This publication was made possible by the generous support ... · Downeast Energy and Building...

This publication was made possible by the generous support of

the following Maine companies and organizations

Downeast Energy and Building Supply’s motto is “Because community is our bottom line”which says a lot about this company that provides heating oil, propane and building materialsthroughout southern and central Maine. Downeast and its employees have a long history ofgiving to community efforts and support projects that benefit its employees, their families, andtheir communities. It is located in Brunswick and at www.downeastenergy.com.

Kennebunk Savings Bank is a mutual savings bank and a true community bank. It offers a fullrange of commercial and personal financial products, technology enhanced access, uncommonlyresponsive service, and the highest level of commitment to our community. As a mutual bank, itis committed to doing its share to build a strong community. It does not have stockholders, soeach year it gives back a portion of its earnings to non-profit and charitable organizations inSouthern Maine. This has amounted to over $3 million in charitable donations since 1994. It islocated in Kennebunk and at www.kennebunksavings.com.

L.L.Bean has been a trusted source for quality apparel, reliable outdoor equipment and expertadvice for more than 90 years. Founded in 1912 by Leon Leonwood Bean, the company hasgrown from a one-man operation to a global organization but remains a family-owned privatecompany located just down the road from its original store in Freeport and at www.llbean.com.

Maine Center for Economic Policy is an independent, nonpartisan research organization.MECEP’s mission is to advance public policy solutions to achieve a prosperous, fair andsustainable economy. Since 1994, MECEP has published research and analysis in the areas of fairbudgets and taxes, livable wages and family support, affordable health care, and sustainabledevelopment. It is located in Augusta and at www.mecep.org.

Western Mountains Alliance strives to improve the quality of life and to strengthen theregional identity of the western mountains region of Maine, while honoring rural values and theenvironment, and supporting sustainable community development. They build capacity throughleadership and policy development; advocacy and education; and projects and programs. Theyare located in Farmington and at www.westernmountainsalliance.org.

The Institute for Local Self-Reliance is a national nonprofit organization providing research,analysis and innovative policy solutions for building strong local economies and sustainablecommunities. ILSR maintains several content-rich web sites; publishes electronic newsletters andbooks, including The Home Town Advantage: How to Defend Your Main Street Against ChainStores and Why It Matters; and has advised small business groups, community organizations, andpolicymakers in cities and towns nationwide. For more information, contact ILSR in Portland at207-774-6792 or on the web at www.newrules.org

Maine Businesses for Social Responsibility (MEBSR) is a diverse community of Mainebusiness people who believe in the unparalleled power of business as an agent of positive socialchange. MEBSR provides education and tools to help companies adopt triple bottom linepractices that integrate economic, environmental, and social concerns. MEBSR takes a leadershiprole in defining, demonstrating, and recognizing these innovative and sustainable businesspractices for the benefit of all. For more information, contact MEBSR in Belfast at 207-338-8908, PO Box 157, Belfast, ME 04915, or on the web at www.mebsr.org

This report was commissioned byMaine Businesses for Social Responsibility

in an effort to serve asa catalyst for a sustainable Maine economy.

© 2006 Institute for Local Self-Reliance and Maine Businesses for Social Responsibility

10 Reasons Why Maine'sHomegrown Economy Matters

and 50 Proven Ways to Revive It

By Stacy MitchellInstitute for Local Self-Reliance

Published byMaine Businesses for Social Responsibility

May 2006

Table of Contents

Overview..................................................................................................... i10 Reasons Why Maine's Homegrown Economy Matters.............................................................i50 Proven Ways to Revive Maine's Homegrown Economy .........................................................ii

Introduction............................................................................................... 1

The Benefits of Locally Owned Businesses ................................................... 3Job Creation.................................................................................................................................3Keeping Dollars in the Local Economy........................................................................................5Entrepreneurship..........................................................................................................................5Tax Benefits and Costs .................................................................................................................6Local Character and Long-Term Prosperity ...............................................................................7Community Well-Being.................................................................................................................7Environmental Sustainability........................................................................................................8Competition and Consumers........................................................................................................9

Planning for a Homegrown Economy.........................................................11Leveling the Playing Field ..........................................................................................................11Planning Policies that Support Locally Owned Businesses........................................................11The Comprehensive Plan: Envisioning a Strong Locally Owned Economy...............................12Steering Commerce Downtown..................................................................................................13Ensuring Appropriate Scale .......................................................................................................14Assessing Community and Economic Impacts ...........................................................................15Ensuring Diversity .....................................................................................................................16Meeting Community Needs.........................................................................................................17Creating the Ideal Habitat for Local Ownership........................................................................17Regional Cooperation.................................................................................................................19

Downtown Revitalization and Small Business Development ........................21Downtown Revitalization............................................................................................................21Maine Downtown Center............................................................................................................22State Support for Downtown Revitalization................................................................................26Keeping Public Buildings Downtown .........................................................................................27Favoring Local Businesses in Government Purchasing............................................................29Maintaining Affordable Commercial Space................................................................................29Small Business Development......................................................................................................30

Independent Businesses Unite.....................................................................35Purchasing and Marketing Cooperatives ..................................................................................35Think Globally, Eat Locally........................................................................................................36Independent Business Alliances..................................................................................................37Business Alliance for Local Living Economies...........................................................................43

Encourage Independent Businesses to Support One Another.....................................................44Reward Local Shopping .............................................................................................................45Localizing E-Commerce.............................................................................................................45

Conclusion ................................................................................................49

Resources ..................................................................................................51

Notes.........................................................................................................53

Why Maine's Homegrown Economy Matters | i

Overview10 Reasons Why Maine's Homegrown Economy Matters

1. Job and WagesLocally owned businesses create more jobslocally and often provide better wages andbenefits than chains do. (p. 3)

2. Keeping Dollars in the Local EconomyCompared to chain stores, locally ownedbusinesses recycle a much larger share of theirrevenue back into the local economy,supporting a broad range of local jobs andenriching the whole community. (p. 5)

3. EntrepreneurshipEntrepreneurship fuels America’s economicinnovation and prosperity, and serves as akey means for families to move out of low-wage jobs and into the middle class. (p. 5)

4. Tax Benefits and CostsLocal stores in town centers requirecomparatively little infrastructure and makemuch more efficient use of public servicescompared to big box stores and strip shoppingmalls. (p. 6)

5. Local Character and ProsperityIn an increasingly homogenized world,communities that preserve their one-of-a-kindbusinesses and distinctive character have aneconomic advantage. (p. 7)

6. Community Well-BeingLocally owned businesses build strongcommunities by sustaining vibrant towncenters, linking neighbors in a web ofeconomic and social relationships, andcontributing to local causes. (p. 7)

7. Local Decision-MakingLocal ownership ensures that importantdecisions are made locally by people who livein the community and who will feel theimpacts of those decisions. (p. 8)

8. Environmental SustainabilityLocal stores help to sustain vibrant, compact,walkable town centers—which in turn areessential to reducing sprawl, automobile use,habitat loss, and air and water pollution. (p. 8)

9. CompetitionA marketplace of tens of thousands of smallbusinesses is the best way to ensureinnovation and low prices over the long-term.(p. 9)

10. Product DiversityA multitude of small businesses, eachselecting goods based on the interests andneeds of local customers, guarantees a muchwider range of product choices. (p. 9)

ii | Overview

50 Proven Ways to Revive Maine's Homegrown Economy

The following provides an overview of thefifty strategies described in this report,organized under each of the report's threemain sections. Turn to the page numberindicated for more details.

Planning for a Homegrown Economy

1. Target tax incentives to local stores.Bar the use of tax breaks and other subsidiesfor "big box" stores and sprawling shoppingcenters. Limit incentives to locally ownedbusinesses locating in town centers. (p. 11)

2. Avoid zoning too much land for retail.Most communities have far more land,particularly along major roadways, zoned forretail than they need or can support. This canlead to haphazard commercial sprawl anddrain downtown vitality. (p. 11)

3. Provide public services only indesignated business districts.

Establish a defined geographic area withinwhich water, sewer, and other municipalservices will be provided in order to maintainthe vitality of the downtown and preventretail growth along outlying roadways. (p. 11)

4. Incorporate support for localbusinesses into the master plan.

Communities, such as Kent County,Maryland, have listed supporting locallyowned businesses, limiting the proliferation ofnational chains, and maintaining a vibrantdowntown as goals in their comprehensiveplans. (p. 12)

5. Temporarily halt retail development.Avoid being caught off guard by an out-of-the-blue proposal for a large-scale shoppingcenter. Easton, Maryland, placed a 3-monthmoratorium on retail development and usedthe time to study the impacts of big boxstores and revise its planning policiesaccordingly. (p. 13)

6. Funnel new retail growth downtown.St. Petersburg, Florida; Hailey, Idaho; and SanLuis Obispo, California; are among the citiesthat require developers to infill downtownvacancies and open lots before building on theoutskirts of town. (p. 13)

7. Limit the size of retail stores.Dozens of cities and towns prohibit theconstruction of retail stores over a certainsize. Some have banned only the biggest of thebig boxes, while others, like Ashland, Oregon,have mandated even smaller stores. (p. 14)

8. Examine potential impacts beforeapproving new retail stores.

Retail proposals in some cities, such asGreenfield, Massachusetts, must undergo acomprehensive economic and communityimpact review before gaining approval. (p. 15)

9. Engage experts in relevant fields toreview retail development proposals.

Stoughton, Wisconsin, requires developersproposing retail projects larger than 40,000square feet to undergo traffic, economic, andfiscal analyses conducted by independentexperts selected by the city and paid througha fee assessed on the developer. (p. 15)

Why Maine's Homegrown Economy Matters | iii

10. Restrict 'formula' fast-food outlets.Bristol, Rhode Island and Bainbridge,Washington, limit the proliferation of formularestaurants within their borders. (p. 16)

11. Minimize the number of cookie-cutter'formula' retail stores allowed.

Coronado, California, limits the number offormula restaurants and retail stores allowedin its commercial district to maintain an"appropriate balance" of small and largeretailers. (p. 16)

12. Establish community-servingcommercial zones.

Palm Beach, Florida, mandates that new retailstores must be geared towards meeting theneeds of local residents, not tourists. (p. 17)

13. Require that new developmentresemble traditional retail districts.

Brunswick, Maine, insists that newcommercial development resemble itstraditional downtown by mandating two-story buildings, no set-backs, parking in therear, glass storefronts, and frequent pedestrianentryways. (p. 17)

14. Support sales tax fairness.More than thirty states, including Maine, arepushing for a federal policy change that wouldrequire internet and mail order retailers tocollect sales taxes—putting them on an equalfooting with local stores. (p. 18)

15. Establish regional guidelines.Cape Cod's region wide planning commissionreviews all proposals for retail constructionlarger than 10,000 square feet, "considers anynegative impacts that the project would have

on the Cape Cod economy," and works to"encourage businesses that are locally ownedand that employ Cape Cod residents." (p. 19)

16. Partner with neighboring towns.Hood River, Oregon, has undertaken a city-county agreement that prevents big box retaildevelopers from playing the jurisdictionsagainst one another. (p. 20)

Downtown Revitalization and SmallBusiness Development

17. Take advantage of proven strategies.Hundreds of communities around the countryhave turned their dying downtowns intothriving centers with the help of the NationalMain Street Center. There's no need toreinvent the wheel; take advantage of thelessons they've learned. (p. 21)

18. Reinforce the downtown's sense ofplace.

Successful revitalization programs amplify thedistrict's sense of place by building on itsunique natural, historic, and cultural assets.(p. 22)

1 9 . Foster a mixture of uses in thedowntown.

Encouraging a variety of different types ofactivity and uses downtown ensures vibrantstreet life throughout the day and evening, anddiversifies the district's economic base. (p. 22)

20. Encourage pedestrians.Pedestrians are both a barometer and catalystfor downtown vitality. Relatively simple andinexpensive steps can make a town centermore pedestrian friendly. (p. 22)

iv | Overview

21. Enlist help from the Maine DowntownCenter.

The Maine Downtown Center can help yourcommunity develop and implement aneffective downtown revitalization plan. TheCenter offers technical assistance, training,and a variety of supporting resources. (p. 22)

22. Reap the rewards of becoming a MainStreet Maine community.

The Maine Downtown Center providesextensive, multi-year training and technicalassistance in downtown revitalization to aselect number of designated Main StreetMaine communities. (p. 23)

23. Learn from Maine success stories.Gardiner and Bath are among several Mainecommunities that have developed successfuldowntown revitalization programs. Find outhow they did it. (p. 24 & 27)

24. Keep public buildings downtown.A growing number of communities recognizethe economic and community value of keepingcity buildings, post offices, schools, andlibraries downtown. (p. 27)

25. Give city contracts to local businesses.Many communities are using their purchasingpower to boost the local economy. (p. 29)

26. Protect affordable retail space.Communities are exploring several strategiesto alleviate the problem of rapidly rising rentspushing local stores out of the market. (p. 29)

27. Establish a commercial land trust.The Community Land Trust model, which hasbeen very effective for affordable housing,could be used to keep commercial spaceaffordable for independent businesses. (p. 30)

28. Identify opportunities for localretailers.

Conduct a market analysis to identifyopportunities for new entrepreneurs and localbusinesses seeking to expand. (p. 30)

29. Expand local merchants' skills.Offer training and technical assistance for localretailers in areas such as merchandising andinventory control. (p. 32)

30. Establish a small business revolvingloan fund.

Some communities provide local businesseswith matching grants and low-interest loans tofund storefront renovations and otherimprovements. (p. 32)

31. Promote support of local stores anddowntown shopping.

Consider organizing a marketing campaign andevent to encourage local shopping. (p. 32)

32. Help with succession planning.Identify and connect local business ownersnearing retirement with aspiring entrepreneursin need of a good opportunities. (p. 32)

33. Harness creativity and initiative tobuild new independent businesses.

Employ creative strategies to build a new localbusiness that meets community needs---not assimple as attracting a chain, but much morerewarding over the long-term. (p. 32).

34. Establish a community-owneddepartment store.

Follow the example of half a dozen smalltowns by launching a community-owneddepartment store to provide basic goods ataffordable prices and an anchor for thedowntown (p. 33).

Independent Businesses Unite

35. Connect local retailers with nationaland regional purchasing cooperatives.

Thousands of independent retailers—including grocers, hardware dealers, bicycleshops, lighting stores, and pharmacies—haveformed purchasing groups to gain some of theeconomies of scale and clout with suppliersthat chain retailers enjoy. (p. 35)

36. Establish local purchasing co-ops.Independent restaurants in Tucson, Arizona,have cut their food costs by 10-20 percentthrough a cooperative buying program. (p. 36)

37. Use humor to encourage dining atlocally owned restaurants.

In Kansas City, Missouri, independentrestaurants are countering the rise of chainrestaurants with humorous, tongue-and-cheekads that poke fun at the chains and grab theattention of readers. (p. 37)

38. Get help forming an independentrestaurant alliance.

Contact the Council of IndependentRestaurants of America for assistance forminga local restaurant alliance to cut costs andorganize joint advertising campaigns. (p. 36)

39. Bring locally owned businessestogether to solve common challenges.

In many communities, locally ownedbusinesses from different sectors (such ashardware stores, banks, and bakeries) areforming Independent Business Alliances(IBAs) to address common challenges anddevelop shared strategies. (p. 37)

40. Launch a public education campaign toencourage residents to support locallyowned businesses.

IBAs in several communities have developedeffective educational initiatives and marketingcampaigns that encourage residents to supportlocally owned businesses. (p. 38-42)

41. Pool resources for joint advertising.Several IBAs have helped member businessespool funds to buy print, radio, and televisionads, giving them a much broader reach thanthey could attain on their own. (p. 38-42)

42. Publish a local business directory.One way to counter the extensive advertisingof national chain retailers is to publish adirectory of local businesses. Sprinkle thedirectory with messages about the benefits oflocally owned businesses. (p. 38-42)

43. Create a voice for independentbusinesses in public affairs.

An IBA can provide a powerful voice for localbusinesses in government decision-making, asIBAs in Austin, Texas, and Santa Fe, NewMexico have done. (p. 43)

44. Tap into national expertise, resources,and technical assistance.

The American Independent Business Allianceprovides technical assistance, templates, andother resources to help independent businessowners form IBAs and launch educationalinitiatives in their communities. (p. 38-42)

45. Celebrate Independents Week.Join in seven days of events designed tohighlight independent businesses and their rolein keeping entrepreneurialism alive, makingour hometowns unique, and strengtheningcommunity. (p. 41)

vi | Overview

46. Join a network of sustainable, locallyowned businesses.

The Business Alliance for Local LivingEconomies is a national association of localbusiness networks dedicated to buying andselling locally, operating sustainably, andstrengthening their communities. (p. 43)

47. Start a "local first" campaign.Start a "local first" campaign, complete with ahow-to kit for merchants, to engagecommunity support for locally ownedbusinesses. (p. 43)

48. Encourage local businesses to supportone another.

In the day-to-day grind of running theirstores, many business owners overlookopportunities to support one another andkeep dollars in the local economy. (p. 44)

49. Provide discounts and rebates tocustomers who support local retailers.

Joint loyalty cards, such as the CommunityBenefit Card, work at dozens of local storesand encourage local shopping by rewardingcustomers with discounts and rebates. (p. 45)

50. Create a community-wide e-commerceweb site for local retailers.

Business owners could share the expense ofcreating and marketing an e-commerce site bydeveloping a community-wide portal, whereresidents could shop at any local store. (p. 45)

Why Maine's Homegrown Economy Matters | 1

Introduction

One of the most significant but oftenoverlooked aspects of what makes life inMaine special and sets the state apart fromthe rest of the country are our locally ownedbusinesses. They give our cities and townstheir unique character. They infuse ourdowntowns and neighborhoods with life andvitality. They contribute a great deal to thehealth and well-being our communities byproviding leadershipand financial supportto civic and charitableorganizations.

