Raising Money for Revitalization
By Kennedy Smith | From Main Street Story of the Week | March 1998 | 141
|Raising Money for Revitalization|
Somebody once told me that fund raising is like going to the dentist. Nobody really likes it, but everyone has to do it—and the longer you put it off, the more urgent it becomes.
Well, I think that's a crazy analogy. I'm sure I have at least an average amount of dental dread, but I actually think fund raising for main street revitalization is kind of fun. In fact—beyond the obvious benefits of keeping the organization fiscally fit—fund raising can be the single most effective tool available for building volunteer and political support for the revitalization effort.
Myths and Misunderstandings
No other aspect of the main street revitalization process is more misunderstood than fund raising. Among the common misperceptions:
But the "one size fits all" myth is probably the greatest myth of all—believing that the kind of fund raising you do in the first few years of the revitalization effort is equally appropriate in later years, as the program matures. As revitalization programs mature, their funding needs—and opportunities—change as well. So, before going further, let's outline the general stages of revitalization work. Revitalization programs typically go through three distinct organizational phases.
During the Catalyst Phase, the revitalization program's participants learn basic revitalization skills (and, sometimes, unlearn skills that are ineffective or counterproductive); build a credible image for the revitalization effort; bring about some positive visible changes in the district; and, after learning about the district's best economic opportunities, define an economic development direction for the future.
Most of the major reinvestment in physical improvements, business growth, and expansion of new economic activities (such as housing and small-scale industry) occurs during the second phase—the Growth Phase. These are the years when the revitalization organization's participants build on the skills they've developed in the first few years to tackle tougher revitalization and development issues. The growth phase typically lasts between 10 to 15 years, depending on the severity of the commercial district's economic needs.
Strictly speaking, the first two organizational phases—catalyst and growth—are the phases in which revitalization takes place. These are the years in which the district returns to a state of economic health. The third (and ongoing) phase involves managing the changes that have been made and maintaining the district's economic viability.
Therefore, when the district has experienced significant levels of reinvestment, the revitalization organization enters the Management Phase. At this point, the organization becomes a very different entity. The threatening challenges that propelled the community to become active in commercial district revitalization usually no longer exist—and, for that reason, people may no longer feel as motivated to support the program. This fundamental change—an important indicator of the program's success—has significant implications for main street staff, volunteer, and fund-raising needs.
What do these three phases mean for the organization's fund-raising strategies?
In the catalyst phase, revitalization programs usually raise money by securing unrestricted pledges and commitments from both the public and private sectors. Since the new program has not yet established a track record, it gets funding commitments by getting people excited about the possibilities—in essence, by selling a vision.
By the time the organization moves into the growth phase, it better have something to show for its efforts. People will want to see some tangible progress—and, more importantly, a sound, achievable plan for the next few years—before investing more money in the revitalization program. In essence, they want to see a business plan.
Finally, when the organization shifts its focus from revitalization to management, it will need several sources of ongoing, earned income—or another constant, reliable revenue stream—since it is unlikely that people will feel as passionate a need to contribute to a healthy, vibrant district as they did to one that was suffering.
Revitalizing a traditional commercial district involves a wide variety of activities, from rehabilitating buildings to recruiting new businesses to organizing festivals. Because these projects are so diverse, fund raising for the revitalization effort is more diverse as well. If you have raised money for the United Way, Girl Scouts, a church or temple group, or a merchants' association in the past, all the skills you developed with these organizations will be useful. If you have helped write applications for Community Development Block Grants (CDBG), worked to finance housing developments, or helped establish special assessment districts, these skills will be useful, too.
In brief, many types of funding are needed to revitalize a traditional commercial district. And it's the sheer diversity of funding needs that distinguishes the process of raising money for a main street revitalization program from fund raising for other charitable, civic, educational, or community development programs. (See Table 1.)
A Crash Course in Main Street Fund Raising
In your revitalization program's early years—the catalyst phase—start-up funds for the program's administration are usually contributed by both the public and private sectors. There's not much magic involved in raising this start-up money, just lots of elbow grease and persuasiveness: you go to the city council and ask for a commitment, and you go to members of the community and ask them for commitments. Shoot to raise 50 percent from each sector. Get up-front pledges, good for the first three or four years of the program's work. Make sure the revitalization program makes great progress in its first few years, keep your contributors informed about this progress, be diligent about calling in the pledges, and you should have some happy contributors.
