Emerging Neighborhood Markets: Investing in Local Businesses

Improving Access to Community Development Capital Series

Whether you represent a community, a nonprofit organization, an investment firm or any of a number of entities with money to spend on community development, the advice is the same: You gotta know the territory.

As so aptly put in Meredith Wilson’s The Music Man, knowing the territory is the best way to sell your idea or to decide where to invest your money.

That sage advice was presented at the third meeting in the Improving Access to Community Development Capital Series, sponsored by the Community Affairs Office of the Federal Reserve Bank of St. Louis. Speakers emphasized the importance of obtaining an accurate market analysis before investing money in communities.

Without a good analysis, a community’s economic goals are often impeded, said John Talmage, president and CEO of Social Compact in Washington, D.C. The organization is a national coalition of business leaders who promote successful business investment in lower-income communities. It provides neighborhood market analysis services to local governments, community organizations and businesses looking to attract investment or to invest in inner cities.

Negative stereotypes and inaccurate Census date often are barriers to revitalizing the business community in low-income neighborhoods, Talmage said. Retailers and developers need to see that a strong market exists before committing money to an area.

As an example, Talmage referred to an analysis the organization did for Santa Ana, Calif. Of the city’s 100,000 residents, 69 percent did not have bank accounts. However, surprisingly, about 52 percent were home owners and had an average household income of $69,000. There was no supermarket and only one bank. It became clear that the retail market had a lot of buying power that was not being captured.

Rollin Stanley, executive director of the Planning and Urban Design Agency for the city of St. Louis, echoed Talmage’s remarks.

The agency spends “a lot of time” conducting analyses for “big box” retailers and others. It has data on consumer expenditures in all of the city’s neighborhoods and can compare it to data on neighborhoods in other cities. The agency also tracks housing trends and residents’ education and income levels, among other demographics. And it regularly challenges Census Bureau data. Stanley pointed out that downtown St. Louis has 10,000 more residents than it did in the last Census.

Stanley also acknowledged that St. Louis has had a dramatic loss of residents in the last few decades, which is detrimental to the economy. “We’ve got to get back 500,000 people to support the city,” he said. “Give me density or give me death!”

Other speakers gave overviews of federal and state tax credit programs and how they can be the financial key that opens the door to building a project.