Perhaps mostimportant, locallyowned businesses are powerful economicengines for the state. Unlike national chains,they purchase many of their inputs—frominventory to banking and accountingservices—from other Maine-based businesses.By keeping dollars flowing back into thestate's economy, local businesses create moreopportunities for entrepreneurship, morejobs, and more taxable income to supportschools and public services.

Despite their importance to ourcommunities and economy, Maine'sindependent businesses have struggled inrecent years. Thousands have closed asnational chains have opened stores across thestate and captured a growing share of themarket. Many Maine towns are now flankedby the same big box stores and sprawling stripdevelopments that blanket much of the rest of

the country. And moremay be on the way asnational retailers lookto replicate the level ofmarket saturation thatthey have already

achieved in other regions here in Maine.Indeed, developers have announced plans toconstruct two million square feet of new bigbox stores in the state over the coming year.1

The current trends for locally owned retailbusinesses are sobering. But trends are notdestiny. More and more people are beginningto recognize the importance of independentbusinesses to the long-term health andprosperity of our communities. Hundreds of

The National Picture

Nationally, the shift from local to chainretailers has been advancing at a staggeringpace. During the 1990s, more than 11,000independent pharmacies disappeared. Chaindrugstores now account for more than half ofall pharmacy sales.2 Forty percent ofindependent bookstores closed. Barnes &Noble and Borders Books currently capturehalf of all bookstore sales.3 Home Depot andLowe’s control nearly 45 percent of thehardware and building supply market.4

Clothing sales are dominated by chains likeThe Gap and Target. Five firms account for42 percent of all grocery sales, up from 24percent just six years ago.5 More than 40percent of restaurant spending is captured bythe top 100 chains.6 Most striking of all, asingle firm, Wal-Mart, now captures nearly 10percent of all U.S. retail spending. Wal-Martis the largest grocer in the country, the largestmusic seller, the largest jeweler, the largestfurniture dealer, and the largest toy seller.

The current trends for Maine'slocally owned businesses aresobering. But trends are notdestiny.

| Introduction2

cities and towns across the country are nowmoving to curb chain store sprawl and reviveMain Street commerce. They are eliminatingtax breaks and other advantages commonlyprovided to big box development and adoptingnew policies and strategies that strengthenlocally owned businesses.

This report opens with an overview ofresearch on the impacts of large chain storesand the benefits of locally owned businesses.It then outlines dozens of concrete strategiesto rebuild the homegrown economy. These areorganized into three sections. The first sectiondescribes planning and land use policies thatlimit sprawling chain store development andcreate an environment where locally ownedbusinesses can thrive. The second sectiondiscusses downtown revitalization and smallbusiness development tools. The third looks

at ways independent businesses can joinforces to gain economies of scale and educatethe public about the benefits of supportinglocally owned stores.

These three kinds of approaches workbest if pursued simultaneously. Downtownrevitalization programs have little chance ofsuccess if planning policies allow unlimitedretail development on the outskirts of town.Likewise, strong planning policies that containbig box sprawl may not be enough to reviveindependent retail without a proactive smallbusinesses development and downtownrevitalization plan. Finally, active and engagedbusiness owners and a lively educationalcampaign are key to winning public supportfor new policies and to shifting spending backto Maine's locally owned businesses.


The Benefits of Locally Owned Businesses

Locally owned businesses and are vital tohealth and well-being of Maine's cities andtowns. They keep dollars circulating in thestate's economy, generating more jobs andeconomic activity than national chains, andplace much less of a burden on publicservices. They're essential to maintaining thevitality of downtowns, conserving openspace, and building strong communities.

Job Creation

Locally owned businesses create andsupport more jobs in the communities theyserve than national chains. There are twocategories of jobs to consider: direct jobs,those created by the stores themselves, andindirect jobs, those created at other local firmsthat produce goods and provide services forretail businesses.

In terms of direct employment, citiesoften court big box stores for the jobs theygenerate. But dozensof studies have foundthat these storeseliminate as many ormore jobs than theycreate . This isbecause consumers have only so muchpurchasing power. Building new stores doesnot increase consumer spending—thishappens only incrementally as population andincomes grow—but rather reapportions theexisting pie. As a result, the arrival of a bigbox store almost invariably causes sales todecline at existing businesses, some of whichwill downsize or close. Research has foundthat the resulting job losses typically equal orexceed the gains from the new superstore.

Studies by Dr. Kenneth Stone, a professorat Iowa State University who has trackedWal-Mart's impact on Iowa communities formore than a decade, have consistentlyconcluded that big box development is a"zero-sum-game." That is, gains in sales atnew stores are mirrored by an equal volume ofsales losses at existing businesses. More than7,600 small businesses have closed since Wal-Mart first entered into Iowa. Losses are feltnot only in the community that hosts thesuperstore, but also in smaller towns nearby.Dr. Stone more recently began to study HomeDepot and has likewise concluded that thecompany eliminates about as much economicactivity as it creates.7

Other studies have reached similarconclusions. A study commissioned by theNational Trust for Historic Preservationexamined nine Iowa counties where Wal-Marthad located and found that 84 percent of thecompany’s sales were captured from existingbusinesses within the same county. "None of

the nine case studieswas experiencing ahigh enough level ofpopulation and incomegrowth to absorb theW a l - M a r t s t o r e

without losses to other businesses," the studyfound. There was no evidence that traffic atnew big box stores brought more shoppersdowntown. Instead, "there were clearlyidentified losses in downtown stores afterWal-Mart opened. General merchandise storeswere most affected. Other types of stores thatclosed include: automotive stores, hardwarestores, drug stores, apparel stores, andsporting goods stores."8

As local stores close followingthe arrival of a superstore, thecommunity generally loses as manyjobs as it gains.

| The Benefits of Locally Owned Businesses4

As local stores close following the arrivalof a superstore, the community generallyloses as much active retail space and as manyjobs as it gains. An economic impact study ofa proposed Wal-Mart store in Greenfield,Massachusetts, conducted by RKGAssociates, for example, found that the storewould cost existing merchants $35 million insales. Many of these businesses would close,leaving the community with 239,000 squarefeet of vacant retail space.9

Another study by economist ThomasMuller of a massive big box development—which was to include a Lowe's homeimprovement store, a Wal-Mart supercenter,another large department store, and four chainrestaurants—in Leominster, Massachusetts,found that the shopping center's $185 millionin projected saleswould be offset by$176 million in saleslosses at businesseswithin a 12-mileradius. The 869 jobscreated by the newstores would be matched by an equal numberof job losses at local stores.10

Sometimes the job losses actually exceedthe job gains. A study of a proposed big boxstore in St. Albans, Vermont, concluded that76 percent of the superstore's sales would becaptured from existing businesses within thecounty. As these businesses downsized andclosed over a ten year period, the countywould experience a net loss of 167 retailjobs.11

Here in Maine, many cities assume thatallowing the development of big box storeswill enable them to become regional shoppingdestinations. Overall retail spending will riseas the big boxes draw consumers fromneighboring towns. This expanding pie willnot only insulate local businesses from sales

losses, but may even boost downtownspending as shoppers drawn to the big boxesalso visit local stores. It's a compellingargument, but not rooted in fact. Data analysisby Leslie Bray of the consulting firm, MainStreet Insights, has found that most of theMaine communities that gained Wal-Martsuperstores in the early 1990s actuallyexperienced a declining pull factor followingthe retailer's arrival. (A pull factor is ameasure of a town's ability to draw in retailspending.) By the late 1990s, three-quartersof the towns with a population under 20,000had a smaller pull factor than they had priorto Wal-Mart.12

In many cases, the jobs gained at the newbig box stores pay less and offer fewerbenefits than the jobs they replace at local

s to res . Th is iscertainly true of theowner-manager "jobs"that disappear whensmall businesses close.According to manyeconomists, the rapid

expansion of big box chains during the 1990swas the main reason why growth in retailwages over the decade lagged average wagegrowth by more than 20 percent. Large chainsemploy a variety of techniques to keep wagesdown, including high worker turnover ratesand aggressive anti-union policies. Wal-Mart'slabor tactics have been well-documented. Thecompany has been cited for violatingnumerous labor laws and is currently facinglawsuits in three dozen states for falsifyingemployee timecards and failing to payemployees for all of the hours they worked.13

Taxpayers are picking up the tab for largeretailers' low wages and lack of benefits.According to a report by the staff of the U.S.House of Representative's Committee onEducation and the Workforce, each Wal-Mart

Most of the Maine communitiesthat gained Wal-Mart superstoresin the early 1990s actuallyexperienced a declining pull factorfollowing the retailer's arrival.


employee costs taxpayers $2,100 per year inhousing assistance, tax credits for the workingpoor, and healthcare programs for children oflow-income families.14 States too are facing agrowing burden. More than 10,000 children ofWal-Mart workers are enrolled in Georgia'shealth insurance program, at an annual cost totaxpayers of $6.6 million. Taxpayers areeffectively subsidizing national retailers' laborcosts—to the detriment of more responsiblebusinesses that pay a living wage and providehealth insurance.

Keeping Dollars in the Local Economy

The other category of jobs worthconsidering are those indirectly supported bylocal retail stores. Compared to chains, localretailers purchase a much larger share of thegoods and services needed to run their storesfrom other local businesses. They bank withlocal banks. They advertise in local media.They stock goods produced by localmanufacturers. Theyhire local accountants,printers, marketingfirms, and so on.Chain stores, on theother hand, have littleneed for local goodsand services. They instead drain resourcesfrom the local economy by transferring almostall of the dollars they take in back tocorporate headquarters. As a result,communities composed primarily of locallyowned businesses support a larger andbroader range of jobs than those dominated bynational chains.

Last year, the Institute for Local Self-Reliance and Friends of Midcoast Maineconducted a small study in the towns ofRockland, Camden, and Belfast. The study

collected detailed financial information fromeight locally owned businesses, representing arange of goods and services with a combinedtotal of $6 million in annual sales. The studyfound that the local businesses recycle about45 percent of their revenue back into the localeconomy (defined as Knox and Waldocounties) and spend another nine percentelsewhere in the state of Maine. This includeswages and benefits paid to local employees,goods and services purchased from other localbusinesses, taxes paid to local governments,and profits accrued to local owners. Incontrast, only 14 percent of the revenue takenin by a typical big box store in the Midcoastregion is re-spent within the Maine economy.The rest leaves the state.15

Every dollar spent at a locally ownedbusiness therefore creates more than threetimes as much local economic activity as adollar spent at a chain. From an economicdevelopment standpoint, the implications aresignificant. Annual retail sales are projected toexpand in Rockland, Camden, and Belfast by

$74 million over thenext four years. If allof this growth were tobe captured by newand expanding locallyowned businesses,rather than national

chains, it would mean an additional $23million in local economic activity. Thatamounts to hundreds of new jobs—theequivalent of attracting a major employer.

Entrepreneurship

The shift from locally owned stores tolarge chains has not only had a negativeimpact on the number and range of jobsavailable locally, but it has dramatically

Every dollar spent at a locallyowned business creates more thanthree times as much localeconomic activity as a dollar spentat a national chain.


reduced opportunities for entrepreneurship.Until recently, small businesspeople were thebackbone of the American economy and wayof life. Entrepreneurship is a great equalizer:being able to start a business offers a meansfor low-income, minority, immigrant, andother disadvantaged families to fulfill theirdreams and move out of low-wage jobs andinto the middle class.Entrepreneurs' hardwork, investment,and creativity in turnfueled the nation'seconomic innovationand prosperity.

Today, however, few families run theirown businesses and even fewer young peopleconsider business ownership a viableoccupation. Once a nation of shopkeepers, weare rapidly becoming a nation of clerks—withpotentially devastating social and economicconsequences.

Tax Benefits and Costs

By recycling dollars back into the Maineeconomy, locally owned businesses createmore local economic activity and income, and

thus more tax revenue to support schools andother public functions. Moreover, becausesmall businesses are typically situated incompact downtowns and traditionalneighborhood commercial districts, they areextremely efficient users of publicinfrastructure and services—that is, theygenerate far more in property tax revenue than

they cost in terms ofroad maintenance,po l ice and fireservices, and so on.

Although big boxretailers are often seenas a way to boost the

tax base, new research has found that thesesprawling stores are very expensive in termsof public infrastructure and services. A studyby the Vermont Forum on Sprawl noted, "Incommunities with downtown shopping areasand commercial strips, the tendency ofbusinesses to migrate to the strips increasedroad maintenance and repair costs. Somecommunities are now providing services totwo different commercial zones, with the stripdevelopment more costly to maintain becausethe roads are often longer, wider, and involvecomplex drainage and engineering issues."

Big Business and Community Welfare

There have been surprisingly fewempirical studies of the social and civicimpacts of economic consolidation and theloss of locally owned businesses. Oneexception is a recent study, “Big Business andCommunity Welfare,” by Dr. Thomas Lysonof Cornell University. He examined 225counties nationwide, comparing those witheconomies dominated by a few largecorporations to those with many small, localenterprises.

Lyson found that counties dominated bybig businesses had greater income inequality,fewer owner-occupied homes, higher levels ofworker disability, lower educationaloutcomes, and higher crime rates. Not onlydid the small business counties score higher onall of these socioeconomic measures, they hada larger independent middle class and higherrates of civic engagement, as measured byvoter turnout and membership in communityorganizations.

Entrepreneurship is a greatequalizer: being able to start abusiness offers a way for manyfamilies to move out of low-wagejobs and into the middle class.


A recent analysis conducted by Tischler &Associates of the impact of different kinds ofland uses on municipal finances in Barnstable,Massachusetts, found that big box storesrequire nearly $800 more in public servicesper 1,000 square feet than Main Streetbusinesses. In fact, according to the study, bigbox stores actually cost the city more inpublic services each year than they generate intax revenue. "This study shatters the commonmisperception that any sort of growth createsrevenue," said Christopher Cullinan ofTischler & Associates. The two main factorsbehind the higher costs were greaterexpenditures for roadmaintenance (due to amuch greater volumeof car trips per 1,000square feet) andgreater demand forp o l i c e s e r v i c e s(compared to smallbusinesses, big boxstores generate a much larger volume of policecalls for crimes like shoplifting and checkfraud, as well as parking lot accidents).16

In addition to overlooking the higher costof servicing big box development, cities alsofrequently fail to consider how downtownproperty values---and thus tax revenue---willbe affected by the closure of local businessesand rising vacancy rates as economic activityin the town center decreases. In the NationalTrust for Historic Preservation study of theimpact of big box development on Iowacommunities cited above, the authorsconcluded, "Although the local tax base addedabout $2 million with each Wal-Mart, thedecline in retail stores following the openinghad a depressing effect on property values indowntowns and on shopping strips, offsettinggains from the Wal-Mart property."

Local Character and Long-Term Prosperity

In an increasingly homogenized world,communities that have preserved their one-of-a-kind businesses and distinctive characterhave an economic edge. They have a strongsense of local identity. They are moreinteresting places to live and visit. And,according to a growing body of economicresearch, they are better able to attract newinvestment and entrepreneurs, and thus tocreate jobs and prosper over the long-term.

Local economies composed primarily ofmany small, independent businesses are also

more diversified andstable. They are muchless vulnerable tofluctuations in theglobal economy anddecisions made indistant boardrooms.They are not overlydependent on a few

large, absentee-owned companies, whichmight raise prices, demand a tax break,threaten to move to a nearby town, or, likeBradlees and Ames, fail altogether, leaving agaping hole in the local economy.

Community Well-Being

Locally owned businesses build strongcommunities. They create a sense of place.They maintain the vitality of town centers.They strengthen the web of personalinteractions essential to a healthy community.These important, but often happenstance,interactions with our neighbors are becomingless common as people spend more time alonein their cars traversing highways and stripmall parking lots for basic needs.

Local economies composedprimarily of many small,independent businesses are muchless vulnerable to fluctuations inthe global economy and decisionsmade in distant boardrooms.


There's much to be said too for the civicvalue of doing business with ourneighbors—people who greet us by name,send their kids to school with ours, and have avested interest in the long-term well-being ofthe community. Local merchants oftensponsor cultural events and take a leadershiprole in community organizations. Although wehear a lot about the charitable giving of bigcorporations, one study has found that smallbusinesses actually give more than twice asmuch per employee to charitable causes as dolarge companies.17

Local ownership ensures that importantbusiness decisions affecting the well-being ofthe community—whether to carry producefrom local farms, stock a controversial book,pay a living wage,protect environmentalresources, or donateto a local charity—aremade, not in distantboardrooms, but locally by people who live inthe community and who will feel the impactof those decisions.

Environmental Sustainability

Small-scale, locally owned stores help tosustain vibrant, compact, walkable towncenters—which in turn play an essential rolein limiting sprawl and automobile use, andreducing related problems like habitat loss andair and water pollution.

As commerce shifts to large chain stores,more and more land is being consumed forretail uses. According to some estimates, theamount of retail space per capita in the U.S.has tripled in the last twenty years.18 That'snot even counting the acres of parking andmiles of roads needed to access these stores.

Unlike centuries-old downtown buildings,these new developments may last only a few

years before being deemed obsolete as thechains move on to newer and bigger formatsfurther out on the perimeter. Hundreds ofolder strip shopping centers and malls havegone dark in recent years. Even big box storesare closing as companies like Wal-Martabandon their older stores to build even largersupercenters. Wal-Mart currently has morethan 300 vacant stores nationwide, most lessthan a mile away from a new supercenter.Altogether, more than 500 million square feetof retail space in the U.S. now sits idle.19

The retail vacancy epidemic that nowplagues much of the country is beginning tospread to Maine. In addition to numerousempty strip malls and vacant Bradlee's andAmes outlets, Wal-Mart plans to vacate two

s u p e r s t o r e s i nWaterville and Bangorin the coming months.

