Main Street, LLC
“Main Street, llc may offer a way forward for your downtown, one that is private sector-fueled, and community-led.”
it fills a need
it asks people to put their money where their house is
it inspires people to invest in their community
it creates community cheerleaders
it establishes a pro-active network of committed residents for the next opportunity
it makes for a compelling narrative
it creates success on the ground that neutralizes lingering cynicism
it builds momentum for others
it spreads the risk
it is better positioned to take advantage of public incentives
Pick a big building in your downtown which is largely vacant, deteriorating. It’s two, maybe three stories tall, built 80 or more years ago. Perhaps the cost of a true rehabilitation is beyond the financial ability and/or short-term timeframe of its individual owner or any buyer. And the prospects of any future 90% matching grants appearing on New York State’s horizon are dim. The building may be able to endure only five more years of neglect before it reaches the point of no return. Is there a way out?
Your community is not alone in facing this problem. While each city and village has unique circumstances, I have been astounded by the similarities, and by the interest in a solution I call “Main Street LLC.” As the title implies, this is a for-profit development group that nonetheless recognizes the qualitative – as well as quantitative – benefits of reversing the momentum caused by blighting structures. Instead, it creates a broadly shared success story that itself leads to wider reinvestment in a community.
Let’s start with the basics. Main Street LLC is an inclusive development group whose strength is in its numbers. You become a member by investing whatever amount you can afford to not see again for awhile. That may be $2,500 or $25,000. Or perhaps you’re a plumber, an electrician, a surveyor, a lawyer, an architect or you sell building supplies, and you can allocate all or a portion of your goods or services as an in-kind investment. Maybe you have an IRA and you direct your manager to invest a portion of that money in your own community. Finally, you might be the owner of the building – you can take a membership interest as a portion of the purchase price.
So with the above participation, your Main Street LLC has raised substantial funds – a group in Perry actually has raised $580,000 for two buildings doing just this. Your lenders are going to be thrilled to contribute a smaller share of the total acquisition and renovation cost. The remaining amount you borrow may even be at interest rates subsidized through NYSERDA or your IDA. Some IDA’s will further partner with you by offering a sale-leaseback agreement that locks in your property taxes for 5-10 years and eliminates sales tax on construction material.
Meanwhile, your thirty member-investors all become your downtown’s newest cheerleaders. They’ve put their “money where their house is” and they now own a piece of downtown. They will make a more conscious effort to patronize businesses; they may become a tenant themselves when the time is right. And they will certainly direct potential tenants to “their” building. Meanwhile, the scale of the project assures that its cost per square-foot of leasable space is lower than possible on a smaller project. Your Main Street LLC has minimized its debt load, and can thus afford to take the long view, providing affordable, available, attractive space.
While you’re waiting for the project to cash flow in years one and two, there are tax credits for you. The low-hanging fruit is a 10% tax credit with no strings attached as long as your building is old, not residential, and not in a designated historic district. That alone means that if you are just a 5% member of an LLC that spends $500,000 on rehabilitation costs (some of that can be borrowed money, you know), you will save $2,500 on your personal federal income tax during those first years. And if your community is forward-looking enough to recognize the benefits of creating a national register historic district in your downtown, it means that in the same example you will save $10,000 split between federal and state income taxes, as long as the building follows rehabilitation standards. (On the other hand, owners in a national register historic district who want to knock their building down, blow it up, paint it pink or wrap it in vinyl will not be prevented from doing so by this designation – their local zoning ordinance may be another issue!).
There is a lot more to this strategy. In the end, “Main Street LLC” may offer a way forward for your downtown, one that is private sector-fueled, and community-led.