Then, you come to the growth phase—and, all of a sudden, your previously happy contributors want more. They want to know they're getting something tangible for their investment. In just a few short years, their perception of the revitalization program has shifted from that of a gamble on a new venture to an investment in a program with a promising track record. And, that's not the only change you suddenly encounter. Of all the communities whose Main Street revitalization programs have failed, almost all have failed at the transition point between the catalyst phase and the growth phase.
For lots of reasons, therefore, this is a critical moment in the revitalization program's evolution. And, for that reason, we're going to spend most of the rest of this article focusing on fund raising for the growth phase.
As your program starts to dip its toes into the growth phase pool and to consider tackling the bigger challenges, you will generally need four things:
A strategic plan
You can't raise money until you can tell people what it is that you're raising money for. In the catalyst phase, it might be good enough to just say you're raising money to support the revitalization effort. But, after the program is under way and you're looking at its long-term needs, people need to know what they're investing in.
As a result, you must clearly articulate the three or four major activities that will be the main focus of the revitalization program's energy over the next five years. Thus, it's critical to precede a comprehensive fund-raising campaign by developing a strategic plan. Step back, identify the biggest challenges the district faces, and think strategically about how to use the skills the program has developed, the partnerships it has built, and the resources it has gathered to tackle these issues.
Without getting into the nitty-gritty of strategic planning, here are a few basic points about structuring your strategic plan and using it to develop a financial plan:
A financial plan
Once you have your strategic plan in hand, your next step is to turn it into a budget—then to turn the budget into a fund raising plan.
First, the budget: What's it going to cost to do all the things you need to do over the next five years to advance your district's revitalization efforts? For each of your major strategies, hammer out a budget that includes not just your program's operating costs but also capital costs, payments to consultants, expenditures to provide financing or financial incentives, and everything else.
At this point, it doesn't matter if some costs will actually be covered by another entity and therefore don't really need to be part of your fund-raising goals; put everything in your budget anyway. For instance, if replacing the district's sidewalks is a priority activity to achieve one of your goals and the city is already planning to use CDBG money for this project, you should still include this cost in your preliminary budget (it'll be an expense that already has dedicated funding). Putting everything in the budget not only gives you an accurate estimate of all the costs involved in the revitalization effort but also helps illustrate how a wide range of agencies, organizations, businesses, and individuals can—and should—play a role in funding the district's revitalization. With the budget complete, the next step is to estimate how much you can reasonably expect each potential "investor" to contribute (see Table 3 on pg. 12).
This process can get a bit complicated because you will probably have to ask potential major donors (like local government) what they might contribute before you develop the matrix. Start with public-sector contributions, particularly with CDBG funds, Certified Local Government funds, and other money that might be available for specific types of bricks-and-mortar projects or other activities for which public funds are specifically dedicated. In essence, you can almost shape the future availability of funds and make this part of the fund-raising plan a self-fulfilling prophecy. For instance, if new sidewalks are part of your five-year strategy, the city has plenty of time to apply for CDBG funds to cover most or all of the cost—but, unless you ask, the city might not apply.
It's also wise to carefully preview your strategic plan with several potential major contributors—the president of a major local industry, for example, or the chair of an influential civic organization. You'll want to find out if this is a strategic plan—and a direction for the district's revitalization—that they are willing to support. These visits have three key benefits:
These "assessment" visits are best conducted by someone who can relate to potential funders on a peer-to-peer basis. And this brings us to the third thing a revitalization program moving into its "middle" years needs, at least in terms of funding—a well-organized fund raising campaign.
The fund raising campaign
Now that your targets are established, it's time to expand your fund-raising team. The first thing you'll need is a
great campaign manager to oversee the operation, keep everyone moving in the same direction, enforce deadlines, be a public spokesperson for the campaign and its goals, and twist a few influential arms. You should choose someone who is very well organized, great at working with people, influential, and highly regarded in the community. And, no, even though your revitalization program's professional director may have these characteristics, he or she cannot be the campaign manager (see "Making it the Staff's Responsibility—and other Classic Fund-Raising Mistakes opposite). Fund raising is a board responsibility, not a staff responsibility. Your fund-raising campaign manager can come from just about any profession, be working or retired, and be of almost any age. What is most important is that, in addition to having the attributes listed above, the person be willing to commit a significant amount of time to the campaign for up to a year.