This inefficient useof land has significant

environmental consequences, including loss ofhabitat and biological diversity, andmushrooming automobile use. A typical bigbox store requires 1,000 parking spaces andgenerates 10,000 car trips every day. Evensmaller-scale chains, like Walgreen’s andBlockbuster, tend to favor locations and storedesigns that foster driving and discouragewalking and public transit. As a result, Maineresidents log three times as many road milesfor shopping and errands as they did ageneration ago.

"From an environmental standpoint,parking lots rank among the most harmful landuses in any watershed," notes Tom Schuelerof the Center for Watershed Protection. "Noother kind of surface in a watershed. . .produces more runoff and delivers it faster [toa local waterway] than a parking lot," Schuelersays. Parking lot runoff contains pollutantsfrom cars and the atmosphere, and has been

Maine residents log three timesas many road miles for shoppingas they did a generation ago.


found by researchers to contain extremelyhigh concentrations of phosphorous, nitrogen,trace metals, and hydrocarbons. Schuelercontends the best way to minimize the waterquality impacts of development is "toconcentrate it in high density clusters orcenters"—compact downtowns, rather thanlow-density sprawl.20

Competition and Consumers

The best way to ensure innovation,vigorous competition, low prices, and broadproduct selection over the long-term is amarketplace composed of tens of thousandsof independent small businesses, each makingdecisions based on the needs and tastes oflocal customers.

Today, however, most categories of goodsare controlled by two or three large retailcompanies. In some local markets, consumershave little or no choiceabout where topurchase certain kindsof goods. The growthof national chains hasactually reduced, notincreased, competition.

There are two mainreasons to be alarmed by these trends. One isthe price of goods. Although chains may comeinto a market sporting deep discounts, someevidence suggests that these low prices lastonly as long as the local competition. AsBarnes & Noble and Borders Books havegained market share—the two companiesaccount for about half of bookstoresales—they’ve sharply reduced the number of

books offered at a discount. Blockbuster'srental fees are higher in markets where it has anear monopoly.

A price survey by the Maine Departmentof Human Services found that prescriptiondrug prices are significantly lower at locallyowned pharmacies than at chains like Rite Aidand CVS. The survey also found thatprescription prices at Wal-Mart stores aroundthe state varied by more than 16 percent.Prices were lowest in areas where Wal-Mart isfairly new and still faces competition, andhighest in those communities where theretailer has largely eliminated rivals.21

Product Diversity

The other major concern has to do withproduct diversity. At one time, a multitude ofsmall businesses, each reflecting thepreferences of their own customers,

collectively ensuredthe availability of awide range of goodsand services. Today,a few buyers at majorretail companies exertgrowing control overwhat goods are

produced—a particularly disturbing trend inthe context of books, music, and other formsof expression. The disappearance of localretailers, combined with the fact that largechains generally deal only with largemanufacturers, has meant that smallcompanies, no matter how innovative theirproducts, are having an increasingly difficulttime obtaining shelf space.

The best way to ensure vigorouscompetition, low prices, and broadproduct selection over the long-term is a marketplace composed oftens of thousands of independentbusinesses.



Planning for a Homegrown Economy

There are three primary kinds ofapproaches communities are taking to rebuildtheir homegrown economies: adopting newplanning policies, launching downtownrevitalization and small business programs,and encouraging independent retailers to worktogether to solve common challenges andengage public support. This section describesplanning and land use policies that cities areenacting to limit big box sprawl and supportsmall-scale, community-based retail.

Leveling the Playing Field

Many communities are examining existingpolicies to ensure that they are not favoringchains over local businesses by facilitatingsprawling development patterns andundermining the viability of town centers.How policy decisions will impact localbusinesses should be a routine considerationfor state and local officials. For example:

Public Subsidies — State agenciesand communities should ban the use of taxbreaks and other subsidies to underwrite bigbox development. Subsidies for big boxretailers are quite common both in Maine andnationally. These incentives produce no netgain in jobs and serve only to acceleratesprawl and to give national retailers an edgeover Maine-based businesses. If publicincentives are used at all for retaildevelopment, they should be limited toprojects in downtowns and town centers.

Roads — Cities should consider howroad and highway construction or expansion

might affect local business districts or fuelcommercial sprawl. Communities shouldavoid zoning large swaths of land next to newor expanded roadways for commercial retail.This can lead to a haphazard developmentpattern that fosters chain store proliferationand drain activity from town centers.

Municipal Services — Some citieshave established clearly defined geographicareas within which municipal services, such aswater and sewer, are provided. Sewer linesplaced along major roads in a linear fashionwith no limit on the number of hookups willencourage retail sprawl. Developers may offerto pay for line extensions outside the servicearea boundaries, but this should not beallowed by the municipality.22

Planning Policies that Support LocallyOwned Businesses

One of the most important actions acommunity can take to ensure that its locallyowned businesses continue to have anopportunity to compete and thrive is to reviseits comprehensive plan and zoning code.Many Maine towns have land use policiesthat are out-dated and ill-equipped to dealwith the challenges posed by big box andchain retail development.

It's common too for towns to have farmore land zoned for commercial retail than thecommunity actually needs or can support.Large swaths along every major road andhighway are often zoned for retail, allowingchain stores to sprout up willy-nilly withlittle or no opportunity for citizens or local

| Planning for a Homegrown Economy12

officials to review, alter, or turn-downdevelopments that will undermine the localeconomy. This "over-zoning" has much to dowith the glut of retail space and the epidemiclevel of vacancy currently facing the U.S..

Over the last few years, hundreds ofcommunities have revised their comprehensiveplans and zoning rules to support small-scale,local businesses. Cities and towns have broadauthority over land use, provided that theirdecisions reflect a commitment to protectingpublic welfare, rather than arbitrary orcapricious treatment of a particular landowner or developer. The courts haveconsistently granted local governmentsconsiderable leeway to exercise this authorityto defend the community's quality of life,natural resources, historic character, localeconomy, and downtown vitality.

Zoning makes many people uneasy due toconcerns that government should not impingeon private propertyrights. But it's worthremembering that allresidents have a stakein their community.T h r o u g h w o r k ,homes, taxes, and amyriad of otherways, they haveinvested both personally and financially in thecommunity's future. As stakeholders, theyhave a responsibility to protect existing assetsand their quality of life, and to ensure thatnew development is compatible. Over time,sensible land use planning enhances propertyvalues and encourages investment by fosteringstability and orderly growth.

The following are examples of the kinds ofland use policies communities are adopting tocurb chain stores and support localbusinesses. All of these policies have beenupheld by the courts as valid uses of local

authority, and are permissible under Mainestatutes governing municipal planning.

The Comprehensive Plan: Envisioning aStrong Locally Owned Economy

There are two primary pieces of local landuse policy: the comprehensive plan, which isessentially a vision statement containinggeneral guidelines for development, and thezoning code, which implements the planthrough concrete rules governing land use.Maine state law requires most towns to adoptcomprehensive plans and mandates that alllocal zoning rules must be consistent with thecomprehensive plan.

Having a plan that clearly articulates acommitment to small businesses anddowntown commerce yields several importantbenefits. Such a plan will serve as the policy

foundation for draftingand enacting specificzoning regulations. Itwill provide clearguidance for localofficials trying todecide whether toapprove a particularproject. It will also

protect the community from lawsuits; adecision to reject a particular developmentbecause it conflicts with goals outlined in acomprehensive plan demonstrates anadherence to established policy rather thanarbitrary and unequal treatment of a particulardeveloper.

A number of communities around thecountry have included in their comprehensiveplans an intention to preserve and strengthenlocal businesses and to limit commercialdevelopment to the downtown or otherexisting retail districts.

Kent County, Maryland'scomprehensive plan lists among itsobjectives "support [for] small,locally owned businesses" and"prevent[tion of] commercialsprawl outside the county's existingtraditional commercial centers."


Kent County, Maryland — Thecomprehensive plan lists among its objectives"support [for] small, locally ownedbusinesses" and "prevent[tion of] commercialsprawl outside the county's existingtraditional commercial centers."

Skaneateles, New York — The town'splan states, "Rather than establishingcompeting shopping centers in the Town toprovide basic goods and services, the Villagecommercial center. . . should remain the centerfor shopping in the community."

Corvallis, Oregon — The planrequires that the city work to "maintain a low

unemployment rate and promotediversification of the local economy" and"support existing businesses and industriesand the establishment of locally owned,managed, or controlled small businesses."

Steering Commerce Downtown

A number of communities have adoptedland use rules that steer new development toidentified growth areas in or adjacent to thedowntown or other established businessdistricts. Instead of allowing scatteredcommercial development on the outskirts oftown or sprawling shopping strips alongmajor roads, only land in designated growth

Development Moratoria

If your community's existing zoningpolicies are out-dated and inadequate withregard to big box and other chain retaildevelopment, consider adopting a temporarymoratorium on commercial development.

Like most states, Maine allows towns totemporarily suspend new development whilethey evaluate and revise their planningpolicies. Under state law, moratoria must beused for planning purposes—such asconduct ing s tudies , revis ing thecomprehensive plan, or drafting new zoningordinances—and are limited to 180 days (180-day extensions are allowed if reasonableprogress is being made towards addressing theissues that led to the moratorium) .

The US Supreme Court has uphelddevelopment moratoria as valid uses of localauthority. In 2002, in Tahoe-SierraPreservation Council v. Tahoe RegionalPlanning Agency, the Court ruled that adevelopment moratorium does not constitutea taking of property requiring compensation.

Many communities have suspended retaildevelopment while they investigate theimpacts of large-scale stores and revise theirzoning rules accordingly. In July 2000, Belfastadopted a 6-month moratorium onconstruction of retail stores larger than 25,000square feet. The moratorium was promptedby a developer's interest in building a Wal-Mart superstore. According to MayorMichael Hurley, the moratorium enabled thecommunity to engage in "an incrediblyvaluable debate across kitchen tables, in coffeeshops, [and] on the street corner." Residentsultimately voted to restrict the size of retailstores to no more than 75,000 square feet(about half the size of a typical Wal-Mart).

See Maine Statutes, Title 30-A, Chapter187 § 4356. The National Trust for HistoricPreservation (www.nthp.org) and theAmer i can P l ann ing Assoc i a t i on(www.planning.org) have published guidelinesfor towns considering development moratoria.


areas is zoned for retail. This supports a morecompact and contiguous pattern ofdevelopment and thus a more efficient use ofland and resources. It also ensures that newgrowth compliments existing businesses ratherthan shifting customer traffic and economicactivity to a previously undeveloped area.

St. Petersburg, Florida — The city'splanning policy states, "The City has anadequate supply of commercial land-use tomeet existing and future needs. Futureexpansion of commercial uses shall berestricted to infilling of existing commercialareas and activity centers except where a needcan be clearly identified."

Hailey, Idaho — The town'scomprehensive plan states that the downtown"should be theprimary commercialc e n t e r o f thecommunity." Thecity's policy clearlydelineates the downtown's geographicboundaries and calls for developing anyvacancies in the downtown district prior toallowing commercial growth in other areas. In1995, the Idaho Supreme Court upheld thispolicy, noting that "preserving. . . theeconomic viability of a community'sdowntown business core can be a properzoning purpose."23

San Luis Obispo, California — Thecity's planning policy includes a clearlydelineated area designated for development.The plan allows the City Council to limitcitywide growth in commercial space to nomore than one percent annually, unless thedevelopment occurs in the downtown core.

Ensuring Appropriate Scale

Many cities and towns have enactedzoning rules that prohibit stores over a certainsize. They have done so in part because theyrecognize that their economies can absorbonly so much new retail without causingsignificant dislocations of existing businesses.Large-scale stores may also be out-of-scalewith existing buildings and thus detract fromthe town's character. They can cause trafficcongestion and unduly burden public roadsand services.

Limiting the allowable size of retail storeswill keep out some national retailers thatrefuse to build stores smaller than theirstandard formats; others will opt to constructstores more appropriately scaled for thecommunity. What constitutes an appropriate

upper limit for thesize of retail storesdepends on manyfactors, including thesize of the town, the

scale of its existing buildings, and its long-termgoals with regard to retail development.

Some communities have banned only thebiggest of the big boxes, while others havechosen a much lower threshold:

Damariscotta, Maine — In 2006,voters endorsed a measure capping retailstores at 35,000 square feet.

Belfast, Maine — In 2001, votersendorsed a referendum capping retail stores at75,000 square feet.

Easton, Maryland — After studyingthe issue for several months, city officialsconcluded, "Once a big box retail store exceeds65,000 square feet, it is of such a scale that itsnegative impacts outweigh its positive ones."

Many cities and towns haveenacted zoning rules that prohibitstores over a certain size.


Easton now limits stores to no more than65,000 square feet.

Bozeman, Montana — Bars storesover 75,000 square feet.

Ashland, Oregon — Restricts storesto 45,000 square feet (about the size of aBorders Books superstore).

To prevent large-scale developmentsbarred from a city from simply locating justbeyond its borders on county land, in someplaces, cities and their surrounding countieshave enacted identical size policies:

Hood River, Oregon — In 2002, thecity and county concurrently adopted ruleslimiting retail uses to 50,000 square feet.

Assessing Community and Economic Impacts

Cities and towns commonly makedecisions about new retail developmentwithout sufficient, objective information onthe potential costs and impacts. A new free-standing chain pharmacy on the edge of town,for example, might look like a good deal atfirst. The developerpromises two dozennew jobs and hasagreed to pay forneeded infrastructure,including a new trafficsignal.

But a more detailedinvestigation reveals that the local marketcannot support both the new drugstore andtwo existing independent, downtownpharmacies. Given the chain’s deep pocketsand staying power, a likely scenario is thatone of the local pharmacies will close,

eliminating jobs and tax revenue, and reducingspillover traffic for other downtownbusinesses. Moreover, the new pharmacy islikely to encourage additional auto-orienteddevelopment nearby. The on-going cost ofmaintaining the road network needed to servethis growth will be greater than the addedproperty tax revenue. Once all of the facts areon the table, the development no longer seemslike such a good idea.

To ensure adequate review of proposalsfor new retail development, manycommunities are adopting policies that requirecomprehensive economic impact reviews. Togain approval, the development must meetspecific criteria outlined in the law. Thecriteria vary depending on the concerns andgoals of each community.

Greenfield, Massachusetts — The cityrequires that proposals for stores that exceed20,000 square feet or are expected to generatemore than 500 vehicle trips per day mustundergo a comprehensive review and obtain aspecial permit. Approval hinges ondemonstrating that the development will notcreate traffic congestion, lead to a net declinein employment or tax revenue, unduly burdenpublic infrastructure and services, undermine

the central businessesdistrict, harm theenvironment , ordetract from thecharacter of thecommunity.

Stoughton,Wisconsin — A city ordinance requiresproposals for stores over 40,000 square feetto undergo a traffic study and an economicand fiscal impact analysis. The studies arepaid for by the developer and conducted byconsultants selected by the city. The

The ci ty o f Greenfield,Massachusetts, requires thatproposals for stores that exceed20,000 square feet must undergo acomprehensive economic andcommunity impact assessment.


economic and fiscal analysis must consider thestore's impact on jobs, commercial vacancyrates both within the community and innearby towns, public services costs, and shortand long-term impacts on city tax revenue.The analysis must also: evaluate whether thedevelopment will create an over-supply ofretail space in the city; estimate to whatextent it would "reduce the diversity of thecity’s economic base by eliminating smallerbusinesses"; and "estimate the differencebetween how much of the revenue generatedby the proposed project will be retained andre-directed back into the economy of the city.. . compared to other chain stores and locally-owned, independent retailers in the city."

Homer, Alaska — A draft ordinancecurrently under consideration would requireproposals for stores over 15,000 square feetto undergo a review and meet a variety ofstandards regarding the store's impact onemployment, the downtown business district,local character, and surrounding towns. Theanalysis would also evaluate projected taxrevenue, demand on city services, and theeffect on nearby property values. Theordinance seeks to prevent the construction ofmore retail space than the town can support.It reads: "The applicant shall demonstrate thatthe project will contribute to the financialhealth of Homer’s overall economy and that itwill not precipitate the decline of existingretail business." To cover the cost of thereview, developers pay a permit fee of $300per 1,000 square feet paid by the developer.

Ensuring Diversity

Global retail chains are no longer confinedto shopping strips and big box “powercenters” on the edge of town. Many, like The

Gap and Starbucks, are moving into towncenters and urban neighborhoods. In somecases, these companies have helped toenergize ailing commercial districts and havemaintained a balance with locally ownedbusinesses. But elsewhere, the pendulum hasswung too far. Some commercial districts arelosing their sense of place and local identityand becoming little more than outdoor malls.As Richard Moe, president of the NationalTrust for Historic Preservation, has said,"More and more. . . every place in Americalooks like every place else, and that meansevery place looks like no place."24

To prevent their commercial districts frombeing inundated by chains, about a dozencommunities have enacted local land use rulesthat restrict the proliferation of “formula”business, which are defined as businessesrequired by contract to adopt standardizedservices, methods of operation, decor,uniforms, architecture or other featuresvirtually identical to businesses elsewhere.

Bristol, Rhode Island— Prohibitsformula restaurants from locating in itshistoric town center.

Bainbridge, Washington — Prohibitsall formula restaurants town-wide.

Coronado, California — Allows nomore than ten formula restaurants in the cityat one time and requires that formula retailstores obtain a special use permit before beingallowed in. Approval hinges on demonstratingthat the store will be compatible with thecommunity. The ordinance notes that the“establishment of additional formula retailuses will unduly limit. . . opportunities forsmaller or medium sized businesses, many ofwhich tend to be non-traditional or unique,and unduly skew the mix of businesses


towards national retailers in lieu of local orregional retailers, thereby decreasing the. . .diversity of retail activity."

