Appalachian Downtown Developers Initiative - Invest Appalachia by Destination by Design

APPALACHIAN DOWNTOWN DEVELOPERS

Planning Summary, Strategic Recommendations, and Implementation Road Map >> SPRING 2025

Introduction Letter: Why Downtowns?

Downtowns are the beating heart of small cities, towns, and rural communities. Downtowns are what gives a place character, where residents come together, and where local ownership, small businesses, and quality jobs anchor a local economy. Decades of disinvestment from Central Appalachia and across Rural America has hollowed out many downtowns, to the great detriment of community well-being and local economic vitality. Fortunately, there has been a shift in recent years of recognizing the pivotal roles that downtowns play in our social fabric and in the shape our local economies take.

Downtowns - especially in small cities, towns, and villages - are once again a place where people want to live, work, shop, play, pray, meet, and interact with neighbors and strangers alike. While there has been a resurgence of interest in supporting the growth of downtowns across America, Central Appalachia has struggled to meet the opportunity of this moment because of a critical barrier: a lack of public, private, and non-profit developers with the capacity, experience, commitment and resources to redevelop the historic built environment of Downtown Appalachia.

The Appalachian Downtown Developers Initiative is a collaborative effort of 40+ organizations and 60+ individuals across eastern Kentucky, western North Carolina, southwest Virginia, and all of West Virginia who have come together to tackle a persistent barrier to downtown revitalization in our region: the need for a sustained, resourced and strategically integrated support system to launch the next generation of Appalachia’s developers.

It is well documented that sustained locally-driven economic development has had the most success in places where it works in tandem with community development. At the same time, the work to revitalize and rebuild vibrant local economies is increasingly centered on a place-based strategy of redeveloping downtowns. Central Appalachia has witnessed some of this successful downtown-based development, particularly in places where multiple diverse stakeholders partner together to drive downtown revitalization and redevelopment through strategies that center community needs and local economic activity. This work often starts with organizing, planning, and engagement of residents,

local businesses, and other stakeholders. To achieve transformative community progress, this work must be complemented by the tangible and tactical work of mission-aligned real estate development and revitalization.

Real estate serves as the critical foundation of downtown revitalization and - in several important ways - of community development and civic health. Yet, even in places where there is sustained collaboration and creative strategies for downtown revitalization that are right-sized for each individual community, sustained and systemic challenges to achieving downtown revitalization remain. In particular, these challenges relate to the built environment in communities that are lowincome and have a significant portion of real estate that are historic, dilapidated and with limited space for new development.

Real estate links critical issues and challenges of downtown development, including: ownership and control, access and belonging, wealth-building and entrepreneurship, resilience and longevity, and culture and local identity. As we pursue downtown revitalization strategies through real estate development, key questions must be grappled with, including: Who owns downtown real estate and redevelopment projects? Who develops it? What is its purpose? Who does it benefit?

As various initiatives across Central Appalachia have pursued aspects of downtown revitalization and real estate development, partners across the region have identified patterns: what is working, what the gaps are, and what it will take to capture the massive opportunity that communityoriented downtown development presents.

TROPICAL STORM HELENE

In the midst of this planning process, Tropical Storm Helene brought unprecedented wind and rain to southern Appalachia leading to the worst disaster in our region’s history. As a native and resident of WNC, I witnessed firsthand the storm’s devastation of homes, businesses, buildings, infrastructure, and entire landscapes. Neighborhoods and downtowns were devastated that anchor entire economies and countless livelihoods. But I also saw how rural downtowns served as the epicenters of locally-rooted recovery efforts. Volunteers, residents, and recovery agencies worked side by side to restore their beloved downtowns. Much redevelopment, renovations, and new construction will be necessary. The need for community-oriented downtown developer capacity, support networks, technical assistance, flexible financing, training, and collaboration is more apparent and acute than ever. We must do what we can to keep our downtowns rooted by local ownership and geared towards community benefit, in WNC and across Appalachia.

- Andrew Crosson, Asheville, NC

The Appalachian Downtown Developers Initiative was born out of a desire to pull these lessons and this progress together to catalyze a new phase of downtown development across multiple states in Central Appalachia. But as the name of this initiative indicates, the key to unlocking the opportunity in Appalachia’s downtowns is in the developers themselves - the entities (organizations, businesses, agencies) that can actually do the real estate projects in a way that advances community interests, and which become the permanent capacity for place-based development when they achieve success. If we want to see deep and lasting benefits from downtown development work, these entities should be locally rooted and motivated by community benefit to the greatest extent possible.

The vision guiding this initiative is of an Appalachian region full of thriving communities and economies centered on vibrant downtowns. Realizing that vision will take a whole ecosystem of support and resources centered around Appalachian downtown developers. We have seen powerful engagement, excitement and belief in the value of this initiative from the partners in this planning process, demonstrating to us that we are in a unique moment to make something new together. The region is ready to build a comprehensive initiative that weaves together multiple strategies into a new integrated approach to downtown development that is created by and for Appalachians. Through this report we hope to demonstrate the need in the region, the opportunity of the moment, and a clear vision of how to put a suite of strategies into action.

There has never been a greater time to invest in rebuilding the downtowns of Central Appalachia. We believe that by investing directly in the developers that are central to these rebuilding efforts, we will cultivate a generation of growth, development and economic opportunity for our region.

- Andrew Crosson, CEO Invest Appalachia

- Stephanie Tyree, Executive Director WV Community Development Hub

Acknowledgments

We thank the many leaders from across the region that committed time, expertise and guidance to the development of this project and analysis. The enthusiasm for this initiative demonstrates the energy and commitment of Central Appalachia, as well as the demand for a comprehensive strategy to catalyze downtown revitalization by building on the strength of our built environment and our many local leaders.

ADDI LEADERSHIP COUNCIL

Beka Burton, Economic Development Specialist – Community and Economic Development Initiative of Kentucky

Dave Clark, Executive Director – Woodlands Development and Lending

Andrew Crosson, CEO – Invest Appalachia

Kim Davis, Executive Director – Friends of Southwest Virginia

Mae Humiston, Director of Grants and Operations – Invest Appalachia

Nicole Intagliata, Vice President of Programs – Fahe

Christine Laucher, Strategic Partnership Manager – Mountain BizWorks

Ray Moeller, Economic Redevelopment Specialist – Northern Brownfields Assistance Center at West Virginia University

Bryan Phillips, Project Manager Consultant – West Virginia Community Development

Billie Rogers, Project Manager Consultant –Friends of Southwest Virginia

Caroline Stahlschmidt, Senior Project Manager – Destination by Design

Stephanie Tyree, Executive Director – WV Community Development Hub

Hannah Vargason, Senior Project Manager – Center for Impact Finance, UNH Carsey School of Public Policy

Paul Wright, Business Coach – Wright Venture Services

This work was made possible through support from the following organizations:

SECTION 1: PURPOSE AND ASSESSMENT

SECTION 2: RECOMMENDATIONS & IMPLEMENTATION

EXECUTIVE SUMMARY

The Appalachian Downtown Developers Initiative (ADDI) is a plan for a comprehensive, coordinated, and ecosystem-based approach to supporting new and emerging community-based real estate developers. ADDI will invest in building a generation of place-based developers that have increased individual, organizational, and financial capacity to lead downtown development across Central Appalachia. In addition, ADDI will support the physical redevelopment of hundreds of downtown real estate projects and will ultimately launch a new era of investment into downtown revitalization in communities across Central Appalachia. ADDI will accomplish this by linking local public, private, and non-profit local developers to the technical and financial resources and support they need at each step of the downtown real estate development process.

THE NEED

Appalachia’s downtowns are the linchpin of our local economies. They have assets to build on - historic buildings, walkable streets, beautiful landscapes. There is new energy and economic opportunity across the region - main street businesses seeking space, tourists seeking lodging and activities, and residents and newcomers seeking housing. Yet successful community-centered downtown development remains a challenging endeavorexpensive, slow, and fraught with complications.

The system that provides investment and support for downtown revitalization in rural Appalachia is not meeting the opportunities that communities are creating. Across the region, investment in Main Streets have been inequitably distributed as small towns - and entire regions - with high redevelopment potential struggle to implement community revitalization plans and major real estate projects that can drive business development, access to affordable housing, and local economic growth. At the same time, a forward-looking and

coordinated approach to downtown redevelopment is necessary as the Appalachian region confronts the future implications of population change, economic revitalization, and resilience for our downtowns.

The primary barriers to rural downtown development in Appalachia have been clearly identified and include (1) insufficient local developer capacity (or lack of local developers) in most parts of the region, (2) a lack of peer networks and support for developers, (3) disjointed and inconsistent technical assistance resources and training for local developers, and (4) limited access to flexible investment capital for communityoriented projects.

THE PLANNING PROCESS

To address these disparities and opportunities, the Appalachian Downtown Developers Initiative conducted a state-level landscape analysis across four contiguous states, and developed a multi-

pronged implementation plan. This plan is grounded in a robust analysis of the history of downtown development in the region (See Chapter 2.1-2.2), and of existing strategies and programs relevant to this topic (See Chapter 2.3-2.4). The planning process involved over 60 individuals from 40+ different organizations who are working on some aspect of downtown development. Their collective input and analysis, through focused working groups and an in-person convening, validated a focus on strengthening the local developers themselves as the key to transformative downtown development across the region. This focus on downtown developers involves five key pillars: training programs, technical assistance services, peer-to-peer developer support, flexible investment capital, and a comprehensive regional infrastructure to coordinate programs and foster connections.

The result of this planning process is a proposal for an integrated, comprehensive approach to downtown development that links emerging and established developers to the resources and support they need at each step of the development process. These four strategically coordinated programs are:

1. A training program that will include a virtual self-paced course for prospective developers as well as a hands-on cohort model for developers working on a specific project.

2. A technical assistance program providing matching funds and vetted TA providers for eligible projects (building on the Opportunity Appalachia model).

3. A flexible fund of capital products providing grant-funded financial assistance to help secure investment for downtown development projects.

4. A developer peer support network, including a “mentorship” program matching experienced and emerging developers and a “co-developer” model to provide hands-on support to emerging developers taking on projects.

Wherever a developer is in their maturity, and whatever stage their project is, there will be a way for them to plug into the ADDI network for critical support and resources.

The implementation project will also explore structures and operating models for ongoing coordination and resource provision, potentially transitioning to a permanent “Appalachian Downtown Developers Association” entity by the end of the grant period.

Appalachia’s economic revitalization will require transformative investment in the physical assets of our downtowns if it is to be lasting, inclusive, or resilient. And we need locally-rooted and community-oriented developers to take on projects and guide them from concept to reality.

A project-by-project, town-by-town approach to revitalization will not meet this moment. Therefore, the ADDI leadership council and project partners are excited to propose a bold, comprehensive, and coordinated regional strategy for developerfocused downtown revitalization in Appalachia.

PURPOSE AND ASSESSMENT

Chapter 1: Background and Purpose

Chapter 2: Discovery and Analysis

Chapter 3: State Assessments

BACKGROUND AND PURPOSE

The Appalachian Downtown Developers Initiative (ADDI) Implementation Plan serves as the chief planning document to guide Invest Appalachia and its partners in the anticipated implementation of the Appalachian Downtown Developers Initiative. This chapter summarizes the foundation and intent of this important work and provides insight on the plan purpose, goals, process, and overall organization.

IN THIS CHAPTER:

1.1 Project Background

1.2 Project Goals

1.3 Planning Process

1.4 Plan Organization

Project Background

Led by Invest Appalachia and the WV Community Development Hub (The Hub), the Appalachian Downtown Developers Initiative is a regional project supported by the Appalachian Regional Commission (ARC) through the Appalachian Regional Initiative for Stronger Economies (ARISE) program. The initiative convened over 60 organizational partners and subject matter experts from Kentucky, North Carolina, Virginia, and West Virginia to research and design an implementation plan for increasing the capacity of place-based developers to revitalize downtowns and economic hubs across the Central Appalachian region.

The need for locally-driven downtown development in Central Appalachian communities has been identified by several organizations, including Main Street America in their “Small Deal” survey, the Downtown Appalachia Working Group (DAWG) in West Virginia, and in the Downtown Revitalization Playbook, published in 2021.

According to the “Small Deal” survey by Main Street America, a major obstacle to economic growth in Appalachian downtowns is the difficulty of rehabilitating small buildings and advancing infill development. Seventy percent of local leaders in Main Street America communities identified a lack of built-out space as a key barrier to growth. This shortage of functional infrastructure limits the ability to launch new businesses or expand existing ones.

The Downtown Appalachia Working Group of West Virginia identified the need for more locally-based developers as a key barrier to

economic development and local revitalization in a strategic planning assessment in 2019. The group recognized that “Downtowns represent a third space for West Virginia’s future. In places where downtown development is working, these places are building the local economy, improving quality of life, and showing that this can be done. We have seen again and again that major national franchises and chains are not working at the scale of our downtowns. So instead, we must look at how to construct something more localized or regional that meets those same needs.” Starting in 2021, the analysis of this group focused particularly on the need for more mission-driven developers who are regionally focused and deeply embedded in local communities, using community priorities to drive real estate development strategies. More detail on DAWG and its analysis of West Virginia’s downtown redevelopment needs are included in the full WV State Assessment

The Downtown Revitalization Playbook makes the case that downtowns in Central Appalachia are primed for redevelopment and includes multiple case studies of successful downtown redevelopment strategies across the region, including highlighting individual, organizational and collaboratively developed real estate development projects that have succeeded across the region. The Playbook provides an analysis for how to determine if a community is ready for a downtown redevelopment strategy, and provides detailed guidance for multiple stakeholders on how to move forward downtown redevelopment within the context of the region.

These external analyses all identified the primary barriers to rural downtown development in Appalachia as including (1) insufficient local developer capacity, (2) a lack of peer networks and support, (3) disjointed and inconsistent technical assistance resources and training for local developers, and (4) limited access to flexible predevelopment financing and investment capital for community-oriented projects.

To address these disparities, the Appalachian Downtown Developers Initiative conducted a state-level landscape analysis across four contiguous states, and developed a multipronged implementation plan. This plan focuses on five key pillars: training programs, technical assistance services, peer-to-peer development support, flexible financing, and a comprehensive regional infrastructure to manage and drive the project.

Project Goals

LANDSCAPE

Conduct an assessment of the downtown development landscape for each state, including an analysis of existing assets, unmet needs, potential partners, and developmentready communities.

PARTNERS

Engage community leaders from each state, regional partners, and subject matter experts to conduct thorough research, collaboratively develop innovative designs, and strategically plan an implementation process.

GAPS

Identify strengths within the region to leverage, pinpoint gaps that need to be addressed, and explore opportunities for collaboration with stakeholders to promote economic growth and foster revitalization in rural downtown areas.

REGIONAL BALANCE

Address the unique needs of each state while ensuring the fair distribution of resources and opportunities across the region.

STRATEGY

Develop a collaborative regional implementation process with a multi-faceted strategy focused on increasing local developer capacity, supporting peer networks, and expanding investment capital.

Photo by: Friends of Southwest Virginia

Planning Process

The ADDI Implementation Plan represents the culmination of nearly a year of analysis, collaboration, and planning. The planning process involved more than 60 partners and subject matter experts across the region and five major phases, including:

DIRECTION SETTING & PROJECT

LAUNCH MARCH 2024 - MAY 2024

Established a Leadership Council composed of the project management team and the state and working group leads. Facilitated a directionsetting meeting with the Council to establish the vision and goals for the planning process and to identify key project partners.

RESEARCH & ANALYSIS

APRIL 2024 - SEPTEMBER 2024

Conducted interviews, surveys, and demographic research to understand the current landscape and needs of downtown development in Central Appalachian communities.

STATE & WORKING GROUP MEETINGS

JUNE 2024 - SEPTEMBER 2024

State and Working Group leads conducted a series of group meetings and interviews to assess the gaps, barriers, and opportunities within each state and the region. Groups collectively compiled a report reflecting their findings and recommendations.

PLAN FRAMEWORK & PARTNER SUMMIT

JULY 2024 - SEPTEMBER 2024

The Leadership Council compiled draft findings and reports, and prepared presentations on their findings to present to all project partners at the Partner Summit. All project partners were invited to convene at the in-person ADDI Partner Summit in Bristol, Virginia to review and refine the recommendations.

FINAL PLAN DEVELOPMENT

OCTOBER 2024 - FEBRUARY 2025

Developed the comprehensive implementation plan that incorporates the state-specific reports and the implementation recommendations provided by the five working groups as identified during the planning process.

Plan Organization

The ADDI Implementation Plan is organized into nine (9) major chapters as outlined below.

CHAPTER 1: BACKGROUND & PURPOSE

The current chapter, which outlines the plan’s purpose, goals, process, and organization.

CHAPTER 2: DISCOVERY & ANALYSIS

A snapshot of the regional context, regional and state demographics, related programs, and strategically aligned programs are presented here.

CHAPTER 3: STATE ASSESSMENTS

The assessment of the downtown development landscape in Kentucky, North Carolina, Virginia, and West Virginia are summarized in this chapter.

CHAPTER 4: TRAINING PROGRAM

This chapter outlines the results of the Training Program Working Group including the analysis methodology, training assessment and gaps, and recommended training and education products.

CHAPTER 5: TECHNICAL ASSISTANCE

All aspects of the Technical Assistance recommendations are outlined here including analysis methodology, regional challenges, recommended programs, eligibility criteria and cost share, and types of TA providers.

CHAPTER 6: CO-DEVELOPER MODEL

The Co-Developer Model chapter includes analysis methodology, types of developers in the region, challenges for developers, the role of housing, and the co-developer and mentorship models.

CHAPTER 7: CAPITAL PRODUCTS

This chapter outlines the recommendations for Capital Products including analysis methodology, existing capital products, systemic gaps, financing challenges, and proposed capital products.

CHAPTER 8: REGIONAL ASSOCIATION

All aspects of the Regional Association recommendations are outlined here including analysis methodology, existing regional development associations, relevant organizations, and proposed structures for the ADDI Regional Organization.

CHAPTER 9: GENERAL IMPLEMENTATION

This chapter outlines implementation guidelines, including general recommendations and a proposed organizational chart.

Photo by: Mountain BizWorks

DISCOVERY AND ANALYSIS

This chapter explores the regional context and demographics as they relate to downtown development and economic growth. It also offers a high-level overview of the current challenges facing downtown development, as well as related and strategically aligned programs in Central Appalachian communities. The chapter is organized into the following sections:

IN THIS CHAPTER:

2.1 Regional Context

2.2 State of the Downtown Development Field

2.3 Related Programs

2.4 Strategically-Aligned Programs

Regional Context

The Appalachian Downtown Developers Initiative (ADDI) is focused on the region in Central Appalachia composed of the 165 counties in Kentucky, North Carolina, Virginia, and West Virginia that are part of the Appalachian Regional Commission (ARC) region. (See Map 01: ADDI Region, page 28)

The ADDI service area encompasses diverse communities deeply rooted in regional and local cultural traditions, characterized by rugged terrain, rolling hills, and dense forests that define its scenic beauty. While the four states share common economic challenges, each maintains a distinct identity shaped by its unique landscape and history.

For decades, industries like coal mining, timber, and manufacturing drove local economies, providing jobs and fueling community growth. However, market shifts and resource depletion have led to significant economic stagnation, with many communities experiencing population loss and disinvested downtown commercial districts marked by vacant storefronts and deteriorating infrastructure.

The region is home to over 300 small cities and towns, many featuring historic main streets and buildings rich with potential for rehabilitation. These communities now stand at a critical turning point, with aging

structures at risk of decay and demolition without strategic intervention. Supporting local, community-based developers in revitalizing downtown districts can preserve historic spaces, stimulate economic activity, create employment opportunities, and attract new populations.

The macro economic and social context in the U.S. today supports a renewed focus on downtowns in rural communities and small towns. There is a wave of economically and geographically mobile population that is seeking authentic places with walkable main streets, nearby recreational assets and unique, locally owned business offerings that are more original than many of the suburban communities and commercial centers built in the last half of the 20th century. Coupled with demographic shifts and larger trends around urban affordability, lifestyle choice, and the expanded ability to work remotely, these factors make this a moment in time where small towns and cities have an unprecedented opportunity to reinvent themselves physically and economically.

Main Street programs play a crucial role in downtown preservation for the ADDI region, with 63 designated communities across the 4 states that have access to training,

technical assistance, grant programs, and other resources. Main Street programs served as critical partners in each of the four state working groups in the ADDI planning project and brought significant guidance and expertise to the project’s analysis. That said, programs vary greatly from state to state and the number of designated communities and the capacity/level of support Main Street programs provide is inconsistent across the four states. The majority of communities analyzed through the ADDI program were not in Main Street programs and many communities currently lack capacity and resources to participate in the program. The ADDI Leadership Council anticipates that the program implementation will work in close coordination and collaboration with state and national Main Street partners and ideally will serve as a capacity building mechanism to prime more communities in the region to participate in the critical services of the Main Street programs.

The project’s focus on downtown redevelopment aligns with the Appalachian Regional Commission’s investment key priorities of promoting local businesses and supporting regional culture and tourism. By transforming historic downtowns into entrepreneurial hubs, these efforts not only support home-grown businesses but also showcase the region’s rich cultural heritage and potential for economic diversification

DISASTER PREPAREDNESS, COMMUNITY RESILIENCE, AND DOWNTOWN DEVELOPMENT

Downtowns are the epicenters of rural communities and small towns across Appalachia and beyond. They house business, provide housing, and maintain critical infrastructure and community resources. Downtowns also have a major role to play in determining a community’s level of resilience. Streetscapes and green spaces, water and sewer systems, electrical grids, building materials, roadways and bridges, building siting and design - these are all aspects of downtown development that can help reduce negative impacts while also preparing communities for the predictable effects of natural disasters. As we witnessed in the 2022 flooding in E. Kentucky, 2016 floods in West Virginia, and the catastrophic impacts of 2024’s Hurricane Helene on Western NC and parts of Tennessee and Virginia, our downtowns are where natural disasters can hit hardest and where response, recovery, and long-term resilience are rooted. In small towns and rural communities, disaster preparedness and recovery relies more heavily on local capacity and community networks than urban centers that larger government programs are designed well for. Downtown development and revitalization can and should be aligned with the goal of resilience and adaptation, to give Appalachian communities the best possible chance to thrive in a changed future.

MAP 01: ADDI REGION

L e g e n d

S t a t e B o u n d a r i e s

A R C C o un t i e s

K e n t u c k y

N o r t h C a r o l i n a

V i r g i n i a

We s t V i r g i n i a

I n d i a n a

L e w i s

G r ee n u p

N i c h o l a s

B a t h R o w a n

C l a r k

M a d i s o n

G a rr a r d

E d m o n s o n

H a r t

M e n i f e e

P o w e l l

J a c k s o n

R oc k c a s t l e

L a u r e l

K n o x

M o r g a n

Wo l f e Magofﬁn

B r e a t h i t t

P e rr y

H a r l a n

L a w r e n c e

J o h n s o n

F l o yd

K n o t t

L e t c h e r

W h i t l e y

P i k e

B u c h a n a n

D i c k e n s o n

W i s e

B e l l

R u ss e l l

Wa s h i n g t o n

M i t c h e l l

Ya n c e y

H a y w oo d B u n co m b e

M c D o w e l l

S w a i n

C h e r o k e e

M a co n

J a c k s o n

H e n d e r s o n

Tr a n s y l v a n i a

Ta z e w e l l

B u r k e

A s h e

M o n

P u l a s k i

W i l k e s

TOTAL POPULATION

5,653,350

TOTAL # OF HOUSEHOLDS

2,342,326

MEDIAN AGE (compared to 39.3 in the US)

43.4

TOTAL BUSINESSES

193,509

TOTAL # OF MAIN STREET COMMUNITIES

63 MEDIAN HOUSEHOLD INCOME

$56,237 (compared to $79,068 in the US)

COLLEGE DEGREE

HOUSEHOLDS WITH DISABILITIES

POPULATION 65+

26%

13.6% (compared to 9.63% in the US)

WORKING AGE POPULATION (18-64)

21.9% (compared to 18.1% in the US)

HOUSEHOLDS BELOW THE POVERTY LEVEL

58.6% (compared to 60.8% in the US)

17% (compared to 12% in the US)

Source: U.S. Census Bureau. American Community Survey 5-year estimates, 2018–2022.