Working with the campaign manager, the board should recruit "lieutenants"—people who will manage specific segments of the fund-raising program. The segments for which you'll need managers will depend on how you structure your list of potential contributors, of course—but, in general, you will probably want people to manage such segments as:
Each segment manager should recruit a core team of volunteers. The size of each team will depend, to an extent, on the size of the potential donor pool. If there are only three local industries in the community, that team needn't be very big, whereas the team you need to reach a thousand potential individual donors likely to make contributions of $100 or less would obviously be fairly large. Each team should consist of people who know likely donors in that category.
The first task of all of the teams is to develop a list of potential contributors—as long a list as possible. For each potential contributor, jot down some thoughts about what that person is likely to find most compelling about the revitalization process and most appealing about your planned activities. And, based on what you know about the donor's resources and previous charitable contributions, take a stab at estimating how much you should ask for. Remember that this is a multi-year gift, so you should be asking for a multi-year amount.
Next, the campaign manager and team managers need to get feedback from the teams. Be sure to combine all the lists of potential contributors developed by each team and check them to ensure there is no duplication. Also, take a close look at the major messages the teams think should be emphasized in the fund-raising campaign; this information will help you shape your campaign materials.
"Campaign materials," you ask?
Yep. You should have professionally designed materials that explain—in as compelling and dynamic a manner as possible—why revitalizing your commercial district is so important; why the direction laid out in your organization's strategic plan is the right one for tackling the tough challenges ahead; and how each donor's contribution is an important part of making it happen. Your materials should outline opportunities for potential contributors to sponsor a particular activity or project (like "adopting" a bench or underwriting a promotional event) as well as to make an unrestricted contribution that the program can use for whatever it needs. Your volunteers should also have well-designed materials—folders, note cards, assignment sheets—that make them feel like they're part of a top-notch team and are doing an important job.
Speaking of volunteers, be sure to provide thorough training so that they can do the best job possible for you. Set up exercises for the people who will be making "cold calls" to ask for contributions so that they can practice how to start a conversation, explain the program's goals, and ask for a donation. People who make "cold calls" for a living, like insurance agents or stock brokers, can often help structure training programs and exercises for fund-raising volunteers. Finally, ask each of your volunteers to make a contribution up front; people are more likely to give to a cause to which the fund raiser has personally contributed.
After you get feedback from each of the team leaders, your fund-raising campaign manager should shape up and finalize the overall fund-raising targets for each segment. The old adage about 80 percent of the funding coming from 20 percent of the donors really is true, more or less. It's likely that local government (probably in the form of dedicated funding for specific bricks-and-mortar or other tangible projects); a handful of financial institutions and industries; and several key individuals will contribute the bulk of the money, while there may be several hundred individuals who give $100 or less.
Start the fund-raising campaign quietly by going to a few businesses, organizations, agencies, and/or individuals who are good bets to make major contributions and secure their donations. Although there's no hard-and-fast rule about this, it's a good idea to try to raise one-quarter or one-third of your total target before going "public." Being able to announce some major contributions—and an impressive list of influential groups, businesses, agencies, and individuals who have made a commitment to the revialization effort—gives the public campaign considerable momentum.
When you're ready to go "public," kick off the campaign with a big media event. Have key individuals present the major strategies your organization plans to pursue over the coming years, stressing the urgent need to strengthen the commercial district and the benefits to the entire community of a strong, vibrant main street. Publicly acknowledge and thank those who have made contributions so far, and ask them to say a few words about why they support both the revitalization effort and the fund-raising campaign.
Once the public is aware of the campaign, get your volunteers to fan out and start making contacts! Set clear deadlines, get frequent feedback from all of your teams, keep them updated on the progress of the campaign, and get ready to record those pledges!
Fund raising, of course, does not end when you've reached your target. In many ways, it's just beginning. The most important steps in the fund-raising program lie ahead: collecting your pledges (annually); fulfilling your promises; and keeping all your contributors updated on your program's progress and on the good work their contributions have made possible.
A few additional guidelines and rules of thumb:
Channeling Increased Economic Activity into Ongoing Management
Believe it or not, with your next few years now more financially secure—and your work plan very full!— it's not too soon to start thinking about funding the program in the management phase.
Lest it sound too exhausting to think about more fund raising at this point, we'll save most of the gory details for another issue of Main Street News sometime in the future. For now, the key aspect of management phase funding to focus on as your revitalization program moves into the growth phase is how to turn some of the district's tangible economic growth into ongoing program funding. After all, if buildings improve in value, business sales grow, rents increase, and tax revenues from the district expand, it makes sense for some of that new economic activity to be "captured" in some way and invested in the revitalization program's continuing activities.