Meeting Community Needs

Communities that have become touristdestinations often have difficulty maintainingretail businesses that serve everyday needs.The local hardware store or grocery might bereplaced by an upscale national brand or achain coffee shop. For these towns, acommunity-serving requirement may be aworthwhile addition to the zoning code.

Palm Beach, Florida — Residents ofthis island community converted their maincommercial district into a "town-servingzone." Businesses must demonstrate to theCity Council that at least 50 percept of theiranticipated customer base will be "townpersons: those living, or working in PalmBeach.”

Creating the Ideal Habitat for LocalOwnership

Most locally owned businesses prefer tolocate in downtowns or in other compact,walkable shopping districts. These areasprovide ideal habitat for growing locallyowned businesses. Small storefronts can beleased for less than the cost of building a free-standing structure on the urban fringe.Belonging to a cluster of small shops createssignificant synergies and benefits. Customertraffic generated by one business will benefitthe others. This spillover traffic, combinedwith the visibility of a downtown location,can be especially helpful to a new businesslacking the draw of a national brand or a large

advertising budget. Traditional commercialdistricts also provide “one-stop shopping,”allowing residents to obtain many goods andservices within a compact, walkable area.

Unfortunately, many cities and townsadopted zoning regulations in recent decadesthat prohibit developers from replicating thestructure and density of traditional retaildistricts. The zoning code might, for example,require buildings to be setback from thesidewalk and have on-site parking. As growthoccurs, new development, rather thanresembling the existing business district, willbe much more suburban and automobile-oriented in design.

Communities that want to revitalize andexpand their downtowns in a manner that bestsupports locally owned businesses shouldreview and revise their zoning code to ensurethat regulations allow, encourage, or require:

multiple-story buildings;

a mixture of uses, such as second-story apartments or offices;

small lot sizes;

a high building-to-lot-size ratio (intraditional downtowns, buildings cover 60 to80 percent of the total lot area, while currentzoning in many communities sets upper limitsof 15 to 50 percent, guaranteeing a spread-outland use pattern);

maximum, not minimum, frontage andsetback requirements (commercial zoningoften mandates a minimum of 200 feet ofstreet frontage and setbacks of 50 to 150 feetfor the fronts and sides of buildings, whiletraditional commercial districts have narrowfrontages and small or no setbacks);


maximum, not minimum, parkingrequirements (zoning often requires anunnecessarily large number of spaces, whichinhibits more compact development); and

an accelerated permitting process forinfill development to further encourageredevelopment of empty lots downtown.25

A growing number of New Englandcommunities are incorporating theseprovisions into their zoning codes:

Brunswick, Maine — Developmentstandards for the downtown district mandatethat all new buildings and additions shouldabut the front property line, be at least twostories high, and include at least 50 percentglass in the first-floor façade. Buildings maynot have horizontal expanses of more than 40feet without a pedestrian entry. Site plansmust be pedestrian-friendly and parking lotsmust be located at the rear of buildings.

Sales Tax Fairness

The US Supreme Court has ruled that statescannot compel out-of-state companies,including internet and mail order retailers, tocollect state and local sales taxes. The Courtconcluded that requiring companies to complywith the various rules and rates governing thenation's 7,600 local tax jurisdictions would betoo complex and would unduly burdeninterstate commerce. This policy effectivelygives out-of-state companies, whichcontribute little to Maine's communities, afive percent price advantage over local stores.

It's also harming the state's finances.Untaxed internet sales cost the state anestimated $43 million in lost revenue in 2001.As on-line shopping grows, annual losses areexpected to reach $178 million by 2011.26

A major multi-state endeavor, called theStreamlined Sales Tax Project (SSTP), is nowunderway to remedy this situation. Theproject aims to eliminate the burden ofcomplying with multiple taxing jurisdictionsby establishing uniform definitions andadministrative procedures that allparticipating states will follow. Currently, forexample, a marshmallow might be defined as

taxable candy in one jurisdiction, but asuntaxable food in the next. Although the SSTPcalls for states to harmonize theadministrative aspects of sales tax collection,it preserves the authority of states to decidewhat types of goods (e.g., food, clothing, etc.)to tax and at what rate.

Maine is one of 38 states that haveenacted legislation to participate in the SSTP.The participating states have reached anagreement on common tax definitions andprocedures. Bills are now being presented ineach state to bring the state’s tax rules intocompliance. So far, 21 states have passed thelegislation. (A bill has been introduced inMaine, but, as of this writing, has not yetwon approval.)

Once states adopt these uniform sales taxrules, the burden of collecting and remittingsales taxes for multiple jurisdictions willlargely be eliminated. In its second phase, theSSTP will lobby Congress to level the playingfield for internet and hometown stores bylifting the sales tax exemption that out-of-state companies currently enjoy.

For more, see www.nga.org.


Regional Cooperation

Big box stores and large shopping centershave economic, community, traffic, andenvironmental impacts that are felt far beyondthe borders of the municipality in which theyare located. Despite this, Maine communitiescurrently have no planning process to weighthe regional costs and benefits of large-scaleretail construction (or for that matter, anyother development of regional impact, such asa casino or a liquid natural gas facility).Authority to approve or deny a developmentrests entirely with the host community.Neighboring towns are not represented in theprocess and any impacts they will experience,such as increased traffic congestion and higherroad maintenance costs, are generally notconsidered.

The lack of a regional review process forlarge-scale development not only means thatsome costs are never taken into account, but italso leaves communities vulnerable toaccepting a projectthey do not wantout of fear that itwill end up beingbuilt just across theborder in an adjacentjurisdiction—producing many of the same negative impacts butwithout any of the tax revenue.

For these reasons, there is a pressing needfor neighboring communities to work togetherto develop a shared vision for economicgrowth that will benefit the entire region, aswell as joint policies for reviewing very largedevelopment proposals. Regional planning ischallenging everywhere and, in Maineespecially, it needs to be approached from thebottom up, rather than top-down. Solutionsmust be in keeping with the state's stronghome rule tradition by giving local

communities some say over developmentproposals that will have regionwide impacts,while not overly restricting the authority oflocal governments. Several models might serveas starting points:

Cape Cod, Massachusetts — In 1990,the residents of Cape Cod voted to create theCape Cod Commission, a regional planningbody composed of representatives of each ofthe Cape's fifteen towns. All largedevelopment proposals, including large retailstores, must gain approval from both the hosttown and the Cape Cod Commission. Thecommission's review process involves a publichearing and focuses on the project's impact onthe environment, traffic, community character,and the regional economy. A Regional PolicyPlan, updated every few years, provides thecommission with guidelines and standards forreviewing and approving developmentapplications. The current Plan states that thecommission "should take into account any

negative impacts thatthe project would haveon the Cape Codeconomy and shouldencourage businessesthat are locally-ownedand that employ Cape

Cod residents." Over the years, thecommission has rejected several large retailstores, including Home Depot, Wal-Mart,Sam's Club, and Costco, on the grounds thattheir regional costs outweighed their benefits.The commission also operates an economicdevelopment arm that focuses onstrengthening the local economy and growingbusinesses that will benefit the entire region.

Vermont — In 1970, Vermont adoptedAct 250, which requires developments ofregional impact to obtain a permit from one of

The Cape Cod Commission'sreview process involves a publichearing and focuses on theproject's impact on the regionaleconomy.


nine regional commissions. In most cases,retail development proposals require regionalreview when they encompass ten or moreacres of land. Approval depends on meetingseveral conditions that focus on the project'senvironmental and fiscal impacts. Act 250specifies that developments must not placeunreasonable financial burdens on the abilityof municipalities to provide education andother public services, must not exhaust atown's ability to accommodate growth, mustbe consistent with local land use policies, andmust not harm historic sites. Act 250discourages scattered development byrequiring a project to be contiguous to existingsettlements unless the tax revenue generatedby the project exceeds the additional cost ofproviding public services to an outlying area.Under Act 250, a few big box applicationshave been denied after commission review

determined that the projected public costswould outweigh the tax benefits. In othercases, Act 250 has enabled communities toreduce negative impacts by negotiating withdevelopers to build smaller, more centrallylocated, and better designed stores.

City-County Agreements — Under atown-county agreement, whenever the townof Hood River, Oregon, adopts a land useordinance, the surrounding county is obligatedto consider the ordinance as well. So, whenthe town banned stores over 50,000 squarefeet two years ago, the county soon followed.The move prevents big box developers deniedentry into the town from locating onundeveloped land just beyond the town'sborders. The city of Flagstaff, Arizona, haslikewise worked with Coconino County tocraft shared policies on big box development.

Download Policy Examples at www.NewRules.org

Examples of all of the policies describedhere can be found on the New Rules Projectweb site at www.newrules.org. The NewRules Project is a five-year-old program of theMinneapolis- and Washington, DC-basedInstitute for Local Self-Reliance. The goal ofthe Project is to research and promote polices

that build strong local economies andcommunities. The Project has identifiednumerous polices that can strengthen locallyowned businesses, and is working withcommunity groups to build support for andimplement these polices in cities and townsnationwide.


Downtown Revitalization and Small Business Development

Recognizing the long-term economic andsocial benefits of a strong, locally rootedeconomy, a growing number of communitiesno longer focus their economic developmentefforts on attracting large out-of-state firms.Instead they are finding ways to revitalizetheir downtowns, strengthen and expandhomegrown businesses, and foster the creationof new local enterprises.

Downtown Revitalization

A healthy downtown creates a richgrowing medium for locally owned businesses.Over the last few decades, however, there hasbeen very little public and private investmentin most downtowns. Resources have insteadbeen directed to commercial development onthe fast-growing periphery. Manydowntowns havefallen into a self-reinforcing cyclewhere disinvestmentleads to vacancies,which leads to furtherdisinvestment andmore vacancies. Evenpopular, well-run businesses have difficultysurviving in such a climate.

In recent years, hundreds of cities andtowns have reversed this cycle andimplemented successful revitalizationprograms under the guidance of the NationalMain Street Center, a division of the NationalTrust for Historic Preservation. The MainStreet Center helps communities deviserevitalization strategies that build on theirunique local assets, such as historic buildings,

locally owned businesses, and naturalenvironment. Participating communitiesfollow a four-pronged approach that focuseson 1) building the capacity of the localrevitalization organization; 2) enhancing thecommercial district's physical appearance; 3)strengthening its economic base throughbusiness recruitment and retention; and 4)promoting the downtown as a destination.The Main Street program ranks as one of themost effective economic development toolsavailable and has been implemented in morethan 1,700 towns and cities.

Downtown revitalization efforts aregenerally undertaken by a local nonprofitorganization funded primarily by donationsfrom residents and business owners, withsome financial support from city governmentand foundations. To succeed, a downtownrevitalization program must enlist broad

public participation,as well as an activeand involved citygovernment. Revivinga town center is aninc rementa l andcumulative process. Asingle promotional

event or one-time investment, no matter howlarge, rarely produces substantial and lastingchange. What does work is a sustainedprogram of incremental improvements. Overtime, this approach gradually buildsconfidence in the downtown, encouraging firstsmall, and then larger, private investments.

Downtown revitalization is not analternative to strong land use planning. It'svirtually impossible to increase economicactivity downtown while pursing significant

Over time, a sustained programof incremental improvementsgradually builds confidence in thedowntown, encouraging firstsmall, and then larger, privateinvestments.

| Downtown Revitalization and Small Business Development22

commercial growth on the outskirts of town.There are only so many consumer dollars togo around. Investments in downtownrevitalization will produce at best onlymodest returns unless local planning andzoning policies support the downtown as thecommunity's primary commercial center.

The following core strategies have beenidentified by research as essential componentsof successful revitalization programs:

Reinforce Downtown's Sense of Place— Successful revitalization programs reinforcea community's sense of place by building onits unique assets—natural, historic, andcultural resources thatset it apart from otherplaces and shoppingareas. This mightinvolve establishing awaterfront park; facilitating the preservationand renovation of historic buildings anddowntown storefronts; enhancing or creating asquare or other public space; establishingdesign standards in keeping with thecommunity's geography and history; orenhancing the role of an important culturalevent or institution.

Foster a Mixture of U s e s —Successful revitalization programs pursueopportunities to diversify the range of uses intheir town centers. Downtowns thrive whenthey are the center of both commerce andcommunity life. The healthiest downtownsare places where residents can not only obtaina wide variety of goods and services, but canalso live, work, take in a cultural event, strollin the park, check out a book at the library,pick-up the mail, attend religious services, orgo to a city council meeting. A mixture of usesensures active street life throughout the dayand evening, and helps diversify the

downtown's economic base. A local café, forexample, can count on office workers at lunchtime and downtown residents for dinner.

Encourage Pedestrians — The level ofpedestrian activity in a town center is a goodindicator of its vitality. Pedestrians also tendto attract more pedestrians by improving theperception of the downtown. Successfulrevitalization programs work to make thetown center more pedestrian friendly throughsuch things as wider sidewalks, easier-to-crossstreets, buffers between pedestrians and cars,and streetscape improvements like benches,trees, and signage and lighting designed for

pedestrians instead ofcars . Faci l i tat ingpedestrian use alsomeans maintaining thehistoric densities of

town centers, so that a variety of services areavailable within walking distance.

Maine Downtown Center

The Maine Downtown Center provides awealth of resources, including acomprehensive training and technicalassistance program, to help communitiesdevelop downtown revitalization programs.The Center is part of the nonprofit MaineDevelopment Foundation. It was founded in2000 with initial funding provided by theBetterment Fund and the state of Maine. TheCenter is affiliated with and follows the four-pronged approach to downtown revitalizationdeveloped by the National Main StreetCenter. Its advisory board includes a diversemix of business, community, and governmentleaders from across the state.

The Center has two primary functions. Itserves a clearinghouse of information and

Downtown revitalization is notan alternative to strong land useplanning.


resources on downtown revitalization for allMaine communities. It also providesextensive, multi-year training and technicalassistance to a select number of designatedMain Street Maine communities. The Centerselects Main Street Maine communitiesthrough a statewide competitive process.Communities are evaluated on such factors aswhether they have developed a vision andpreliminary work plan for revitalization; havesecured adequate financial commitments tofund a downtown organization, including apaid director, for three years; have establisheda network of committed volunteers; and arelikely to be successful.

In 2001, about a dozen towns applied fordesignation as Main Street Mainecommunities. The Center selected four: Bath,Gardiner, Saco, and Waterville. Two morecommunities, Eastport and Norway, weredesignated in 2002. In exchange for agreeing tofollow the Center’s approach, thecommunities receive three years of trainingand technical assistance worth about$30,000–$40,000. This includes:

Orientation for Executive Director andBoard – The Maine Downtown Center’s staffprovide an orientation for the downtownorganization’s executive director and boardmembers, including an overview of theirresponsibilities and an introduction toresources available through the Center.

Start Up Library – Main Street Mainecommunities are supplied with a library ofmaterials from the National Main StreetCenter to help educate residents, businessowners, and officials about revitalization; trainvolunteers; and provide the director with toolsand how-to information.

Reconnaissance Visit – MaineDowntown Center staff travel to thecommunity to conduct an initial needsassessment, assist with organizing theprogram, and meet with residents and officialsto explain the approach.

Resource Team Visit – A team ofexperts spend three to four days in thecommunity conducting interviews andobserving and analyzing local conditions. Theteam is selected by the Center based on thecommunity’s unique needs and challenges (inEastport, for example, the team included anational expert on economic development invery small towns). After the visit, the teamproduces an extensive report with specific,detailed recommendations that form the basisfor the local organization’s work plan.

Training – During the first year, theprogram’s executive director, board members,and volunteers receive training in downtownrevitalization and the National Main StreetCenter’s four-pronged approach. Thisincludes training on such things as how toconduct a market analysis; obtain and managebuilding façade improvement grants; createpromotional events; develop a fundraisingstrategy; and recruit and train volunteers.Most training is conducted on-site.

Intensive training and technical assistancecontinues in the second and third year, but isless general and focuses more on the specificneeds of the local community. In Norway, forexample, the Center hired an architect to helpthe community develop downtown designguidelines. Eastport received training andassistance in establishing a downtown taxincrement financing district.


Gardiner Main Street

Once a bustling regional shopping hub,downtown Gardiner fell into decline in the1960s with the rise of malls and the closure ofthe town’s shoe factories and paper mills. Bythe 1990s, the downtown was home to only ahandful of viable retail businesses. Manyprime storefronts were either vacant orunderutilized---i.e., occupied by offices,hobby businesses, and other activities thatwould be better suited to upper stories orside-street locations.

In 1999, the city recognized the latenteconomic potential of its downtown anddrafted a revitalization plan. A downtownorganization began forming and in 2001,Gardiner applied for and won designation as aMain Street Maine community. The GardinerMain Street program was officially launched.

In three years, the organization hasdeveloped a strong foundation within thecommunity and has made significant strides inchanging the perception of downtownGardiner . “You can feel the difference. Theenergy downtown has changed. There’s asense of optimism,” says LindaMatychowiak, Gardiner Main Street’s full-time downtown manager. Mayor Brian Rinesagrees, "We now have a tremendous amountof momentum downtown."

Gardiner Main Street is run by a board ofdirectors that includes community andbusiness leaders. Its work is carried out byMatychowiak, the only paid staff person, andmore than thirty volunteers, who sit on fourcommittees: design, economic restructuring,promotion, and organizational development.About one-third of its budget comes from thecity, the rest through donations fromproperty owners, businesses, and residents.

As a Main Street Maine community,Gardiner Main Street has been receiving

extensive training and technical assistance,including a comprehensive downtownassessment by a team of experts. Their reportoutlined the downtown's assets anddeficiencies, and offered dozens of concreterecommendations.

