside the arts.

—  More of the money spent in arts establishments is likely to stay in the local economy, compared to the money spent in chain stores, franchises and the Internet.  (For more on this, read Ann Markusen’s work on the artistic dividend.)

—  The arts are part of place-based experience economies, so artists tend to be involved with local economic revitalization efforts.

—  Creativity is critical to industries that rely on innovation, such as biotechnology and other knowledge economy businesses.

How the arts (and artists) can contribute to the environment

(Note: Art tends to be neutral regarding the environment, but artists have a long history of being connected to the natural world.)

—  Visual artists, such as landscape painters, draw inspiration from local environments.

—  Artists are more likely to be involved in preservation efforts.

—  Artists are more likely to reclaim abandoned and blighted spaces, reducing construction waste.

—  More architects and urban designers are promoting “green” building and design.

—  Visual artists, such as landscape painters, draw inspiration from local environments.

—  Artists are more likely to be involved in preservation efforts.

—  Artists are more likely to reclaim abandoned and blighted spaces, reducing construction waste.

—  More architects and urban designers are promoting “green” building and design.

(Presentation tip: Use an image that shows artists working with children in a ‘green’ project.)

How the arts (and artists) contribute to equity

—  Art provides a safe and inviting bridge for people to learn about other cultures.

—  Art gives people who feel discriminated against a productive way to express themselves.

—  Artists are often involved in revitalization efforts in their communities.

—  The arts can provide job opportunities to people without advanced degrees.  (Ok, it’s probably not a lot of jobs, but it helps.)

How communities can better connect the arts and sustainability

—  Bring arts and sustainability leaders together.

—  Identify current and potential connections between the arts and sustainability initiatives.

—  Create a local cultural plan with a sustainability focus. Try to get it attached to the community’s master plan.

—  Work on short-term and highly visible projects to highlight the connections.

—  Develop a leadership group committed to promoting the arts and sustainability.  Build the group to include all parts of the community.

—  Try more. Learn from your mistakes. Create new solutions. Update your plan. Build more leaders.  Repeat.

--Leonardo Vazquez, AICP/PP 

Rutgers University's Arts Build Communities provides research, continuing education and technical assistance in the arts and community and economic development.  Learn more...

In the 21st century, planners need a new watchword

“Let your watchword be order and your beacon beauty.” Daniel Burnham

Daniel Burnham’s biggest influence on urban planners was not in urban design but in their DNA. Burnham created the model of large, comprehensive thinking in the 1909 Plan of Chicago. And many if not most planners today focus on orderly and harmonious development.


This has brought a lot of benefit to the places we serve. When property owners know what their neighbors can do with their property, there is less risk, and property values go up. Planning that provides a clear set of goals and objectives can give stakeholders more hope about places that are unsafe and unhealthy.

But the lust for order nurtures intolerance. Anyone who makes order their watchword is going to be uncomfortable with diversity. Maybe not a diversity of land uses, because zoning maps don’t talk back at you. Tension builds when people with different perspectives, beliefs and demands share space. This tension is usually not orderly or beautiful.

But diversity is valuable, if not essential, for enhancing creativity and helping communities find better and more sustainable solutions to difficult problems. (There are a lot of scientific studies that prove this point. Start with Scott Page’s The Difference) Planners who want to help their communities succeed in the 21st century need to do better at balancing the discomfort of diversity with the demand for order.

If you read the works of Leonie Sandercock, Stacy Harwood, and the authors they reference, you’ll see how planners use racially neutral language and methods of problem solving to perpetuate structural racism and stymie innovative thinking. I believe that most planners are open-minded and welcome creativity, so I think that what we’re seeing is the impact of decades of incomplete or misguided professional training.

Oyster Bay is the latest in a long string of communities to use the “order defense” to make it more difficult for low-income Latinos to look for work there. A new ordinance prevents a pedestrian from soliciting employment while standing on a sidewalk. Of course, there is no specific language targeting Hispanics (there never is). It just happens that the people who are most affected by this are low-income Latinos. More than 90 years ago, the city of Louisville, Kentucky used the order defense to justify zoning that prevented African-Americans from buying property in white communities. (The city argued in Buchanan v. Warley that the ordinance was to protect the safety of African-Americans, who would be attacked for moving into white neighborhoods.) Burnham’s most powerful descendants, including Robert Moses, used urban renewal to clear away neighborhoods and build housing projects that looked orderly on paper but failed in real life. Even the New Urbanists display their order gene through their formulas and intolerance of urban design that doesn’t fit their romanticized visions of pre World-War II American communities. (That’s probably why a couple of New Urbanist leaders got their hats handed back to them when they tried to push a diverse area of Biloxi, Mississippi to adopt new urbanism.

Is all this the fault of planners? No. But they do often unintentionally aid and abet. And this is again a result of the order gene. By focusing on orderly practices, planners in many cases are little more than coordinators, data jockeys and glorified jacket holders for powerful interests in communities. Unable or unwilling to manage the complexity of diversity other than by avoiding it, planners in many cases squander their powers to lead.

In another essay, I wrote about how planners can more effectively work with diversity by being more culturally competent. And in that vein, I understand why Burnham placed so much emphasis on order and beauty. The industrial revolution changed American cities dramatically. In the late 19th and early 20th centuries, cities got packed with huddled masses who couldn’t breathe free because of the dirty factories that polluted their communities. The nation was only a few decades away from an existential struggle over who should have what civil rights, and the White Anglo-Saxon Protestants who had for centuries ruled urban centers were understandably distressed by so many people of different colors and creeds crowding cities.

But that was then. Why is the desire for order still so entrenched in the minds of urban planners? One reason is that the public sector, being focused on the efficient delivery of services, tends to be less tolerant of risk than the private or nonprofit sector. Public administrators are trained to focus on the efficient delivery of services. That, combined with the fear of looking bad in public when mistakes are made, tend to make public sector leaders value stability and fear change. But all organizations – especially large ones – tend to become more orderly over time. It simply is more efficient and less risky to repeatedly do the same thing. Another reason is that planning school students tend to be trained by social scientists. They are the core faculty members, which means they determine what is taught and how, who gets to teach, and the culture of learning. Though scientists learn by trial and error, the ideal scientific method is orderly (and frankly, a little compulsive). So planners are trained to value order, and then they see that maintaining order is the best way to get ahead in their organizations. It’s no wonder then that the person who most changed the way planners think was a self-proclaimed ‘housewife’ with no college degree and no formal training in architecture or urban planning – Jane Jacobs.

A third reason is that humans crave order in times of change.  That desire is why relationships (even bad ones) persist, why cultural habits continue, and why charismatic individuals who offer easy solutions become leaders in times of crisis. Many planners want to serve the interests of the communities they work for, so it's natural that these planners would want to give people what they want: a sense of order.

But while order is a short-term relaxant, it makes societies vulnerable in the wake of changing conditions.  (One of the best studies of how societies fail when they fail to change is Jared Diamond's book, Collapse)

So we can understand how Burnham’s words became a part of the planner’s genetic makeup. But we know that DNA is not destiny. Planners can learn to do a better job of working with diversity while effectively promoting order. But first they have to realize their genetic makeup, question their assumptions, and develop new ways of thinking and acting.

In the 21st century, let your watchword be balance and your beacon creativity.

Leonardo Vazquez, AICP/PP