State of the Downtown Development Field

As discussed above, multiple initiatives have identified the opportunity for downtown redevelopment in Central Appalachia as a critical component and driver of local economic development. Significant resources have been invested in the region over the past decade to increase local community capacity, build local leadership, and increase access to private and public resources for economic development. Despite these opportunities, persistent barriers to downtown revitalization have stymied real estate development projects across Appalachia. Without targeted interventions, development will continue to drive towards economically vibrant areas of the region and leave high-need and high-potential communities behind, increasing the disparity across the region.

Critical challenges that continue to create barriers to downtown real estate development in Central Appalachia were analyzed by the Co-Developer Working Group, led by Dave Clark, Executive Director of Woodlands Development and Lending, who has decades of experience in community and housing development, real estate financing, and small business support in West Virginia. The sustained challenges impacting downtown development in the ADDI region that this group identified serve as a useful grounding landscape analysis of the field, and include:

1. THE NEED FOR REVITALIZING REAL ESTATE ACROSS THE REGION IS TREMENDOUS.

Several initiatives in recent years have worked with communities in Central Appalachia to identify vacant, dilapidated, or underutilized buildings, and plan for redevelopment. Those include Opportunity Appalachia, West Virginia University Brownfields Assistance Center’s Blighted and Dilapidated Buildings Program, the Downtown Appalachia Working Group in West Virginia, Invest Appalachia’s Framers Training (in partnership with the Federal Reserve Bank of Richmond) and others. Additionally, regional partners including community development financial institutions (CDFIs), the Central Appalachian Network (CAN) and the Appalachian Funders Network (AFN) have all documented the persistent and growing need for services to support real estate development projects in rural, distressed communities in Appalachia. Through these efforts, communities have identified hundreds of assets in their downtowns that need to be addressed, and have consistently found that demand for services, financing and support outstrips available resources in the region.

THE NUMBER OF COMMUNITY-BASED DEVELOPERS SERVING CENTRAL APPALACHIA HAS DECLINED over the last 20 years due to leadership attrition, relative decrease in federal grant programs, the decline of support for Community Development Corporations (CDCs), and long-term impacts of the 2008-2010 housing crisis. This has resulted in decreased capacity for downtown redevelopment, along with decreased capacity for housing development that responds to local priorities. Significant geographies across the region have limited or no access to communitybased developers. Multiple communities have attempted to tackle real estate development through initiatives led by community volunteers or municipal programs, which often lack the capacity, expertise or sustained resources to complete complex projects.

SUBSIDIES AVAILABLE FOR DOWNTOWN AND HOUSING DEVELOPMENT INCREASINGLY RELY ON MARKET-DRIVEN APPROACHES. Funding for federal grant programs, like the US Housing and Urban Development (HUD) HOME Investment Partnerships and Community Development Block Grant (CDBG) programs, has been reduced or remained flat for over 20 years. Subsidy programs for real estate development that have grown significantly over this time rely largely on incentivizing market-based investments, such as New Markets Tax Credits, Opportunity Zone Investments, Community Reinvestment Act, etc. These market-driven programs heavily favor large, urban projects and are often inaccessible or overly complex for the size and scope of downtown redevelopment projects in Central Appalachia.

2. PROJECT FINANCING HAS GROWN SIGNIFICANTLY MORE COMPLEX as a result. As funding/financing resources have decreased and construction and project development costs have increased nationally, redevelopment in rural areas often needs to rely on multiple smaller sources of financing for individual projects. Individual funding programs typically have specific requirements and prioritized outcomes, so layering these programs together on any given project can mean juggling multiple performance criteria and reporting requirements. Small projects may require dozens of layered financial resources, each with their own requirements and timelines. This leads to projects whose capitalization is unreplicable, requiring a custom funding approach each time and consuming time that could be better spent actually delivering finished projects.

3. ACCESSING AND MANAGING THESE RESOURCES REQUIRES SIGNIFICANT CAPACITY AND TECHNICAL EXPERTISE BY LOCAL DEVELOPERS, INCENTIVIZING DEVELOPERS TO CONCENTRATE ON LARGER PROJECTS OR COMMUNITIES THAT HAVE MORE RESOURCES FOR REAL ESTATE DEVELOPMENT. Projects that may be community priorities can fail because of a lack of local technical expertise to successfully manage the financial complexity of rural real estate development projects.

4. THE REAL ESTATE MARKET IN RURAL AREAS HAS BEEN DISPROPORTIONATELY IMPACTED BY COVID AND RECENT MARKET SHIFTS. Mirroring national trends, construction costs have increased substantially without a corresponding increase in either rental rates or incomes – making real estate development more difficult to pencil out.

5. REAL ESTATE DEVELOPMENT AS AN INDUSTRY IS INCREASINGLY MOVING AWAY FROM SMALLER PLACES AND BESPOKE PROJECTS, IN SEARCH OF MORE FORMULAIC MODELS IN HIGH VELOCITY MARKETS. This means capital, purpose, expertise and construction capacity are moving further and further from the communities that need it the most.

This historical context is important to understand the current moment for downtown development work. While the opportunity and need is greater than ever, systemic challenges and project complexity have raised the barriers to effective community-based development. The ADDI implementation plan aims to provide a clear-eyed assessment and strategic framework identifying what it will take to empower a network of community-minded developers to build thriving downtowns across the region.

Despite these challenges, there is energy and optimism in the region, as demonstrated by the sustained engagement of dozens of partners committed to building a new system to achieve locally-driven real estate development in Central Appalachia. There is a shared sense that we must build something new that works for our region, learning from others across the country and taking advantage of the unique strengths and opportunities of Appalachian communities.

DEVELOPER TAXONOMY

We have defined the following categories of developers in order to match ADDI support to developers based on their stage of maturity, in an effort to build long-term capacity. ADDI will include non-profit and for-profit communitybased developers, including individuals, across all categories. Additionally, developers may be real estate owners or fee-for-service developers, though eligibility criteria will include clear and full commitment to the project and community.

EXPLORING

Potential developers with relevant skills and interest in leading a real estate project, for whom support is focused on understanding the development process and their personal capacity.

STARTUP

Developers identifying their first project, for whom support is focused on testing project viability and their fit as a developer.

EMERGING

Developers who are actively working on their first several projects, for whom support is focused on advancing and managing the risk of projects.

ESTABLISHED

Developers who have completed several projects, for whom support is focused on managing the risk and complexity of scaling.

MATURE

Developers who have a strong portfolio of projects, for whom support is focused on managing the risk of taking on new partners and/or riskier projects.

Related Programs

The Appalachian Downtown Developer Initiative (ADDI) draws insights from several regional programs targeting similar economic development objectives. These existing initiatives are providing critical services to specific areas of downtown redevelopment in the region and provide various valuable frameworks. At the same time, they have various limitations that prevent them from taking a multi-state approach to addressing downtown development challenges in rural areas. Limitations that have limited these programs from taking this multi-state approach include: geographic limitations (restrictions to certain counties, states or regions); participation constraints (time-bound programs with limitations on the number of participants each year); and discordant timelines that may not align with other programs. As part of the planning process, we identified key functions or resources they provide, lessons learned from each of these programs, and how ADDI can complement their results or ongoing efforts. Key comparative programs include:

COMMUNITY INVESTMENT FRAMER TRAINING

Created by Invest Appalachia and implemented in partnership with local or regional partners (currently with the Federal Reserve Bank of Richmond), this investment program uses a cohort model to increase the skills, knowledge, tools, and connections of place-based individuals seeking to advance community projects towards investment readiness. Training from this program provides fundamentals necessary to activate investment-worthy projects related to small business, social enterprises, housing, community facilities, and downtown real estate development. The Community Investment Framer curriculum designers and instructors participated in the ADDI working group focused on training to help guide the training recommendations. Status: Founded 2021, ongoing annual cycles.

Photo by: Mountain BizWorks

DOWNTOWN APPALACHIA REDEVELOPMENT

INITIATIVE

The West Virginia University Brownfields Assistance Center coordinates the Downtown Appalachia Redevelopment Initiative in partnership with Partner Community Capital (PCAP). The program provides multiple layers of targeted assistance for downtown redevelopment projects throughout West Virginia, including individual project technical assistance, a property redevelopment handbook including templates and a resource guide, and access to grants or loans to reduce project development expenses. Services are limited to projects in commercial business districts in West Virginia towns that have demonstrated market opportunity and existing community capacity to support redevelopment. The lead of this program, Ray Moeller, also led the ADDI Technical Service Working Group, and provided valuable recommendations based on his multiple years of experience running this state-based downtown real estate development technical services program. He has also served as the West Virginia state liaison to the Opportunity Appalachia program, described below. Status: Ongoing

MAIN STREET AMERICA

Main Street America is a national movement dedicated to reenergizing and strengthening older and historic downtowns and neighborhood commercial districts through place-based economic development and community preservation. In collaboration with partners, Main Street America provides grants and technical services to support thriving local economies and resilient Main Streets. The guiding principles of Main Street America helped inform the ADDI implementation plan and leaders from the organization have been actively involved in the design of the implementation plan. Status: Ongoing.

STATE MAIN STREET PROGRAMS

State Main Street Programs provide downtown strategic economic development planning and project-specific technical assistance to help successful and enduring community revitalization. Training, framework, and educational opportunities are provided to support and promote healthy, vibrant, and sustaining downtowns and business districts for economic growth and community pride. Representatives from the four Main Street programs (Kentucky, North Carolina, Virginia, and West Virginia) participated in the planning process and helped inform the ADDI implementation plan. Status: Ongoing, varies across states.

OPPORTUNITY APPALACHIA

Opportunity Appalachia (OA), coordinated by Appalachian Community Capital, provides coaching and financial assistance for predevelopment of real estate development projects. Investment priorities include downtown development, housing manufacturing, IT, healthcare, education, food systems, clean energy, and heritage tourism and recreation with a primary focus in rural communities. OA has a limited number of projects and is not exclusively focused on downtown redevelopment but many aspects of the program have inspired the recommended implementation strategy for ADDI. Status: Ongoing, 2-year cycles (grant dependent).

WEST VIRGINIA MON FOREST TOWNS

The Mon Forest Towns (MFT) partnership cultivates relations across the Monongahela National Forest gateway communities in order to enhance the economy and quality of life for residents and visitors while sustaining the quality of the environment. Twelve towns participate in the Mon Forest partnership and draw visitors to festivals, lodging, local dining, and outdoor recreation. Aspects of this program have inspired the ADDI, especially for cities and towns that are gateway communities to public lands. Status: Ongoing

Photo by: Friends of Southwest Virginia

Photo by: Kristian Thacker

Strategically-Aligned Programs

The Appalachian Downtown Developer Initiative (ADDI) aligns with key regional and national programs focused on rural economic revitalization. These initiatives share core goals but offer unique strategies, creating a collaborative ecosystem. As ADDI is implemented, the leadership team will continue to collaborate with these organizations and partners. Key programs include:

APPALACHIAN REGIONAL COMMISSION (ARC) – PARTNERSHIPS FOR OPPORTUNITY AND WORKFORCE AND ECONOMIC REVITALIZATION

INITIATIVE (POWER)

The ARC POWER Initiative targets federal resources to help communities and regions that have been affected by job losses, coal mining, coal power plant operations, and coal-related supply chain industries due to changes in energy production. Investments aim to strengthen a variety of industries, bolster re-employment opportunities, create jobs in existing and new industries, and attract new sources of private investment in coal-impacted communities. Significant economic development capacity building and project development across the four states within the ADDI project have received ARC POWER funding.

EPA GREENHOUSE GAS REDUCTION FUND

The Greenhouse Gas Reduction Fund aims to mobilize funding for greenhouse gas and air pollution reducing projects in communities across the country, with a subset of funding dedicated to low-income and disadvantaged communities. Small businesses, non-profit organizations, state, territorial, local and Tribal governments are eligible to receive funding through financial intermediaries.

OPPORTUNITY APPALACHIA

See Opportunity Appalachia program description in Section 2.3. Chapter 5: Technical Assistance outlines how the ADDI program will align with Opportunity Appalachia’s approach and resources.

GREEN BANK FOR RURAL AMERICA

Green Bank for Rural America, started by Appalachian Community Capital, provides public and private capital that enables rural areas to gain the most benefit from the new energy economy, with prioritization investments in Appalachia, rural communities of color, and Native communities. Funding will be used by community lenders to create jobs, preserve the quality of life in rural communities, and reduce harmful pollution. Eligible projects relevant to ADDI include green building construction, energy efficiency improvements, renewable energy, and other physical improvements to real estate that move buildings towards net zero emissions. Available funding includes Greenhouse Gas Reduction Fund.

REPURPOSE CAPITAL (NATIONAL TRUST FOR HISTORIC PRESERVATION)

Emerging from Main Street America’s “Small Deal Initiative”, this emerging fund will focus on downtown revitalization and construction projects that are aligned with Greenhouse Gas Reduction Fund eligibility criteria. Their target project types and impact goals are in line with ADDI’s focus on downtown development projects in small towns and rural communities.

BUILDING SMALL

Building Small is a grass roots initiative with national reach. The program has evolved over thirteen years to build a community of Small Scale Developers across the US, focusing on all asset classes and at all stages of experience.

Now hosting two Small Scale Developer Forums (SSDF) per year, the program reaches over 1,000 individuals who are actively developing smaller scale projects in communities across the rural to urban transect. In 2017, the projects, sponsor stories and challenges encountered inspired the research and publication of Building Small: A Toolkit for Real Estate Entrepreneurs, Civic Leaders and Great Communities by Urban Land Institute in 2021. The need for continuous learning and desire to maintain the professional networks led to an open source, online social community and resource sharing network open to all small developers, policy makers, lenders and citizen activists interested in small-scale incremental development as a tool for rebuilding downtowns, neighborhoods and communities.

Photo by: Invest Appalachia

STATE ASSESSMENTS

This chapter summarizes the shared needs across the states in the ADDI region related to developer support, economic development gaps, and opportunities. It also provides state-level snapshots for Kentucky, North Carolina, Virginia, and West Virginia. These state profiles include a state map highlighting developmentready communities, state-specific demographics, and identified place-based developers. Each state group contributed a detailed report of its findings, which are included in full in the appendix. The chapter is organized into the following sections: IN THIS CHAPTER: 3.1 Regional Themes and Key Findings 3.2 Kentucky 3.3 North Carolina 3.4 Virginia 3.5 West Virginia

Regional Themes & Key Findings

While each state has a unique landscape for downtown development, developers across the region share many common needs to enhance their long-term capacity and their success with individual projects.. Below is a summary of developer needs identified through the planning process, along with an assessment of these needs for each state.

EXHIBIT 02: DEVELOPER NEEDS PRIORITIZED FOR EACH STATE

development for the construction trades

on sustainable development practices and building materials

Streamlined permitting process and updated zoning regulations

or mentor to provide guidance and support on projects

Enhanced understanding of historic preservation

Flexible capital with streamlined and accessible funding mechanisms

for projects in floodplains

and affordable bridge loans to finance the early stages of a project

Credit enhancements to de-risk investment on larger projects

Improved access to state historic tax credits for smaller developers

Several common themes emerged related to economic development gaps and needs. Below is a summary of the gaps and needs identified by two or more states.

EXHIBIT 03: REGION-WIDE ECONOMIC DEVELOPMENT GAPS

REGION-WIDE ECONOMIC DEVELOPMENT

GAPS

Limited availability of prepared sites and buildings

Lack of connectivity between building owners/landlords and potential tenant businesses looking for space

Inadequate infrastructure in some areas, including transportation networks, broadband, utilities, and water supply shortages

Limited collaboration among stakeholders, including public, private, and nonprofit entities

Connectivity and coordination between resources, such as federal, state, philanthropic, and private sector support

Lack of accessible investment for small scale development and emerging developers

Inadequate incentives compared to neighboring states

EXHIBIT 04: REGION-WIDE ECONOMIC DEVELOPMENT NEEDS

REGION-WIDE ECONOMIC DEVELOPMENT NEEDS

Regional collaboration/coordination mechanisms

Incentives for small and medium-sized businesses

More technical assistance and business support for real estate development

Support for small businesses and entrepreneurs

Better coordination and resource alignment among capital providers, including expertise in real estate finance and tax credit navigation

Zoning and permitting reforms

Comprehensive infrastructure investment including utility improvements

Strategic economic diversification initiatives, such as tourism, advanced manufacturing, and local agriculture

Workforce retention strategies

Public-private partnerships

Sustainable development strategies including renewable energy and conservation

Kentucky

Within Eastern Kentucky, there are 54 counties and approximately 80 cities and towns in the Appalachian Regional Commission’s region. The Kentucky State Group consisted of 12 members, with representatives from seven organizations, and was led by the CEDIK at the University of Kentucky and Beka Burton.

While findings reflect available information and insights from group members, the data and analysis should not be considered definitive due to the ambiguous and evolving nature of the “downtown development space”.

For the detailed Kentucky state report, please see Appendix A3. Kentucky State Report, page 132.

MAP 02: KENTUCKY COMMUNITIES

KENTUCKY STATE GROUP

Beka Burton, Group Lead – CEDIK at University of Kentucky

Jessica Bledsoe – Foundation for Appalachian Kentucky

Kitty Dougoud – Kentucky Main Street

LaTasha Friend – SOAR

Robin Gabbard – Mountain Association

Colby Hall – SOAR

Peter Hille – Mountain Association

Nicole Intagliata – Fahe

Madilyn Jarman – SOAR

Colby Kirk – OneEast

Les Roll – Mountain Association

Ruby Smith – Fahe

DEVELOPERS IN KENTUCKY

“By focusing on regenerative development, fostering collaboration among stakeholders, and providing clear guidance on available resources, Eastern Kentucky can advance toward a more resilient economic future.”

~

Kentucky State Group

DEMOGRAPHICS OF KENTUCKY ARC REGION

Total Population: 1,162,206

Number of Households: 465,047

Median Age: 42.1

Median Household Income: $48,959

College Degree: 19%

Households with Disability: 16.2%

Population 65+: 19.8%

Working Age Population (18-64): 58.8%

Households Below the Poverty Level: 24%

Total Businesses: 37,489

Main Street Communities: 10

* Source: U.S. Census Bureau. American Community Survey 5-year estimates, 2018–2022.

North Carolina

Western North Carolina’s Appalachian Regional Commission region includes 31 counties and approximately 70 cities and towns. The North Carolina State Group, led by Christine Laucher of Mountain BizWorks, comprised 11 members representing nine organizations, including local and state government leaders, mission-driven developers, and nonprofit organizations.

For the detailed North Carolina state report, please see Appendix A4. North Carolina State Report, page 154.

MAP 03: NORTH CAROLINA COMMUNITIES

NORTH CAROLINA STATE GROUP

Christine Laucher, Group Lead – Mountain BizWorks

Ann Bass – NC Department of Commerce

Beverly Carlton – Olive Hill Community Economic Development Corporation

Kyle Case – Western Piedmont COG

Andrew Crosson – Invest Appalachia

Ingrid Johnson – PODER Emma

Bernadette Peters – Town of Sylva Main Street

Matt Raker – Mountain BizWorks

Russ Seagle – Sequoyah Fund

Stephanie Swepson-Twitty – Eagle Market Streets Development Corporation

Anthony Thomas – Eagle Market Streets Development Corporation

DEVELOPERS IN NORTH CAROLINA

“Western North Carolina (WNC) has a more robust and diversified economy than most of Central Appalachia, including many downtowns in advanced phases of revitalization and redevelopment. This is thanks in part to a robust state Main Street program, the third largest in the country. However, there is a shortage of local community focused and non-profit real estate developers. Most large downtown development projects are owned and managed by developers from other states or large cities, which are less likely to serve community interests and build local wealth.”

~ North Carolina State Group

DEMOGRAPHICS OF NORTH CAROLINA ARC REGION

Total Population: 2,067,146

Number of Households: 865,576

Median Age: 43.9

Median Household Income: $61,803

College Degree: 31%

Households with Disability: 11.6%

Population 65+: 22.8%

Working Age Population (18-64): 58.2%

Households Below the Poverty Level: 14%

Total Businesses: 79,763

Main Street Communities: 10

* Source: U.S. Census Bureau. American Community Survey 5-year estimates, 2018–2022.

Virginia

For the detailed Virginia state report, please see Appendix A5. Virginia State Report, page 168.

04: VIRGINIA COMMUNITIES

VIRGINIA STATE GROUP

Kim Davis, Group Lead – Friends of Southwest Virginia

Billie Roberts, Group Lead – Friends of Southwest Virginia (contractor)

Alicia Bynum – Friends of Southwest Virginia

Cindy Green – Locus Impact Investing

Jessica Hartness – Virginia Dept of Housing and Community Development

Stephanie Lillard – People Incorporated

Taylor Lindsay – TYL Properties, LLC

Ellie Dudding-McFadden – Virginia Main Street

Chris McNamara – Virginia Housing

Courtney Mailey – Virginia Dept of Housing and Community Development

Chris Thompson – Virginia Housing

Rebecca Rowe – Virginia Dept of Housing and Community Development

Kelli Smith – People Incorporated

Emma Wyatt – The Innovate Fund

DEVELOPERS IN VIRGINIA

“Overall, Southwest Virginia presents a mixed landscape of developer activity and capacity. Large mainstream developers are active in the interstate corridor of I-81 and the larger towns (e.g. Roanoke, Bristol, Christiansburg), while most towns struggle to attract developer attention for smaller or boutique projects (with success stories like St. Paul). Like other states, Southwest Virginia is challenged by the “missing middle” of local developers with the interest and capacity to take on multiple small to medium sized development projects.”

~ Virginia State Group

DEMOGRAPHICS OF VIRGINIA ARC REGION

Total Population: 650,185

Numbers of Households: 273,411

Median Age: 44.5

Median Household Income: $52,600

College Degree: 23%

Households with Disability: 14.2%

Population 65+: 23.3%

Working Age Population (18-64): 59%

Households Below the Poverty Level: 17%

Total Businesses: 20,205

Main Street Communities: 30

* Source: U.S. Census Bureau. American Community Survey 5-year estimates, 2018–2022.

West Virginia

The Appalachian Regional Commission’s jurisdiction encompasses all 55 counties and over 100 cities and towns in West Virginia. The West Virginia State Group, composed of 18 members from 10 organizations, was led by the WV Community Development Hub under the leadership of Stephanie Tyree, Bryan Phillips, and Beth Thompson.

For the detailed West Virginia state report, please see Appendix A6. West Virginia State Report, page 186.

MAP 05: WEST VIRGINIA COMMUNITIES

WEST VIRGINIA STATE GROUP

Stephanie Tyree, Group Lead – WV Community Development Hub

Bryan Phillips, Group Lead – WV Community Development Hub (contractor)

Beth Thompson, Group Lead – WV Community Development Hub

Jennifer Brennan – West Virginia Main Street

Brian Chenoweth – Coalfield Development Corporation

Dave Clark – Woodlands Development and Lending

Maddie Coffman – Partner Community Capital

Carla Ferguson – Coalfield Development Corporation

Jennifer Hudson – Greater Williamson Community Development Corporation

Marten Jenkins – Partner Community Capital

Lauren Kemp – RenewALL

Kayleigh Kyle – USDA Rural Development

Marlo Long – Truist

Monica Miller – M. Miller Development Services

Ray Moeller – Northern Brownfields Assistance Center at West Virginia University

Carrie Staton – Northern Brownfields Assistance Center at West Virginia University

Emily Wilson-Hauger – Woodlands Development and Lending

Bill Woodrum – Claude Worthington Benedum Foundation

“At the start of this planning process, the WV State Group expected that one of the key challenges facing the state was the lack of developers serving West Virginia. Surprisingly, we were able to identify a significant number of developers serving the state, though the capacity of those developers varied widely. The number of emerging and growing developers identified in West Virginia indicates the opportunity for growth in the state, and the direct value that capacity building for emerging developers will bring to muchneeded downtown development projects throughout West Virginia.”