One of Gardiner Main Street’s first taskswas to work with the community to develop aclear vision for the downtown's future thatbuilds on Gardiner's unique assets, includingits location on the Kennebec River and themore than forty-five historic buildings in itsdowntown core. This shared vision serves as aguide and assessment tool for theorganization’s day-to-day work.

Another early task was the completion ofa market analysis, which presents data on thelocal market and its capacity to supportvarious kinds of businesses. The analysis hasbeen key to attracting new businesses. Twoentrepreneurs interested in opening a clothingstore in the region, for example, met withMatychowiak and were persuaded to choseGardiner based on figures in the analysisshowing that the town was under-served interms of clothing stores. They used the datato develop a business plan and obtainfinancing, and opened Moda Bella indowntown Gardiner a few months later.

Moda Bella has not only been successfulas a business, but has given other downtownproperty owners a sense of the potential oftheir buildings. Many were skeptical ofGardiner Main Street at first, but have sincedeveloped strong relationships with theprogram. Several have turned to theorganization for help in identifying andrecruiting businesses that are likely tosucceed. Matychowiak believes that thedowntown should be managed more like a mallin the future, with decisions driven by market


analysis and property owners cooperating toachieve a complimentary mix of businesses.

Largely due to Gardiner’s activerevitalization program, the city has been ableto secure two $400,000 communitydevelopment grants from the state. The fundshave been used for downtown improvements,including a $60,000 grant to help with anextensive restoration of a prominentdowntown building that now houses ModaBella and A1 To Go, a new café and take-outbusiness, on the ground floor and Blue MarbleGeographics on the second floor.

Another $160,000 was used to establish afaçade improvement program. Administeredby the city during its first year, the program isnow coordinated by Gardiner Main Street'sdesign committee. Building owners may applyfor 50/50 matching grants of up to $5,000 toimprove their façades. Those selected receivefree architectural assistance to ensure therenovations fit Gardiner's historic character.So far, more than forty building facades havebeen renovated.

The city also secured federal grants to setup a $750,000 revolving loan fund to helpexisting downtown businesses expand andnew businesses open, and to help downtownbuilding owners renovate and provide

disability access to underutilized upper floors.One of Gardiner Main Street's long-rangegoals is to diversify the range of uses in thedowntown's upper stories to include moreoffices and a mix of housing. This in turn willexpand the market for stores and restaurants.

Gardiner Main Street is also partneringwith the city to improve access to theKennebec River and to better integrate thewaterfront with the downtown. Theorganization is working to establish a newdestination business in an historic train stationoverlooking the river. Other activities includeorganizing two annual downtown events andcrafting a plan to upgrade downtown signage.

Gardiner's experience well illustrates theimportance of approaching downtownrevitalization as a long-term program ofsteady improvements that developmomentum over time. After three years,visible evidence of the program's impact isonly now beginning to emerge in the form ofrenovated facades and a handful of newlyoccupied storefronts. But the downtown hasclearly turned a corner. Gardiner Main Streethas begun to create the kind of environmentwhere local businesses can thrive and its workwill likely yield an accelerating stream ofdividends in the coming years.

Quarterly Executive Director Meetings– The executive directors of the downtownorganizations are brought together at least fourtimes a year to network and share ideas, andreceive training on topics of interest.

On-Si te Assis tance – MaineDowntown Center staff provide on-siteassistance when necessary to address localneeds and problems. This might involve, forexample, coordinating a special strategysession or training for a volunteer committee.

Membership in the National MainStreet Center – Main Street Mainecommunities receive a three year membershipto the National Main Street Center. Benefitsinclude a monthly newsletter, access to anonline database and discussion board,discounts on publications, and use of atelephone information hot-line.

Conference Attendance – Main StreetMaine communities receive limited freeregistration to attend the National Main Street


Center’s annual conference and the MaineDowntown Center’s annual statewideconference.

Public Relations – The Center’s staffhelp to build visibility and publicize the workand accomplishments of each Main StreetMaine community.

The Maine Downtown Centerrecommends that communities spend at least ayear or two learning about the program andlaying the groundwork locally before applyingfor Main Street Maine designation. TheCenter has developed a Getting Startedprogram to guide communities through thisearly stage.

State Support for Downtown Revitalization

In addition to the training and technicalassistance provided by the Maine DowntownCenter, one of the benefits of being designateda Main Street Maine community is theadvantage it gives in securing a variety ofgrants for downtown improvements. ThroughMaine’s Community Development BlockGrant program, towns and cities can apply forgrants for downtown planning (up to$10,000); downtown revitalization, whichpr imar i ly involves inf ras t ruc tureimprovements such as street lamps andsidewalk renovation (up to $400,000); andbuilding façade improvements (up to$100,000). All Maine communities are eligibleto apply, but, because grant applicants areevaluated based on whether they have acomprehensive downtown revitalization planin place and whether there is local capacity toimplement the grant, Main Street Mainecommunities have an inherent advantage.

The state also provides a tax credit forrenovation of historic commercial buildings.Renovation projects that qualify for thefederal historic rehabilitation tax credit oftwenty percent (the building must qualify forthe National Register of Historic Places andthe renovation must be substantial) are eligibleto receive an additional twenty percent taxcredit from the state.

During 2004, under the direction ofGovernor John Baldacci, the Maine StatePlanning Office will be conducting research toidentify state and local policies that createbarriers to downtown investment and willrecommend policy changes and otherstrategies to foster revitalization of Maine'sdowntowns.

Maine could do more to supportdowntown revitalization. The state providedfunding for the Maine Downtown Centerduring its first two years---through alegislative appropriation of $100,000 in 2001and a grant of $100,000 from the StatePlanning Office in 2002---which helped theCenter secure additional support from privatesources. But the state has not allocated anyadditional funding to the Center since. This isunfortunate. With a relatively modest budget,the Maine Downtown Center has been able toleverage significant local and privateinvestment in the state’s downtowns, leadingto the creation of more than two dozen newbusinesses during its first two years. And,because downtown revitalization is anincremental process, positive results are likelyto multiply over time if programs continue.Moreover, research suggests that havinghealthy, vibrant downtowns will beincreasingly important to the state’s ability toattract entrepreneurs and new investment overthe long-term.27


Main Street Bath

At first blush, Bath may not seem like aplace that needs a downtown revitalizationprogram. Scores of long-standing, vibrantindependent businesses line Front and Centrestreets. While many coastal towns aredominated by boutiques and tourist-orientedstores, a remarkable number of Bath'sdowntown businesses are focused on meetingthe needs of residents, including two grocerystores, an appliance dealer, kitchen store,department store, bookstore, and pharmacy.Upper stories are filled with housing andprofessional offices.

Downtown Bath's vitality is no accident.It's due to years of active involvement byresidents and business owners. In 1965,voters blocked a plan to demolish most of thedowntown for a mall. In the 1970s, significanthistoric renovations and investments wereundertaken. In the early 1990s, Bath's retailersformed the Bath Business Association toaggressively counter competition from newbig box stores in neighboring Brunswick.

Main Street Bath's mission is to build onthis history, maintaining the vitality of thedowntown and ensuring that the districtcontinues to be innovative in the face of newchallenges and the ongoing threat from big boxretailers. Selected as a Main Street Mainecommunity in 2001, the program is run by a

diverse board of directors, two part-timecoordinators, and four volunteer committees.

One of Main Street Bath's goals, sayscoordinator Mari Huotari, is to make thedowntown not only economically vital, butthe center of community life. A big step inthis direction was the opening of Café Crèmein 2003. Until then, the downtown lacked agathering spot. Main Street Bath is alsoplanning to erect a bulletin board downtownwhere residents can post events and meetings.

Once a month, Main Street Bath hosts aBusiness Barometer meeting that givesmerchants a chance to check in with oneanother and discuss common challenges.Another monthly meeting brings businessowners and city officials together to talkabout issues that affect the downtown.

Main Street Bath is conducting a marketanalysis and consumer survey to identifyproducts and services currently lacking in thedowntown that could provide opportunitiesfor businesses to modify or expand theirofferings. The organization also coordinates ajoint advertising program, started by the BathBusiness Association, in which merchantspurchase a full-page in the newspaper toadvertise both their stores and the downtownas a whole, and hopes to establish a façadeimprovement program in the coming year.

Keeping Public Buildings Downtown

Municipal offices, post offices schools,libraries, and other public buildings rank highin the mixture of uses essential to a healthydowntown. Unfortunately, in recent yearsmany federal, state, and local governmentagencies have been moving public buildingsout of downtowns to sprawl locations on theoutskirts of the community.

The closure of a public building reducesdowntown activity and can have a harmfuleffect on local businesses. A 1993 survey bythe National Trust for Historic Preservationfound that 80 percent of Iowa residents whoshopped in downtowns planned their triparound a visit to the post office. Other studieshave found that when communities close acentrally located school in favor of a newfacility on the outskirts of town or a


consolidated school in a nearby district,downtown commerce suffers. Sales fromstudents and teachers evaporate and parentsdo more of their shopping near their children'snew school. When consolidation led to theclosure of the high school in Lund, Nevada,retail sales dropped eight percent.28

Rather than site new public facilities onundeveloped land on the outskirts of town,communities should consider rehabilitating orexpanding an existing building or locating anew structure on a vacant lot in or adjacent tothe town center.

Municipal Buildings — Cities andtowns should consider making a formalcommitment to keeping public facilities, suchas the town hall, fire station, or communitycenter, in the downtown. This commitmentshould be reflected inthe comprehensiveplan, zoning code, andmunicipal bylaws.

State Facilities— In recent years,state agencies havebecome more sensitiveto how the location of public buildings canaffect Maine’s downtowns and localeconomies. Legislation adopted in 1999requires that, where appropriate, preferencebe given to downtowns in choosing sites fornew state office buildings. Several statefacilities have been located in downtowns as aresult.

Public Schools — Up until the 1960s,public schools in Maine were almost alwaysbuilt within walking distance of the studentsthey served. But beginning in the 1960s,schools were increasingly sited on large tractsof land fur ther f rom established

neighborhoods and the town center. Thethinking was that students would be betterserved by larger, more modern facilitiessurrounded by large athletic fields and ampleparking. State policy encouraged this trend bystipulating that state construction funds couldonly be used for new buildings, not renovationof existing schools. State regulation alsorequires that new schools meet minimumacreage requirements, effectively ensuring thatthey are located on large, inexpensive sites onthe outskirts of town.

Over the last forty years, this pattern ofschool construction has played a major role inspurring outward migration, fueling sprawl,and draining the vitality of establishedneighborhoods and central business districts.Moreover, a growing body of research oneducational achievement has found that

students are betterserved by smallneighborhood schoolsthan they are bylarge, consolidatedfacilities.29

The state beganto alter its policies onschool construction

in the late 1990s. The State Board ofEducation and the Department of Educationrevised the application for state constructionfunds in an effort to give preference torenovation over new construction. The statealso established a revolving loan fund forschool renovation projects. New school sitingpolicies have been adopted to encouragemunicipalities to coordinate schoolconstruction with overall land use planningand to build new facilities in establishedneighborhoods or in designated growth areas.

These are good first steps, but more needsto be done. The state continues to spend farmore on new school construction than it does

Municipal offices, post officesschools, libraries, and other publicbuildings rank high in the mixtureof uses essential to a healthydowntown. . . Unfortunately, manyagencies have been moving publicbuildings out of downtowns.


on renovation. Minimum acreage requirementshave not yet been lifted and, althoughmunicipalities may request waivers, manyavoid doing so for fear that it will reduce theirchances of receiving state construction grants.Many biases in favor of new constructionpersist in the application process and in thestate’s health and safety codes. Schooldistricts are not required to factor in walkingdistances and the full cost of busing whenthey evaluate school sites. The idea that largeschools are better for students persists amongmany residents and local decision-makers,despite evidence to the contrary.

Post Offices — In recent years, the USPostal Service has closed many downtownpost offices, shifting operations to newbuildings outside of the town center or toconsolidated facilities in larger communities.The Postal Service’s decision-making processcurrently does consider how closing a branchwill impact downtown vitality and the localcommunity. A bill introduced in Congress, thePost Office Community Partnership Act,would require that the Postal Service solicitcommunity input before deciding to close,relocate, or build a post office. In themeantime, communities concerned about thepotential relocation or loss of a downtownpost office should obtain a copy of A LocalOfficial’s Guide to Developing BetterCommunity Post Offices, published by thePreservation Trust of Vermont.

Favoring Local Businesses in GovernmentPurchasing

Many cities and states have adopted lawsthat give preference to local businesses forcity contracts and purchases if the bid fromthe local business is within a certain

percentage of the lowest bid received. Thelogic behind these rules is that the additionaljobs, economic activity, tax revenue, and otherfinancial benefits that will be created bykeeping dollars in the local economy morethan make up for the additional cost.

In Maine, state agencies generally givepreference to local businesses in the case of atie bid. Some states more heavily weight bidsfrom in-state businesses. Montana, forexample, awards contracts to residentbusinesses if they are within three percent ofthe lowest bid received from any responsiblevendor, or within five percent of the lowestbid if the goods are not only sold but alsomanufactured by a Montana business.

Counties and municipalities may also optto use their purchasing power to boost thehomegrown economy. Officials in WashingtonD.C., for example, choose local businesseswhen their bids are within five percent of thelowest price available. Ketchikan, Alaskaprovides a seven to ten percent preference forpurchases under $200,000 (no preference isgiven above this amount).30

Maintaining Affordable Commercial Space

Rising commercial rents are generally asign of good health in a retail district. But insome communities, rents are rising far too fastfor local businesses that serve everydayneeds, like the hardware store and pharmacy,to keep up. They are being priced out of themarket by chains and upscale boutiques thatprimarily serve tourists or leisure shoppers.Residents are forced to travel outside of thedowntown district to malls and big box storesfor basic items. Over time, the downtownloses its important role as the center ofcommunity life. As distinctive homegrownbusinesses disappear, it may lose its appeal to


visitors as well. Towns facing this problemmight consider the following strategies:

Encourage Owner Occupancy — Thebest way for a local retailer to ensure a stablelocation at a reasonable price is to buy thebuilding his or her store occupies. Cities andthe state could encourage this throughproperty tax or income tax incentives, or low-interest loan funds dedicated to this purpose.

Commercial Land Trust —Community Land Trusts (CLTs) have beenused effectively in cities around the countryto establish and maintain affordable housing.The CLT model could be adapted and appliedto commercial buildings with the requirementthat buyers or lessees be independentbusinesses. CLTs arefunded largely byCommunityDevelopment BlockGrants, which areavailable for bothhousing and economicdevelopmentprojects.

PubliclyOwned Space — A city could buy acommercial building and contract for itsmanagement with the stipulation that space beleased only to locally owned businesses thatmeet community needs. Rents would be stableand below market, reflecting the city's actualcosts of owning and maintaining the building,without a profit margin.

Identify Spill-Over Space — Are thereunderutilized, perhaps run-down, commercialdistricts in the community where localbusinesses pushed out of high-rent areasmight relocate? If so, the city might focus

revitalization and development efforts onmaking these districts viable alternativelocations for local stores.

Small Business Development

The best way to encourage small businesscreation is to create the kind of environmentthat will enable independent retailers to thrive.Cities and towns that have demonstrated acommitment to building a vibrant downtown,supporting locally owned business, andlimiting sprawling retail development inoutlying areas, will gradually attractentrepreneurs and new enterprises.

Many cities and towns are no longerfocusing their economic development efforts

on trying to recruitoutside firms. Theyare instead puttingtheir resources towork helping locallyowned businessesexpand and newentrepreneurs getstarted. This kind ofbottom-up approachto growth can be more

challenging, but, in the end, it yields far greatereconomic and community benefits. Thebusinesses created moreover are also morelikely to stay put, rather than picking up andmoving on to a town offering lower wages or atax break.

Here are a few ideas a municipality,community nonprofit organization, orbusiness association could pursue to fostersmall business development:

Conduct a Market Analysis — Arethere certain types of goods or services thatare currently lacking in the community? What

Many cities and towns are nolonger focusing their economicdevelopment efforts on trying torecruit outside firms. They areinstead putting their resources towork helping locally ownedbusinesses expand and newentrepreneurs get started.


Worksphere Initiative for the Katahdin RegionBy Michael Shuman

For a century, residents of the KatahdinRegion harvested wood and processed it intopulp and paper, enjoying high-paying jobsand community prosperity. Since the 1980s,however, a series of layoffs have plunged thearea’s economy into a virtual depression.Between 1986 and 2000, employment at theGreat Northern Paper Company fell from4,000 to 1,500 workers. In early 2003, thecompany shut its doors altogether, leaving1,300 workers without jobs. Today, regionalunemployment stands at 25 percent.

The Worksphere Initiative for theKatahdin Region (WIKR), led by theBucksport-based Training & DevelopmentCorporation (TDC) and funded largely by agrant from the U.S. Department of Labor,aims to transform this economic crisis into agroundbreaking opportunity. The premise ofthe initiative is simple: The Katahdin Regionshould never again put all of its economic eggsinto a single company focused globally.Instead, it should create hundreds of locallyowned businesses that focus primarily onlocal consumers and business purchasers.

Through a year of targeted research,discussion, and action, WIKR seeks toidentify new small business opportunitiesthat, once established, can create a diversified,stable, and prosperous economy. Nearly onehundred residents volunteered to participatethroughout the year in a dozen teams, eachfocused on a sector of the economy such asFood, Energy, Finance, and Manufacturing.