There are many ways this can happen. For instance, the district's property owners might decide to support a Business Improvement District (BID), through which they'd pay a voluntary assessment in exchange for certain districtwide management services provided by the revitalization program. The main street program itself might acquire and redevelop one or more of the district's key buildings; it could then use the income from those buildings to cover all or part of the program's operating expenses. Or the program might contract with the local government to provide certain services, such as managing municipal parking areas.
The important thing to remember is that you need to plant the seeds for future funding. If your program's leaders think a BID might be a good idea to pursue in a few years, for example, you'll need the support of most of the district's property owners (or, in some instances, business owners)—so be sure to build their support now.
Major steps in the fund-raising campaign:
Table 1: Fund raising needs and typical sources, by phase of program activity
Phase Need Typical sources
Catalyst Unrestricted funds to support Private-sector pledges;
the revitalization process appropriations from local
Growth Project-related funds Public and private contributions and
(including support for program allocations for specific activities;
administration) some earned income
Management Both unrestricted funds to Revenues from special assessment
support the ongoing districts; earned income; municipal
management of the district as service contracts; sponsorships;
well as project-related funds ongoing contributions and allocations
Avoid Common Mistakes
Sooner or later, just about everyone is asked to help out with a fund-raising campaign of some sort. But, hardly anyone has had any kind of training in fund raising—people are just expected to go out there and raise money, regardless of whether they have a clue how to do it. Well, if someone has asked you to help raise money for a revitalization program without giving you much guidance, that's a mistake. But that's just the first of many mistakes commonly made in fund raising for revitalization programs. Here are a few of the others:
Big Mistake #1: Making fund raising a staff responsibility. If staff's major responsibilities are (a) helping coordinate the revitalization program and (b) raising the money to cover his or her own salary, which do you think will be the number-one priority? The odds are good it'll be the latter. And, if the staff is spending all its time raising money, who's coordinating the revitalization program?
Not only is it a bad management decision to make fund raising primarily a staff responsibility, it isn't even an effective fund-raising technique. Potential contributors are always going to be a little suspicious of the "hired gun." After all, the staff person is being paid to say good things about the revitalization program, whether he or she believes it or not.
In short, the program's volunteer leaders are the best fund raisers. Since they're volunteering for this assignment (instead of relying on it to pay the mortgage), their motives are more credible with potential funders. And, by assuming primary responsibility for fund raising, they free up the staff's time to keep the revitalization program moving forward. Sure, there's a role for staff in the fund-raising process—but it's primarily an administrative, supporting role. The program's volunteer leaders are the ones who should be asking the community to invest.
Big Mistake #2: Using the same fund-raising strategy every year. Revitalization programs change as they mature—and their fund-raising needs change also (see "Fund raising over the years"). This means their fund-raising strategies must also change. A 10-year-old revitalization program, for instance, must have built a credible track record in order to keep the community's support. But a program that's just getting started hasn't built a track record yet; it has to raise money by getting people excited about the possibility of a vibrant, revitalized commercial district. These programs need different fund-raising strategies.
Big Mistake #3: Raising only enough to cover the revitalization program's administrative costs. Too many revitalization programs short-change themselves by setting their sights too low, raising only enough money to cover operational costs. Don't neglect the costs of public improvements, promotional activities, financial incentive programs, business development, and other crucial revitalization activities that can—and must—be included in the budget. Even if the money for some of these activities doesn't technically appear in your organization's budget, it's still money that needs to be spent on the revitalization effort and should be tallied up for fund-raising purposes.
Big Mistake #4: Thinking that federal or state government has "big bucks" for revitalization. For an incredibly brief period of time in the 1970s, the federal government made limited grants available for the rehabilitation of historic commercial buildings. Somehow, though, the idea that the government is handing out lots of money for historic preservation became ingrained in the minds of people everywhere, and the belief that the feds will fund downtown revitalization became one of the most popular myths of all time (at least in the downtown revitalization world). The myth probably grew to its astronomically exaggerated state because people confused it with the federal government's now-extinct Urban Renewal program, which did throw huge amounts of money at downtowns in the 1960s and 1970s. Unfortunately, most of this money was used to tear down buildings, turn main streets into expensive and over-designed pedestrian malls, and wreak similar forms of havoc on commercial districts. At any rate, since the late 1970s, both the federal and state governments have cut back the funding for use purely in commercial revitalization to zero. A few programs, such as the CDBG program, can be used for various revitalization activities, but the bottom line is that main street revitalization efforts must learn to be self-sufficient.