~ West Virginia State Group

DEMOGRAPHICS OF WEST VIRGINIA ARC REGION

Total Population: 1,773,813

Number of Households: 738,292

Median Age: 43.4

Median Household Income: $56,394

College Degree: 26%

Households with Disability: 14.2%

Population 65+: 21.9%

Working Age Population (18-64): 58.8%

Households Below the Poverty Level: 17%

Total Businesses: 56,052

Main Street Communities: 11

* Source: U.S. Census Bureau. American Community Survey 5-year estimates, 2018–2022.

RECOMMENDATIONS AND IMPLEMENTATION

Chapter 4: Training Program

Chapter 5: Technical Assistance

Chapter 6: Co-Developer Model

Chapter 7: Capital Products

Chapter 8: Regional Association

Chapter 9: Overall Implementation

A COMPREHENSIVE APPROACH TO DEVELOPER CAPACITY BUILDING

The shortage of community-based developers serving rural Appalachia, limited capacity of current local developers, and limited access to flexible capital have been identified as critical barriers to economic growth in communities throughout Central Appalachia. At the same time, a forwardlooking and coordinated approach to downtown redevelopment is necessary as we confront economic shifts and consider the implications for the region’s infrastructure, downtowns, housing, and more. This project brings together key partners from across the region who are working on downtown redevelopment and proposes a coordinating strategy that links technical assistance services, peersupported developer models, and financing.

The recommended implementation phase of ADDI will include 4 strategic programs that have been collaboratively designed and will complement and align with existing programs:

A training program that will include a virtual self-paced course for prospective developers as well as a hands-on cohort model for developers working on a specific project.

A technical assistance program providing matching funds and vetted TA providers for eligible projects (building on the Opportunity Appalachia model).

A flexible fund of capital products providing grant-funded financial assistance to help secure investment for downtown development projects.

A developer peer support network, including a “mentorship” or coaching program that matches experienced and emerging developers, and a “co-developer” model to provide hands-on support to emerging developers taking on projects.

The implementation project will also explore structures and operating models for ongoing coordination and resource provision, potentially transitioning to a permanent “association” entity by the end of the grant period.

The following chapters summarize the analysis, design considerations, and ultimate recommendation from the working group tasked with developing the plan for each of these strategic interventions.

EXHIBIT 05: COMPREHENSIVE APPROACH TO DOWNTOWN DEVELOPMENT

State + Local groups and partners

Ecosystem PartnersCAN, AFN, Fahe, etc.

Potential Developers

Policy / program best practices

Individual Coaching

Early stage TA

Emerging Developers

Predev. Services

Peer Network

Self-led education

Main Street programs

Perm. Financing

Instructorled training

Mentorship by Developers

Mature ("Serial") Developers

Bridge Financing

Training

Technical Assistance

APPALACHIAN DOWNTOWN DEVELOPERS INITIATIVE REGIONAL COORDINATION, I.E., "ASSOCIATION"

Mentorship & Partnership

Capital Products

Developers

Stakeholders

Perm. Financing

Communitycentered, Downtown

Revitalization Projects

CoDeveloping

Photo by: Mountain BizWorks

TRAINING PROGRAM

The Training Program Working Group was tasked with developing a framework for a comprehensive training curriculum aimed at building the capacity of emerging and prospective downtown developers. The Training Group is composed of eight members and led by Hannah Vargason from the UNH Carsey Center for Impact Finance. This chapter includes:

IN THIS CHAPTER:

4.1 Analysis Methodology

4.2 Training Assessment and Gaps

4.3 Recommend Training and Education Products

Analysis Methodology

TRAINING PROGRAM WORKING GROUP

Hannah Vargason, Group Lead – UNH Carsey School Center for Impact Finance

Beka Burton – CEDIK at University of Kentucky

Andrew Crosson – Invest Appalachia

Kaleigh Kyle – USDA Rural Development

Rebecca Rowe – Virginia Department of Housing and Community Development

Anthony Thomas – Eagle Street Markets

Beth Thompson – WV Community Development Hub

Paul Wright – Wright Venture Services

The Training Program Working Group conducted the following research and analysis to inform its recommendations:

• Reviewed historical and current communitybased real estate development initiatives and training programs, including the Appalachian Investment Framer Action Cohort.

• Researched external training programs with relevant content or components to inform the ADDI curriculum.

• Identified target participant characteristics and needs.

• Identified subject matter experts (SMEs) to support curriculum development.

Photo by: Eagle Market Streets

Training Assessment & Gaps

The following recommendations are informed by lessons learned from programs with a successful, long-term track record of capacity building for mission lenders and project developers, including the Center for Impact Finance training. Notably, the Working Group also consulted with Grow America (formerly National Development Council), the Incremental Development Alliance, Community Preservation Corporation (CPC), and Capital Impact Partners which, with CPC, also represents a national collaborative of CDFIs that run developer support programs. Key insights from these experts and research literature include:

• A mix of in person, live-remote, and self-guided training should be used to address the various stages/steps of the development process and development finance

• Novice tier participants quickly realize whether they want to advance on their development journey

• Emerging developers don’t know what they don’t know, require “hand holding,” and for whom 1:1 coaching is essential

• Emerging developers need a blend of training, mentorship, and flexible financing

• Blended cohorts of individuals with 0 –3 years’ experience are most effective and participants value networking opportunities

• Access to resources to sustain developer growth is essential; incubation could take a few years to a decade

• Most community-based developers are focused on housing; and housing carries mixed-used projects and builds demand for commercial products/services

• Key topic areas include entrepreneurship, team building, practical market analysis, project due diligence, good design (i.e. how buildings need to work), and risk mitigation

Recommend Training & Education Products

To meet the needs of developers with varying degrees of expertise and interest, the recommended curriculum includes three components: open-access resources, self-paced courses, and accelerator training.

EXHIBIT 06: ADDI TRAINING & EDUCATION PRODUCTS

Criteria: Objectives:

Outputs:

Criteria: application & registration fee

promote program and support ecosystem development understand real estate development process, personal capacity, and professional development pathway

Outputs: completed activities and passed quizzes

Objectives:

Criteria: self-paced course, risk assessment, and references

Outputs: development plan package

instructor led, cohort based training paired with targeted technical assistance for emerging developers

Objectives:

master the real estate development process by doing - take a project through exploration & discovery

COMPONENT 1: SELF-PACED COURSE

The self-paced course will be targeted to start-up and nascent developers and will serve as a gateway to the full suite of ADDI products/services. The learning objectives for developers in the self-paced course are to understand the real estate development process, their personal capacity, and next steps on their professional development pathway. Developers will be required to successfully complete the self-paced course to access other program offerings, unless they can demonstrate equivalent relevant experience, effectively “testing out.”

The self-paced course will be virtual and completely asynchronous, i.e., developers will start and complete the course on their own. The course curriculum will include:

• Readings

• Recorded presentations and conversations

• Self-guided activities

• Automatically graded quizzes

Ideally, the course will be housed and accessed through a learning management system (LMS), which will help guide the student through the curriculum and allow for interaction with program managers and other participants. The curriculum will be built on existing products and resources, customized for rural markets.

Successful completion of the course for the purpose of accessing additional ADDI

products/services amounts to passing all quizzes, with no limit on the number of attempts (in addition to any other criteria for additional products/services).

The targeted estimated time to complete the course is approximately 8 hours, consistent with the level of effort for a micro-credential from a higher education institution. To receive a micro-credential, participants would have to submit the course activities for review and certification by an instructor. The program will fully explore micro-credentialing as part of the curriculum development process.

Prospective participants will have to apply and pay a registration fee to access the course. The primary purpose of both the application and fee is to demonstrate value and, thus, generate interest in the ADDI program. The application also serves as a mechanism to capture baseline data and market information.

The registration fee will be $150, with discounts for nonprofit/municipal personnel (i.e., repeat customers) and scholarships for individuals from disadvantaged communities (e.g., rural residents, veterans, individuals in recovery, women and people of color). Participants will also receive access to office hours and a Network Directory of all program participants. (See Exhibit 06: ADDI Training & Education Products, page 62)

COMPONENT 2: OPEN-ACCESS RESOURCES

In addition, program managers will consider making some information and resources open access online, as a means of promoting the ADDI program and supporting ecosystem development. For example: this may include basic information about the real estate development process that provides insight into the self-paced course and accelerator training curriculum; or terms/definitions and recordings of short talks that would help a broad range of stakeholders understand the investment ecosystem.

COMPONENT 3: ACCELERATOR TRAINING

The ADDI Accelerator will consist of cohortbased training and targeted technical assistance for emerging developers, i.e., those with some experience (1-3 completed projects) or high potential for success based on relevant experience. In the accelerator training, participants will “learn by doing,” taking a real project through the exploration and discovery phase of the real estate development process.

There will be no cost for the training and support from co-instructors; there may be a cost-share requirement for targeted technical assistance, including coaching.

Program managers will determine what information/resources should be open-access based on frequently asked questions and other feedback from program participants – this will be an on-going process. (See Exhibit 06: ADDI Training & Education Products, page 62)

The training will include self-guided work as well as regular virtual classes/group meetings and periodic in-person workshops, led by 2 co-instructors with real estate development expertise and guest presenters with specific subject matter expertise.

Ideally, successful participants will earn a certificate/credential from a recognized leader in community development training/education. ADDI will select a qualified training partner as part of the curriculum development process described below, who may be able to offer credentialing.

The timeline for a cohort will span 6 months, including an early-stage sprint and flexible virtual content to accommodate different project timelines, on-going meetings, and 2-3 in-person intensive workshops. The targeted total level of effort is 70+ hours, consistent with certificate/ credential programs at a higher education institution. Cohorts will include up to 20 people.

As part of the training work, participants will complete the following:

• Project development plan

• Team roster

• Market analysis

• Pro forma financial projections

• Construction/rehabilitation budget

• Pitch deck

Successful completion of the accelerator will serve as eligibility criteria for additional ADDI products/services and a seal of approval to lenders/investors, indicating developer capacity (i.e., risk mitigation for lenders/investors). These materials will represent an important baseline for project refinement and advancement, while recognizing that some materials will eventually need to be professionally prepared in order to meet investment/underwriting requirements.

To apply for the Accelerator Training, applicants must:

• Complete the self-paced course (or “test out”)

• Commit fully to the training schedule

• Identify a potentially viable project to work on during the training course

• Draft a business model canvas and basic risk assessment

• Provide a letter of recommendation from a community-based stakeholder demonstrating community buy-in on the project

• Submit character references

The application will be reviewed by a real estate development expert, who will provide a recommendation to program managers as to whether the applicant is ready for the Accelerator Training and/or what technical assistance they may need. Program managers may choose to provide targeted technical assistance to applicants in advance of the training to address critical risk areas as part of assessing project viability. (See Exhibit 06: ADDI Training & Education Products, page 62)

Photo by: West Virginia Community Development Hub

TECHNICAL ASSISTANCE 5

The Technical Assistance Working Group was charged with identifying a range of technical assistance products and services designed to support community-based developers. The group was composed of 13 members and led by Ray Moeller from Northern Brownfields Assistance Center at West Virginia University. This chapter includes:

IN THIS CHAPTER:

5.1 Analysis Methodology

5.2 Regional Challenges

5.3 Proposed Structure for Technical Assistance Services

5.4 Types of TA Providers & Solicitation

5.5 Eligibility Criteria & Cost Share

Analysis Methodology

TECHNICAL ASSISTANCE WORKING GROUP

Ray Moeller, Group Lead – Northern Brownfields Assistance Center at West Virginia University

Ann Bass – North Carolina Commerce

Lacey Bacchus – Retail Strategies

Jennifer Brennan – West Virginia Main Street, WV Department of Economic Development

Brian Chenoweth – Coalfield Development Corporation

Maddie Coffman – Partner Community Capital

Kitty Dougoud – State Main Street Coordinator, Kentucky Heritage Council

Christine Laucher – Mountain BizWorks

Courtney Mailey – Virginia Dept of Housing and Community Development

Chris McNamara – Virginia Housing

Bernadette Peters – Sylva Main Street

Kathryn Coulter Rhodes – Rural Support Partners

Stephanie Tyree – West Virginia Community Development Hub

The Technical Assistance Working Group conducted the following research and analysis to inform its recommendations:

• Compiled a list of current and past TA service programs for rural downtown development projects within the ADDI region.

• Analyzed the successes, limitations, and gaps of existing programs and services in the region.

• Researched external TA programs that could serve as models or inspiration for ADDI’s implementation.

• Identified qualified subject matter experts at the local, state, regional, and national levels, with the capacity to provide TA services to emerging community-based lenders.

Regional Challenges

Technical Assistance programs within the ADDI region vary significantly based on local government and regional agency support, nonprofit resources, and state programs. While a suite of technical assistance programs have arisen in the region over the past 5-10 years (most notably the Opportunity Appalachia program managed by Appalachian Community Capital), the sustained impact of these programs has demonstrated multiple barriers and areas of persistent challenge that were identified by the Working Group. In particular, current robust technical assistance services in the downtown development space are largely project-focused and not integrated with developer capacity building services.

Common gaps and barriers in Technical Assistance offerings across the region include:

• Match Requirements: Some programs require local matching funds, which can be a barrier for communities and projects with limited financial resources.

• “Main Street” Community Participation: Certain services are only available to designated or active “Main Street” communities, excluding other communities that might benefit but do not hold this designation.

• Local Engagement: The success of many projects hinges on their ability to connect with viable local government and community leadership that can actively engage in support of the redevelopment process. Local capacity varies significantly throughout communities across the region, and can often hinge on a single person or small group of leaders. Generational turnover, staff changes, and limitations on the capacity of local electeds creates persistent barriers to sustained local engagement. Technical assistance without community engagement is usually not sufficient for a successful project.

• Program/Staff Capacity: Many initiatives face limitations due to constrained organizational capacity, reducing their awareness of as well as ability to access and deploy the impactful technical assistance that may be available. Consistently programs were operating with staffs of 1-4 people, serving dozens of communities and in some cases multiple states. This limited the ability of program staff to provide the depth or breadth of services that were needed in the region. These staffing challenges were often a result of funding limitations.

• Designated Geography: Many programs have geographic restrictions, offering services only to specific regions or designated areas, which limits broader access.

• Program Timing: Most programs operated on a structured timeline with a single point of entry to the program at the beginning of the program start. This limited when new and emerging projects and developers could access the program, particularly if the project came to fruition at a time that was not before the start of a technical assistance program.

• Limited Funding: A common challenge across programs is restricted funding, which can limit the scale or duration of support offered to communities/projects.

• Cost of Pre-development Technical Assistance: Grant funding for predevelopment support at a scale of more than a few projects is high and often the most risky of development project costs.

• Applicability to Redevelopment: Certain programs may have limited relevance to on-the-ground redevelopment efforts, focusing instead on community planning, local capacity building, or conceptual guidance without sufficient support for project implementation.

• Awareness of technical program availability: Potential clients may not have visibility/insight into the existing technical assistance programs within each ADDI participating State. Awareness of programs depended largely on networks that local project developers were connected into and how well connected the state service providers were with each other and with local communities.

Photo by: West Virginia Community Development Hub

Proposed Structure for Technical Assistance Services

The urgent need for downtown redevelopment in Central Appalachia necessitates a consistent, accessible, clearly structured, and widely promoted technical assistance services program that serves the region and support long-term capacity building for local developers. As discussed earlier and as demonstrated by the competition for funding under the Opportunity Appalachia program, the breadth of need in the region for these services will outpace the resource availability of even the most robust program. That said, pairing and staging technical assistance services with other elements of the ADDI program will amplify the impact.

For that reason, we recommend ADDI limit technical assistance resources to directly build the capacity of local developers, rather than direct resources to projects independent of developer capacity-building. Generally, technical assistance will be provided for developers seeking services ranging in size from $5,000 (or below) to $75,000. All technical assistance will be focused on predevelopment needs for projects underway by ADDI-supported developers, directly integrating developer capacity building with technical assistance for projects. Technical support that is more than $75,000 may be supported through capital products provided to developers through ADDI.

Through coordinated, intentional, and aligned technical assistance support to developers in the ADDI region, this project will both catalyze impactful community-driven projects while directly growing the long-term capacity of individual developers and the region as a whole. This structure will also work in coordination with other technical assistance programs serving downtown development projects in the region, enabling multiple layers of project funding to support developers supported by the ADDI project.

The findings of the Working Group demonstrate a need for continued and increased technical assistance services for the growing downtown redevelopment field in the region. Intentional collaboration between ADDI and other development technical assistance service providers, like Opportunity Appalachia, the state Main Street programs, and others will serve to increase the impact and value of the field serving developers. Many of the technical assistance services identified by the Working Group expected to be supported are similar to those funded by Opportunity Appalachia. ADDI’s goals are shared and served by the Opportunity Appalachia program, and continued funding and operating of that program will benefit the region and potentially identify nascent developers. ADDI’s proposed TA program will

complement and fill in around this and other existing programs, in several key ways: rolling technical assistance awards (versus a 2 year cycle with future rounds dependent on new grant funding), broader eligibility and project types, a larger number of projects supported at smaller amounts, and an “a la carte” approach to TA provision that is focused on supporting developers as they encounter needs rather than Opportunity Appalachia’s focus on projects.

LEVEL 1: EXPLORATION ($5-25K)

To meet the needs of developers at varying levels of expertise and project stages, the predevelopment technical assistance will be categorized into two levels, 1) Exploration and 2) Discovery.

The Exploration level of TA services provides initial assurance of project viability, focusing on property, structural, and reuse planning considerations. There is no expectation of service cost recovery, and these services could be positioned as an upfront, required local investment as ADDI determines participant and project eligibility. In some cases, these services may be matched with other funds but that should not necessarily be a requirement to access the resources.

The most common technical assistance services at the Exploration level are expected to include:

• Architectural analysis providing structural and systems status

• Program or business plan concept, and market analysis, business plan concept

• Code, life safety, and accessibility assessments

• Conceptual reuse guidance

• As-built drawings

• Preliminary level restoration cost estimation

• Property detail reports such as survey, environmental Phase 1, historic tax credit compliance, title search

LEVEL 2 DISCOVERY ($25-75K)

The Discovery level of technical assistance services provides comprehensive support in evaluating project feasibility and establishing the necessary groundwork for development. Depending on the services, technical assistance services in this level may be suitable for a recoverable grant.

The most common TA services at the Discovery level are expected to include:

• Refined schematic design to address:

• Code compliance

• Life safety services provision

• Accessibility

• Utilities access/upgrades

• Value creation and community benefit

• Follow-up environmental sampling and findings reports such as:

• Phase 2 Environmental Site Assessment

• Asbestos

• Lead paint testing

• Financial analysis and plans

• Cost projections

• Sources and uses

• Revenue and cash flow projections

• Capital stacking and aligning sources/ terms

• Tax credit support services

• Market and related studies pertinent to the proposed reuse strategy to lay groundwork for anticipated funding resources

The Working Group recognized that many projects will need additional predevelopment support that is beyond the scope of Exploration and Discovery. Services that may be more expensive than what is offered through this program could include: legal services; layout design; financial packaging; and others. It was recognized that a significant investment of time, resources, and effort is often required to finalize the project launch, and that often the most expensive services are required at the end of the project prior to financing. ADDI anticipates that these services may be available through its capital products (see Chapter 7) to developers who are eligible for those resources.

Types of TA Providers & Solicitation

To provide a broad range of Technical Assistance for the ADDI region, the following types of providers and procurement process is recommended:

Types of Technical Assistance Providers:

• Architectural; Financial Structuring

• Tax Credit Processing

• Market Study/Research

• Economic Analysis

• Environmental;

• Engineering: Civil, Structural, Mechanical, Environmental & Electrical

• Capital Raise

• Business and Economic Development Research/Consultation/Guidance

• Developer Consultation

• Landscape Architecture

• Legal

As technical assistance will be provided on a rolling basis to developers within the ADDI network, the services provided will be evaluated by program leadership as needs are identified and may expand based on project needs within the region.

Solicitation processes:

ADDI will adhere to state and federal procurement regulations, by soliciting providers through RFQs/RFPs. Selection will be based on:

• Proposal fit

• Availability

• Delivery timing

• Cost

• Mission-aligned

Once providers are selected, negotiating ongoing service agreements could enhance consistency and availability throughout the ADDI engagement.

Photo by: Invest Appalachia

Eligibility Criteria & Cost Share

Recommended guidelines for eligibility criteria, cost-share, and recapture of technical assistance funding follow.

ELIGIBILITY CRITERIA FOR TECHNICAL ASSISTANCE:

ADDI eligibility should address both projects and developers, including factors such as property ownership, reuse projections, community engagement, and training commitment. This qualification process will be a critical strategic challenge for ADDI leadership. Once projects are qualified, TA will focus on addressing specific project needs and advancing developers through training, advising, mentoring, or co-development partnerships. While ADDI may consider implementing safeguards to prevent undue enrichment, it is essential to prioritize accessibility of TA for predevelopment, with potential recapture upon successful project completion.

COST SHARE REQUIREMENTS FOR ADDI TECHNICAL ASSISTANCE:

Cost-share requirements in the redevelopment space vary significantly, primarily focused on the “hard costs” of restoration and reuse. Given ADDI’s role in providing supplementary resources, a costshare component may be considered to ensure buy-in. However, in most cases, buyin has already been established through the champion’s efforts to advance the project. Therefore, it is recommended to propose recapture at project close rather than a blanket requirement TA cost share.

RECAPTURE OF ADDI TECHNICAL ASSISTANCE FUNDING:

As ADDI plans to offer capital products (including recoverable grants for predevelopment and soft costs) projects will transition from requiring TA to needing pre/ development capital. ADDI should consider attempting to recapture predevelopment investments at the project close, as likely a small portion of the total project cost.

Opportunity Appalachia utilizes a limited “pay it forward” model, with returns capped at a percentage of the project cost within three years, yielding an expected return of around 10%. Given the level of engagement and resources involved, ADDI may opt for a more rigorous recapture approach if deemed necessary for program stability.

TECHNICAL ASSISTANCE BUDGET AND STAFF

Based on the cost estimates outlined in the proposed suite of technical assistance (section 5.3), we propose an initial lump sum budget allowing for a robust set of TA services. With the potential for preliminary owner TA investment and access to various supplemental predevelopment resources, a $2M total allocation should cover at least 20 projects. Incorporating cost-share or recapture mechanisms could stretch these resources further. The TA program would need to be staffed by some combination of employee and contractor time, likely accounting for between 0.5-1 Full-Time Equivalent in total time committed to this area.

ADDI will need to adjust this allocation based on leadership’s target for project engagement and establish clear eligibility criteria, prioritizing developer capacity building over advancing

individual projects. Additionally, ADDI must remain closely connected to local, regional, state, and national TA programs to complement and offset predevelopment costs.

• Local (Community): ADDI will want to assure the municipal, county, EDA, and regional planning organizations have project awareness and endorsement to confirm access to all of the potential local TA resources.

• Regional/State: ADDI projects will benefit from regional connectedness via in-state partner organizations, to assure access to State, EPA, SHPO, Main Street, Angel Funder, and all other regional predevelopment support.

Photo by: West Virginia Community Development Hub

CO-DEVELOPER MENTORSHIP MODEL 6

The creation of a multi-faceted Co-Developer Mentorship Model was led by the Co-Developer Working Group, composed of 14 members and led by Dave Clark from Woodlands Development and Lending. The Co-Developer Group was charged with exploring solutions for the challenges faced by new or emerging developers who lack support and guidance for undertaking complex and demanding real estate development projects. Specifically, they identified possible structures for peer supported development models, including codeveloper structures, a mentorship program, and financial models.