At its first public meeting in January2004, each group was charged to ascertainindicators of progress, assets usable for newor expanded local businesses, and expenditureleakages that could be met by linking localproduction with local demand. The groups

then presented their ideas for plugging theleaks with new businesses. Among the ideaswere an Evian-style water bottling plant,Katahdin ice-cream, a retail hardwood store, asporting equipment store, a newspaperprinting operation, a computer repairbusiness, an expansion of the local airport,and a local-reinvesting pension program.

Preparations are now underway for asecond symposium on ways to improve localpurchasing power. Three ideas in particularwill be explored: a Maine credit card thatencourages holders (perhaps through interestcharges) to buy from designated locally ownedbusinesses; an enterprise that links localsuppliers with one another; and anotherenterprise that consolidates small businessgoods and services into competitive bids forstate and local contracts.

The third phase of WIKR will focus onlocal investment strategies and how toincrease the availability of capital for smallbusinesses. An analysis is being developedthat will identify all available federal, state,and local capital programs; present a record ofcommercial loans from area banks; pinpointkey venture capital sources; outline the costsand procedures for businesses to issue localstock; and analyze opportunities for creatinglocal mutual funds that could accept 401k,403b, IRA, and other retirement-fund dollars.

A key element of this work will be todevelop revenue-generating enterprises---like aKatahdin credit card and a Katahdin venture-capital fund---that enable the work to expand.TDC views WIKR as a pilot for similareconomic programs it will develop in otherdistressed communities.

To learn more, contact TDC, listed in theResources section of this report.


are the demographics of the local market?What kinds of stores do economic data showresidents could support? Conducting acomprehensive market analysis will revealgaps in the local retail mix, illustratingopportunities for a local merchant seeking toexpand into new product lines or anentrepreneur looking to open a new business.A market analysis provides concrete data thatcan form the basis of a business plan and helpto secure financing from lenders and investors.Communities can undertake a market analysisthemselves using a detailed, step-by-stepguide created by the Center for Communityand Economic Development at the Universityof Wisconsin Cooperative Extension Serviceand available at www.uwex.edu/ces/cced/dma.

Provide Training and TechnicalAssistance — Individual small businesses canafford little in the way of training andtechnical assistance. Communities couldbridge the gap by hiring experts and organizingworkshops and on-site assistance for all of thebusiness owners in town. Topics mightinclude merchandising, marketing, inventorycontrol, storefront displays, and newtechnologies.

Establish a Revolving Loan Fund —Some communities have established arevolving fund to provide matching grants andlow-interest loans to help local businessesexpand, renovate their storefronts, install newtechnologies, and make other capitalimprovements. These programs stimulateprivate investment, enhance the attractivenessof the downtown, and foster other businessdevelopment by creating a climate of vitalityand expansion.

Maintain a Resources Clearinghouse— Communities should identify and maintain

a clearinghouse of resources for prospectiveentrepreneurs, including sources of financing,technical assistance programs, and availablecommercial space. The Maine Department ofEconomic and Community Developmentpublishes a comprehensive guide to financialresources and technical assistance programsavailable to small businesses, called a “APocket Guide to Maine’s BusinessResources” and available online atwww.econdevmaine.com/doing-biz.htm.

Organize Joint Marketing Campaigns— Communities might organize marketingcampaigns and promotional events that buildpublic awareness of the importance ofsupporting locally owned businesses andencourage residents to keep their dollars in thelocal community. (See the next chapter forexamples of marketing tools.)

Help with Succession Planning —Many local businesses disappear not becausethey aren't viable but because their owners areretiring and there's no one to take over thebusiness. Communities should identify andconnect business owners nearing retirementwith aspiring entrepreneurs in need of goodopportunities. Communities might alsoprovide financial and technical assistance toaid the transition.

Pursue Creative Strategies — Manycommunities seeking a particular kind of store,such as a pharmacy or bookstore, try tointerest a national chain. But a growingnumber are developing creative strategies tofill the gap with an independent, locallyowned business.

In 1999, after Rite Aid closed indowntown Orono, town officials were eagerto land a new drugstore to meet this criticalneed, but they did not want another footloose


chain. They decided instead to send letters tosome 1,200 pharmacists licensed by the stateof Maine, asking if they might be interested inopening a pharmacy in Orono. They got abouthalf a dozen responses and soon identified theright candidate. The Orono CommunityPharmacy opened a few months later.

In Berkeley, California, after a low-incomeneighborhood was left with no supermarket,the city worked with a small, independentgrocery store on other side of town, providingtechnical and financial support to help theowners move to the neighborhood and open alarge, full-service supermarket.

Community-Owned Department Stores

Missing in many downtowns today---aside from the dozen or so Maine townsserved by Reny’s, a local chain of discountdepartment stores---is a store that sellsbasic, affordable clothing and householdgoods. Such a store could provide analternative to the big boxes and an importantanchor for downtown commerce.

One potential solution to this problem isto open a community-owned departmentstore. It may sound far-fetched at first, butthere are in fact more than half a dozensuccessful community-owned departmentstores operating in the Rocky Mountainregion, and business and civic leaders in twoNew England towns affected by the closureof Ames--Greenfield, Massachusetts, andMiddlebury, Vermont---are now pursuingthe idea.

These stores are generally structured asstate-chartered corporations and capitalizedthrough stock shares sold to local residents(bylaws stipulate that stockholders mustlive in the state). They are run by a board ofdirectors elected by the shareholders andmanaged day-to-day by a store manager.Investors generally expect that much of theirreturn will be in the form of communitybenefits, rather than financial gains.

Over the last few years, about half adozen community-owned department storeshave opened in Montana and Wyoming, and

several more are in the works. A goodexample is The Mercantile in Powell, a townof 5,500 in northwestern Wyoming. Thestore was largely a response to the closure ofStage, a Houston-based chain of smalldepartment stores that pulled out of Powelland several other towns a few years ago,leaving residents with no place to buy basicclothing and shoes for the whole family.

Rather than allow the town’s commercialbase to decline, a group of residents hit uponthe idea of opening community-owned store.They drew up a business plan, filedincorporation papers with the state, andbegan selling shares priced at $500 each.Within a few months, they'd sold over 800shares, raising more than $400,000 in capital.

The Merc opened in July 2002. Thestore sells affordably priced clothing andshoes for men, women, and children. With aWal-Mart supercenter just 20 miles away inCody, some Powell residents predicted thatThe Merc, like most small town storesfocused on basic needs, would fail.

But the store has been remarkablysuccessful, meeting vital local needs,boosting sales at other downtownbusinesses, and even turning a profit. Duringits first year, The Merc took in $500,000 inrevenue, outpacing projections, andgenerated a profit of $36,000. The earningswere used to expand the store from 7,500 to


10,000 square feet.Founders cite several factors in The

Merc's success, including top-notchcustomer service and a board made up ofexperienced local businesspeople. With nodebt to service or stockholders demandinghigh rates of return, prices can be keptrelatively low. "We're probably not quite aslow as Wal-Mart," said store manager PaulRamos, "but we're close and we usually dobetter than the mall up in Billings."

Ramos says the store has had noproblems building good relationships withsuppliers. The Merc and a similarcommunity-owned store in Worland,Wyoming, often purchase goods together in

order to reduce costs by buying largerquantities.

Another significant factor in The Merc'ssuccess, according to board member KenWitzeling, is the community's sense ofownership. "When you walk down the streetand talk to people about the store," he said,"they all refer to it as 'our store.' Not 'thestore,' or 'that store.' It's 'our store.'"

In both Middlebury, Vermont, andGreenfield, Massachusetts, committees haveformed to explore the possibility oflaunching a community-owned departmentstore. For more information, contact theCooperative Development Institute, listed inthe Resources section of this report.


Independent Businesses Unite

Independent businesses of all kinds arefacing very similar challenges brought on bygrowth of large corporations, technologicalchanges, and public policies that often tilt theplaying field in favor of their big competitors.Many have realized that they could benefitsubstantially from joining forces and workingtogether. This final section will look at severalof these cooperative approaches, which areenabling independent businesses to reducecosts through economies of scale, broadenpublic awareness of the importance ofsupporting locally owned businesses, and gaina stronger voice in public policy decisions.

Purchasing and Marketing Cooperatives

One way that independent retailers cangain some of the advantages enjoyed by thechains is to form a wholesale cooperative(sometimes known as a purchasing or sharedservices cooperative or a buying group). Likeall cooperatives, theseenterprises are ownedby their members—inth is case retailmerchants—all ofwhom have an equalsay in decision-making and receive ashare of any profits generated.

Wholesale cooperatives give localmerchants greater purchasing power andleverage with suppliers, enabling them tolower the cost of goods and negotiate betterterms. Co-ops often negotiate directly withmanufacturers, just as the chains do.

Some retailer-owned cooperatives serveonly as buying groups. Others operatewarehouses and distribution systems for theirmembers, an important function given thatthere are fewer wholesalers and distributorsoperating now because the large chains buydirectly from producers. Many providemembers with additional advantages thatnormally would be unaffordable to anindependent businesses, including arecognized brand name, national or regionaladvertising, in-store promotional tools,accounting and other professional services,and access to lower cost health insurance foremployees. Many wholesale cooperativeshave taken an aggressive stance towardscompetition from chain stores by setting uploan funds and providing on-site assistance tohelp their members install new technologies,redesign their stores, and improve operations.

Wholesale cooperatives have experienced aburst of growth in the last ten years as locallyowned businesses look for ways to surviveagainst the chains. The largest retailer-owned

cooperatives are in thehardware and grocerys e c t o r s , w h e r ewholesale co-ops havebeen active for morethan a hundred years.Nationwide more than40,000 independent

grocery stores own forty wholesalecooperatives, the top nineteen of which hadcombined revenue of $28.5 billion in 2000, up4.5 percent over 1999.31 In Maine, about 250stores, including supermarkets as well assmaller food and convenience stores, belong toAssociated Grocers of Maine.

Wholesale cooperatives givelocal merchants greater purchasingpower and leverage with suppliers,enabling them to lower the cost ofgoods and negotiate better terms.

| Independent Businesses Unite36

Most hardware stores are also affiliatedwith a cooperative, such as TruServ (TrueValue), Ace, or Do It Best. These co-opsreduce their members' merchandise costs byan estimated ten to twenty percent.32 In 2000,the top seven hardware co-ops took in $12.5billion in revenue.33

Most locally owned pharmacies likewisebelong to one of about 30 regional purchasinggroups, which negotiate with drugmanufacturers for volume discounts.Pharmacy buying groups have been around forabout 15 years, but they are more importantnow than ever. HMOs have dramaticallyreduced the reimbursement rates forpharmacies and the added cost savingsprovided by buying cooperatives has becomeespecially critical.34

These established co-ops are growingrapidly and many new co-ops are forming insectors that previously lacked this option forindependent retailers. In 1999, several lightingstores formed a wholesale cooperative calledLighting One, which now has some 100member businesses, including House of Lightsin Scarborough. Lighting One has negotiatedwith suppliers toobtain significantdiscounts for itsmembers. The co-op also providestraining in salesand management,television andprint ads that canbe customized for local markets, extensivetechnical assistance, and a private label creditcard that allows member stores to offercustomers the zero percent financing thatmany chain stores provide. Other newwholesale cooperatives include YaYa Bike,which formed last year and has a membershipof about 100 locally owned bicycle shops, and

the Coalition of Independent Music Stores,which has 74 member stores nationwide.

Several organizations that can helpindependent retailers form wholesalecooperatives are listed in the Resourcessection at the end of this report.

Think Globally, Eat Locally

Tucson Originals — Three years ago,a group of independent restaurant owners inTucson, Arizona decided to stop seeing oneanother as competitors and launched acollective effort under the banner TucsonOriginals to counter the rapid expansion ofchain restaurants.

It all began with an article in a localmonthly in 1998 by writer Michael Munday,who expressed concern about the city'sdwindling number of locally owned eateriesand the explosive growth of chain restaurants.The article touched a nerve with CityCouncilor Steven Leal, who convened ameeting with the magazine's publisher, JohnHudak, and several restaurant owners. The

group met for severalmonths and decided toform a coalition. TucsonOriginals now includesm o r e t h a n fortyrestaurants, ranging fromhot dog stands to high-enddining.

Tucson Originals hasfour goals. The first is to lower costs for itsmembers through group purchasing. This hasbeen accomplished through the creation of aseparate entity, the Arizona IndependentRestaurant Alliance (AIRA), which negotiateswith food suppliers and has trimmed itsmembers food costs by 10 to 20 percent.AIRA is open to all of the state's independent

Three years ago restaurantowners in Tucson, Arizona decidedto stop seeing one another ascompetitors and launched acollective effort to counter theexpansion of chain restaurants.


restaurants and now includes 120 members inTucson, Phoenix, and Scottsdale. According toDon Luria, owner of Cafe Terra Cotta andfounding member of Tucson Originals, AIRAsaves his restaurant at least $100,000 a year.

The second goal is to encourage consumersto support Tucson's independent restaurants.Publisher John Hudak donated $50,000 in freeadvertising for this purpose. His magazine nolonger reviews or accepts ads from chainrestaurants. Member restaurants also include acard with each diner's check that lists thecity's local restaurants and describes theirimportant role in maintaining Tucson'sculinary sense of place.

The third goal is to raise awareness of thecommunity contributions of independentrestaurants, which thegroup accomplishesthrough high profilefund-raisers for localnonprofits. The finalgoal is to expose kidsto the experience ofindependent dining through various schoolprograms.

To join, restaurants must commit at least$50 in annual donations to a food bank andagree to actively participate in one committeeand one fund-raiser for a local nonprofit.

Kansas City Originals — As it turnsout, Tucson restaurant owners were not theonly ones turning to cooperation. In KansasCity, some twenty independent restaurantscame together in early 2001 and formed theKansas City Independent RestaurantAssociation. The group, which now includesthree dozen restaurants, has since changed itsname to Kansas City Originals. Thecoalition's main goal is to market the idea ofeating at locally owned restaurants. Memberscontribute $90 each month to fund

advertisements that use humorous, tongue-and-cheek messages to poke fun at the chainsand grab the attention of readers. Membersalso sport business cards and tabletop tentsthat read "local food served with local flavor"and list each restaurant's name and address.

Council of Independent Restaurants ofAmerica — These local coalitions have beenso successful that they inspired the creationof the Council of Independent Restaurants ofAmerica (CIRA), a national umbrella groupthat is working to seed local restaurantalliances nationwide and provide a network ofresources and support. "Chains are aboutmoney. Independent restaurants are aboutfood," says CIRA's founder, Washington, DC

restaurant ownerRobert Kinkead. "It'stime to fight back andunchain America."CIRA o rgan izesworkshops around thecountry, hosts an

annual conference, and is developing acomprehensive marketing and advertisingprogram. Local chapters have formed inAlbuquerque, Birmingham, Charlotte,Cleveland, Indianapolis , Madison,Milwaukee, Minneapolis, St. Louis, Sarasota,and Washington DC.

Independent Business Alliances

Over the last few years, locally ownedbusinesses have formed Independent BusinessAlliances (IBAs) in more than fifteen citiesacross North America. These coalitionstypically include a broad range of differentkinds of businesses, from local banks tohardware stores and restaurants. They enabletheir members to work together to address

Member restaurants include acard with each diner's check thatlists the city's locally ownedrestaurants and describes theirimportant role in maintainingTucson's culinary sense of place.


common challenges and to develop sharedstrategies for countering the growth of chains.IBAs have been particularly successful in twoareas: They've developed highly effectivepublic education campaigns, which haveincreased support for locally ownedbusinesses, and they've provided a strongvoice for independent businesses in shapinglocal government policy.

The idea originated in Boulder, Colorado,in 1998 when a group of business ownersformed the Boulder Independent BusinessAlliance. The alliance grew to include morethan 150 businesses and was so successfulthat it caught the attention of business ownersin other cities, who went on to found theirown local IBAs.

Today, these IBAs belong to a nationalorganization called the A m e r i c a nIndependent Business Alliance (AMIBA),which was founded by one of the creators ofthe Boulder IBA. AMIBA offers on-siteworkshops, how-to materials, templates fordeveloping "buylocal" educationalp r o g r a m s , a n dtechnical assistance tohelp small businessowners launch IBAsi n t h e i r owncommuni t ies . I tprovides networking opportunities forestablished IBAs, develops new publiceducation and membership tools, andcoordinates national events, such asIndependents Week (see sidebar). Contactinformation for AMIBA can be found in theResources section at the end of this report.

Boulder Independent Business Alliance— In 1998, David Bolduc, owner of theBoulder Bookstore, and Jeff Milchen, a long-time community activist, conceived the

Boulder Independent Business Alliance(BIBA). They shared the idea with severalprominent local business owners who formeda committee and launched the organization.

Today, BIBA has a diverse membershipbase of 160 locally owned businesses,including food producers like Twisted PineBrewery and the Boulder County Farmer'sMarket, repair shops like Hoshi Motors,retail stores like Video Station, serviceproviders like Silver Star Printing, restaurantslike The Sink, and Boulder's only independentcommercial bank, Heritage Bank. The smallestare sole proprietorships. The largest, thenonprofit Boulder Community Hospital, hasmore than 2,000 employees.

BIBA's main goal is to make the choice"local or chain?" a significant consideration forresidents in their shopping and spendingdecisions. To this end, the alliance has createda highly visible and effective marketingcampaign. Popular decals displayed on thewindows and doors of every BIBA member

serve to remindresidents of the fullimpact of theirspending wheneverthey approach a localbusiness. One says,"We are a locallyowned, independent

business. Buy locally. Strengthen ourcommunity and local economy." The other,BIBA's logo—two arrows circling into eachother, much like the mark on a recyclablecontainer—also conveys an important lessonin community economics: Compared to theirchain competitors, locally owned businessesrecycle a higher percentage of their revenueand profits back into the local economy.

