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More than face value: façade improvement grants in North Carolina

A paper submitted to the faculty of The University of North Carolina at Chapel Hill

in partial fulfillment of the requirements for the degree Master of Public Administration

By Scott Sherrill

Spring 2012 This paper represents work done by a UNC-Chapel Hill Master of Public Administration student. It is

not a formal report of the Institute of Government, nor is it the work of School of Government faculty.

Executive Summary

Façade improvement grants are a common tool for encouraging investment in downtown areas across

the state of North Carolina. This project examines the use of best practices from the literature and how

those best practices can help to address some of the problems commonly reported by practitioners. The

data for this project were collected via a survey of North Carolina’s Main Street directors and downtown

development professionals.

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Introduction

Large and small communities have employed façade improvement grants to generate investments in

downtown areas. Fundamentally, façade improvement grants are designed to improve the aesthetics of

downtowns and preserve local historic character. They do so by incentivizing property owners to

undertake façade improvements and by tying funds to design criteria or a committee review process.

The literature on façade improvement grants is generally thin, but some sources have identified best

practices for façade improvement grants. This study examines the usage of some of those practices in the

state of North Carolina to answer the research question:

Does the usage of façade improvement grant best practices affect the utilization of façade improvement

grants?

After a brief description of the methodology and characteristics of respondents, this paper will describe

best practices, the extent of the use of those practices and façade improvement grant utilization trends

among communities, impediments to grant utilization, and recommendations.

Methodology

This study included a survey designed to measure programmatic variation and common obstacles to

façade improvement grant utilization. The survey targeted groups connected by an interest in downtown

development including members of the North Carolina Downtown Development Association(NCDDA)

and the North Carolina Main Street Program under the assumption that communities in those groups

already had an interest in downtown development and would be more likely to have a façade

improvement grant program.

Survey questions focused specifically on:

1. Community matches of owner investment

2. Additional assistance communities provided to grant recipients;

3. Program marketing efforts;

4. Design contingencies associated with façade improvement grants;

5. Common impediments to grant applicants;

6. Number of grants; amount spent on grants; and amount budgeted for grants.

The survey questions provided metrics for five best practices and utilization trends for façade

improvement grants.

Communities Using Façade Grants

44.2% of communities receiving the survey responded to the survey had an active façade improvement

grant program in the last ten years. Respondent populations ranged from around 830 to over 400,000. The

median population was 12,900.

Of the 54 communities that responded to the survey, 18 provided enough information to identify spending

and utilization trends, and 5 had one year of data or relatively new programs. This smaller subset of the

respondent population had a median population of 16,190, was predominantly located in Tier 2 counties,

and had a median household income of $35,358, below the North Carolina median of $43,674.

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None of the organizations active in this study had programs prior to 1981. The median start date of 2001

suggests a surge in façade improvement grant programs within the last ten years.

Best Practices

The survey provided insight into five best practices among those identified by the literature. The best

practices analyzed in this report come from the NCDDA’s Façade Improvement Grant Workshop and the

Commercial District Advisor Blog.

1. Require matching funds from private sector that cover 25 to 50% of total project cost. Said

another way, the community should provide a grant for 50 to 75% of the total project cost. The

Commercial District Advisor Blog provides this best practice, noting that “the higher match is

necessary in areas where business owners are struggling and may lack the capital necessary to

meet their match requirements.” For example, on a $4,000 project, the property owner would

provide $1,000 to $2,000 and the community would provide $2,000 to $3,000.

Source: Community Provides 1-1 to 1-3 Match

2. Provide design services as needed. Given that the fundamental goals of many façade

improvement grant programs are to improve the aesthetics of downtown areas and preserve local

historic character, the NCDDA suggests providing design services as needed. The service both

helps to accomplish the program goals and makes it easier for property and business owners to

renovate facades.

Source: Design Assistance

3. Establish grants to ensure good design choices. This best practice also addresses the

fundamental goals of façade improvement and is recommended by the NCDDA, but is

implemented through the application and review process. For the purpose of this research, good

design choices include review processes tied to the Secretary of Interior Standards for

Rehabilitation, Local Design Guidelines, or a committee review.

Source: Secretary of Interior Standards, Local Design Guidelines, Committee Review

4. Communicate one-on-one with businesses and property owners. This best practice comes

from the NCDDA with the intent of determining property owner interest in façade improvement

grants.

Source: Communicate One-on-One

5. Have straightforward applications. This best practice comes from the Commercial District

Advisor Blog. The blog particularly recommends for communities with small grants, with the

idea that the smaller a grant is, the easier it should be to use.

Source: Administrator Reports Applications as Impediment to Use

Best Practice Analysis

The 18 communities that provided data on money and utilization trends show no clear correlation

between best practice usage and utilization trends. Utilization trends reflect the number of grants over

time. The money trend reflects the amount of money spent on façade improvement grants over time or the

amount budgeted if the amount spent is not available. In 61% of instances, the money trend reflects the

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utilization trend. There is a limited relationship between the use of best practices and the utilization of

façade improvement grants: those with a downward utilization trend average 3.33 best practices, and

those with an upward utilization trend average 3.75.