IN THIS CHAPTER:

6.1 Analysis Methodology

6.2 Types of Developers in the ADDI Region

6.3 Challenges for Emerging CommunityBased Developers

6.4 The Role of Housing

6.5 Overview of Co-Developer Agreements and Developer Mentorship Models

6.6 Co-Developer Model

6.7 Mentorship Model

Analysis Methodology

CO-DEVELOPER WORKING GROUP

Dave Clark, Group Lead – Woodlands Development and Lending

Beverly Carlton – Olive Hill Community Economic Development Corporation

Robin Gabbard – Mountain Association

Peter Hille – Mountain Association

Jennifer Hudson – Greater Williamson Community Development Corporation

Lauren Kemp – RenewALL

Taylor Lindsay – TYL Properties, LLC

Marlo Long – Truist

Les Roll – Mountain Association

Chris Thompson – Virginia Housing

Stephanie Swepson-Twitty – Eagle Market Streets Development Corporation

Stephanie Tyree – West Virginia Community Development Hub

Emily Wilson-Hauger – Woodlands Development and Lending

Bill Woodrum – Claude Worthington Benedum Foundation

The Co-Developer Working Group conducted the following analysis and research to shape its recommendations:

• Assessed the needs, opportunities, barriers, and strategies necessary for developers in the ADDI region to achieve greater success.

• Analyzed case studies of regional and national projects employing co-developer models to inspire ADDI’s implementation.

• Evaluated compatibility factors for potential co-developer and mentor-mentee partnerships, including legal structure, race/ ethnicity, geography, project type, purpose, and size.

• Collaborated with state groups to document the current landscape of established and emerging developers in the ADDI region, assessing the feasibility of the co-developer model.

• Examined the advantages and disadvantages of co-developer versus mentorship models.

• Reviewed and proposed templates for co-developer mentorship collaborative agreements

Types of Developers in the ADDI Region

Individuals or organizations take on downtown redevelopment for a wide variety of reasons. For the purpose of this plan, we have defined emerging developers and experienced developers, using the following definitions:

Emerging Developer: A non-profit or local government entity that wishes to increase capacity to address commercial or mixed-use downtown development projects in a specific community or region.

Experienced Developer: An organization that has a portfolio of projects that have utilized a variety of financing sources.

Generally speaking, however, developers who have completed projects on in rural communities fall into one of several categories:

EXHIBIT 07: TYPES OF DEVELOPERS

• For profit or nonprofit

• Primary driver is need

• Needs a home for primary endeavor

• Development is secondary to main business

• Underwritten differently from developers

• Borrowing – CDFIs & banks

• Grants/donations in the case of nonprofits

• Secondary career/ pursuit

• Communityminded

• Sweat equity

• No real interest in subsidies

• Almost exclusively self-financed

• No financial return anticipated

• Primary pursuit

• Use of subsidies if simple

• Locally-focused

• Borrowing –traditional banks

• Financial return expected

• Limited use of credits/subsidies

• Scale matters

• Developed network of contractors, investors and project partners

• Will work anywhere within their functional network

• Tax credit programs

• Large banks

• Housing subsidies

• Large margins

• Small scale, often marginal projects

• Heavy reliance on local partners

• Responsive to community

• Mix of private & public funds

• Multiple sources per project

• Heavy use of subsidies

Challenges for Emerging CommunityBased Developers

Community-based redevelopment faces significant obstacles, including complex funding, high predevelopment costs, and limited access to expertise. These challenges include the following:

1) COMPLEXITY OF PROGRAMS & FINANCING

Commercial real estate development has become increasingly complex, with subsidy programs requiring detailed market studies, rigorous Historic Tax Credit applications, and compliance with extensive legal and financial standards. Rural areas often lack the professional expertise needed, and initial project development costs can reach $300K–$400K before closing.

Rural projects also rely on multiple smaller funding sources, often with conflicting requirements, such as differing income eligibility criteria, leading to challenging occupancy demands.

2) UNDERWRITING CRITERIA FOR DEBT AND EQUITY INVESTMENTS

Unless self-financed, most downtown projects require debt. While a small percentage of projects are able to minimize or eliminate long-term debt, some form of interim or bridge financing is almost always required. In addition, predevelopment costs can be extensive, as noted above, and it is common to secure debt to meet these expenses as well.

When considering an investment, tax credit investors underwrite both projects and developers, assessing project viability and the financial health of the sponsoring entity. Smaller community banks will often prioritize character, potential impact on the community, and established banking relationships. Community banks in rural communities, however, often have little or no experience with tax credit investments and finite tax liability. Larger banks have extensive experience with tax credit investments but typically focus on balance sheets and collateral – debt to income ratios, long term liabilities, property management performance, and detailed, sector-specific appraisals. The community value and impact of an individual project typically has minimal influence on tax credit investment decisions of larger, more experienced banks.

Community-based organizations with limited assets or borrowing history often struggle to secure debt or equity investments. Some rely on partner organizations for guarantees, but many projects stall due to difficulty obtaining initial funding.

3) EXPERIENCE REQUIREMENTS AND PREFERENCES

Several funding programs now require that an applicant demonstrate significant experience in project development. State-administered Low Income Housing Tax Credit (LIHTC) programs – a commonly used financing tool for redevelopment efforts – often require or heavily weight prior experience working in the program, as do state-administered HOME programs.

Tax credit equity investors will often invest only in experienced developers as a risk mitigation factor, given the complexity of many of the project structures.

Photo by: Invest Appalachia

The Role of Housing

Given that many downtown structures are mixed-use buildings, containing both commercial and residential use, housing is a critical component of the vast majority of redevelopment projects. Additionally, there are significantly more subsidies and resources available for affordable housing development than there are for commercial uses. LIHTC alone accounts for $10B in investment annually in the US. Other housing subsidy sources include HUD’s HOME Program, the National Affordable Housing Trust Fund, the Federal Home Loan Bank’s Affordable Housing Programs, Dept. of Treasury’s Capital Magnet Fund, a host of state-level housing trust funds, and others.

Many of the existing developers – both non-profit and for-profit -- identified by ADDI are predominantly housing developers. Unsurprisingly, given the chicken and egg needs of housing and economic development, the residential revenues generated by downtown redevelopment projects often far outweigh commercial/retail revenues, are much more predictable, dependable and consistent, and often drive the project pro forma. As such, the majority of successful projects in rural downtowns likely must include housing as well as commercial development

in order to be financially viable. This, along with the need and value of downtown housing in small towns across the region, is why the ADDI project has prioritized projects that are mixed-used downtown development.

Of the other efforts surveyed that utilize a peer-to-peer training model, several of these are focused on housing development. As with downtown development, it has been widely recognized that there is a severe shortage of housing developers, particularly in rural areas. Furthermore in a region comprised of towns where the downtown and edge of town are only a short walk from each other, the housing and downtown development needs are difficult to differentiate.

Due to these practical considerations - as well as the similar technical capabilities, mission, and role in community - communityoriented commercial real estate development and housing developers are naturally aligned. Any effort to grow locally-based downtown development organizations in the ADDI region should strongly consider joining forces with housing-based organizations and intermediaries.

Overview of Co-Developer Agreements and Developer Mentorship Models

Given the identified barriers for new and aspiring community-based developers, significant assistance is needed to support downtown revitalization. That assistance could take multiple forms, depending on the existing capacity and experience of an emerging developer.

Providing in-depth training, technical assistance and one-onone coaching are approaches employed by many intermediaries to help scale and grow nascent development activities. Programs currently underway using one or more of these approaches include Grow America (formerly National Development Council) Supporting Empowered Emerging Developer (SEED) Academy, LISC’s Developer Training Program, Freddie Mac’s Develop the Developer Program, and others. Programs often combine approaches, and often will couple those with initial capital investment in predevelopment or related financing. The vast majority of these programs are focused on developers in urban areas, at a municipal level or a network of developers across a national region. From our research, we were not able to identify any other program in the country that proposed a regionally contiguous developer mentoring model for rural developers.

Even with training programs, the obstacles outlined above –complexity of funding, lack of borrowing capacity, programmatic inexperience – are challenging to overcome even with high-caliber training and coaching. We also believe that a program that includes regional knowledge, context and an understanding of the unique dynamics of a highly-distressed, shifting economy would be most impactful for the Central Appalachian region. For this reason, we have identified two different levels of structured relationship - a fully structured co-developer model that entails a greater commitment from all parties (and greater expected impact), and a lighter commitment option of peer developer mentorship (with lesser but still significant expected impact).

EXHIBIT 08: CODEVELOPER & MENTORSHIP MODEL

Emerging Developer - A non-proﬁt or local government entity that seeks to increase capacity to address commercial or mixed-use downtown development projects in a speciﬁc community or region.

Needs

(a) A financial partner who brings equity/assets and borrowing capacity to the project, or (b) A developer who brings required experience for specific program financing or investment.

Is paired with an Established Developer

Co-Developer

-Both parties share in investments, risks, return, and potentially ownership;

-Legal partnership, shared decision-making

. Mentorship

-Established Dev. responsible for all borrowing, risk mitigation, guarantees; -Mentor involved in all projects & investor meetings throughout project development; -MOU/contractu al agreement. Guidance & consultation regarding project structure, investment strategies, professional roles & references, or access to lenders & investors.

Co-Developer Model (Greater Commitment, Greater Impact)

In this model, an Emerging Developer is paired with an Experienced Developer in the interest of building the capacity of the Emerging Developer through partnering on the implementation of a specific project.

The Experienced Developer is able to provide:

a. Equity/assets and borrowing capacity to the project

b. Required experience for specific program financing or investment

c. Guidance and consultation regarding project structure, investment strategies, professional roles & references

d. Access to lenders & investors

The roles and responsibilities of each party are documented in a legal agreement, the terms of which will be dictated by the duration of the partnership, the terms of committed equity investments, and the level of ongoing guarantee commitments (See A7. Co-Developer Agreement Template, page 205)

The duration of the Co-Developer relationship will differ project by project, depending on the long-term goals of each party, the property management resources available to the project, and the funding timeline.

CO-DEVELOPER AGREEMENT OPTIONS

We have identified two broad categories for a co-developer agreement on a project. The options depend on the project, and on the relationships that the experienced and emerging developers are willing to agree to with each other.

The two options may include:

1. A Co-Developer partnership that extends through the predevelopment process to the end of construction and the project being placed in service. The Emerging Developer is then responsible for all property management and ongoing program compliance. Predevelopment work typically consists of all design and engineering, surveying, environmental assessments, title review, and securing all financing commitments. The timeframe for predevelopment can differ dramatically on projects, but 3-4 years is realistic in a CoDeveloper relationship. The legal framework that may best suit this arrangement is a Development Agreement (See A7. CoDeveloper Agreement Template, page 205).

2. A partnership that extends through the end of a funding program compliance period. A partnership in a project financed with Historic Tax Credits may need to extend through the 5-year compliance period, for instance. LIHTC is a minimum of 15 years; HOME is 20. In this case, a formal Limited Partnership may be the best vehicle, codified in a Partnership Agreement.

EMERGING DEVELOPER –ASSESSMENT AND CRITERIA CONSIDERATIONS

When pairing an emerging developer with an experienced developer, both the capacity of the emerging developer and the viability of the proposed project will need to be considered. Criteria for an emerging developer well-suited to a co-developer relationship may include:

• Business Strategy – track record of successful related efforts, capacity for developing or evaluating project-specific business plans, projected activities, target market, sectoral focus.

• Community Impact and Engagement –history in the community and demonstrated local partnerships, involvement and support of community strategies, track record of impact.

• Management and Organization Capacity – level of organization, legal structure and governance, staffed or volunteer organization, contracted partners

• Financial Strength – types of funding secured, capital raise track record, historic financial statements, financial projections

• Level of readiness for the project and for the organization.

Significantly, every existing developer interviewed stated that the single most important factor is a deep commitment to the community and to the project – an understanding that the local organization is going to see the project through to completion no matter what.

EXPERIENCED DEVELOPERS

Parts of the Central Appalachian region have strong networks of existing community-based developers, and these provide a conduit for identifying interested and willing partners. The state working groups were able to identify a number of experienced developers, many of whom said they may be willing to participate in a mentoring or co-developer agreement with emerging developers in the region.

Some of the examples of experienced developers identified throughout the region included Fahe and CommunityWorks in WV, two examples of nonprofit membership organizations. In Virginia and Kentucky, the state’s Housing Finance Agencies bring together community development organizations on a regular basis. In some cases, nonprofit lenders and tax credit syndicators help play a similar role, notably Virginia Community Development Corporation and Mountain Bizworks in NC.

It is expected that there are likely fewer than a dozen entities in the ADDI region that could play the role of Experienced Developer in the codeveloper model, based on the characteristics described above (experience, financial and management capacity, commitment to community, and interest in the broader mission of ADDI).

Photo by: CEDIK

PAIRING STRATEGY

Given that existing community developers already have a heavy workload, and the fact that taking on the role of a Co-Developer is time-intensive and potentially long-term, it is anticipated that any committed Experienced Developer will take on no more than one or two Emerging Developers at any given time.

Matching an Emerging with an Experienced Developer will depend on several factors, and those may include:

1. Type of development anticipated – multifamily, commercial, new construction or renovation.

2. Size and scale of proposed project.

3. Level of organizational and project readiness on the part of the Emerging Developer.

4. Geographic proximity – while much can be accomplished remotely, some site visits will be needed. Additionally, some understanding of state financing programs, and state administration of federal programs, will be critical.

5. Existing relationship and trust between the experienced and emerging developer.

6. Commitment to help build the capacity of the emerging developer through the process, by the experienced developer. (i.e. this shouldn’t just be an opportunity for experienced developers to cherry pick new project opportunities with inexperienced partners).

While the program intermediary can certainly help vet Emerging Developers and propose matches, ultimately the Experienced Developer will want to do their own underwriting of the Emerging Developer and the proposed project before committing. A substantial amount of facilitated conversation will need to happen before a final commitment is made by the parties.

BUSINESS MODEL

The high level of commitment and focus a Co-Developer arrangement will require from the Experienced Developer will particularly require a significant level of compensation. Traditionally, developers recoup expenses and see additional revenue at the completion of a project in the form of a developer’s fee. It varies widely among projects, but fees are typically between 10%-18% of total project costs. In the interests of building the capacity of the Emerging Developer, any recognized developer fee would ideally remain with that Emerging Developer.

The level of compensation for the Experienced Developer could vary, and will depend on multiple considerations that will have to be negotiated on a project-by-project basis:

• Relative assumption of financial risk. Is the Emerging Developer able to pledge any assets, or contribute funds to the predevelopment & construction phases, or secure any debt independent of the Experienced Developer?

• Relative assumption of risk mitigation costs. Multiple forms of insurance and risk mitigation vehicles are required on any given project – property insurance, builders risk insurance, title insurance, performance bonds, liability insurance. Can the Emerging Developer assume any of these, or help offset the costs in any way (e.g. local security of the project site during construction)?

• Long-term liability. Is there a long term compliance period for which the Experienced Developer will be responsible? Non-compliance can trigger a full recapture of funding or tax credits.

For the purposes of planning and budgeting, a fee equivalent to the project developer fee should be budgeted to compensate the Experienced Developer. This would be in addition to any other predevelopment or related funding provided to a project/developer. These fees could be paid at the completion of the project or on a pro-rated basis over the course of the project development, as outlined in the CoDeveloper agreement between the parties.

Photo by: Friends of Southwest Virginia

PROPERTY MANAGEMENT

Long term property management is an essential component of any successful project. The goal of any project is that it is maintained as a community asset, and that is largely dependent on how the property is managed. Additionally and as noted, compliance with any financing requirements is also critical – for many of the products available, noncompliance would be catastrophic for the project and the lead organization.

Third-party management is sometimes available, depending on location and size of the project.

Other projects can be self-managed, which has benefits to the broader development ecosystem and wealth-building goals. Supporting local building property management firms can become a vehicle to create new jobs and broaden capacity and wealth for individuals who do not possess the interest or entrepreneurial skills to do development, but could become a valuable part of the larger ecosystem by supporting the developers post completion. Regardless, identifying the responsible property manager must be a consideration at the initial stages of project concept.

Photo by: Friends of Southwest Virginia

Mentorship Model (Lighter Commitment, Lesser Impact)

There are situations where an Emerging Developer will have greater institutional capacity or relevant experience that can support their emerging development function and does not need a formal co-developer agreement in order to complete their project, but may still need some level of ongoing support and guidance. For example, an Emerging Developer may be a subsidiary or close partner of a larger organization. In some cases, Federally Qualified Health Centers are playing a role in community redevelopment and have strong financial capacity. Local governmental or quasigovernmental economic development entities have expressed interest in spinning off a nonprofit development organization.

In these cases, the Emerging Developer may not need the financial backing or support of an Experienced Developer in order to access financing and/or complete a project. Rather they need expertise assistance and guidance navigating development finance and implementation. In these cases, a Mentorship approach may be more applicable.

Under this model, an Emerging Developer would still be paired with an Experienced Developer. The complexity of the project will dictate the amount of time and energy required, but it is anticipated that this will still require a significant commitment of time on the part of the Experienced Developer. The Experienced Developer will utilize their existing relationships, engage in all project team meetings and all negotiations with investors and lenders, and work side by side with the Emerging Developer through all phases of project implementation.

This approach also opens up the opportunity to engage several recently-retired community development professionals. Part of the increasing shortage of community-based developers is due to this attrition of community development leadership, and this provides an avenue for engaging these very experienced and high-functioning individuals.

Since the assumption of risk on the part of the Experienced Developer is much lower in the Mentorship approach, compensation can be proportionately reduced and may be more appropriate on a fee-for-service basis rather than as a share of project revenues or developer fees.

The legal framework that may best suit this arrangement is a Partnership Agreement (See A8. Mentorship/Partnership Agreement Template, page 206)

CAPITAL PRODUCTS

The Capital Products Working Group was tasked with identifying challenges and solutions for the investment capital aspect of downtown development. They worked to analyze gaps and barriers in accessing capital for projects that have real development potential, documenting existing investment resources, and proposing credit enhancement and risk mitigation products tailored to support community-based real estate development projects. The group was composed of 15 members and led by Paul Wright from Wright Venture Services. This chapter includes: IN THIS CHAPTER:

7.1 Analysis Methodology

7.2 Existing Capital Products

7.3 Systemic Gaps

7.4 Financing Challenges, Needs and Gaps

7.5 Proposed Capital Products

Analysis Methodology

CAPITAL PRODUCTS WORKING GROUP

Paul Wright, Group Lead – Wright Venture Services

Jessica Bledsoe – Foundation for Appalachian Kentucky

Brian Chenoweth – Coalfield Development Corporation

Andrew Crosson – Invest Appalachia

LaTasha Friend – SOAR

Cindy Green – Locus Impact Investing Colby Hall – SOAR

Jessica Hartness – Virginia Dept of Housing and Community Development

Marten Jenkins – Partner Community Capital

Stephanie Lillard – People Incorporated

Monica Miller – M. Miller Development Services

Drew Prichard – FAHE

Matt Raker – Mountain BizWorks

Kelli Smith – People Incorporated

Emma Wyatt – The Innovate Fund

The Capital Products Working Group conducted comprehensive research and analysis to inform its recommendations, including the following:

• Compiled a list of capital products—such as loans, tax credits, and credit enhancements— available for rural downtown development projects in the ADDI region.

• Analyzed the successes, limitations, and gaps of existing capital products, evaluating what worked and what didn’t for various downtown projects.

• Identified systemic gaps hindering the flow of capital to downtown redevelopment projects in the region.

Eligibility Criteria & Cost Share

The Capital Product Working Group completed surveys of over 20 developers, project managers and some capital providers, as well as a handful of interviews and discussions.

Seventeen federal program funds, nine state-specific funds, and fourteen private/philanthropic funds were identified as being utilized for commercial downtown redevelopment across the ADDI region. Resources were cataloged across a spectrum of types: grants, loans, credit enhancements, and equity or tax credits as well as phases of use in a typical project.

Projects follow a typical progression of key milestones to advance to the next stage of project finance. For downtown real estate development or revitalization projects, these usually include the predevelopment, construction, lease-up and performance stages. This graphic matches the types of capital that are often sought during each stage and their relative level of complexity in accessing and securing an investment. Note that some categories of investment include multiple capital products or programs, but with similar impact/risk/return profiles and complexity related to process, eligibility, or deal structure.

EXHIBIT 09: TYPES OF CAPITAL FOR COMMERCIAL REAL ESTATE DEVELOPMENT

Types of Capital by Stage & Complexity

Systemic Gaps

Systemic gaps preventing the flow of capital to downtown redevelopment projects were identified, with several themes emerging that span various types of projects, deal sizes, and locations.

1) EXPERIENCED DEVELOPERS IN APPALACHIAN COMMUNITIES

Experienced developers bring expertise and credibility, navigating complex processes, securing financing, and managing projects effectively. Without them, downtown redevelopment in Appalachia may continue to struggle to attract capital.

The problem with the traditional real estate development process is that it is “top-down” and starts with the money that can be attracted to a special district (ie. Hub Zone) and then identify the site for development and lastly sell the plan to the community. This approach follows the typical money-flow “downhill”, resulting in “copy-cat” projects that may not fit the community’s needs.

2) UNDERDEVELOPED REAL ESTATE MARKETS AND LACK OF “COMPS”

Traditional real estate decision-making, and the investment for it, relies on comparable data that overlooks local demand, potential rent growth, sector-driven economic opportunities, and communities’ aspirations to invest in their vision for redevelopment. The lack of “market comps” - industry data on the real estate values in a particular geography - is a major barrier to investment for rural and small town projects, as it leads underwriters to negatively assess the collateral value and risk profile of projects that are attempting to stimulate greater local economic activity and real estate development.

3) LACK OF PARTICIPATION AND LEADERSHIP FROM REGIONAL BANKS

Regional banks play a crucial role in providing financing and investment opportunities for development projects, including downtown revitalization initiatives. However, according to a recent ARC report on small business credit, capital demand outpaces available capital supply across Appalachia. From 2017-2022 demand ranged from $117B-$127B, shortfalls averaged $70B per year. While banks provide most capital (97.1%), they are closing and consolidating operations in metro areas (a 2.3% decrease over 7 years).

Banks in the Appalachian region may be hesitant to invest in these projects due to perceived risks, Community Reinvestment Act (CRA) considerations, or a focus on other types of investments. This has been most evident in New Markets Tax Credits investments (which banks have been significantly involved in). Since the inception of the NMTC in 2000, only 6.6% of credits have been invested into projects located

in Appalachian Census Tracts. Today, much of the Appalachian region has banking deserts, meaning there are limited opportunities for banks to fulfill their CRA obligations in these areas.

However, recent legislative changes should help flow additional funding from traditional lenders seeking CRA credit into Appalachia, perhaps creating a larger pool of potential investors in tax credit equity, which presumably will create upward pressure in equity pricing.

Without the support and leadership of regional banks, downtown redevelopment projects may struggle to secure the necessary financing. Their participation and leadership are essential for attracting other investors and stakeholders to contribute to downtown revitalization efforts.

4) INFORMATION ASYMMETRY AND PERCEIVED RISKS / RETURNS

Information asymmetry among capital providers and potential investors, as well as their perception of risk and limited returns can also hinder the flow of capital. Outside investors and developers often view rural downtown redevelopment projects as risky due to outdated data or lack of information related to economic challenges, population decline, limited market demand, and infrastructure issues (including the lack of market comps identified in point #2, above).This perception can create a barrier to attracting the necessary funding and investment needed to support downtown revitalization efforts, resulting in a “chicken-or-egg” dilemma of real estate investment vs economic activity.

Property owners, commercial tenants, and government leaders often have risk and return perceptions that hinder investment. Examples include:

• Historic properties: Families living elsewhere treat them as tax write-offs, unwilling to sell or improve.

• Leased spaces: Startups and nonprofits often lack the cash flow or equity for predevelopment costs or real estate purchases to support ownership of their own property.

• Government-owned properties: Restrictions, limited capacity, and challenges accessing funds impede stabilization and redevelopment.

These steps should be taken to address these systemic gaps:

• Raise awareness on de-risking capital stacks with philanthropic funds and attracting local investments.