BIBA distributes a bumper sticker—PutYour Money Where Your House Is!—and hasdeveloped several marketing tools designed for

Through highly effective publiceducation campaigns, independentbusiness alliances are increasingsupport for locally ownedbusinesses among residents andelected officials.


specific membership segments. Bookmarkslist nearly two dozen locally owned book,music, and video stores in town and offer fivereasons to support them. Number 4: Do youreally want Wal-Mart (the fastest growingmusic seller) deciding what gets recorded?Eight local cafes use BIBA coffee cups—forless than the cost of buying genericcups—which list each cafe's address and offercustomers a word of thanks: By buying thisbeverage from a local independent business,you've just helped keep Boulder the great townwe all love!

For residents and visitors alike, one ofBIBA's most useful creations is The BIBAGuide , a directory of local businesses. Ifyou're looking for atoy and all that comesto mind is the heavilyadvertised Toys 'R'Us chain, the guideoffers a solution:Grandrabbit's ToyShoppe. Or whatabout pet supplies?Instead of Petsmart, try Petland of Boulder.Updated annually, the colorful directory issprinkled with answers to the question, Whyshop locally?

BIBA advertises in many local mediaoutlets. At first, its ads built public awarenessof the alliance and recognition of its logo.Later ads made the case for supporting locallyowned businesses and illustrated the diversityof Boulder's independent businesses byshowcasing specific membership segments,such as music and video stores, or retailers ina particular neighborhood.

According to members, BIBA's educationcampaign has broadened awareness of theimportance of a strong, locally rootedeconomy. It has generated an on-goingdiscussion among residents as well as city

officials about ways to strengthen and expandBoulder's independent business base. Oneway to measure BIBA's impact is to skim thenewspapers. The number of businesses thatinclude "locally owned" in their ads has risensharply. The city's newspapers now featureadvertising sections specifically for locallyowned businesses. "Independent ownershiphas become a selling point," says Milchen.

Corvallis Independent BusinessAlliance — Concerned about the growth ofchain stores, Jack Wolcott of Grass RootsBooks & Music, Bob Baird of The Book Bin,and several other local business ownersinvited Jeff Milchen, founder of BIBA to host

a public forum. Theevent drew more than125 en thus ias t icresidents and businessowners and catalyzedthe formation of theCorvallis IndependentBusiness Alliance(CIBA).

Two years later, CIBA has 85 members,encompassing a wide range of goods andservices, including a local bank, hardwarestore, toy store, pharmacy, plant nursery, andinsurance agency. Dues are $100-$150 peryear, depending on the size of the business.

CIBA emphasizes that the growth ofchains is not inevitable; the community has achoice. "[Local merchants] are passionateabout business. We can't imagine doinganything else. We'll keep doing it as long aswe can," Wolcott says. "But consumers haveto recognize that they have a choice. We willnot be here if they stop supporting us. Theyhave to choose what kind of community theywant, what kind of community they'll pass onto their children."

O n e o f t h e BoulderIndependent Business Alliance'smost useful creations is a colorfuldirectory of locally ownedbusinesses that is updated annuallyand sprinkled with answers to thequestion, "Why shop locally?"


The alliance gets its message out throughhalf-page newspaper advertisements thatexplain what the alliance is and encouragepeople to look for the CIBA logo onstorefronts when they shop, as well as adirectory of independent businesses,sprinkled with messages about the value oflocally owned stores and available for freethroughout the city. CIBA also produces amonthly column for the Corvallis Gazette-Times, which provides an opportunity for thealliance to expand on its core message andtackle complex issues.

Local business owners say CIBA's workhas strengthened their customer base andgenerated a lively public discussion aboutchain store proliferation. CIBA has begunforging a relationship with local officials andhopes to persuade thecity to adopt policiesthat nurture localbusiness developmentand limit chain storesprawl.

In addition to itspublic educationcampaign, one of CIBA's goals is to help itsmembers strengthen their businesses. "Justgetting together and discussing commonchallenges and sharing ideas has been verybeneficial," notes Bonnie Helpenstell, ownerof Home Grown Gardens. She says a growingnumber of CIBA members are providingdiscounts to one another and including otherlocal businesses in their marketing. The localChamber of Commerce, perhaps in responseto the competition from CIBA, is nowoffering workshops and programs specificallydesigned for independent businesses.

Austin Independent Business Alliance— Two years ago, Warterloo Records andBookpeople, two of the oldest and most

beloved independent businesses in Austin,Texas, learned that Borders Books planned tobuild a giant book and music superstore acrossthe street from their stores. The developmentwould be funded in part by $2.1 million inpublic subsidies. While small businesses inmost places would have little power to stopsuch as project, Waterloo and Bookpeoplewere backed by the Austin IndependentBusiness Alliance (AIBA), a coalition that atthat time included more than 150 locallyowned businesses.

AIBA teamed up with an Austin civicorganization, Livable City, to fight theproject. They asked the firm Civic Economicsto study the economic impact of allowing theBorders store to open. The results werestunning. The firm concluded that every dollar

spent at Waterloo orBookPeople generatedthree times as muchlocal economic activityas a dollar spent atBorders. BecauseBorders was expectedto cannibalize much of

its sales from the two independents, the studyestimated that Austin would lose $2.4 millionin economic activity annually, on top of the$2.1 million in taxpayer subsidies. The studyenabled AIBA turn the issue into front-pagenews and galvanize a lively public discussionabout the merits of independent businessesversus chains. The public outcry eventuallyled Borders to abandon its plans.

Today, AIBA has more than 240members, ranging from coffee shops andappliance dealers to opticians and motels. Thegroup's logo and window decals feature anarmadillo and encourage support of locallyowned businesses. Bumper stickers and tee-shirts urge residents to Keep Austin Weird.AIBA's local business directory, available for

The results were stunning. Thefirm concluded that every dollarspent at Waterloo or BookPeoplegenerated three times as muchlocal economic activity as a dollarspent at Borders.


free from any member business, is filled withmessages about the importance of supportingthe homegrown economy. "We believe that bypreserving what is unique about our city, wecan all continue to thrive and keep Austinfrom becoming Anywhere, USA. . . The nexttime you shop, cast your vote for Austin," itreads. Print advertisements initially focusedon recruiting new member businesses andfeatured a "Declaration of Independents."More recent ads are aimed at consumers andencourage support of Austin's homegrownbusinesses.

One of AIBA's most successful initiativesto date was Austin Unchained, a one-dayevent in November when AIBA askedresidents to shop exclusively at locally ownedbusinesses. The event was promoted throughposters, tee-shirts, and flyers. It receivedextensive coverage in local media andcatapulted AIBA to a new level of visibilitywithin the community. Membership grew.Many AIBA members reported beingespecially busy in the weeks following AustinUnchained and said that more of theircustomers asked if they were locally owned.

Celebrate Independents Week

During the week of July 4th, 2004, theAmerican Independent Business Alliance andits local affiliates, in partnership with theAmerican Booksellers Association, theAmerican Special ty Toy RetailersAssociation, and others, will celebrateIndependents Week---seven days of eventsdesigned to highlight independent businessesand their role in keeping entrepreneurialismalive, making our hometowns unique, andstrengthening community.

This is the first year that IndependentsWeek will be celebrated nationally. It has beena local event in Tampa, Florida, for the lasttwo years. It was conceived by Carla Jimenez,co-owner of Inkwood Books, who had longused July 4th as an opportunity to remindcustomers of the importance of independentbusinesses. Two years ago, she invited otherlocal businesses to join her.

Seventeen businesses agreed to sign-onduring the first year. They displayed postersin their stores that declared, "CelebrateIndependents Week!" and read, "As wecelebrate our nation's independence, we inviteyou to join us in celebrating our great local

independents." Owners and employeesengaged customers in conversations aboutlocally owned businesses. Each business helda drawing at the end of the week in whichcustomers could win $60 in gift certificates forthe other participating businesses.

The event garnered extensive coverage inlocal media. The Tampa Tribune ran a front-page store. The local Fox affiliate broadcast itsmorning news show from a differentindependent business every day that week.The coverage gave business owners a chanceto talk about how much independentbusinesses contribute to the local economyand community.

"The key was that it was so simple. Therewere no meetings and very little timeinvolved," says Jimenez. Based on commentsfrom her own customers, she says, "It wasdefinitely worth it." More businessesparticipated during the second year. Now theevent has been taken over locally by thenewly formed Tampa Independent BusinessAlliance and has spread to communitiesnationwide through the American IndependentBusiness Alliance.


AIBA has also joined a broad coalition oforganizations, including many neighborhoodand civic associations, environmental groups,and labor unions, to fight the proliferation ofbig box retailers in Austin. The coalitionorganized an extensive grassroots campaignthat succeeded in blocking Wal-Mart frombuilding a supercenter on an environmentallysensitive site. Now the coalition is advocatingthat the city study the impacts of big boxretailers and adopt new planning and zoningpolicies to prevent development that woulddamage the environment and the localeconomy.

Santa Fe Independent Business andCommunity Alliance — Formed in late 2002,the Santa Fe Independent Business andCommunity Alliance has grown to more than500 members, about60 percent of whichare independentbusinesses, while ther e m a i n d e r a r eresidents and localnonprofit groups thatshare and supportSFIBCA's mission.T h e b u s i n e s s e srepresent a broadrange of goods andservices: bookstores, pharmacies, banks, radiostations, auto repair shops, accountants,printers, builders, beauty salons, andphysicians.

One of SFIBCA's goals is to encouragemembers to share ideas, collaborate, and buygoods and services from one another, ratherthan from out-of-state companies. Many ofSanta Fe's local businesses now offerdiscounts to other local businesses and theiremployees.

Another goal is public education. Memberbusinesses display window decals andbumper stickers that identify their stores asindependently owned and urge residents tosupport the community by shopping locally.The group runs print advertisements innewspapers and magazines, and has produceda 60-page directory of local independentbusinesses.

In 2003, SFIBCA commissioned a studyfrom Angelou Economics that found thatwhile "independent businesses comprise ahigher share of Santa Fe's economy than thenational average," chains are expanding at amuch faster rate than the city's localbusinesses. The proliferation of chains inundermining Santa Fe's distinctive characterand its local economy, the study concluded. Itfound that shopping at independent

businesses producestwice as much localeconomic activity asshopping at chains,because the localstores purchase moreof their inputs fromother Santa Febusinesses.

Five of eight citycouncilors attendedthe press conference

announcing the study's results. Both localnewspapers carried front-page stories. TheSanta Fe New Mexican editorialized, "Thesuccess of Santa Fe's economy is in large parttied to the success of the many men andwomen who run small businesses. Thosebusinesses need---and deserve---our support."As a result of the study and SFIBCA'sadvocacy, several pro-local businessinitiatives may be included in Santa Fe's neweconomic development plan.

The Santa Fe IndependentBusiness and Community Allianceincludes more than 500 members,representing a broad range ofgoods and services: bookstores,pharmacies, banks, radio stations,auto repair shops, accountants,printers, builders, beauty salons,and physicians.


Business Alliance for Local LivingEconomies

In late 2002, a group of visionarybusiness owners, led by Judy Wicks, ownerof the White Dog Café in Philadelphia andLaury Hammel, owner of The LongfellowClubs in greater Boston, launched theBusiness Alliance for Local Living Economies(BALLE), a national association of localbusiness networks dedicated to buying andselling locally, operating sustainably, andstrengthening their communities. BALLE hasgrown to include twenty local businessnetworks in cities and towns across NorthAmerica.

BALLE provides on-site workshops andstart-up kits to help local networks form. Ithosts a national conference that enables localaffiliates to share ideas and learn aboutsuccessful strategies, and organizes monthlyconference calls andforums on a varietytopics. BALLE hasalso created an on-linemarketplace thatallows users to searchfor products andservices offered bysustainable independent businesses, and isdeveloping a "Local First" marketing campaignthat will encourage consumers to supportlocally owned businesses. Contactinformation for BALLE can be found in theResources section at the end of this report.

Sustainable Connections — Foundedin 2001, Sustainable Connections is a BALLE-affiliated network of 280 locally ownedbusinesses in northwestern Washington state,a region that includes the city of Bellingham.Members encompass a broad range ofbusinesses committed to collaborating, buying

locally, healthy environments, meaningfulemployment, and a strong community.

Sustainable Connections helps membersshare ideas and best practices through regularnetworking and educational events. Allmembers take an annual self-created pledge tomake specific improvements to theirbusinesses (they might, for example, committo shifting to recycled paper or buying morelocally produced goods). The network hasorganized a buying club to reduce costs onoffice supplies. Many members offerdiscounts to one another and are activelyhelping start-up enterprises succeed.

Last year Sustainable Connectionslaunched a campaign to urge residents to"think local first" when shopping. Theorganization developed posters, tee-shirts,bumper stickers, flyers, and newspaperadvertisements that feature the campaign'slogo---an image of nearby Mount Baker and

the words, "thinklocal, buy local, belocal"---and messageabout the importanceof supporting locallyowned businesses.

Every memberbusiness received a kit

that includes tips on how to promote thecampaign; a fact sheet on the top ten reasonsto support local businesses; a poster todisplay in their stores; a window decal; and amaster copy of the logo to reproduce in theirown marketing. The kit also included sixtypes of thank-you cards for customers, eachwith a different message about the benefits ofsupporting the homegrown economy.

Small businesses "tend to be more flexible,more attuned to what their neighbors need andwant, and they tend to give more to charitableorganizations," said Kathy Van Winkle,manager of Griggs Office Supply, explaining

The Local First kit included sixtypes of thank-you cards forcustomers, each with a differentmessage about the benefits ofsupporting the homegrowneconomy


her message to customers. "The more youspend your money with local businesses, themore those dollars stay in the community."

The campaign has received extensivecoverage from local radio, the BellinghamHerald , and the Bellingham Weekly, andparticipating businesses say it's beginning toaffect residents' purchasing decisions.Sustainable Connections plans to expand thecampaign in the coming year with specialseasonal celebrations and a local businessdirectory.

Sustainable Business Network ofGreater Philadelphia — SBN is a coalition ofmore than 150 local businesses andcommunity leaders dedicated to building "ajust and sustainable economy in thePhiladelphia region by connecting, promoting,and strengthening locally-owned independentbusinesses which seek to serve the needs ofcustomers, employees, our community, andthe earth."

SBN works to establish relationships andtrade among local businesses. For example, thenetwork has persuaded many local restaurantsto buy from local sustainable farms and hashelped facilitate the transactions anddistribution. SBN organizes regularnetworking events, bimonthly educationalseminars on topics such as renewable energyand community capital, and an annualconference. In the coming year, SBN plans todevelop a Local First campaign similar to theone created by Sustainable Connections.

Another major initiative underway thisyear is New Profiteers, an annual competitionfor best business plan. The program, createdby SBN in partnership with MurexInvestments, the Science Center, OsirisMarketing, and a Quaker group, PhiladelphiaFriends Yearly Meeting, is designed to nurturenew local enterprises that meet social or

environmental goals. All local entrepreneurswith an idea or fledgling business are eligibleto enter. The first annual contest will be heldin the fall of 2004. The top prize is up to$500,000 in equity investment from MurexInvestments' venture capital fund. Runners-upwill receive grants of $5,000.

Encourage Independent Businesses toSupport One Another

A large and untapped source of customersfor independent businesses are otherindependent businesses. In the day-to-daygrind of running their stores, many businessowners overlook opportunities to supportone another and keep dollars in the localeconomy. They might be buying officesupplies at Staples rather than the local dealer;picking up building materials for a storerenovation at Home Depot instead of the localhardware store; getting their copying done atKinko's instead of the local print shop; orobtaining internet service through a nationalcompany rather than a local provider.

Encouraging retailers to shift theirspending to local businesses where feasiblewould provide a significant injection offinancial resources into the local economy. Itwould also broaden awareness among businessowners about how their own spendingdecisions affect the community.

Such an effort could be undertaken by alocal chamber of commerce, an independentbusiness alliance, a downtown revitalizationorganization, or the municipality itselfthrough its community development orplanning office. Creating an directory of localbusinesses or an online database wouldprovide retailers with a simple way ofidentifying a locally owned supplier or serviceprovider.


Reward Local Shopping

Shop locally or get the best deals? Whynot do both? One way to encourage residentsto shift more of their spending to locallyowned businesses is to reward them withdiscounts, rebates, and other goodies. Formany years, major chains have offered"loyalty cards" that enable customers to earnpoints when they shop and redeem them fordiscounts on future purchases. Mostindependent businesses cannot afford the costand time involved in administering their ownloyalty card programs—nor would consumerswelcome the hassle of carrying a card forevery shop on Main Street. Thus was bornthe idea of a jointloyalty card—a singlecard that would workat every independentbusiness in town.Launched by IBAs ornonprofit communitygroups, joint loyaltycards have emerged inseveral cities. They've succeeded by rewardingloyal customers, shifting more spending tolocal stores, and helping independentbusinesses market themselves to thecustomers of other nearby businesses.

Community Benefit Card — Thesimplest and most straightforward approachcomes from the Boulder IndependentBusiness Alliance. For $15—less than theprice of membership at one warehouse buyingclub—residents can purchase a CommunityBenefit Card from a local business or one ofseveral nonprofit community organizationshelping to promote the cards in exchange for aportion of the purchase price. TheCommunity Benefit Card provides discountsand other benefits at more than 80 locally

owned businesses, with most knocking tenpercent off every product and service theyoffer. More than 6,000 Community BenefitCards are currently in circulation.