Big Mistake #5: Relying on grants. What grants? Didn't you just read Big Mistake #4?
Sure, there are some grants out there—if not government grants, then possibly from foundations or corporations. With rare exceptions, however, grant makers don't like to fund ongoing administrative costs (like salaries and overhead expenses). They'd rather fund specific, short-term activities and, if possible, activities that are innovative, rather than standard or commonplace. Besides, a program that relies on grants for its initial funding never develops the comprehensive fund-raising skills it needs to survive over the long term.
Big Mistake #6: Relying on only one or two sources of funding. Any investment advisor worth his or her salt will tell you that it's important to diversify your investment portfolio. If all of your money is invested in oil companies, and the price of oil takes a nosedive, you've lost lots of money. If, on the other hand, you've invested in several different industries, you're in a less risky position, since it's unlikely that all of these industries will decline at the same time.
The same lesson applies to funding a commercial district revitalization program. Relying on just one or two sources of funding can be dangerous—if your major funding source suddenly disappears, so can your program. There are, unfortunately, too many examples of main street programs that received heavy financial support from local government, and, then, when a new mayor or city council was elected, found their funding cut and their program dead. As your program grows, be sure its sources of funding grow too.
Big Mistake #7: Confusing "fund raising" with "financing." It takes a lot of money to revitalize a traditional commercial district. Some of it supports the program's administration—staff salaries and fringe, office rent and utilities, staff development costs, and other administrative expenses. Some of it is needed as capital to invest in building rehabs, public infrastructure, or business development. But, these aren't the same kinds of funding. Developing sources of capital or equity is not the same thing as raising money to support the administration of a revitalization program.
Table 2: Quantifying the revitalization program's needs (sample 5-year budget)
Strategy #1 Strategy #2 Strategy #3 Strategy #4
Capital expenditures $1,200,000 3,000,000 100,000 2,000,000
Consultants 30,000 50,000 10,000 100,000
Financing costs and financial incentives 10,000 0 10,000 50,000
Other 25,000 50,000 5,000 25,000
Subtotal, project-specific costs: $1,265,000 $3,100,000 $125,000 $2,175,000
Item Total budget % of organization's focus
40% 25% 20% 15%
Salary and fringe benefits $75,000 30,000 18,750 15,000 11,250
Overhead/administration $25,000 10,000 5,250 5,000 3,750
Subtotal, prorated costs: $100,000 40,000 25,000 20,000 15,000
Total costs, by strategy: $1,345,000 $3,125,000 $145,000$2,190,000
Total five-year fund-raising goal: $6,805,000
Table 3: Targeted sources of funding (sample 5-year targets)
Strategies/priorities Total, by source
Strategy #1Strategy #2 Strategy #3 Strategy #4 (5 years)
Total costs: $1,345,000 $3,125,000 $145,000 $2,190,00 $6,805,000
Community Development Block Grants 2,475,000 1,240,000 3,715,000
State transportation funds or ISTEA funds 750,000 750,000
Development impact fees 50,000 25,000 75,000
Certified Local Government funds (SHPO) 10,000 10,000
City line-item appropriation 50,000 50,000
Subtotal, public-sector sources: 800,000 2,500,000 50,0001,250,000 4,600,000
Merchants' Association 95,000 95,000
State Arts Council 25,000 25,000
Chamber of Commerce 40,000 40,000
Local industries 500,000 300,000 200,000 1,000,000
Corporate sponsorships 125,000 125,000
Civic clubs 10,000 50,000 60,000
Rental income and other earned income 90,000 90,000
BID (when implemented in 3 years) 500,000 500,000
Individual donors: gifts of $10,000+ 50,000 50,000 100,000
Individual donors: gifts of $5,000-$10,000 50,000 50,000
Individual donors: gifts of $1,000-$5,000 50,000 50,000 100,000
Individual donors: gifts of $250-$500 5,000 5,000 10,000
Individual donors: gifts under $250 5,000 5,000 10,000
Subtotal, private-sector sources: 545,000 625,000 95,000 940,000 2,205,000
Total targets, by strategy: $1,345,000 $3,125,000 $145,000 $2,190,000 $6,805,000
Total, public- and private-sector sources (five years): $6,805,000
Kennedy Lawson Smith is the former director of the National Trust Main Street Center.