• Showcase ADDI capital stacks engaging diverse investors.

• Educate stakeholders on mitigating risks through pre-development, data-driven strategies, public-private partnerships, and financial incentives.

• Help identify and quantify a range of relevant comps from other markets, to demonstrate the value that can be created with the right project in a new market.

Financing Challenges, Needs & Gaps

Surveys of developers and investors revealed the top project financing issues were: 1) size of project cost, 2) uncertainty in the market, industry or other risk factor and 3) incomplete project documentation. Respondents elaborated on financial issues they faced, describing:

• A need for “emergency” additional financing after project costs rose, but having difficulty finding new funding; especially once lenders and other investors had made commitments and there was not room for adjustments (e.g. on collateral positions).

• Need for technical assistance to accompany financing

• More energy related financing options to offset higher up-front costs for renewables and energy efficiency

• More funding from grantmakers and community minded funders for planning, community engagement, and predevelopment soft costs

Most of the gaps in capital are experienced in the pre-development stage of a project where traditional lenders and grant makers are not readily available with capital products. A project that has higher risks in debt service coverage and/or having enough collateral (loan-to-value) are often denied credit. In under-resourced markets like the ADDI region, this challenge is endemic. Specific unmet capital product needs or financial gaps included:

• Capital to pay for pre-development costs; now average over $100,000 per project in region

• Bridge financing for tax credits and other reimbursable sources, because few lenders are able to offer subordinated or unsecured loans

• Patient and flexible capital - including equity and equity-like capital that helps during the first 3-5 years of a business or projects growth in cash flow, or holds for longer term returns (10+ years)

Proposed Capital Products

Given the gaps and needs identified, the following suite of capital products is recommended for exploration and development in the ADDI region. These products are designed to complement, leverage and “de-risk” investment capital from existing sources.

Many grants should include a “recoverable” feature that is unique to the project. Recoverable grants are an increasingly common tool in the fields of philanthropy, impact investment, and community finance, utilized by actors ranging from private Donor Advised Funds, community foundations, and philanthropic investors to federal funding programs such as the EPA Clean Community Investment Accelerator program.

Recoverable grants are less common in Appalachia but have been used extensively by Invest Appalachia in its first two years of operations. Recoverable grants provide a gap-filling function for uses where repayment is likely, or even certain, but there are barriers to financing such as lack of collateral, inability to cover debt service, and short repayment periods.

EXHIBIT 10: PROPOSED CAPITAL PRODUCTS

PRODUCT

Pre-development (Recoverable)

Grant Emergency Bridge (Recoverable)

Grant Credit

Enhancements:

• Loan Guarantee

• Interest Rate

Buy-Down

• Non-profit Tenant Rent Guarantee

FUNDING GAP

Project planning, site development, and soft costs such as feasibility/architectural/ engineering/financial projections that are necessary prior to securing financing

Fills unexpected cost/gaps in a committed stack that is scheduled to close

1-3

POTENTIAL FEATURES AND TERMS

Used to pay for pre-development cost, advance grant for specific soft cost for a property for development; repayable if project secures/closes on permanent financing, 1-3 years, no interest, enrollment fee, maximum $100,000.

Co-Developers Equity Match (Recoverable)

Grant

Recoverable funds or commitment to help lender(s) reach LTV (loan to value) or DSC (debt service coverage) ratio required to approve financing

2-3

Help provide “near-equity” to emerging developer; incentivize co-developer model

2-3

Level 3

Priority: non-profit applicant

No interest, enrollment fee; payable at time of permanent financing (less than 2 years) or on an agreed schedule.

Must fill financing ratio gaps for senior and subordinated lenders. Enrollment fees

Loan guarantee for mission-oriented lenders providing construction or permanent financing, with a documented shortfall of collateral. Funds held “off balance sheet”, secured by a guarantee agreement.

Interest rate buy down requires reimbursement/take-out documentation to determine the need for interest rate buy-down.

Non-Profit Tenant Rent Guarantee must have a philanthropic sponsor providing funding for nonprofit tenant, match 1:1 for ADDI rent payment guarantee to help them pay full market rates for the first three years.

Recoverable grant over 3-5 years. Up to 10% of project cost, maximum $250,000. Investment represents up to 50% of emerging developers equity in a joint venture. Repayment based on either flexible repayment plan (i.e. revenue dividends, share of developer fee), or refinance balloon and interest. Non-dilutive, nonownership, but requires personal guarantee from both partners and a subordinate lien position if possible. This product will be coordinated with the Co-developer model’s fees/subsidy.

Local Investor Equity Match (Recoverable)

Grant

Validate and source local investor equity, aggregated by a platform like Revocity or from an angel/ impact fund

Level 3

Target: owneroccupied business

Matches local equity investors, angels, impact funds, crowdsourced. Revenue share repayments based on cash flow benchmarks, non dilutive. Min of $25,000 1:1 match upon successful initial raise and up to $100,000 for $400,000 raise (1:4), underwriting of business operating plan required for higher amounts.

Targeted to owner-operator business or social enterprise who are operating business in downtown property.

ADDI Capital Products portfolio projections include an initial proposed capitalization of $6.5 million which will leverage an additional $38 million in capital over 5 years. The funds are split into Credit

Enhancements and Recoverable Grants. The majority of the initial funds will be deployed in the first three years and invested in an estimated 80-100 projects.

FINANCIAL ASSUMPTIONS AND IMPACT:

• Due to short-term cycles estimated at 2–5 years, ADDI funds will turn approximately 1.2 times over a five-year grant period, totaling $7.9 million in total deployment.

• The unrecycled rate averages 23% in this estimate. By the end of a five year grant, it is estimated that 60% of the grant dollars will have been recycled and remain available to continue the program.

• While difficult to project with certainty, capital is expected to leverage significant additional debt and equity for projects. Every dollar invested is projected to generate $5 in leveraged investment from other sources.

• A projected $285,250 in earned transaction fees (averaging 3.8% of deployed capital) can help pay for some of the administrative cost of operating the funds.

FUND OBJECTIVE AND MISSION

To provide flexible gap-filing investment capital products that help to “de-risk” and leverage other investment sources into a viable capital stack for Appalachian commercial development projects.

PROPOSED FUND GOVERNANCE AND DECISION-MAKING

In line with the collaborative intent and structure of the overall ADDI project, a collective of stakeholders including ADDI partners will participate in the governance and investment policy creation for the ADDI Funds and make nominations to a representative decision-making committee. Key investment policies should include:

• Define targeted sector and/or eligible applicant that align with Training and TA programming

• Underwriting guidelines, acceptable ratios, and “but for” test definitions or examples

• Capital structuring guidelines, fiscal agent guidelines and co-investing guidelines

• Risks assessment, review and reporting; allowance for unrecoverable grants

• Recoverable grant covenants, fee schedules and legal counsel requirements

• Processes and procedures for project screening, underwriting, approvals

• Standard reporting, progress reports, and cohort accountability participations

• Fulfillment of ‘soft returns’ such social benefits, job creation, economic development, benefit to community resilience, catalytic potential to incite other inward investment

One key policy is that any single project or aggregate of investment to the same borrower that would exceed 10% of the portfolio must be approved by the governing board. Grantmaking policies should follow philanthropic standards and best practices, and comply with all federal guidelines including ARC policies and 2.CFR.200, with attention to adaptations necessary in Appalachian community projects.

A Fund Administrator will need to have the experience and capacity to manage: applications, project underwriting, communications with other investors into a project, legal documentation and grant portfolio monitoring and reporting. Administration fees should be within industry standards for community development industry and subject to approval by the governing board..

Eligibility for projects and borrowers should complement the other offerings of the ADDI programs (as referenced in the table of proposed capital products. This may include stratified access to resources according to ADDI Member participation and project readiness; especially those persons that have actively engaged with training, technical assistance and mentoring resources.

Projects will need to fit within the definition of a “Appalachian Downtown Development,” primarily a commercial or mixed-use property development that will be catalytic to the redevelopment of a business district. We suggest the following eligibility levels, which reference other ADDI components including training, technical assistance, and mentorship/codeveloper model:

• Level 1: ADDI Network Member + self directed course completion + project concept approved

• Level 2: Level 1 + site control/option + Complete Cohort + TA for feasibility (or similar level of readiness vetting)

• Level 3: Level 2 + Mentor or Co-developer participant (Community-focused developer)

Photo by: Mountain BizWorks

REGIONAL ASSOCIATION

The goal of the Regional Association Working Group Group was to explore potential structural options and outline the process for developing a Regional Downtown Developers Association structure and services to support an implementation phase of Appalachian Downtown Developers Initiative and possibly serve as permanent infrastructure for the region. The group was led by Nicole Intagliata of Fahe and composed of seven members. This chapter includes:

IN THIS CHAPTER:

8.1 Analysis Methodology

8.2 Existing Regional Development Associations and Models

8.3 Relevant Organizations as Potential Members of the ADDI Regional Association

8.4 Takeaways from Organizations with Similar Functions in the ADDI Region

8.5 Options for Piloting a Regional Association Structure

8.6 Recommendations for Pilot Phase

Analysis Methodology

REGIONAL ASSOCIATION WORKING GROUP

Nicole Intagliata, Group Lead – Fahe

Kyle Case – Western Piedmont Council of Governments

Andrew Crosson – Invest Appalachia

Carla Ferguson – Coalfield Development Corporation

Billie Rogers – Friends of Southwest Virginia

Ruby Smith – Fahe

Carrie Staton – Northern Brownfields Assistance Center at West Virginia University

Stephanie Tyree – West Virginia Community Development Hub

To guide the recommendations, the following analysis and research was conducted by the Regional Association Working Group:

• Completed a field survey and analysis of other regional development associations and models that could be replicated or adapted.

• Analyzed the strengths and weaknesses of associations and similar groups working in the rural development space, both regionally and nationally.

• Conducted interviews with relevant regional organizations within the ADDI region to understand their expectations for a regional association and their level of interest in participating.

• Interviewed organizations and groups with functions similar to those of a regional association to understand their structure, business model, and potential fit for ADDI.

• Gathered ideas and feedback from members of the ADDI Leadership Council regarding the potential structure and function of the Regional Development Association.

Existing Regional Development Associations and Models

Within the ADDI region, there are no regional organizations or associations that are solely focused on downtown development initiatives and developer capacity building. Most associations that have a model similar to what is being considered for the ADDI Regional Association (RA) fall into three categories including:

1. Open and accessible organizations: The general public can easily engage with these usually quasi-public agencies, such as state planning and development districts. Their focus or priorities may be set by legislation, state directives or community planning processes.

2. Membership-based organizations: Generally require formal dues or fees for participation and are typically limited to practitioner entities in a particular sector or industry.

3. Partnership-based organizations: Operate with less formal structures and are often more flexible in their scope and function, but include some commitment to shared strategies or programs.

Most association models operate nationally or within single states. While some see value in a regional approach, few adopt it, favoring state-specific or generalized focus groups. Variations in resources, capacity, and regulations across states often hinder regional development efforts. NeighborWorks America is a notable exception, organizing its membership into regional sections. State agencies primarily provide ground-level resources like grants and project support, while regional and national organizations focus on generalized technical assistance or capital funding.

A key challenge in the regional approach is the variation in resources, policies, and regulations across states. For example, across the four states included within ADDI, each state has different state laws governing home rule, or municipal authority to implement local laws that are not specifically enabled by state statute. The complexity of the differences between state and municipal laws across a region significantly complicates the work of regional associations working across state lines. Limited personnel and expertise to address diverse state requirements often hinder regional approaches.

Capacity building, essential for downtown development, is often secondary to capital provision or technical assistance in existing organizations focused on downtown redevelopment initiatives. It is typically offered as part of other services or at a local level, with few entities addressing it regionally. Additional providers may exist but were not identified in this survey.

Advocacy, a potential service for a regional association, is already well-covered by many national organizations. A regional association should assess whether to develop independent efforts or leverage existing advocacy networks.

Relevant Organizations as Potential Members of the ADDI Regional Association

As part of this planning process, numerous organizations and local government entities were identified as potential members of an RA, however, all of these entities have differing experiences, needs, and interest in this work.

To accommodate these differences, an RA membership structure could be organized into three distinct tiers, each designed to meet the needs of varying levels of involvement and capability.

• Tier 1 would encompass general partners, nonprofits in supportive roles, mission aligned TA providers, and developers with an interest in joining the RA but who may not be ready to fully commit. These members might not be directly involved in downtown development but would benefit from networking, community partnerships, and project engagement that could still impact their communities. Organizations in this tier could include developers not focused specifically on downtown initiatives, service organizations, and broad-scale funders.

• Tier 2 would focus on emerging developers, communities actively engaged in downtown development, and business owners looking for development opportunities. These organizations could also include community groups and nonprofits eager to play a more engaged role in downtown initiatives. The benefits of Tier 2 would include access to experienced developers, training, capital, and other resources—in addition to the benefits available in Tier 1.

• Tier 3 would consist of established developers, nonprofits, and funders with a proven capacity to support development projects. This tier could include experienced organizations capable of mentoring and training new developers and assisting in co-developing projects. These groups may also be more capable of contributing higher membership fees, should a fee-based structure be chosen, and would offer opportunities for sponsorship and leadership.

In addition to these three tiers, the RA might consider including a general “partner” category. This category could be either separate or part of Tier 1 and could involve entities such as Chambers of Commerce, tourism centers, small business development centers, economic development organizations, planning/development districts, and main street organizations. Each state’s structure for these organizations varies, which might warrant their inclusion in a distinct, standalone category.

Takeaways from Organizations with Similar Functions in the ADDI Region

Within the ADDI region, three organizations have similar functions to what an ADDI RA could look like. Each of these organizations has invested directly in supporting downtown redevelopment projects, but do not currently have structured programs for capacity building for developers focused on mixed-used rural downtown development projects. All three have strengths and limitations, but they each serve a footprint that significantly overlaps or fully includes the ADDI region. These organizations include:

• Fahe

• Appalachian Community Capital (ACC)

• Central Appalachian Network (CAN)

Fahe has the closest alignment in terms of functions and capacity, with its membership-based structure and core capabilities of financing and capacity-building for housing developers. However, Fahe has its limitations including a housing focus and limited geography, as well as existing structures that may preclude new program functions like those proposed by ADDI.

Appalachian Community Capital (ACC) is also a membership organization, structured as a network of CDFIs serving Appalachia. ACC also operates the highly relevant Opportunity Appalachia program (see Technical Assistance chapter). Additionally, ACC has taken on a major initiative as the parent organization of the Green Bank for Rural America, one of the awardees of the EPA’s Greenhouse Gas Reduction Fund program.

The Central Appalachian Network (CAN) is a well-established, broad-based peer-to-peer network of community development non-profits that supports shared learning and strategies across a set of targeted sectors. CAN does on occasion coordinate a new regional program or strategic initiative, but does not have an existing or historical focus on downtown development.

While none of these three existing network entities are an optimal fit to house a Regional Association at this point, their membership will likely have significant overlap with ADDI participants and they will be important allies in standing up a useful new program. At some point, one of these entities may make sense as the permanent home for an ADDI Regional Association, but the recommendation out of the planning process is to pilot the ADDI implementation functions before committing to an ongoing structure.

Options for Piloting a Regional Association Structure

Following the conversations and research conducted by Fahe and the Regional Association working group, three potentially viable options came forward for a regional Downtown Developers Association.

• Option 1: Loosely coordinated informal regional network.

• Option 2: Fiscally sponsored project hosted by existing organization

• Option 3: New organization

OPTION 1: LOOSELY COORDINATED INFORMAL REGIONAL NETWORK

Governance Structure: Governance is informal, with shared leadership and decisionmaking. Each community or developer retains autonomy while collaborating regionally. Informal working groups may form for specific initiatives, such as state policy advocacy or project financing. MOUs govern any passthrough funding and programmatic responsibilities.

Core Activities: Harnessing local expertise, peer learning, and shared problem-solving among communities. The regional approach fosters cross-state collaboration through virtual and in-person convenings while balancing regional goals with statespecific priorities. Some aspects of the Recommendations detailed in previous chapters could be managed by various entities via MOUs or sub-award agreements, so long as funding is available.

Staffing Structure: No extensive formal staffing is required, reducing costs and complexity. A network facilitator would be important to ensure that network activities are sustained and well directed. Leadership and responsibilities for meetings, resource sharing, and projects would be largely

shared within the network.

Programs are operated by staff within sub-awarded or contracted organizations.

Membership Structure: An informal, relationship-based structure involving local governments, developers, community organizations, and regional downtown experts.

Participation is voluntary, guided by shared goals and collaboration.

Financial Model: Communities or developers independently secure funding for projects through grants, partnerships, or local resources. With no formal entity, financial needs are minimal, limited to optional joint initiatives like regional conferences or capacity-building efforts. Any new programs are funded through pass-through grants. Financial elements of the ADDI program, such as the capital products and technical assistance services, would be held by individual organizations within the network and not by a central entity.

Legal Structure: No new legal structure is required; participants in the collaborative continue operating within their own legal frameworks.

Strengths: No formal organization is required, avoiding the financial

and administrative burdens of staff, governance, and legal structures. The informal, peer-driven network fosters sharing expertise, resources, and strategies, strengthening bonds between communities and developers. Discrete program strategies (i.e. TA, Capital, Training, Co-Developer) operate with relative autonomy and some may find more success than others.

Drawbacks/Limitations:

Maintaining focus on regional goals and ensuring coordination may be challenging. Without dedicated staff or resources, progress could slow, and the collaborative may struggle to sustain momentum or adapt to emerging challenges. Possibilities to access and manage major new pools of resources are very limited, particularly if programs are funded and operating incongruously. The aforementioned program strategies, operating separately from each other, may not benefit from alignment and shared capacity articulated in this planning process.

OPTION 2: FISCALLY SPONSORED PROJECT HOSTED BY EXISTING ORGANIZATION

Fiscal sponsorship relationships can take many different forms, depending on the organizational structure of the sponsored projects (for example, if it has an existing legal nonprofit status or not), and the contractual agreements between the project and the sponsoring organization. This option assumes a middle ground, where ADDI is not a formal nonprofit organization at the start of implementation but is a structured, independent project that operates in alignment but with limited oversight by the fiscally sponsoring organization.

Governance Structure: The governance structure would follow the existing model established during the planning process, using the Leadership Council across the four states to create a project Advisory Board (e.g., board, advisory committees, working groups). While the fiscally sponsored program would be under the ultimate control of the host organization’s board and executive, the ADDI program would benefit from a high degree of autonomy including its own governance structure empowered with decision-making about strategies, program management, and resource allocation (e.g. a steering committee comprised of stakeholder groups). Any program elements well-suited to a different organization could be structured as pass-through awards with MOUs.

Core Activities: Core activities could include all program recommendations in this report, operated by a fiscally managed project that reports to the sponsoring organization. Fiscal sponsorship could be more or less hands off, with the most minimal oversight providing financial back

office support and grant application and management support. The fiscally sponsored program would be responsible for implementing program strategies through new/ existing staff, contractors, and sub-award relationship with partner organizations well-positioned to administer each program (Capital, TA, Training, Co-Developer).

Staffing Structure: The fiscal sponsor would provide staffing for back office support, such as accounting, financial management and grant oversight. The fiscal sponsor may include some staff time for project leadership and direction support, depending on the fiscal sponsor’s capacity and interest. The project would have directed staffing for project management and growth. This leadership role would manage the ADDI project and Regional Association as a discrete program with substantial autonomy. Additional staff and contractors, hired by the project leadership role/team, would handle day-today operations, program activities, community engagement, grant writing and reporting, and project

oversight. The organization may need to hire specialists in planning, economic development, and legal aspects of downtown revitalization, depending on the ultimate scope of the services being offered. Staff would likely be hired as employees of the fiscal sponsor and have detailed employment agreements that outline the unique relationship between the sponsored project that are employed to implement and the fiscal sponsor. Contractor relationships and MOUs with partner organizations may complement fulltime staff capacity.

Membership Structure: The membership structure would be set by the project, based on guidance for a leadership council, that may include participation from staff or board members of the existing organization. In cases where the sponsoring organization has an existing membership structure, the fiscal sponsorship agreement should outline how the project and sponsoring organizations memberships may differ and how aligned they should be.

Financial Model: The pilot phase of the Regional Association would be included in the budgeted grant funding for the implementation phase. The fiscal sponsor’s existing funding structure would be supplemented by potential earned revenue from ADDI activities, including government contracts, additional grants, membership fees, and earned income for downtown development. If lending services are already offered, additional projects could generate revenue. Adding downtown development may open new funding opportunities.

Legal Structure: The organization is already established, so no new entity is needed to start the project. If the project becomes a formal legal entity, its legal structure must support downtown development activities and, if a non-profit, align with its charitable purposes. Formal board resolution of support is advisable and should be expected. ADDI activities and

the Regional Association would be managed as a fiscally sponsored project of the host organization. The fiscal sponsor must include all ADDI activities in its financial statements, audit, tax documents, etc. To optimize ADDI’s strategic flexibility and chances of success, the fiscally sponsored project would have as much autonomy for daily operations and programming as appropriate and permissible under the host organizations bylaws and policies.

Strengths: Utilizing an existing organization lowers initial costs and effort, as its structure, staffing, and governance are already in place. Established relationships with funders, policymakers, and partners can expedite access to resources, expertise, and support. The organization’s reputation also adds leverage for partnerships, grants, and community buyin. There is a level of ultimate accountability for the program, but

a sense of shared responsibility for the initiative’s success. There is no damaging outcome - the ADDI implementation pilot could thrive and become a formal permanent Regional Association, or stay as a set of programs under the host organization, or sunset at the end of the implementation grant period pilot.

Drawbacks/Limitations:

A key challenge is aligning downtown development with the organization’s mission to avoid mission creep. Prioritizing a broader mission could strain resources, including staff time and finances. Attention must be paid to the right degree of autonomy between ADDI and the organization. A high level of trust between the fiscal sponsor, the ADDI leadership team and the project manager would be most beneficial to the project seeing success.

OPTION 3: NEW ORGANIZATION

Governance Structure: A traditional board of directors composed of representatives from member organizations including municipal, non-profit, and private sector stakeholders would be recommended. A lean structure would be advantageous during a launch and startup phase that would inevitably require adjustments to strategy and process.

Core Activities: Key activities should include: (a) connecting to lenders and facilitating access to funding; (b) offering capacity building and technical assistance in planning, zoning, legal, and compliance matters; (c) providing training and support for advocacy, promotion, and marketing; (d) encouraging cross-state projects; (e) providing technical assistance funding and capital resources, and (f) coordinating events like conferences and workshops. These services are inclusive of and in addition to the defined program strategies of the implementation plan.

Staffing Structure: Begin with an Executive Director and Project Manager. Additional staff may be needed for legal, policy, program, technical, community engagement, and communications roles. Regional staff will also be required for on-the-ground support and ongoing promotion.

Membership Structure: A new Regional Association would likely use a membership-based, tiered model to support smaller municipalities and emerging developers, with varying levels of formality.

Financial Model: Varied revenue streams, such as membership dues, grants, philanthropy, and earned income from consulting, events, and training, will be needed to cover overhead, particularly in the early stages. A substantial initial funding commitment would be necessary to make this model possible, and financial stability would be a major concern.

Legal Structure: While a nonprofit 501(c)(3) may be successful for a new organization, structuring a multi-state regional entity will require legal expertise to comply with varying state regulations. Forming a new entity can be a time-consuming and costly process, and may delay or ultimately undermine the ability to deliver the programs and services identified in this planning process.

Strengths: A new organization can prioritize downtown development as its primary mission, fostering cross-state collaboration and supporting holistic development initiatives. There is clarity on the initiative’s leadership and ultimate responsibility.

Drawbacks/limitations: This option is resource-intensive, requiring significant capacity, energy, and financial resources. Expertise in varying regulations, tax credits, and development procedures would incur substantial costs, and it would take the longest to implement. ADDI is an untested pilot, and it may be unwise to commit to a permanent entity before the programs have been piloted..