Ohana Savers — Two dozen localstores on the Hawaiian island of Maui hitupon a similar idea two years ago. With chainstores—including Borders Books, Office MaxOld Navy, Cos tco , and HomeDepot—rapidly overtaking the island, theycreated the Ohana Savers loyalty cardprogram. The cards have a magnetic strip andenable customers to accumulate points onpurchases and redeem the points at any of theparticipating businesses. The two dozen

participating storesrange from a grocer toan appliance dealer." W e w a n t t oencourage people toshop at local storesfirst," says JoelineTrenholm, owner ofValley Isle Lighting,

explaining that "Ohana" means family inHawaiian. So far, it's been a success. Morethan 20,000 people have signed-up andcardholder purchases total several milliondollars.

Localizing E-Commerce

Although the dot-com bubble has burstand countless e-tailers have disappeared, on-line shopping continues to expand at a steadypace. On-line retail spending rose 27 percentto reach $93 billion in 2003.35 For manypeople, the web is a convenient adjunct to in-store shopping, especially for certain types ofitems like books, music, and airline tickets.The typical customer of an independent

The Community Benefit Cardprovides discounts and otherbenefits at more than 80 locallyowned businesses, with mostknocking ten percent off everyproduct and service they offer.


bookstore, for instance, buys at least twobooks on-line each year. About one-third ofadults—and over 70 percent of all 18-24 yearolds—shop online.36

Small businesses account for only afraction of these sales; the vast majority flowto big name web-only companies likeAmazon.com or major retail corporations likeTarget. The challenge for independent retailersstems from the cost and time involved in bothdeveloping an e-commerce web site anddevising effective strategies for marketing thesite. There's good news on both fronts.

In terms of developing an e-commerce site,independent retailers in a number of sectorshave joined together and pooled theirresources to build sophisticated e-commerceweb sites. The technology is shared but salesare channeled to the customer's nearest localstore.

A good example is Booksense.com,developed by the American BooksellersAssociation, a trade group of 3,500 localbookstores. Booksense.com works much likeAmazon.com with adatabase of more thantwo million titles andeasy browsing andordering, but everysale is credited to thecustomer's nearestindependent bookseller based on his or her zipcode. Booksense.com enables bookstores toshare many of the expensive, back-endfunctions (the database of books, the searchengine, the security features, etc.) of an e-commerce site, but allows each store to createits own web interface with its own logo andlook, local store information, promotions, andauthor readings and events listings. (See, forexample, the Castine-based Compass RoseBooks tore & Café on- l ine athttp://compassrose.booksense.com.)

Other local bookstores have opted toaffiliate with Booksite.com, developed by abookstore owner in Delaware, Ohio.Booksite.com offers the same powerful back-end functions as Booksense.com, but enablesgreater control and customization for the localstore. Similar initiatives have been undertakenin other retail sectors. Two of the hardwareco-ops, for example, have developed e-c o m m e r c e s i t e s f o r theirmembers—DoItBest.com and TrueValue.com.Florists have also created sites that enablecustomers to order flowers from their localflorist.

Another approach is to organize not bysector but by community. All of the locallyowned businesses in one town could share inthe development of an e-commerce structurethat would enable them to sell their waresonline. Residents of Brattleboro orBennington could log-on to a central site andshop at any of their local stores. Two typesof businesses are obvious candidates fororganizing and financing such a venture. One

is the local newspaper.N e w s p a p e r s a r eamong the mosth e a v i l y v i s i t e dgeographically basedsites on the web (thatis, almost all of their

visitors are locals). The other is a communitybank, which has a strong self-interest inboosting local commerce and a built-incapacity for processing credit cards andfinancial transactions. Other potentialorganizers of a community shopping siteinclude a local nonprofit organization, an IBAor Chamber of Commerce, or even themunicipality, which could also use the site tolet residents pay parking tickets or downloadtheir children's grades.

Booksense.com works much likeAmazon.com, but every sale iscredited to the customer's nearestindependent bookstore.


Developing an e-commerce site is half thechallenge. The other part is marketing the site.As the recent collapse of many dot-comstestifies, web-only retail companies face analmost impossible task. They must bank-rollan advertising campaign capable of creating aname for themselves and all of their revenuemust come from on-linesales. Most fail. Thelesson here is good newsf o r i n d e p e n d e n tbusinesses: e-commerceworks best when it isconducted in tandemwith a physical store. Infact, according to Jupiter Media Metrix, two-thirds of the return on investment from an e-commerce web site comes from purchasesmade in the physical store and from theoverall "branding" value of building the store'simage, marketing in-store events, and reachingnew customers. Jupiter's research suggests

that half of consumers use a retailer's web sitefor research before buying a product in thestore. This in turn in means that a sizable partof the marketing hurdle is reaching existingcustomers by promoting the web site in thestore—a far more attainable prospect forindependent businesses that the massive

global advertisingthat many of thef a m o u s , a n dultimately doomed,e-tailers undertook.S t o r e s c o u l dpromote their sitesthrough banners and

posters or by including a coupon good for on-line purchases with each in-storepurchase—something that lets customersknow that when they want the convenience ofbuying a hammer at 3:00 a.m. or a bookdelivered to their door, there's no need to sendtheir dollars out of the community.

The challenge for local retailersstems from the cost of developingan e-commerce web site anddevising effective strategies formarketing the site to customers.There's good news on both fronts.



Conclusion

A growing number of people around thecountry are recognizing the tremendous costsof losing locally owned businesses touncontrolled big box sprawl: dying towncenters; reduced job opportunities; economicinstability; rising costs for public services andinfrastructure; loss of open space;mushrooming automobile use; homogenouslandscapes; and weakened communities.Altogether, it's a pretty high price to pay inorder to save a few bucks—and even thatupside may not last once the big chains gain adominant share of the local market.

Although we often assume that the growthof chain retailers, big box stores, and large-scale shopping centers is the inevitable resultof market forces, in truth it is a trend drivenby both consumer and public policy choices.Many local, state, and federal policiesfacilitate chain store expansion and underminethe survival of local businesses. It's time tochange the rules. Communities have choices.They need not relinquish their local economiesto distant corporate control or accept a one-size-fits-all model of development.

This report outlines numerous concreteexamples of how local officials, communityorganizations, and small businesses can takeaction to strengthen Maine's homegrown

economy. As noted in the introduction, thethree primary approaches described—revisingplanning and zoning policies, implementingdowntown revitalization and small businessdevelopment programs, and building alliancesamong independent businesses—work best ifpursued simultaneously. Downtownrevitalization programs have little chance ofsuccess if local planning policies allow orencourage massive, competing retaildevelopments on the fringe. Likewise, strongplanning policies that limit excessive chainstore growth may not be enough to revivelocal commerce without a proactive smallbusiness development plan. Cooperativeefforts by local business owners to improvecompetitiveness and communicate their valueto residents are essential to winning publicsupport for new planning policies andrevitalization programs.

For more information about the toolsdescribed in this report or assistance applyingthese approaches locally, review theResources section and contact MaineBusinesses for Social Responsibility and theInstitute for Local Self-Reliance. We lookforward to working with Maine communitiesto rebuild thriving downtowns and strengthenand expand locally owned businesses.

| Conclusion50

Stay Informed

The Home Town Advantage Bulletin

Keep abreast of the latest research and innovative strategies by signing up for The HomeTown Advantage Bulletin. This free, bimonthly email newsletter reports on successfulcommunity efforts to strengthen locally owned businesses and limit chain store sprawl. Learnabout innovative approaches to planning and economic development, effective public educationcampaigns, and new research on the economic benefits of locally owned businesses. To browseback issues and sign-up, visit www.newrules.org/hta

MEBSR's ENews

At the time of this printing there is a Buy Local Campaign starting up in Portland. MEBSR willbe reporting on the progress of this campaign and others around the state as they are launched inits monthly ENews called Bottom Lines. To sign up for this email newsletter send an email [email protected] and put “Subscribe to ENews” in the subject line.


Resources

Institute for Local Self-Reliance(Head Office) 1313 5th St SEMinneapolis, MN 55414Maine Office: (207) 774-6792www.newrules.org

Maine Businesses for Social ResponsibilityPO Box 157Belfast, ME 04915,Tel: (207) 338-8908www.mebsr.org

American Booksellers Association828 South BroadwayTarrytown, NY 10591Tel: (800) 637-0037www.bookweb.org

American Independent Business Alliance222 South Black Ave.Bozeman, MT 59715Tel: (406) 582-1255www.amiba.net

Business Alliance for Local LivingEconomies165 11th St.San Francisco, CA 94103Tel: (415) 255-1108www.livingeconomies.org

Coastal Enterprises Inc.36 Water St.Wiscasset, ME 04578 Tel: (207) 882-7552 www.ceimaine.org

Cooperative Development Institute277 Federal St.Greenfield, MA 01301Tel: (413) 774-7599www.cooplife.com

Friends of Midcoast Maine88 Elm St.Camden, ME 04843Tel: (207) 236-1077www.friendsmidcoast.org

"Get Real, Get Maine" programMaine Department of AgricultureTel: (207) 287-3491www.getrealmaine.com

Grow Smart Maine81 Bridge St.Yarmouth, ME 04096Tel: (207) 847-9275www.growsmartmaine.org

Maine Association of Community Banks489 Congress StreetPortland, ME 04101Tel: (207) 791-8400www.mecb.com

Maine Business Workswww.mainebusinessworks.org

Maine Dept. of Econ. and Com. Dev.59 State House StationAugust, Maine 04333Tel: (207) 624-9804www.econdevmaine.com(request a copy of The Pocket Guide toMaine's Business Resources)

| Resources52

Maine Downtown Center45 Memorial Circle, Suite 302Augusta, ME 04330Tel: (207) 622-6345www.mdf.org/downtown

Maine Eat Local Food CoalitionPO Box 188Unity, ME 04988Tel: (207) 883-6773www. meepi.org/elfc

Maine Organic Farmers and Gardeners AssnPO Box 170Unity, ME 04988Tel: (207) 568-4142www.mofga.org

Maine Pharmacy Association127 Pleasant Hill RoadScarborough, ME 04074Tel: (207) 396-5340www.mparx.com

Maine Small Business AllianceOne Bangor St.Augusta, ME 04330Tel: (207) 622-6500www.msb-alliance.org

Maine Small Business Development CentersUniversity of Southern MaineP.O. Box 9300Portland, ME 04104Tel: (207) 780-4420www.mainesbdc.org

Maine State Planning Office38 State House Station184 State St.Augusta, ME 04333Tel: (207) 287-3261www.state.me.us/spo

National Cooperative Business Association1401 New York Ave. NW Suite 1100Washington, DC 20005Tel: (202) 638-6222www.ncba.org

National Main Street CenterNational Trust for Historic Preservation1785 Massachusetts Ave. NWWashington, DC 20036Tel: (202) 588-6219www.mainsteet.org

New England Booksellers Association1770 Massachusetts Ave. #332Cambridge, MA 02140Tel: (617) 576-3070www.newenglandbooks.org

Sprawl-Busters21 Grinnell St.Greenfield, MA 01301Tel: (413) 772-6289www.sprawl-busters.com

Training & Development Corporation118 School St.Bucksport, ME 04416-1669Tel: (207) 469-6385www.tdc-usa.org

United Food and Commercial Workers1775 K Street, N.W.Washington, DC 20006Tel: (202) 223-3111www.ufcw.org


Notes

1 Stacy Mitchell, "Massive retail expansioncould harm Maine's economy," MaineSunday Telegram, January 11, 2004.2 Todd Dankmyer, CommunicationsDirector, National Community PharmacistsAssociation, personal communication, July2001.3 Dan Cullen, "Independents Hold MarketShare for 2001; Market Share by DollarGrows," Bookselling This Week, April 18,2002.4 "2003 Market Measure," Do-It-YourselfRetailing, November 2002.5 Mary Hendrickson, Ph.D., William D.Heffernan, Ph.D.. Philip H. Howard andJudith B. Heffernan. "Consolidation in FoodRetailing and Dairy: Implications forFarmers and Consumers in a Global FoodSystem," National Farmers Union, January8, 2001. 6 "Top 100," Nation's Restaurant News,June 24, 2002.7 Dr. Kenneth Stone, "Competing with theDiscount Mass Merchandisers," Iowa StateUniversity, 1995; Dr. Kenneth Stone andGeorgeanne M. Artz, "The Impact of 'Big-Box' Building Materials Stores on HostTowns and Surrounding Counties in aMidwestern State," Iowa State University,2001.8 Thomas Muller and Elizabeth Humstone,"What Happened When Wal-Mart Came toTown? A Report on Three IowaCommunities with a Statistical Analysis ofSeven Iowa Counties," National Trust forHistoric Preservation, May 1996.

9 Land Use, Inc. and RKG Associates,"Greenfield, Massachusetts: Fiscal andEconomic Impact Assessment of theProposed Wal-Mart Development," April 2,1993.10 Thomas Muller, "The Fiscal andEconomic Impact of a Proposed ShoppingCenter Project on the City of Leominster,"August 2003.11 Vermont Environmental Board, Re: St.Albans Group and Wal-Mart Stores, Inc.,Findings of Fact, Conclusions of Law, andOrder (Altered), Application #6F0471-EB,June 27, 1995.12 Leslie Bray, "Who Benefits When Wal-Mart Comes to Town?" Main StreetInsights, at www.mainstreetinsights.com.13 Steven Greenhouse, "Suits Say Wal-MartForces Workers to Toil Off the Clock," NewYork Times, June 25, 2002.14 "Everyday Low Wages: The Hidden PriceWe All Pay for Wal-Mart," A report by theDemocratic Staff of the Committee onEducation and the Workforce, U.S. House ofRepresentatives, February 16, 2004.15 "The Economic Impact of Locally OwnedBusinesses vs. Chains: A Case Study inMidcoast Maine," Institute for Local Self-Reliance and Friends of Midcoast Maine,September 2003. A similar study in Austin,Texas, produced comparable results: CivicEconomics, "Economic Impact Analysis, ACase Study: Local Merchants vs. Chains,"December 2002.16 Tischler & Associates, “Town ofBarnstable: Fiscal Impact Study of Non-Residential Land Use Prototype Summary,”July 2002.

| Notes54

17 Patricia A. Frishkoff and Alicja M.Kostecka, "Business Contributions toCommunity Service," Office of Advocacy,U.S. Small Business Administration,October 1991.18 Kennedy Smith, Executive Director,National Main Street Center, personalcommunication, July 2001.19 Constance Beaumont, Better Models forSuperstores, National Trust for HistoricPreservation, 1997.20 Tom Schueler, The Center for WatershedProtect ion, “The Importance ofImperviousness," Watershed ProtectionTechniques, Fall 1994. Schueler, et al., "TheBenefits of Better Site Design in CommercialDevelopment." Watershed ProtectionTechniques, January 2000.21 Maine Department of Public Health,Bureau of Elder and Adult Services, "MaineDrug Pricing Survey," 2002.22 Vermont Forum on Sprawl, "CommunityInvestments in Smart Growth: A Decision-Maker's Guide," May 2002.23 Hailey Comprehensive Plan, Section Six:Economic Development; ConstanceBeaumont , Smart S tates , BetterCommunities, Washington: National Trustfor Historic Preservation, 1996, p. 310.24 Steve Lopez, "The Battle of Downtown,"Time Magazine, July 10, 2000.25 Further information on the zoning policiesdescribed in this section can be found in theVermont Forum on Sprawl’s "ExploringSprawl: The Causes and Costs of Sprawl inVermont Communities," available atwww.vtsprawl.org, and Community Rules: ANew England Guide to Smart GrowthStrategies, published in 2002 by theConservation Law Foundation and theVermont Forum on Sprawl.

26 “State and Local Sales Tax RevenueLosses from E-Commerce: UpdatedEstimates,” by Donald Bruce and William F.Fox, prepared for the Institute for StateStudies (Salt Lake City, Utah).27 This is one of the key tenets of the BlaineHouse Conference on the Creative Economy,held May 6-7, 2004, in Lewiston.28 Petkovich, M. D., & Ching, C. T. K.Some educational and socio-economicimpacts of closing a high school in a smallrural community. Reno, NV: AgriculturalExperiment Station, Max C. FleischmannCollege of Agriculture, University ofNevada, 1977.29 Dollars and Sense: The Cost Effectivenessof Small Schools, The Rural School andCommunity Trust, September 2002, andWhy Johnny Can’t Walk to School, NationalTrust for Historic Preservation, 2000.30 See www.newrules.org for examples oflocal and state locally preferable purchasingrules. 31 National Cooperative Bank, Top 100Cooperatives, 2001.32 James R. Hagerty, “Tough as Nails: HomeDepot Raises the Ante, Targeting Mom andPop Rivals,” Wall Street Journal, January25, 1999, p. A1.33 National Cooperative Bank, Top 100Cooperatives, 2001.34 Todd Dankmeyer, CommunicationsDirector, National Community PharmacistsAssociation, personal communication,August 2001.35 Matt Hines, "E-tailers ring up a big year,"CNET News.com, January 5, 2004.36 Michael Hoynes, "The Current World ofOnline Shopping," Bookselling This Week,February 11, 2002.

I’m Interested!Please contact me about…

o Buy Local Campaigns planned for these regions (starting up in 2006-2008)

_____ Portland _____ Southern Midcoast_____ Northern Midcoast_____ Lewiston-Auburn

_____ Bangor-Brewer _____ York County _____ Gardiner-Augusta-Waterville _____ Ellsworth-Bar Harbor

o Statewide Economic Leakage Analysis (where Maine dollars leave the state ~ potential new business opportunities)

_____ I am a potential sponsor_____ I would like to be involved in the project or know someone who would_____ I would like a copy of the analysis when it is completed_____ Other ________________________________________

o Educational Programs for Maine businesses related to local living economies

_____ Statewide _____ Only in my region

To get hard copies of this report, contact:

MEBSRP.O. Box 157

9 Beaver StreetBelfast, Maine 04915

(207) [email protected]

Also available online at:

www.newrules.orgwww.mebsr.org

Name _________________________________________________________________

Street _________________________________________________________________

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