Potential Funding Sources

Launching and operating a downtown revitalization program requires time, effort, and of course, money. As you plan your organization, you should carefully consider how you will get your funding. Here are some examples of funding sources that can work well for a local Main Street program:

City Government

City government can be a partner in funding basic operating expenses and often contributes money to specific downtown projects. There are two basic funding pots from which you can solicit money from city government: the general fund, and special dedicated funds. Within these funds, Thank You For Your Business Signthe city government has a certain amount of money that must be allocated for particular projects. For instance, one special dedicated fund is made up of money from gas taxes. This money must be allocated to street projects. General fund dollars can be applied to downtown management, public improvements, public facilities, technical assistance, and possibly promotions.

Memberships

Membership fees paid to your organization can be a source of funding for most aspects of downtown revitalization. Your organization must administer a well-planned membership campaign in order for membership dues to become a meaningful source of funding. This kind of fundraising is ongoing and can only succeed with a good chair to spur the board on. Follow-through is essential to a good membership campaign.

Corporate Donations

Corporate donations may be distinguished from membership dues primarily by the size of contribution. Many corporations actively support commercial revitalization efforts through donations of money, services, and equipment. Most corporations see donations to social and economic development causes as investments in their community. Their willingness to give is directly proportional to their existing or future presence in the community. A corporation typically evaluates a donation in terms of return on their investment (usually in terms of dollars, publicity, human betterment, or economic growth).

Sponsorships

Many corporate donations come in the form of sponsorships. Sponsorships are a good source of funding for special events and promotions. Many suppliers of products used in special events, not to mention the media, may be willing to donate their products and services in return for listing as an event sponsor. As with corporate donations, sponsors will only contribute if they are confident of a positive returns on investment.

Fundraising Events

Fundraising events are a good source of revenue for downtown management, promotions, public improvements, and public facilities. Fundraising events are different from special events—they occur regularly, are conceived and run like a business, and are regarded as a business venture by the sponsoring organization. Be careful to work out goals, plans, and budgets thoroughly before launching a fundraiser—a poorly-planned event can cost your organization more money than it generates.

Foundations

Foundations are non-governmental, nonprofit organizations which, primarily through investment of their assets, produce income that is awarded as grants. Foundation grants aid social, educational, charitable, religious, and other activities that serve the common welfare. Foundations generally have restrictions concerning what they will and will not support. In order to qualify for a foundation grant you must be a tax-exempt organization recognized by the IRS. Foundation grants can be used to fund public improvements, public facilities, technical assistance, promotions, and downtown management depending on the purpose, activities, and area of interest of the foundation.

Volunteers

Volunteers are often an overlooked means of funding for many commercial revitalization projects. Volunteers can provide many services that might otherwise require cash resources beyond the means of the organization. Volunteers might sell spots in a coordinated advertising campaign, provide part-time office help or clerical support, solicit donations and memberships, provide physical labor such as painting a building or sweeping a sidewalk, prepare financial statements or submit tax returns, design logos or print newsletters. With proper motivation and good management, volunteers can do almost anything.A festival in downtown Brainerd

Special Service Districts (SSD)

A Special Service District is a local self-help funding mechanism authorized by Minnesota State Statute M.S. 428A, which allows municipalities to levy special assessments on business owners within a defined district. Funds collected can be used to provide management, landscaping, improvements, maintenance, promotion, business recruitment, and parking within the district. Setting up a SSD requires time and effort, includes a defined public process, and can be politically sensitive. Your city staff, MMS, and the League of Minnesota Cities can assist you with the process. For further information, read this Minnesota House of Representatives informational brief on SSDs.

Local Lodging Tax

A Local Option Lodging Tax is a local self-help mechanism authorized by Minnesota State Statute M.S. 469.190, which allows local governments to collect revenues from lodging within their jurisdiction to be used for marketing the city or town as a tourist center. Your city staff and the League of Minnesota Cities can provide you with information on eligibility and procedures.

Product Sales

A budget can be subsidized by selling products related to the organization, community, or promotion. These products might include t-shirts and other apparel, posters, souvenirs, specialized game boards, and customized bricks for streetscape projects. Product variety is only as limited as the imagination. Before launching a product campaign, your organization must be confident it can sell the products. Don’t depend on product sales to make ends meet.

Retail Fees

Retail fees, or “in-fees,” are paid by the primary beneficiaries of a particular promotion or group of promotions. Typically, your organization will think of a retail promotion, develop a budget, and determine participation fees by dividing the total budget by the projected number of participants.

Service Fees

Service fees are a common source of funds for many nonprofit organizations, but are not often used in the commercial revitalization field. Service fees might be generated for professional services such as commercial building design assistance, parking management or enforcement, property management, real estate negotiation or packaging, retail promotion packaging, advertising, or business recruitment. Service fees are a dependable and self-perpetuating source of income, but can be deceptive. Many nonprofit organizations start profit-producing services to subsidize their projects, only to discover later that the services are actually draining organization resources rather than producing income.

Subsidies from Profitable Social Enterprise

A number of very entrepreneurial nonprofit organizations have started for-profit arms to make money and subsidize their basic programs. Examples related to commercial revitalization might include a real estate development company subsidizing a commercial district management nonprofit, or a nonprofit leasing its real estate to for-profit businesses to generate income to support the nonprofit’s activities. Subsidies from profitable businesses can be another source of ongoing and dependable operating support, but should be viewed with similar cautions to income service fees.

A number of very entrepreneurial nonprofit organizations have started for-profit arms to make money and subsidize their basic programs. Examples related to commercial revitalization might include a real estate development company subsidizing a commercial district management nonprofit, or a nonprofit leasing its real estate to for-profit businesses to generate income to support the nonprofit’s activities. Subsidies from profitable businesses can be another source of ongoing and dependable operating support, but should be viewed with similar cautions to income service fees.

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