Recommendation for Pilot Phase

Based on interviews, research, and information provided, it is the recommendation of the Regional Association working group to use the options outlined above as stepping stones to a formal entity to accomplish the purposes of the multi-state project. The Regional Association should leverage the momentum of the planning process to launch implementation with the continuation of working groups and create a multi-state steering committee to keep the momentum of this work going. Implementation funding should be utilized to hire initial project staff to launch and guide the comprehensive implementation program. From there, leadership should move the Regional Association into an implementation pilot phase under Option Two (Fiscally Sponsored Project Under Existing Organization), which will provide the backbone structure and capacity of a host organization as well as the flexibility and autonomy to pilot ADDI with a strategic, flexible, and collaborative approach.

A major discussion point for this group is the challenge of identifying an interested and capable organization that could take on the downtown development initiative, ensuring they have the capacity and mission alignment to handle the additional workload. Based on the limited capacity of key partners (including Fahe, CAN, and ACC) to undertake a major new program, and the ongoing commitment and institutional memory from serving as the project lead for the ARISE Planning Grant and planning phase of ADDI, project partners generally concur that Invest Appalachia is likely the best positioned entity to lead an implementation grant application and serve as the host organization for ADDI as a fiscally sponsored project. Invest Appalachia has the capacity to manage capital products under its existing services, and has experience in managing subsets of funds for specific projects. It has experience running training programs (Community Investment Framer Training) and working with partners to provide technical assistance to projects. IA also has experience serving as a fiscal sponsor to projects that are aligned with the organization’s mission, such as the ADDI project.

During the course of a multi-year initial implementation process, the ADDI Leadership Council, with guidance from Invest Appalachia’s board of directors, should determine whether the Regional Association should be formalized as a separate entity. If this determination is made, the Regional Association could spin off to be its own entity if key factors such as revenue and governance structure were planned for and put into place early on.

OVERALL IMPLEMENTATION

The previous chapters identify the recommendations for strategic programmatic interventions that can strengthen Appalachia’s downtown development ecosystem and build developer capacity, based on the analysis of the various content working groups. Groups also discussed how the different program elements would fit together during implementation, and group leads (the Leadership Council) identified various points of intersection and need for alignment and coordination, presented here. Additionally, the Leadership Council discussed high-level guidance for an anticipated implementation phase for the Appalachian Downtown Developers Initiative, including governance structure, program interactions, and staffing, summarized here. This chapter is organized into the following sections:

IN THIS CHAPTER:

9.1 General Recommendations

9.2 Governance Structure & Organizational Chart

General Recommendations

The Appalachian Downtown Developers Initiative (ADDI) Implementation Plan provides a 5-year roadmap to guide Invest Appalachia and its partners in the implementation of the Appalachian Downtown Developers Initiative. As outlined at the beginning of Section 2, the five primary implementation pillars of this comprehensive strategy are 1) Training Program, 2) Technical Assistance, 3) Co-Developer Model, 4) Capital Products, 5) Regional Association.

In addition to these areas, Invest Appalachia and its partners will consider six general recommendations throughout the implementation of the ADDI Implementation Plan, which include the following:

1. Regional Focus: Prioritize an implementation structure and solutions that address regional needs while ensuring broad participation and fairness. The approach should encompass all participating states and accommodate communities of varying sizes.

2. Partnerships: Build and strengthen partnerships with like-minded organizations such as Appalachian Regional Commission, Main Street America, State Main Street Programs, Appalachian Community Capital, Green Bank for Rural America, Opportunity Appalachia, the Central Appalachian Network, Appalachia Funders Network, and other regional allies, to maximize ADDI’s impact, leverage resources, and avoid duplication of efforts.

3. Geographic Expansion/Scaling: Explore expanding the ADDI Implementation to neighboring states within the Appalachian Regional Commission footprint such as Tennessee and Ohio.

4. Small Wins and Value Demonstration: Focus on delivering tangible value to partners as early as possible, including areas where ADDI programs can directly and quickly support progress on concrete projects and in the ecosystem. This will help to demonstrate proof of concept, cultivate partner buy-in, and provide opportunity to refine tools and strategies based on early pilots.

5. Pillar Interdependence: Clearly communicate how the five pillars of Developer Support are interconnected, highlighting how they complement and reinforce one another to provide comprehensive support for developers along the pathway from project conception through development and execution. The goal is to not merely get more projects done, but to build the capacity of a network of place-based developers to continue advancing downtown development for decades to come. (See Exhibit 11: Developer Support Through Project Progression, page 121)

6. Financial Stability: As noted in the Chapter on Regional Association, the ADDI Implementation Phase is envisioned to transition to ongoing permanent infrastructure and programming for the region. The

Implementation Phase should be considered a pilot that allows us to understand program effectiveness, management best practices, and financial viability. We expect that some aspects of the ADDI program may ultimately be financially self-sufficient, whereas others will require subsidy and grant funding. These findings will inform what a long-term model for the ADDI program looks like beyond the 5-year pilot period, and an outcome of this implementation phase will be a financial model that clearly identifies ongoing expenses, revenues, and funding required to continue operations.

EXHIBIT 11: DEVELOPER SUPPORT THROUGH PROJECT PROGRESSION

Governance Structure & Organizational Chart

The ADDI Implementation Plan will be carried out over a five-year period, guided by a governance structure rooted in a networked approach that, like the planning process, emphasizes representation, collaboration, and deep understanding of the economic and cultural contexts of the Central Appalachian region. Designed for flexibility, this structure can be adapted or expanded as the project evolves to meet emerging needs and opportunities.

1. ADDI Leadership Council: The ADDI Leadership Council, established during the planning process, will continue to guide the implementation. Comprising 7-10 key organizational representatives from across the four states, the Council will convene quarterly to review the implementation work plan, assess budget status, and evaluate staffing levels, ensuring strategic oversight and sustained progress for the initiative. The Leadership Council may designate sub-committees to provide oversight or decision-making functions related to specific programs (e.g. approval of recipients of TA or capital products).

2. ADDI Project Partners: Throughout the implementation, the project partner organizations involved in the planning process will remain actively engaged, offering guidance, support, and advocacy. As the Appalachian Downtown Developers Initiative evolves, new partner organizations will be strategically recruited to address emerging needs and opportunities.

3. State Groups: The State Groups formed during the planning process will continue to meet quarterly to review implementation efforts, address state-specific needs and opportunities, identify new projects, communities, and developers that should be brought into the ADDI network, and build on the collaboration and shared analysis established during the planning phase.

4. ADDI Partner Summit: An annual in-person ADDI Partner Summit will bring together the Leadership Council, project partners, supporting funders and agencies, and participating developers for idea generation, collaboration, and networking, fostering meaningful connections and shared progress. A key consideration will be alignment with partner events, including the Appalachia Funders Network annual convening, Fahe annual meeting, and Opportunity Appalachia Local Development Forum. This will also be an opportunity for project-wide feedback from partners and stakeholders, to allow for regular assessment and adjustment of strategy and programs.

5. Centralized Coordination and Staff: The ADDI Implementation phase will include the addition of full-time staff, part-time staff and external contractors to support its execution. The envisioned start-up team includes an ADDI Director, an ADDI Project Manager, and supporting staff capacity for fiscal and grant management provided by the fiscal project sponsor. Complementing this core team, part-time roles will be filled through contract staff or partnerships for functions such as Technical Assistance Coordinator, Training Coordinator, and Capital Products Manager, ensuring the necessary expertise and capacity for successful implementation.

EXHIBIT 12: PROPOSED ADDI ORGANIZATIONAL CHART

Developer Coaching

Co-Developer Model

Real Estate Development

Community Development

Federal Grant Management

Finance and Accounting

Project Management

Business Coaching and TA

Training and Education

Financing

Membership

EXTERNAL PARTNER ORG. (Partner)

Oversees dev. training and pilot.

EXTERNAL PARTNER ORG. (Partner)

Screens potential participants/ projects, scopes, TA, and provide coaching.

LEADERSHIP COUNCIL

Contribute to strategic vision and provide State/local coordination.

FAHE, MSA, Woodlands, Jim Heid, All 4 State Led Prgs.

ADDI DIRECTOR (TBH) PHASE 1 HIRING

Guides strategic vision, Coordinates leadership council, Leads grant management, Oversees lend contractors.

CONTRACTORS

EXTERNAL PARTNER ORG. (Partner/Contracted Time)

Co-developer mentoring program guidance and direction.

EXTERNAL PARTNER ORG. (Partner/Contracted Time)

Support regional association infrastructure development and program guidance.

LEAD TRAINING PARTNER LEAD TA PARTNER LEAD DEVELOPER MENTORING PARTNER LEAD RA PARTNER

TBD (CONTRACTORS)

Co-leads accelerator w/ﬁnance expertise.

TBD (CONTRACTORS)

Co-leads accelerator w/complementary technical expertise.

SMEs (CONTRACTORS)

Support training/education curriculum development.

SMEs (CONTRACTORS)

Provide coaching and technical assistance services.

* For a larger version of the Proposed ADDI Organizational Chart, see Appendix A1 on page 128.

CHIEF EXECUTIVE OFFICER INVEST APPALACHIA (SPONSOR)

Leads capital raise management and contributes to

LEAD FINANCING PARTNER

INVEST APPALACHIA (SPONSOR)

Oversees ﬁnancial

PROJECT MANAGER (TBH) PHASE 1 HIRING Handles day-to-day TA project management and supports grant reporting.

Identify and refer

ADDI COACHING PROGRAM COORDINATOR (TBH) PHASE 2 STAFFING

Leads all activities on mentoring + co-developer and peer network programs.

CONCLUSION

There is great optimism across the Central Appalachian region around the potential for downtown business districts to drive economic growth and viability for communities in the coming years. We believe that we are in a unique moment of opportunity to launch a new regional initiative that will have generational impacts for Appalachian communities.

The ADDI project demonstrates the high alignment and interest across Kentucky, North Carolina, Virginia and West Virginia in the value of investing in capacity building for downtown developers to support these revitalization efforts. A common theme throughout the planning process was the recognition that while there had been many varied efforts to drive downtown revitalization across the region, these efforts were largely scattered, uncoordinated with similar efforts, and lacked the suite of comprehensive, coordinated capacity building services that developers have requested and need to grow their businesses and complete projects at a faster pace. Over and over we have also seen that the scale of demand dramatically outpaces the resources available in downtown revitalization technical assistance programs.

While much analysis was completed, we recognize that there are a number of pending questions raised by the participants that must be addressed in implementation of the project, and that the findings of the planning phase are limited to who was at the table and what could be accomplished in a limited timeframe. It is also clear that while the planning phase included a robust and representative network, there are many more actors - organizations, businesses, agencies, and community groups - that are active or interested in this space, and should be engaged in the implementation phase. We see this as a starting point for a collaborative effort and look forward to learning more together as we move into implementation.

The ADDI project will serve to meet the demand, need and opportunity of this moment in Central Appalachia. The planning phase of the project has created a high degree of values alignment, strategic consensus, and detail of activity. This implementation readiness enables the project to hit the ground running once funds are received for start up.

We are deeply indebted to the extraordinary effort and guidance that this project received from the Leadership Council and highlyengaged participants. The in-person Partner Summit in August 2024 demonstrated the high level of trust and commitment that dozens of organizations and individuals have in implementing and guiding this project to success. We are excited to continue growing this project with new partners, investors and funders as we move toward implementation and to making this vision of downtown revitalization a reality for our region.

Thank you for your interest in downtown development in Appalachia! We would love to have your feedback on the ADDI implementation plan, and any recommendations as we move forward. If you’re interested in sharing insights or being involved in the next phase of ADDI, please complete this brief survey.

Photo by: Invest Appalachia

APPENDIX A

APPENDICES:

A1: Proposed ADDI Organizational Chart

A2: Developer Support Through Project Progression

A3: Kentucky State Report

A4: North Carolina State Report

A5: Virginia State Report

A6: West Virginia State Report

A7: Co-Developer Agreement Template

A8: Mentorship/Partnership Agreement Template

Proposed ADDI Organizational Chart

Developer Coaching

Co-Developer Model

Real Estate Development

Community Development

Federal Grant Management

Finance and Accounting

Project Management

Business Coaching and TA

Training and Education

Financing

Membership

EXTERNAL PARTNER ORG. (Partner) Oversees dev. training and pilot.

LEADERSHIP COUNCIL

Contribute to strategic vision and provide State/local coordination.

FAHE, MSA, Woodlands, Jim Heid, All 4 State Led Prgs.

CONTRACTORS

(CONTRACTORS) Co-leads accelerator w/ﬁnance expertise. ADDI DIRECTOR (TBH) PHASE 1 HIRING

Guides strategic vision, Coordinates leadership council, Leads grant management, Oversees lend contractors.

EXTERNAL PARTNER ORG. (Partner)

Screens potential participants/ projects, scopes, TA, and provide coaching.

EXTERNAL PARTNER ORG. (Partner/Contracted Time)

Co-developer mentoring program guidance and direction.

EXTERNAL PARTNER ORG. (Partner/Contracted Time) Support regional association infrastructure development and program guidance.

CHIEF EXECUTIVE OFFICER INVEST APPALACHIA (SPONSOR)

Leads capital raise management and contributes to strategic vision 1/8 FTE

LEAD FINANCING PARTNER

INVEST APPALACHIA (SPONSOR)

Oversees ﬁnancial management and supports grant management 1/8 FTE

STAFFING

ADDI PROJECT MANAGER (TBH) PHASE 1 HIRING

Handles day-to-day

TA project management and supports grant reporting.

TECHNICAL ASSISTANCE COORDINATOR (TBH)

PHASE 2 STAFFING

Identify and refer projects to programs.

ADDI COACHING PROGRAM COORDINATOR (TBH) PHASE 2 STAFFING

Leads all activities on mentoring + co-developer and peer network programs.

Developer Support Through Project Progression

EXPLORATORY STARTUP

Objective: Understand Development Process and Fit as Developer Virtual On-demand Course

Ad Hoc Technical Workshops

Objective: Explore First Project; and Determine Fit as Developer

EMERGING ESTABLISHED MATURE

Objective: Build Increased Capacity, Get One or More Pilot Projects Done Using ADDI Support

Objective: Develop Viable & Scalable Approach as Developer, Plug into ADDI Support System

Objective: Continue & Reﬁne Development Activity, Mentor & Support Emerging Developers

Kentucky State Report

This comprehensive report examines the current economic development landscape in Eastern Kentucky, with a focus on empowering local communities, fostering new developers, and aligning resources for continued growth. We explore key challenges, including limited access to capital, developer education, and infrastructure deficits, while emphasizing the importance of shifting from traditional industrial recruitment to community-centric development strategies. Through targeted interventions, such as developer mentorship, capital stacking guidance, and tax credit education, this work aims to cultivate a resilient, vibrant ecosystem where both small towns and emerging developers can thrive. The insights and strategies presented here are designed to support longterm economic vitality, while respecting the unique cultural fabric of Eastern Kentucky.

KENTUCKY STATE REPORT

KENTUCKY STATE REPORT SUMMARY:

The economic development landscape of Eastern Kentucky necessitates a paradigm shift from traditional industrial recruitment toward the cultivation of vibrant, livable communities. This transition should prioritize the enhancement of local resources to create environments that attract developers, residents, and small businesses, rather than merely replacing lost mining jobs. The goal is to foster communities where individuals aspire to live, work, and invest.

A tailored approach to support is imperative, considering the unique size and resource availability of each community. This may include the provision of targeted grants, generally between $50,000 and $100,000, to support specific initiatives focused on enhancing local infrastructure and revitalizing vacant properties. Although the KPDI grant program is already in place, rural communities need further assistance in navigating the grant application process and identifying suitable funding opportunities. Conducting comprehensive community assessments can help these areas optimize their resources and ensure they achieve maximum impact from available funding. Such efforts should be complemented by proactive engagement with property owners to encourage renovation or sale at reasonable prices.

Survey findings highlight that, while certain municipal policies demonstrate potential benefits, a significant lack of awareness and confusion regarding their utilization persists. The absence of economic development organizations in fourteen counties further hampers growth, while limited

access to prepared sites deters new business investments. Critical barriers include water supply shortages, funding gaps, and the pressing need for targeted incentives tailored to small businesses. Moreover, there is an urgent requirement for clear and accessible information regarding available business resources to assist local entrepreneurs in navigating the support landscape. As older buildings deteriorate and ownership transitions occur, communities face significant challenges in property maintenance. Solutions such as property tax penalties for neglect, land banking initiatives, and the establishment of an abandoned property coalition—similar to successful efforts in West Virginia—could serve as effective frameworks to address these issues.

Developers in the region confront additional challenges, including floodplain complications, a fragmented housing market, and a shortage of skilled labor. Overcoming these barriers will necessitate improved access to professional services, dedicated capacity-building funding, and streamlined incentives. By focusing on regenerative development, fostering collaboration among stakeholders, and providing clear guidance on available resources, Eastern Kentucky can advance toward a more resilient economic future.

SECTION 1: DEVELOPERS

Development in Eastern Kentucky faces significant structural challenges that have resulted in a limited pool of active developers compared to other regions of Kentucky and neighboring states. The primary deterrent is the relatively lower return on investment (ROI) associated with projects in this area, making developers hesitant to pursue opportunities here when higher-ROI options are available elsewhere. As a result, local business owners are increasingly assuming the role of developers out of necessity. Many have inherited buildings or are seeking to establish their businesses in ground-floor spaces, prompting them to consider mixed-use development for the underutilized portions of their properties.

Municipalities are also often finding themselves in the position of “accidental developers.” Cities and counties are stepping in to manage properties that have reverted to public ownership due to unpaid taxes, the passing of owners, or the persistence of blighted and dilapidated structures, particularly in downtown areas. With limited interest from external developers, these municipalities are taking a proactive approach to downtown revitalization, recognizing the need to stimulate

economic activity and improve community infrastructure in the absence of traditional privatesector involvement.

The Developers section of the Kentucky State Report provides a comprehensive overview of organizations involved in downtown and community development across the Commonwealth. The report outlines developers’ contact information, geographic focus of each organization, and provides a summary of their accomplishments. This includes both completed and ongoing projects, as well as their willingness to participate in a mentorship program, where applicable.

Active Projects

Several projects are currently active in ARC-designated counties across Kentucky. Although they are mentioned in the Kentucky Connections document, the following provides a more detailed description of the larger projects completed and in progress in Eastern Kentucky.

HOMES, Inc. provides affordable and efficient housing solutions to distressed communities in Eastern Kentucky, with a current focus on Letcher County, through new construction, home repair, and rental opportunities. Over the past two years, they have actively collaborated with Letcher County Government and the Kentucky Department for Local Government (DLG) to secure Community Development Block Grant Disaster Recovery (CDBG-DR) funding for the development of additional home sites in Letcher County, beyond the Commonwealth of Kentucky’s designated “higher ground” sites. To support this initiative, they have engaged Bell Engineering to provide expertise in project design and scope. Currently, they are progressing through the design phase for the following properties:

• UZ – 12 units of single-family housing

• Seco – 26 units of townhouses, single-family ownership

• Thornton – 12 units of single-family housing

• Town Hill – 56 units of multi-family rental

They are also involved with FAKY’s Chestnut Ridge development and have secured a contract to build twelve houses there. HOMES, Inc. is actively looking for property to purchase to separate their solar line of business activity from their construction line of business.

The City of Hazard has become an ‘accidental developer’ fueled by the desire to enhance its community. There are currently three buildings in some level of development in Hazard: the KY Prince Coal building, the former City Hall Building, and the former Combs Hardware Building. They have also created a new park called ‘The Grand’ that still has several phases to be completed.

Other organizations in Hazard are working on additional development of buildings such as:

• The Appalachian Arts Alliance is working on the second floor of their building, and eventually taking over an additional building across the street.

• The Mountain Association has developed 479 Main.

• Jeff Norman is developing a burnt apartment building back into apartments as well as renovating the 3rd and 4th floors of the Goal Line building into apartments.

• Two local property owners have just made an offer on a 30,000 sq ft building with a plan to renovate a mixed-use property.

• Patrick and Melanie Pennington have purchased and renovated Bell’s Market. The first floor is fully occupied, and they are renovating the second floor.

• Lena K Fugate is continuing the development of the former Dawahare’s Building.

Over the past five years, twenty-five buildings in Hazard, KY have been sold, with all undergoing, at minimum, significant renovation efforts.

In addition to the active projects, several developers have identified potential projects within their areas of focus and preferred locations. While this list is not comprehensive, it highlights projects noted by current developers for inclusion in the report.

Potential Projects

HOMES, Inc. is in the preliminary stages of development consideration to convert the old 20,000 SF Neon High School into multifamily rental housing in Letcher County, KY.

The City of Hazard has two buildings in their pipeline for redevelopment in downtown Hazard: the old city hall building and the former Combs Hardware building, both of which are owned by the city already. The City of Hazard is actively looking to engage in additional development projects.

Housing Development Alliance is looking for new development opportunities with high-ground flood recovery going to be the primary focus soon.

In the City of Sharpsburg, the R.L. Brown Foundation has acquired two deteriorated vacant storefronts on Main Street and is currently evaluating renovation plans and potential future uses for the properties. In addition, a fully operational general store is set to be donated to the Foundation in early 2025, with plans for expansion and upgrades to accommodate a variety of uses. Both projects are in the initial stages of exploration.

The City of Burkesville has several projects in the pre-development phase. Multiple privately-owned buildings are being considered for redevelopment initiatives. Additionally, the current City Hall

building is expected to become available for future development, as municipal offices are in the process of relocating. The industrial park also offers publicly-owned vacant properties that present significant development opportunities.

In the City of Wayland, a series of redevelopment initiatives have been steadily advancing over the past 12 years under the guidance of local leadership. Key projects include the restoration of the historic gym, critical infrastructure upgrades such as flood mitigation, and the installation of fiber internet and public Wi-Fi. Currently, efforts are concentrated on completing the comprehensive renovation of the high school campus, encompassing the high school, gym, and annex building. As part of the town’s higher-ground housing development strategy, 11 homes were constructed in early 2024, with plans for an additional 11 homes across the community.

In Harlan County, KY, the City of Harlan’s downtown has seen the most momentum and the largest ongoing project. Gill Holland, a long-time developer with a personal connection to Harlan, has announced his intentions to create a boutique hotel in downtown Harlan that would represent a $5-6 million dollar project and create around 15-20 jobs. They are still in the pre-development phases, but it would be a huge addition to downtown. Mr. Holland also recently completed the conversion of a dilapidated downtown building into Harlan County Beer Company.

Johnson County is planning to construct a flood wall in its downtown area, which currently lies within a floodplain, making it challenging for small businesses to secure federal grants or funding. The flood wall will provide better protection for local businesses during floods and improve their eligibility for federal support. Additionally, Judge Mark McKenzie and his team are working on a sidewalk project to enhance connectivity between two key areas of the city.

DEVELOPER SUPPORT

As Kentucky’s State Lead for the Appalachian Downtown Development Initiative (ADDI), my responsibility includes evaluating the challenges, obstacles, and needs that developers face in Eastern Kentucky. This analysis is based on an extensive review of development projects throughout the region, covering diverse sectors such as real estate, urban revitalization, construction, environmental consulting, and historic preservation. The findings emphasize the key gaps and barriers that developers experience, which impede progress and reduce the impact of redevelopment initiatives in Appalachia.

Barriers:

Eastern Kentucky faces several significant barriers that make development challenging for both local and outside developers. These barriers are deeply rooted in the region’s economic conditions and infrastructure limitations. Here are five major barriers, along with an explanation of each:

1. Property with Marketable Title and Floodplain Challenges

Many properties in Eastern Kentucky are within floodplains, which limits the ability to secure funding and grants for development. Properties that lie within these areas often do not qualify for federal or state tax credits, and developers face additional costs for construction and insurance. Furthermore, FEMA’s flood mapping process is slow, meaning that even if areas are no longer in a floodplain, it can take years for official updates to reflect this. The lack of marketable title due to unclear property ownership further complicates the process, leaving potential developments stalled. For communities with historic downtowns in floodplains, like many in Eastern Kentucky, relocation is not an option, making this an enduring challenge.

