Lessons in Downtown Redevelopment Success: The Story of Schenectady's Comeback

by Michael N'dolo 12. February 2013 15:21
While many downtowns have experienced deterioration since the end of the Second World War, few cities can match the fate of Schenectady, New York. Being home to General Electric can be a blessing and a curse --- GE downsized roughly 40,000 jobs by 2000 in a city whose population included fewer than 70,000. Needless to say, it had a crippling effect on the city and particularly on its downtown core.

And yet, despite this incredible blow, the city has overseen a successful turnaround of its downtown in the last decade.  I recently had the opportunity to listen to Ray Gillen, executive director of Schenectady Metroplex, give a presentation on the factors that led to the success of the revitalization effort.  Some of what Ray had to say seemed like basic common sense, but some of it certainly surprised me. 

Ray listed the five stages of development as they worked in his city, in rough chronological order:

Stage 1: Coffee, Clubs, and Restaurants

These are the “early adopters” that have the lowest barriers to entry to start taking over and fixing up vacant buildings.  Not the typical targets of economic development organizations, Ray pointed out that they are critical to changing the appearance, feel and traffic patterns of the downtown.  They also provide a “quick win” that can be publically announced as a change in the trend of closures and vacancies. There can be some resistance to these targeted businesses, as they are seen as transient (they definitely can be!), potentially obnoxious (sometimes!), and sub-optimal (yes, but better than nothing!).

Stage 2: Arts and Entertainment

The second stage closely follows the first.  Out of the clubs come other entertainment venues.  In the case of Schenectady, it was the Proctor’s Theater, which saw a huge reinvestment including significant public resources.  This live performance venue also helped define the downtown as an entertainment hub and was followed by a six-screen movie theater complex and other smaller venues.  The arts allowed for redevelopment to occur, but more importantly, allowed for perceptions to adjust to the fact that the city had offerings that the suburbs did not and contributed to a sense that “something is happening” in the city.

Stage 3: Technology/Office

This is a well known stage of downtown redevelopment, as young companies looking for non-traditional space back fill vacant spaces.  But, it also includes major employers that want access to a large workforce with public transportation options.  Schenectady was able to attract in a number of large office tenants (albeit with significant incentives to close the early deals).

Stage 4: Housing

Perhaps one of the surprises here is that emphasis on housing only followed the above three steps.  This is not to say that Metroplex ignored housing, it is just that the city had a lot of slack housing capacity and not much demand.  After the changes in opinions resulting from the arts and entertainment developments, and bolstered by new major employment centers, Schenectady could “sell” housing from a much stronger position.

Stage 5: Retail

“Dead Last” in the revitalization efforts, Ray described major retail developments not as a catalyst but rather proof that the revitalization had occurred.  Prior to the groundwork being laid with housing/office/entertainment, major retail clients were simply not interested in the city, period. Now, they provide a nice booster to the city’s ongoing efforts.

Besides the stages listed above, Ray’s second major lesson was to “build from strength”.  It seems logical, of course, but required tough choices for the city.  Many redevelopment groups focus their attention on the worst performing neighborhoods and try to fix those “problem” areas.  Unfortunately, this simply uses up precious resources and can often be a never-ending battle.  Ray stressed avoiding this impulse and instead focusing on areas that were already showing signs of renewal and growth.  Of course, this can be politically difficult, but is the necessary premise for getting meaningful change to occur.  Once the stronger parts of the city were cleaned up and “working”, the city could then focus on tougher areas with a bunch of success stories under their belt.  This also allowed the private sector to be the major driver of development as the redevelopment occurred in “waves”, with the city on the leading edge and the private sector doing the heaving lifting afterwards.

In his remarks, Ray also allowed that “money matters” and that is also where Schenectady stands out as a model. 

Indeed, Schenectady Metroplex was formed under New York State statute that also allowed it to impose a special “half-cent” sales tax (i.e. an additional 0.5% tax within the Metroplex region) whose proceeds would be used exclusively for economic development.  That has created a robust and reliable revenue stream that Metroplex has been able to leverage continuously throughout its efforts.  Undoubtedly, this has been a major factor contributing to its success and we would hope others would see this as an interesting model to replicate elsewhere.  We note that the State of Texas offers this option as an as-of right for its communities, i.e. that each community can choose to levy or not to levy this tax, but all of the tax revenues can only be used to further economic development priorities.  While a new tax is never a popular topic, it is clear that having this revenue stream changed the question from “Should be reinvest in the city?” or “How can we possibly afford to do X, Y, and Z?” to “How should we best deploy these available and dedicated revenues to rebuild the city’s economy?”  

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