The best practices of matching, Good Design, and Non-deterrent application are used in more than 80%

of communities. More than three quarters of communities provide Design Services. The most

underutilized best practice is one-on-one communication, which is used by only 33.3% of communities.

Table 1: Best Practices and Utilization Trends Among Established Programs

Best Practice % Older Programs Utilization Trend Up

Overall -- 44.4%

Community Provides 1-

1 to 1-3 Match

83.3% 53.3%

Provide Design

Services as Needed

77.8% 42.9%

Establish Grants to

Ensure Good Design

Choices

83.3% 40.0%

Communicate

1-on- 1

33.3% 50.0%

Easy Application 88.9% 43.8%

N=18 N=18

Five communities have either started or will soon be starting to implement façade improvement grant

programs. The trends roughly approximate the best practice utilization rates of more established

programs: all provide a match within the recommended range and have simple application processes that

do not deter applicants. 60% provide design services or have instruments in place to encourage good

design. Only one community reports using one-on-one communication.

Table 2: Best Practices and Usage Rates Among Less Established Programs

Best Practice % Less Established Programs

Community Provides 1-1 to 1-3

Match

100%

Provide Design Services as

Needed

60%

Establish Grants to Ensure Good

Design Choices

60%

Communicate

1-on- 1

20%

Easy Application 100%

N=5

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Based on more in depth analysis of trend data from the established programs, the new programs should

expect that façade grant utilization will follow some sort of cyclical pattern, though the periods and

magnitude of the cycle will vary.

Non-utilization Factors

Communities also provided insight into some of the factors that might lead to less utilization. Among the

five most common factors for less utilization, lack of knowledge and small grants are the two areas where

communities have the most capability for improvement. The best practice around one-on-one

communication can help to solve the problem of a lack of knowledge.

Reported problems follow roughly the same patterns across all categories, except that a smaller

percentage of businesses and property owners undertake façade improvements on their own and a smaller

percentage of facades have been redone by communities with new programs. A slightly smaller

percentage of communities with established programs and more complete data report that their grants are

too small.

Table 3: Reasons for Non-utilization

Factor Est. Programs (N=18)

Less Established Programs (N=5)

Total Survey Population (N=35)

Bad Economy 88.9% 80% 82.9%

Lack of Knowledge 55.6% 40% 57.14%

Businesses Undertake Improvements on Own 50% 20% 54.3%

Facades Redone Already 50% 0% 40%

Grants Too Small 33.3% 40% 40%

None of the best practices examined in this paper suggest solutions to the small grants issue. The

Commercial District Advisor Blog suggests a couple of best practices, but they are not façade

improvement grants, rather they are revolving loan funds and microloans for signage which businesses

must repay.

One of the best practices the research going into this paper suggests is providing linkage to other funding

sources like historic preservation tax credits. 55.5% of established programs, 40% of less established

programs, and 57.9% (N=38) of survey respondents use this practice, which suggests that more

communities could use this practice to supplement the grant amounts for historic structures.

Recommendations

Communities in North Carolina to a large extent follow the best practices the literature provides. This is

particularly true for having straightforward applications, providing design assistance, establishing

programs that will encourage good design, and providing matching grants within the recommended range.

Nonetheless, this research does indicate two primary recommendations for improvement:

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1. Communicate one-on-one with business and property owners. 33.3 percent is a rather low

percentage of communities using this best practice. Communities can have very well designed

programs, but if business owners and property owners do not know about it, the program is more

likely to be underutilized.

2. Provide linkage to other funding sources like historic preservation tax credits. Given that

many of the commercial structures in downtown areas in North Carolina are historic, connecting

property owners with historic preservation tax credits and similar resources beyond the façade

improvement grants makes sense. This best practice should help communities to overcome the

perception that grants are too small.

Conclusions and Limitations

Although it would be ideal to say conclusively that certain best practices lead to greater utilization than

others, the analysis conducted in this paper cannot go that far. Instead, what this study demonstrates is

that some best practices have become very widespread among North Carolina communities, while others

are underutilized. Similarly, many communities use façade improvement grant best practices but do not

necessarily see greater utilization. This study provides insight into some of the reasons that communities

may experience less utilization, some of which are within program control, and some of which are not.

A more comprehensive look at North Carolina façade improvement grant programs beyond the NCDDA

and North Carolina Main Street programs would be helpful, to see if membership in those groups is more

likely to result in façade improvement grant programs and if there are any practices missed by the survey

population of this research. Further research on microloans for signage and revolving loan funds for

façades would be useful to determine if up-front capital is a limiting factor in façade improvements. A

survey of business owners to confirm the perceptions of façade improvement grant administrators would

also be helpful. Finally, research may examine a couple of aspects this study missed: the total amount

spent on façade improvements by business owners, economic impacts of façade improvements, and the

issue of whether or not more applicants applied for grant funding than communities could provide for

examining program demand. These may prove useful in evaluating the success of façade improvement

grant programs.