2. Broken Housing Market and Lack of Local Developers

Eastern Kentucky suffers from a broken housing market, where poor property assessments by Property Valuation Administrators (PVA) create uncertainty about future property taxes. This inconsistency makes it difficult to project the return on investment (ROI) for development projects. Additionally, few residential housing developers are working in regions like Letcher County, and the absence of comparable property sales in some towns further hampers accurate appraisals. This lack of market activity, combined with minimal private sector development, creates a vicious cycle where the housing market remains stagnant, deterring new investment.

3. Insufficient Infrastructure for Development

Many areas in Eastern Kentucky lack the basic infrastructure required for large-scale development, particularly access to water and sewer systems. Without these essential utilities, the cost of developing property increases, and developers are forced to bear the burden of infrastructure improvements. In some cases, even if land is available, the absence of waterlines, adequate roads, and other critical services makes it impractical to develop, especially for low-income housing or mixed-use projects. This infrastructure gap exacerbates the already high costs of development, particularly in rural and remote areas.

4. Shortage of Skilled Labor and Trades

There is a significant shortage of skilled labor, specifically specialty trades including architects, structural engineering, drywalling, and historic preservation work. Local contractors are often overbooked, and it is costly to bring in out-of-area contractors who are willing to travel to these remote communities. This lack of expertise prolongs project timelines and raises costs. For example, Eastern Kentucky developers share specialized workers, such as drywall crews, between multiple projects due to a lack of available skilled tradespeople. This shortage of labor extends to the management level as well, with organizations struggling to build capacity in communications, project management, and workforce training to meet the growing demands.

5. Challenges with Blighted and Neglected Properties

Blighted and neglected properties are a persistent barrier to redevelopment in Eastern Kentucky. While programs like the City of Hazard’s blighted and abandoned tax incentivize landlords to sell or improve unused properties, many neglected buildings still linger, sometimes in dangerous conditions. Complicating matters, these properties are often occupied by renters who have no other housing options, making it difficult for local governments to enforce stricter property codes without harming vulnerable residents. A more effective enforcement system, along with increased support for low-income renters, is needed to address this issue. The problem is further exacerbated by the lack of zoning regulations in rural areas, leading to inconsistent development practices across the region.

Additional Barriers:

Capacity Building and Funding Gaps

Before the region’s flooding, housing was not seen as a critical issue, and as a result, there was little investment in capacity-building for housing organizations. Now, after the recent floods, the demand for housing development has skyrocketed, but local organizations struggle to keep up due to a lack of investment in tools, equipment, personnel, and training. For example, local organizations are facing challenges in establishing specialized teams to handle the growing workload, such as creating dedicated drywalling crews.

Low Income and Unfeasible Pro Formas

Eastern Kentucky’s low real-dollar incomes create a significant challenge in developing lowincome housing without substantial subsidies, such as housing vouchers. Even if developers were given properties, the pro forma for renting to low-income individuals often does not work without external financial support. The region’s economic conditions make it difficult to develop housing at market rates, which would be affordable to residents, without sacrificing project feasibility.

Difficulty Finding Appraisal Comparables

Due to the low volume of property transactions in many small Eastern Kentucky towns, it is difficult to find comparable sales to establish accurate property appraisals. In many cases, properties have only changed hands within families, meaning there is no recent market activity to benchmark values. This makes it challenging for developers to secure proper financing, as accurate appraisals are needed to establish loan amounts and funding sources.

These barriers collectively create a challenging environment for developers in Eastern Kentucky, limiting investment and stalling progress on vital community and economic development projects. Addressing these barriers will require a concerted effort from local governments, private developers, and state and federal partners to create a strong path forward for the region.

DEVELOPER NEEDS

Eastern Kentucky developers have identified several key needs that are critical for fostering downtown development in the region. Addressing these needs will enhance the capacity of local organizations and attract investment. Here are the major needs with detailed descriptions:

1. Access to Professional Services

Developers in Eastern Kentucky require ongoing access to specialized professional services, including a certified public accountant (CPA) familiar with the nonprofit sector and a local attorney who can navigate legal complexities surrounding property development. These professionals can provide vital guidance on financial management, compliance, and legal issues that arise during the development process. For example, a CPA can help nonprofits better understand funding opportunities and financial reporting requirements, ensuring they remain accountable and transparent. Similarly, having a local attorney who understands the nuances of property law can streamline transactions and address any disputes or concerns that may arise, ultimately facilitating smoother project execution.

2. Capacity Building Funding

There is a pressing need for capacity-building dollars to support the growth and stability of nonprofit organizations involved in development. These funds would enable organizations to invest in training, equipment, and personnel needed to manage and execute development projects effectively. Developers express the need for ongoing relationships with financial advisors who specialize in nonprofit management to help them navigate funding landscapes and establish best practices. For instance, targeted capacity-building grants could be used to train staff in project management and community engagement, thereby enhancing their ability to undertake larger and more complex projects.

3. Access to Capital in Floodplains

Developers require improved access to capital, particularly for projects located in floodplains. The unique challenges posed by flood-prone areas make it difficult to secure traditional funding sources, as many lenders are hesitant to invest in properties that face potential flood risks. Streamlining access to financial products designed specifically for floodplain development, as well as attracting specialized contractors who are experienced in working in these conditions, is crucial. Developers also emphasize the importance of making tax credits and other incentives more accessible for projects in floodplains or historic properties that may not meet certain development standards. Simplifying these processes would encourage more private investment in the region.

4. Enhanced Understanding of Historic Preservation

Given the prevalence of historic buildings in Eastern Kentucky, developers need a nuanced understanding of how to effectively work within these structures, particularly those located in flood-prone areas. Many cities in the U.S. successfully navigate similar challenges with substantial private investment, which Eastern Kentucky currently lacks. This situation creates a “chicken and egg” dilemma: while grassroots efforts have laid the groundwork for a thriving downtown, the region now awaits larger investments that can help propel development forward. Training programs that focus on historic preservation techniques and best practices for floodplain management could empower developers to more effectively rehabilitate and repurpose existing buildings, thereby preserving the community’s heritage while promoting economic growth.

5. Streamlined Access to Development Incentives

The current process for accessing tax credits and traditional developer incentives can be cumbersome, especially for projects in floodplains or historic districts. Developers have indicated a strong need for these incentives to be more easily attainable, which would significantly boost investment interest. Simplifying the application process, providing clearer guidelines, and offering technical assistance for navigating these incentives would encourage more developers to take on projects in these challenging areas. By fostering a more conducive environment for development through streamlined incentives, the region can attract both local and out-of-state developers, contributing to a more vibrant economy.

By addressing these major needs, Eastern Kentucky can enhance its development landscape, attract investment, and create resilient communities that thrive despite existing challenges. Each of these needs represents a critical component of a comprehensive strategy to revitalize the region and foster long-term economic growth.

SECTION 1: SUMMARY OF DEVELOPERS IN EASTERN KENTUCKY: OVERVIEW AND CHALLENGES

The landscape of community and downtown development in Eastern Kentucky is characterized by a unique blend of local initiative, resilience, and significant barriers. The Kentucky State Report on Developers outlines various organizations dedicated to fostering economic growth and revitalization across the region. Each organization is detailed with key contacts, geographical focus, type of entity (public, private, non-profit), and a summary of accomplishments, highlighting both completed and ongoing projects.

Current Development Landscape

Eastern Kentucky has a relatively small pool of active developers compared to other areas in the state. Many local business owners have stepped into the developer role out of necessity, often managing inherited properties or launching businesses that require mixed-use development. This has led to municipalities becoming “accidental developers,” particularly in the wake of ownership changes due to tax issues or building neglect. With outside developers often hesitant to engage in the region, local governments are taking charge of revitalizing their downtowns.

Active projects include HOMES, Inc., which focuses on affordable housing in Letcher County, and the City of Hazard, which is transforming several key buildings into community spaces. Numerous other local organizations are also contributing to revitalization efforts, reflecting a community-driven approach to development.

Barriers to Development

Despite these initiatives, development in Eastern Kentucky faces numerous challenges that inhibit progress and investment:

1. Market and Floodplain Issues: Properties within floodplains struggle to secure funding and tax credits, complicating development efforts. The slow process of updating flood maps further complicates property viability.

2. Housing Market Limitations: A broken housing market, exacerbated by inconsistent property assessments and a lack of residential developers, stifles investment opportunities.

3. Infrastructure Gaps: Many regions lack essential infrastructure like water and sewer systems, raising development costs and making projects impractical.

4. Labor Shortages: A scarcity of skilled labor in specialty trades prolongs project timelines and inflates costs, hindering local development efforts.

5. Blighted Properties: The presence of neglected buildings creates an environment that deters investment, especially when local governments struggle to enforce property codes due to the risk of displacing vulnerable renters.

Developer Needs and Opportunities

To revitalize Eastern Kentucky, developers have identified several critical needs:

1. Access to Professional Services: Developers require guidance from financial and legal professionals to navigate the complexities of property development.

2. Capacity-Building Funds: Investment in training and resources is essential for local organizations to effectively manage development projects.

3. Improved Capital Access: Streamlined financial products tailored for floodplain developments are necessary to encourage investment in at-risk areas.

4. Historic Preservation Knowledge: Training on preserving historic buildings will enable developers to rehabilitate properties while maintaining community heritage.

5. Streamlined Incentive Access: Simplifying the process for tax credits and development incentives will boost interest and participation from both local and out-of-state developers.

By addressing these needs and overcoming the inherent challenges, Eastern Kentucky can enhance its development landscape, attract investment, and foster thriving communities. Each initiative represents a crucial step toward a revitalized economy that benefits all residents.

SECTION 2: ECONOMIC DEVELOPMENT ORGANIZATIONS

Currently, forty-seven economic development organizations are actively fostering growth across Eastern Kentucky. Among these, four regional entities work to develop cohesive plans and recruitment strategies that cover multiple counties. However, there are fourteen counties without a direct economic development organization, and they do not fall under the jurisdiction of any regional entity. These counties must rely solely on the state’s cabinet for economic development, which often prioritizes projects in more populated areas with better infrastructure. This focus leaves local officials without the necessary support to understand how to establish their economic development organizations or hire professionals to drive growth. As a result, these fourteen counties represent a significant gap in the downtown development support ecosystem, lacking leadership for sustained growth. It is important to recognize that in some of these communities, dedicated local volunteers are working to enhance their areas, but they lack the support needed to achieve rapid progress, often resulting in slower development.

Primary Capital Providers

In Kentucky, economic development organizations rely on a diverse range of capital providers and investment sources to fund their initiatives. Key funding mechanisms include:

1. Appalachian Regional Commission (ARC) Grants: Many organizations, such as the FOCUS organization, depend heavily on grants from the ARC. These grants often require local matching funds, which can come from a variety of sources, including local cooperatives and fiscal courts.

2. Local Donations: Organizations like the Hazard-Perry County Economic Development Alliance (HPCEDA) operate entirely on donations from local investors, primarily businesses. This model underscores the importance of community support in driving economic initiatives. Projects funded through this avenue frequently rely on grants to supplement the donations received.

3. Private Business Contributions: One East Kentucky demonstrates the role of private sector contributions in funding development efforts. This organization raises 100% of its funds through donations from local financial institutions, utility providers, telecommunications companies, insurance providers, and small businesses. These contributions are critical for leveraging additional grants from programs like the ARC and the Abandoned Mine Land Economic Revitalization program.

In 2019, the Kentucky Product Development Initiative (KPDI) was launched as an investment program through which 6 million dollars were available to Kentucky economic development organizations and local governments via grant awards to supplement their site or building improvement projects. It is a statewide effort to support upgrades at industrial sites throughout the Commonwealth and position Kentucky for continued economic growth. KPDI, a collaboration between the Kentucky Cabinet for Economic Development and the Kentucky Association for Economic Development (KAED), as of 2024 has now grown to a total of 100 million dollars in state funding towards upgrades of sites and buildings across the state.

This initiative arose from the recognition that a lack of prepared sites was a significant barrier to economic growth in Kentucky. By providing funding and technical assistance, KPDI aims to equip communities with the infrastructure and amenities needed to compete effectively for new investments.

Today, the KPDI has made significant strides in improving site readiness across the state. Economic development organizations benefit from this initiative as it enables them to identify and develop sites that meet the needs of prospective businesses. By investing in infrastructure improvements, utilities, and access roads, KPDI helps communities position themselves as attractive locations for new industries. This not only fosters job creation but also strengthens the overall economic landscape of Kentucky.

As of now, numerous KPDI awards have been granted to counties in the Appalachian Regional Commission (ARC) areas of Kentucky, reflecting the initiative’s commitment to supporting economic development throughout the state. These awards play a crucial role in enhancing site readiness, contributing to a more robust economic future for ARC counties in Kentucky.

ECONOMIC DEVELOPMENT ORGANIZATION BARRIERS:

Eastern Kentucky faces several significant barriers that hinder the effectiveness of economic development organizations in the region. Addressing these barriers is crucial for fostering economic growth and attracting investment. Here are five major barriers, each with a detailed description:

1. Lack of Awareness and Engagement

Many communities in Eastern Kentucky have historically lacked awareness of the opportunities available to them for addressing local needs. This deficit can stem from insufficient outreach, education, and engagement efforts by economic development organizations. When communities do not fully understand the importance of participation in local initiatives or the potential benefits of pursuing funding and development opportunities, they miss critical resources. This barrier is particularly pronounced in areas where community leaders may not actively promote or seek out initiatives that could foster economic growth. Enhancing awareness and engagement through targeted outreach and education can help communities recognize and capitalize on available opportunities.

2. Water Supply Shortages

The shortage of reliable water supply has direct implications for economic development and recruitment efforts in Eastern Kentucky. Many businesses consider access to adequate water supply as a key factor when deciding where to locate or expand operations. While there has been ongoing long-term planning to address this issue, the current shortages still pose a significant barrier, deterring potential investors and complicating development projects. Until these water supply challenges are resolved, communities will continue to struggle to attract new businesses and sustain existing ones.

3. Limited Availability of Prepared Sites and Buildings

A persistent challenge across the state is the lack of available, prepared sites and buildings suitable for new businesses. While the Kentucky Product Development Initiative (KPDI) has made strides in enhancing site readiness, many areas still lack the necessary infrastructure and facilities to meet the needs of prospective investors. This scarcity can lead to missed opportunities, as companies often prefer locations that are “shovel-ready” and require minimal upfront investment

in infrastructure. Expanding the availability of such sites is essential for enhancing Kentucky’s competitiveness in attracting new business ventures.

4. Inadequate Incentives Compared to Neighboring States

Kentucky’s economic development efforts are hampered by a perception that the state does not offer competitive incentives compared to neighboring states. Rural and disadvantaged areas struggle to attract new and expanding businesses due to limited financial incentives. For instance, implementing a tiered jobs tax credit that provides additional financial incentives for businesses to locate in high-unemployment communities could significantly enhance Kentucky’s appeal. Without such measures, economically disadvantaged regions may continue to fall behind more affluent areas, both within Kentucky and in the broader regional competition for investment.

5. Infrastructural Deficiencies Beyond Water Supply

While water supply issues are a prominent concern, broader infrastructural deficiencies also pose significant barriers to economic development. Many communities in Eastern Kentucky lack essential infrastructure, such as adequate roadways, internet access, and utility services, which are critical for attracting new businesses. These deficiencies not only deter potential investors but also hinder existing businesses from expanding. To combat this, a comprehensive strategy that prioritizes infrastructural improvements across the region is needed to create a more favorable environment for business development.

By addressing these barriers, Eastern Kentucky can enhance its economic development landscape, making it more attractive to potential investors and fostering long-term growth for local communities. Each barrier presents an opportunity for targeted interventions that can lead to more economic growth.

Economic Development Organization Gaps:

Economic development organizations in Eastern Kentucky have identified several critical gaps that hinder growth and development across the region. Addressing these gaps is essential for fostering economic resilience and attracting investment. Here are the primary gaps, each described in detail:

1. Absence of Direct Economic Development Organizations

A significant gap exists in fourteen counties—Bath, Breathitt, Carter, Edmonson, Elliott, Green, Lewis, McCreary, Menifee, Metcalfe, Morgan, Robertson, Wayne, and Wolfe—that lack direct economic development organizations or support. These rural counties have untapped growth potential and would benefit from targeted assistance. Without dedicated economic development entities, these areas face challenges in accessing resources, securing funding, and implementing development

initiatives. Establishing local organizations in these counties could help create tailored strategies that leverage their unique assets, engage the community, and promote economic development.

2. Confusion Over Funding Opportunities

There is a notable gap in the clarity and organization surrounding funding opportunities available to local and regional stakeholders. Although various avenues for support exist, many organizations struggle with confusion regarding which partners to collaborate with to present effective requests for assistance. Through partnerships, such as with Southeast Kentucky Economic Development, efforts have been made to streamline this process and provide tailored technical assistance in response to identified needs. However, continuous efforts are required to improve communication and coordination among potential funding partners to ensure that organizations can effectively access the resources necessary to support their initiatives.

3. Insufficient Financial Support for Implementation

While there are many avenues for assistance, a persistent gap is the lack of adequate financial support to implement the findings and recommendations derived from technical assistance. Organizations often receive valuable insights and guidance on how to improve their local economies, but without the necessary funding to act on these recommendations, progress remains limited. To bridge this gap, it is essential to develop financial mechanisms or programs that provide the necessary resources for communities to turn plans into action, ensuring that proposed initiatives can be effectively executed.

4. Limited Development Opportunities in Industrial Parks

Another significant gap identified is the lack of available development opportunities within the region’s industrial parks, specifically for spaces ranging from 5,000 to 20,000 square feet. This absence creates a barrier for local businesses looking to expand, as well as for outside investors interested in establishing a presence in the area. The inability to accommodate businesses of this size can limit growth potential and deter new investment. Addressing this gap by creating more flexible and adequately sized spaces in industrial parks would help support both existing businesses in their growth phases and attract new projects that align with the region’s economic development goals.

By recognizing and addressing these gaps, Eastern Kentucky can build a more robust economic development framework that supports growth, enhances collaboration, and leads to a more vibrant regional economy. Each identified gap presents an opportunity for targeted interventions that can foster development and improve the quality of life for residents.

ECONOMIC DEVELOPMENT ORGANIZATION NEEDS:

Economic development organizations in Eastern Kentucky have identified several key needs that, if addressed, could significantly enhance growth and development across the region. These needs highlight the importance of collaboration, tailored incentives, and infrastructure improvements. Here is a detailed overview of these identified needs:

1. Need for Regional Collaboration

One of the primary needs is the establishment of stronger regional collaboration and a unified approach to addressing shared challenges, particularly concerning infrastructure upgrades and workforce development. Currently, efforts can be fragmented, with individual communities working in silos. By fostering a collective effort, stakeholders can better identify shared needs and leverage resources more effectively. Improved collaboration could lead to comprehensive infrastructure plans that address not only immediate needs but also long-term stability, ensuring that workforce development programs align with the skills needed for current and future industries in the region.

2. Incentives for Small and Medium-Sized Businesses

Economic development organizations emphasize the need for targeted incentives aimed at small and medium-sized businesses, which are crucial to the vitality of rural communities. While many state incentive programs focus on large-scale developments, smaller businesses often lack the resources and support to thrive. By creating tailored programs that provide financial assistance, mentorship, and training specifically for these businesses, communities can foster entrepreneurship and innovation. This approach would not only help new businesses get off the ground but also contribute to job creation and economic stability throughout the Appalachian region.

3. Local Option Sales Tax and Utility Improvements

In addition to enhancing incentive programs, the region could benefit from the implementation of a local option sales tax, with a portion of the revenue allocated specifically for community and economic development initiatives. This funding source could provide vital resources for projects that directly benefit local economies. Furthermore, regionalizing water and sewer systems to connect multiple municipalities could increase utility capacities at industrial sites, making them more attractive to potential businesses. By improving these essential services, communities can enhance their competitiveness for job-creating projects, leading to greater economic growth and development.

By addressing these needs, Eastern Kentucky can create a more supportive environment for economic development, enabling communities to thrive and adapt to changing economic landscapes. Each identified need offers an opportunity for strategic action that can lead to meaningful improvements in the region’s economic health and resilience.

SECTION 2: SUMMARY OF ECONOMIC DEVELOPMENT ORGANIZATIONS

In summary, Eastern Kentucky faces a range of barriers and gaps that significantly impede the effectiveness of its economic development organizations and hinder regional growth. A primary barrier is the lack of awareness and engagement within communities regarding available opportunities and the importance of participating in local initiatives. This gap leads to missed chances for accessing vital resources. Additionally, the region grapples with water supply shortages, which deter businesses from relocating or expanding, despite ongoing long-term planning to address this issue. Moreover, the limited availability of prepared sites and buildings hampers efforts to attract new businesses. The absence of “shovel-ready” locations diminishes Kentucky’s competitiveness in securing investment compared to neighboring states that offer more enticing incentives.

In terms of gaps, fourteen counties lack direct economic development organizations, restricting their ability to access resources and implement growth strategies. Efforts to clarify and streamline funding opportunities have been initiated, but confusion persists among stakeholders, limiting effective collaboration. Furthermore, while numerous avenues for support exist, a lack of financial backing for implementation remains a critical gap. Organizations often receive valuable recommendations but struggle to act on them due to insufficient funding. Lastly, there is a significant need for development opportunities within industrial parks, particularly for spaces ranging from 5,000 to 20,000 square feet. This shortage prevents local businesses from expanding and discourages outside investment, limiting the region’s economic potential.

Addressing these barriers and gaps is essential for fostering growth in Eastern Kentucky. Economic development organizations emphasize the importance of regional collaboration to tackle shared challenges, particularly in infrastructure and workforce development. Additionally, the creation of targeted incentives for small and medium-sized businesses is crucial, as these enterprises are vital to rural community vitality. By implementing measures such as a local option sales tax and improving utility infrastructure, the region can enhance its attractiveness to businesses and stimulate economic development. Each identified barrier and gap presents an opportunity for strategic interventions that can lead to a more vibrant and resilient economic landscape.

SECTION 3: COMMUNITIES

The Kentucky State Working Group has identified communities based on our extensive knowledge of their involvement in various programs and the growth observed in these areas over the past few years. Each of these communities features highly engaged local leadership teams and economic developers or consultants who actively participate in projects. They are also undergoing

assessments through the Brownfield Assessment/Phase 1 of the EPA Brownfield Grant, alongside other downtown development initiatives, reflecting their commitment to community engagement and revitalization.

A key factor distinguishing communities poised for development in Kentucky is the active involvement of local leadership and the presence of a resolute individual responsible for coordinating growth efforts. This engaged leadership not only fosters collaboration among stakeholders but also ensures that development initiatives are strategically aligned with the community’s needs and goals. Successful communities often feature mayors, economic development directors, or local champions who facilitate communication, mobilize resources, and advocate for projects that enhance economic vitality.

Additionally, these leaders are typically involved in regional partnerships and initiatives, allowing them to leverage funding opportunities and best practices from other areas. This proactive approach is essential for creating a supportive environment that attracts investment, stimulates local economies, and promotes growth.

COMMUNITY DEVELOPMENT OPPORTUNITIES IN EASTERN KENTUCKY

Ashland (Boyd County)

Contact: Eden McKenzie, Economic Development Specialist

Website: City of Ashland

Ashland is positioned for development with ongoing downtown infrastructure upgrades and revitalization projects. The local government is actively engaged, with dedicated support from both the mayor and judge-executive. The city has received direct support from the EDA, enhancing its capacity for future projects.

Burkesville (Cumberland County)

Contact: Elijah Wilson, 4H Extension Agent

Website: City of Burkesville

Burkesville is working on a Brownfield Assessment and has plans for downtown revitalization, particularly as it prepares to renovate an old city hall building. The involvement of local officials ensures a coordinated approach to development. The community is also benefiting from direct support from an EDA, which aids in project funding.