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Appendix A: Resources with Façade Improvement Grants

Because of their function in encouraging downtown facelifts and the sometimes small amount of façade

improvement grants themselves, they are frequently accompanied by additional resources. Among 38

survey respondents, the most common forms of assistance were design assistance and linkage to

additional resources like tax credits for historic structures.

N=38

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Appendix B: Marketing

One of the most commonly reported problems among survey respondents was that knowledge of façade

improvement grants was low. Downtown directors and other façade improvement grant administrators

report a wide variety of means of getting in touch with downtown business and property owners: the most

common are website, which is a pulling medium, i.e. individuals have to be looking for the organization

to find the information, followed by town newsletter, social media, newspaper, and word of mouth.

How do you market your facade grant program?

Answer Options Response Percent Response

Count

Website 80.6% 29

Newspaper 30.6% 11

Social Media 33.3% 12

Town Newsletter 36.1% 13

None 13.9% 5

Direct mail 8.3% 3

Email 8.3% 3

Org Newsletter 5.6% 2

Word of mouth 22.2% 8

Presentations 5.6% 2

Other 5.6% 2

N=36

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Appendix C: Best Practices, Money, and Utilization Trends

Established Programs

Community 50-75% Match

Max Design Services

Good Design

1-1 Communication

Application Deters

$ Trend

# Trend

A N 1000 N ? N N Down Down

B Y 7500 Y Y N N Up Down

C Y 5000 Y Y Y N Down Up

E Y 1000 Y Y N N Up Flat

F Y 4000 Y Y Y N Down Down

I Y 2000 Y Y N N Down Down

J Y 5000 Y Y N N Up Up

K Y 1000 N N N N Flat Up

M Y 5000 Y Y N N Down Down

O N 5000 Y Y Y Y Up Down

Q Y 15000 Y Y Y N Up Up

R Y 5000 N Y N Y Up Up

S DEPENDS DEPENDS Y Y N N Up Down

T Y 1200 Y Y N N Up Up

U Y 2000 N Y Y N Down Down

V Y 1000 Y N Y N Up Up

W Y 2500 Y Y N N Up Up

Z Y 500 Y Y N N Down Down

Less Established Programs

Community 50-75 Match

Max Design Services

Good Design

1-1 Communication

Application Deters

% Budget Used

AA Y 1000 Y Y N N FY12

AB Y 500 Y Y Y N 100

AC Y 1000 Y Y N N 40

AD Y 1000 N N N N 100

AE Y 7500 N N N N Unclear

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Appendix D: Façade Improvement Grant Size and Utilization Trends

Grant Size

Percent at Amount

Utilization Trend Up

<$4000 50% 44.4%

$4000-$5000 33.3% 50%

>$5000 11.1% 50%

One respondent simply noted that it depends, hence chart adds to 94%

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Appendix E: Survey Instrument

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Appendix F: Bibliography

Bibliography

Basile, Ralph J., J. Thomas Black, Douglas R. Porter, Lyndia Lowy. Downtown Development

Handbook.Washington, D.C.: Urban Land Institute, 1980. Focuses primarily on development from

the private side, but touches on areas, particularly pre-development where the public sector might

be involved, especially in providing a source of funding that can make private development happen.

This source focuses more on development than renovations.

Berk, Emanuel.Downtown Improvement Manual.Chicago: Illinois Department of

Government Affairs, 1976. General guide for downtown development, does spend some attention

on Municipal Financing Tools and Resources. Commonly cited by my other sources.

Jenny, Patricia J., Louise W. Taylor, and Raymond J. Burby, III. Downtown Revitalization

in North Carolina-A Guidebook for Community Action. Chapel Hill: Center for Urban and Regional

Studies, The University of North Carolina at Chapel Hill, 1978. Involved a survey of municipalities

under 25,000 population to determine state of downtown in NC. 17.3% of respondents at that time

used façade improvements for structures in their revitalization program. Case studies and finance

resources also provided.

NCDDA.Façade Improvements 101. Goldsboro: NCDDA, Powerpoint delivered 9/22/11.

Presentation describes Goldsboro façade grant program, state historic tax credits incentive program,

and impacts of façade improvements. Provides a sample outline for a façade grant program. Also

provides a good list of contacts for future research

North Carolina. Legislative Research Commission.Downtown Revitalization: Report to

the 1997 General Assembly of North Carolina. Raleigh: State of North Carolina,1997. A study

commission report on state initiatives to encourage downtown revitalization and determine why

downtown revitalization is important.

Pu-Folkes, Larisa Ortiz.“Five Tips to Designing a Great Façade Program.”The

Commercial Advisor Blog.May 23, 2011

http://commercialdistrictadvisor.blogspot.com/2011/05/five-tips-to-designing-great-facade.html

accessed 10/2/11.

Triangle J Council of Governments.DowntownIdeabook. Research Triangle Park:

Triangle J Council of Governments, 1982.Sets forth a process for downtown revitalization along

with some strategies and frameworks. Local funds are specifically mentioned, One of the more

interesting components of the book is a listing of downtown revitalization activities by town.