Grayson (Carter County)

Contact: Dan Click, Director

Website: Grayson Main Street

Grayson is actively pursuing downtown revitalization, supported by local government engagement. The completion of a Brownfield Assessment highlights the community’s commitment to preparing for future development, though currently, it does not receive direct EDA support.

Harlan County

Contact: Cole Raines, Executive Director

Website: One Harlan

Harlan County is making strides in revitalization with projects like the Harlan County Beer Company and hotel redevelopment initiatives. Local leadership is strong, and the county has secured direct support from an EDA, positioning it for significant economic growth.

Hazard (Perry County)

Contact: Bailey Richards, Economic Development

Website: City of Hazard

Hazard is focused on multiple downtown revitalization projects, supported by engaged local officials. The city has also received EDA support, which strengthens its efforts in economic development and community improvement.

Johnson County / City of Paintsville

Contact: Regina McClure, Economic Development Lead

Website: Johnson County

Paintsville is addressing flood risk management through an Army Corps engineering project, aiming to create more developable land. The community is interested in downtown revitalization, particularly in transforming upper floors into housing. Direct support from the EDA enhances their potential for successful projects.

Manchester (Clay County)

Contact: Steve Collins, Mayor

Website: City of Manchester

Manchester is actively pursuing downtown revitalization efforts. Although it currently lacks direct EDA support, strong local leadership indicates potential for future development opportunities.

Pikeville (Pike County)

Contact: Jill Dotson, Mainstreet Director

Website: City of Pikeville

Pikeville has initiated downtown revitalization projects and enjoys strong support from local officials. The city receives direct EDA support, which bolsters its development initiatives and helps attract investment.

Sharpsburg (Bath County)

Contact: Alice Hilton, Director

Website: R. L. Brown Foundation

Sharpsburg is in the pre-development stages for several downtown revitalization projects. The community benefits from partial EDA support, which aids in its Brownfield Assessment initiatives, positioning it for future growth.

Somerset (Pulaski County)

Contact: Alan Keck, Mayor

Website: City of Somerset

Somerset is revitalizing multiple downtown buildings and creating new development spaces within city limits. The mayor’s leadership and the community’s receipt of direct EDA support enhance its potential for economic growth.

Wayland

(Floyd County)

Contact: Ruthie Caldwell, Principal

Website: VisionGranted

Wayland is pursuing downtown revitalization, including the renovation of a historic gym. While it receives partial EDA support, the community’s proactive approach signals a commitment to development and infrastructure upgrades.

Whitesburg (Letcher County)

Contact: Jeffery Justice, Economic Development

Website: Pine Mountain Partnership

Whitesburg is focused on hotel redevelopment and has received direct EDA support, which strengthens its economic development efforts. Engaged local officials indicate a solid foundation for future growth initiatives.

These communities in Eastern Kentucky are well-positioned for development, supported by local leadership and varying degrees of EDA assistance. By leveraging their unique assets and community initiatives, they aim to foster economic growth and revitalization throughout the region.

SECTION 4: POLICY SCAN

We gathered feedback from a diverse group of individuals with varying years of experience, perspectives, and job roles regarding our policy scan. Although we received only seven responses, these insights reflect the views of practitioners who have a deep understanding of the state’s dynamics. Their feedback was grounded in realism, unimpeded by organizational biases or statespecific jargon.

The survey collected responses on the perceived effectiveness of various municipal policies for promoting downtown redevelopment in the state. A total of seven participants provided insights, highlighting several key findings:

1. Beneficial Policies: Respondents identified several policies as beneficial for downtown redevelopment. Notably, vacant, and dilapidated building codes and policies to promote efficiency in permitting processes received the highest ratings, with a weighted average of 1.43 and 1.86, respectively. Meanwhile, city ordinances to encourage downtown business development and funded grant programs for redevelopment were seen as highly beneficial, both with a majority support of 71.43%.

2. Utilization of Policies: Many existing policies, such as tax incentives (including TIF districts), historic district designations, and downtown development action plans, were noted as being utilized across municipalities. However, there was significant uncertainty among respondents, with 42.86% unsure about the current utilization of several policies.

3. Legislative Actions: Only one respondent confirmed that state legislation addressing downtown redevelopment in small towns had been passed in the last decade. This reflects a broader uncertainty, as 85.71% were unsure if such laws existed.

4. Best Practices and Recommendations: Respondents suggested best practices from other states, including the establishment of land banks, consistent funding for downtown projects, and improved pedestrian infrastructure. There was also a call for broader incentive programs targeting smaller, locally-owned businesses rather than just large-scale industrial developments.

5. Policy Advocates: Various organizations, including Main Street KY, Kentucky League of Cities, KAED, and the KY Chamber of Commerce were identified as key advocates for downtown redevelopment policies.

Overall, the survey highlights a critical need for tailored policies and clear communication regarding available resources to effectively promote downtown redevelopment in small towns throughout the state.

SECTION 5: SUPPORTING DATA

The attached list provides a diverse array of resources and supporting data aimed at fostering economic development and community revitalization in Kentucky, particularly in Eastern Kentucky. Here is a summary of the types of resources included:

1. Articles and Reports: Insightful articles like “True South: Appalachia Reflection” and “UK Studio Appalachia Designs for Communities” explore innovative approaches and design principles for enhancing community spaces.

2. Business and Innovation Guides: SOAR offers comprehensive resources, including guides on business incentives, entrepreneurship, and youth entrepreneurship programs specifically tailored for Eastern Kentucky.

3. Community Development: The Rural Partners Network and leadership development programs provide frameworks for building community connections and enhancing local leadership capabilities.

4. Data Resources: The KY Center for Statistics and CEDIK’s County Data Profiles offer vital demographic and economic data to inform development decisions and strategies.

5. Digital Equity Initiatives: The Digital Equity Action Plan focuses on improving access to technology, crucial for modern economic engagement.

6. Economic Development Funding: Information about various funding opportunities, including the KPDI program, grants from Main Street America, and the Abandoned Mine Land Economic Revitalization Program, is provided to support redevelopment efforts.

7. Healthcare and Community Support: The Eastern Kentucky Healthcare Action Plan addresses healthcare access and community health needs, essential for sustaining population growth.

8. Incentives for Development: Resources on state tourism incentives and other economic incentives guide communities in leveraging available funding for growth.

9. Remote Work Strategies: Playbooks for remote work and relocation initiatives aim to attract new residents and enhance the workforce.

10. Studies and Analysis: The University of Kentucky’s CEDIK provides analytical support and research services to help guide community development efforts.

This comprehensive collection of resources equips community leaders and developers with the knowledge and tools necessary for fostering sustainable growth and revitalization in Kentucky’s communities.

North Carolina State Report

NORTH CAROLINE STATE REPORT SUMMARY

While Western North Carolina (WNC) has a more robust and diversified economy than most of Central Appalachia, including many downtowns in advanced phases of revitalization and redevelopment. This is thanks in part to a robust state Main Street program, the third largest in the country. However, there is a shortage of local community focused and non-profit real estate developers. Most large downtown development projects are owned and managed by developers from other states or large cities.

WNC has approximately 13 emerging private or non-profit developers based in the region. Of that group, most are emerging developers that have completed 3-5 projects, have engaged with at least one project budget over a million dollars, and have proven their ability to plan, implement, and cashflow these projects. In addition, there are three Community Development Corporations (CDC) that are taking on development projects in historic downtowns. Most small-scale downtown development is done in the form of one-off projects by local building owners and owner-occupied businesses that can be described as “accidental developers”. These developers are motivated by community interests, but limited experience and access to support services makes these one-off projects inefficient and resource-intensive.

The gaps and barriers that developers in Western North Carolina face are:

• Not enough access to capital, especially affordable pre-development funds, bridge loans, and credit enhancements

• Lack of expertise with investment tools such as Historic Tax Credits and New Market Tax Credits, or projects too small to attract tax credit investors

• Inability to purchase real estate in downtowns due to ownership concentration and generational transfers within families

• Ownership and management of real estate projects by developers from outside the region, which limits local wealth-building opportunities and is less likely to center community needs and interests

• Uneven and insufficient support services, including TA, training, and co-developer support (in particular, outside of designated Main Street communities)

Top priorities to support developers in Western North Carolina are:

• Flexible and affordable bridge loans to finance the risky early stages of a project

• Credit enhancements to de-risk investment on larger projects

• Additional support for navigating and complementing State Historic Preservation Office tax credits and aligning other investment

• Co-developer or mentor to provide guidance and support on projects

• Training opportunities with consistent funding and availability

• Expanded technical assistance with stable funding and broader reach

SECTION 1: DEVELOPERS

Emerging Developers Analysis: Too Early

Emerging Developers often begin because they are motivated to complete a specific project: they own a building that they need to activate or they have a business in need of a commercial home. This impetus is catalytic because it keeps Emerging Developers engaged through an arduous and usually expensive learning process. While they navigate such concrete learning curves such as zoning and building codes, they’re also navigating the more esoteric topics such as access to capital and aligning capital with the project timeline and implementation. This category of Developer is essential, because they’re often driving community-focused passion projects; however, they’re also very resource intensive, requiring more intensive technical assistance, training, and capital to cover mistakes made during the learning process.

Established Developers Analysis: Too Late

For this research, “Established Developers” are those with dozens of multi-million dollar projects in their portfolios. This group tends toward teams that boast wraparound development services such as in-house commercial real estate experts, engineering and architectural design services, attorneys, and usually can access capital through trusted national bank entities and equity. This category is most likely to be deployed in urban centers, where economic activity is at a premium and can guarantee a sufficient return. Established Developers may tend toward more niche projects,

following a particular capital pathway, business sector, or other replicable model, mostly with a less concentrated geographical approach.

Established Developers may not be particularly aligned with Downtown Development Goals, as wealth generation likely wouldn’t have local retention and reinvestment. This group may be open to mentoring Emerging Established Developers, but this conversation would best take place once clear goals, projects, and partners are identified.

Emerging Established Developers: Perfect Target for Downtown Development Support

Emerging Established Developers have completed 3-5 projects, have engaged with at least one project budget over a million dollars, and have proven their ability to plan, implement, and cashflow these projects. This category of developer sees the activation potential of their community and has had enough success as a developer to continue taking on new projects. The geographic focus often seen from Emerging Established Developers builds trust with their communities, and helps locals to embrace the changes that Downtown Development brings. This category of developer presents a much lower threat to rural communities who may resist or reject Established Developers that don’t share their values, aesthetic, or culture.

Thanks to their ability to spot and frame worthy investments, they have a burgeoning relationship with a capital provider like a bank or CDFI that trusts them with projects of a certain size. Emerging Established Developers represent the category best positioned to positively impact Central Appalachia Downtown Development.

Gaps, Barriers & Needs for Emerging Established Developers Access to Capital

Emerging Established Developers often begin humbly. They renovated houses until they could afford a commercial project; they bought and restored a building to house their coffee shop; they spearheaded development to attract a new restaurant to open because they wanted more options in their community. They use the cash reserves from one completed project to fuel the next. As they build their skills, this path provides the perfect on-ramp for newer developers to learn and grow. As they build credibility, however, this runway falls short.

There are few pre-development funds available via grants or loans, so Emerging Established Developers must raise or save the capital required for this risky stage. This can limit project sizes, speed of development, and risk appetite to take on larger projects. In one interview, a local developer had successfully completed 5 Historic Preservation Tax Credit projects, but was resistant to take on a $13M project—at the community’s request--because high pre-development costs were too risky for his established portfolio.

Another oft-repeated barrier was the cost of capital during pre-development. Because of its highrisk, low-collateral nature, risk is often mitigated through higher interest rates—when capital is even available in this category. In rural areas, it is vital to keep costs down, as activated properties may have a slower road to break-even.

Investment Tools

Research has shown that people across Appalachia are accessing investment mechanisms at lesser rates than folks in other parts of the country, even in other rural areas. Two of the very credible developers we interviewed in this category had mastered Historic Tax Credits, but lacked even a working vocabulary around New Market Tax Credits. Additionally, since many projects simply aren’t large enough to pass muster for NMTC, it’s a challenge to learn from nearby peers. In addition to the project sponsors, many local and community banks also lack the savvy to finance tax credit deals.

Real Estate

It is worth noting that many of the buildings along the main streets in small towns are owned by a handful of individuals or holding companies. Critical downtown properties have been passed down generationally to family members living and working outside of the community. These absentee landlords may hold the asset for tax purposes, though they aren’t willing to sell or improve the property. This holding pattern can reduce access for entrepreneurs to own real estate, drive up purchase prices, and prevent business owners from further building wealth by owning their own buildings. To combat the prevalence of cash buyers from outside markets, additional credit tools are needed to support access to wealth generation from local buyers.

Capacity

Early developers are reliant on the knowledge available to them from the business support ecosystem—Main Street program staff, planning departments, development services departments, etc. Not all communities provide equal access, however, as departments vary widely in their capacity and willingness to help and not every NC town is a Main Street Program community. Additionally, we found no clear co-developer entities to support downtown redevelopment.

Top Priorities for WNC: Solutions

Flexible, Affordable Bridge

Loans

Project sponsors want to be prepared and plan for the unexpected, but are lacking the capital tools to be sufficiently prepared for cost overruns and problem mitigation. Developers have trouble accessing additional funds for the unexpected, because they are often already fully leveraged by the time additional costs are discovered.

Credit Enhancements

Credible Developers who’ve built their skills with multiple smaller projects are still wary of largescale projects. They need a way to de-risk big projects without risking their entire portfolio/ personal assets. This is also a space where increased public-private partnerships would jointly benefit communities and developers. Technical assistance is required to support the creation of new partnerships.

Access to financial products that could reduce carrying costs during construction would make projects cashflow with more confidence. Few lenders are able to offer capital for pre-development costs due to their unsecured nature.

Co-Developers

Many of the developers interviewed for this project wanted a co-developer solution intuitively, though most weren’t able to recognize that this type of entity is common outside of Appalachia. They wanted a knowledgeable, well-resourced partner who could alleviate some uncertainty and provide guidance, support, and resources along the way.

Training & Technical Assistance

WNC Investment Framer Cohort (training curriculum from Invest Appalachia) had excellent reviews and outcomes, but doesn’t have a consistent source of funding. Since offering this training to 20 leaders in 2023, requests have poured in from interested participants.

Opportunity Appalachia, a program of Appalachian Community Capital, offers a high level of support and resources, but relies on continued grant funding and therefore its longevity is uncertain. Less than half of qualified, competitive applicants received awards. Expanding this program with reliable, long-term funding would continue to activate worthy projects in rural underinvested Appalachian communities. This program is well-designed to support earlier Emerging Developers with one time projects. This is a great component for enticing newer project sponsors into the development field, but does not solve the repeated, continually present challenges for serial developers.

Additional training support for developers would help alleviate pain points, ensure high quality downtown development, and reduce “learning curve” costs.

SECTION 2: ECONOMIC DEVELOPMENT ORGANIZATIONS

Summary

Western North Carolina hosts a diverse ecosystem of economic development support organizations. Statewide entities like NC Main Street and the NC Department of Commerce provide broad strategic assistance, while regional Council of Governments (COGs) offer targeted local interventions. At the community level, Tourism Development Authorities, Chambers of Commerce, and Small Business Centers deliver more granular support, though the depth and quality of these services can significantly vary across different regions and local contexts.

The economic development gaps and barriers in Western North Carolina are:

• Limited availability of prepared sites and buildings

• Uneven distribution of support, especially for smaller or more remote communities that are not part of the NC Main Street Program

• Lack of connectivity between building owners/landlords and potential tenant businesses looking for space

• Business support ecosystem (SBCs, SBTDCs, CDFIs, etc) is robust but has limited resources or expertise to support downtown development

• Connectivity and coordination between federal, state, philanthropic, and private sector resources, and support for developers navigating different timelines and requirements

The economic development needs in Western North Carolina are:

• More technical assistance and business support dedicated to real estate development

• Better coverage of rural communities and downtowns outside of the NC Main Street network

• Economic development partnerships willing to expand beyond manufacturing recruitment to support downtown revitalization

• Better coordination and resources alignment among capital providers, including new expertise and functions related to real estate finance

Business Development

North Carolina has a rich ecosystem of business supports. There are Small Business Centers (SBCs) embedded into the community college system, which support every county in the state. These provide free business counseling and business classes focusing on start-up and early stage businesses. Additionally, through the university system, the Small Business Technology and Development Centers (SBTDCs) can support larger businesses with counseling and specialty consulting around topics such as government procurement, patents, international trade, and more. There is a robust presence of local Community Development Financial Institutions, Chambers of

Commerce, Tourism Development Authorities, and Councils of Government. Each of these entities enrich the business ecosystem of WNC, but none have specialties in Downtown Development. One noticeable gap is the lack of connectivity between strong business candidates looking for a location and building owners/developers looking for tenants. This connection is still largely made through local connections and word of mouth.

Economic Development

NC Main Street & Rural Planning Center exists at the statewide level with some resources available via their website, but Main Street designated communities are much less comprehensive, with only 22 WNC towns making the list. Additionally, staff for this program are often severely restricted in their geographic service area, limited to literally the main streets in their downtowns. To address some of those gaps, NC Dept of Commerce has regional planning staff that cover 10-15 counties each, providing economic development planning services, though not explicitly tied to “downtown development.” These staff, such as Ann Bass, a member of ADDI’s NC State Working Group, are still limited in what they’re able to provide and who they are permitted to serve, such as local governments who request their support, but not businesses.

A robust infrastructure through the Economic Development Partnership of NC exists across the region to attract large employers, particularly manufacturers, to North Carolina from other states or internationally. They are trained in site selection, incentive packages, and manufacturing-related need identification. This program is driven internally by very specific metrics and definitions of success, which are often in conflict with the mountainous terrain of WNC where there isn’t enough flat land for mega-sites and transportation can be a challenge due to topography. Some of these Economic Developers willing to step out of their defined roles to support smaller, downtown development projects because they understand the real economic opportunity within their communities, but not always.

State Historic Preservation Office

The Historic Preservation Office, under the NC Natural and Cultural Resources Office, offers a very comprehensive guidebook for developers engaging with historic properties. Here, project sponsors can find the National Register of Historic Places, detailed information about the Historic Rehabilitation Tax Credits, architectural survey records and reports, relevant building codes, successful past projects for learning purposes, and the Professional Associates Network. The Network is a special guide from Preservation NC for professional who work, consult, or invest in the field of historic preservation, and includes consultants, contractors, suppliers, realtors, and more. Regional staff exist to support projects with their Phase I and Phase II applications, and provide guidance in how to navigate this complex and sometimes overly administratively burdensome

process. In 2024, the State Historic Preservation Office has been collaborating with NC Main Street Organization to offer regional trainings related to historical downtown development.

Capital Assessment: Debt

Dogwood Health Trust commissioned a Capital Landscape Assessment in 2022 and noted access to capital activity in the region. Here, please find the lenders tackling downtown development.

Mountain BizWorks – leading WNC term debt provider for small business, covering all 26 counties of the WNC region through physical offices in Asheville and Boone. Providing access to capital up to $500,000 and often more by collaborating with lending partners. Offering Commercial Real Estate loan products.

Partner Community Capital (PCAP) – WVA-based, but with an increasing focus on WNC, including the recent opening of a physical office in Asheville and a focus on rural value-adding enterprise, daycare facilities, and critical ‘niche’ quality of life and wellness-related sectors, as well as enterprises at the upper end of the small business segment, but still below the level considered ‘bankable’ by commercial banks. Offering Commercial Real Estate loan products.

Sequoyah Fund (SF) – Based inside the Eastern Band of Cherokee Indians Qualla Boundary, this small Tribal Lender also serves clients across the westernmost ‘COG Region A’ seven counties of WNC. Focus on financial health for both consumer and small business. Average loan size of $35,000, can go as low as $3,000, no set upper limit but prefer to cap at ~$100,000 generally. Capable of Commercial Real Estate contributions, but generally not large enough to lend alone.

Southwestern Commission, Revolving Loan Fund (RLF) – patient capital small business fund, offering loan sizes between $100 - $200,000, focused on historically disadvantaged communities and/or entrepreneurs located in the COG Region A seven counties of WNC. Capable of contributing to Commercial Real Estate deals; has combined funds with Mountain BizWorks for this purpose.

Institute Capital (ICAP) - is the CDFI arm of the National Institute for Economic Development (“The Institute”), a leading holistic economic development organization focused entrepreneurial support. Offering Commercial Real Estate loan products, but not particularly active in WNC.

Carolina Small Business Development Fund (CSBDF) - is a Raleigh-based CDFI with a statewide footprint that has recently sharpened its lending focus on WNC in particular. CSBDF is affiliated with the Western Women’s Business Development Center, which provides focused entrepreneurial and enterprise support, as well as access to small business loans to regional women-owned businesses. Generally not geared to Commercial Real Estate.

VEDIC – is based in the Town of Valdese, in Burke County with a footprint of Burke and surrounding counties. It was organized by the Town of Valdese to support and promote economic growth in Burke County & the surrounding area. VEDIC offers a loan program and technical assistance for entrepreneurs in the area, as well as for existing businesses who cannot qualify for a bank loan. Lending up to $50,000, their loans can cover up to 75% of a business’ project, must be a community development project, create/retain jobs, and must be deployed in an area with a population less than 50,000. Generally not geared to Commercial Real Estate, but can be used in combination with other lenders.

May Coalition – is a non-profit based in Spruce Pine that serves Yancey, Mitchell, and Avery Counties of NC. It offers two loan programs; one for any business that agrees to create new employment for the residents of the three counties (1 Job:$20,000 of loan), and one for low-tomoderate income business owners. The job creation loans max out at $250,000, and the LMI loans cap at $25,000. Offers well-collateralized loans to support Commercial Real Estate.

Self-Help Credit Union – while not staffed for small business lending in their seven branch network in WNC, Self-Help has made a significant impact in the region, with over 600 business loans and >$58 million in portfolio disbursed in WNC from their start in the region in the 1990s, through July 2022. Specific focus on social enterprises (including non-profit and childcare) as well as green enterprises, as well as BIPOC and women-owned businesses.

Capital Assessment: Equity/Quasi-Equity

Eagle Market Street Community Development Corporation, Community Equity Fund – focused on supporting entrepreneurs of color in Asheville-Buncombe and McDowell County, this $1.5 million revenue-based financing vehicle invests at an average ticket size of $60-75,000, typically in graduates of their ‘incubate to innovate’ place-based start-up support initiatives.

Partners In Equity (PIE) – focused on Black entrepreneurs seeking to build assets through purchase and development of commercial real estate where they operate their business, PIE has a unique catalytic approach by taking deeply subordinated positions and/or bridge funding to tie together commercial lending, SBA and other resources, to intentionally build asset value for Black ownerentrepreneurs. Ticket sizes from $150,000 up to $2 million.

Capital Assessment: Flexible Impact Capital

Invest Appalachia (IA) – this blended capital fund is based in WNC and has a broader service area of ARC-defined Appalachian counties in six states, focusing on projects and businesses representing low-income and under-resourced communities across the region. The fund aims to use agile approaches to structured finance around major projects including downtown

redevelopment, commercial real estate, affordable housing and more. The Fund provides flexible large-scale debt (>$100k), sometimes accompanied by guarantees or quasi-equity grants. A focus on leveraging New Markets Tax Credits and Opportunity Zone opportunities is part of IA’s strategy.

Dogwood Health Trust (DHT) —This major philanthropic foundation in the region provides operating capital for community organizations and also participates in Impact Investment. DHT’s support can take the form of bridge loans, loan guarantees, start-up capital, or equity investment. Although investments like these may deliver modest financial returns, the primary focus is the social returns each investment delivers.

Capital Assessment: Public-Private Partnerships

Aligning the interests, capabilities and investment capacity of public, private and philanthropic partners is another key area that is essential for focus in developing well-designed capital stacks. If there were a regional association or other support for a comprehensive planning and capital access effort, it could unlock tremendous potential for investment and economic activity. While some Federal, State and philanthropic resources exist to support development, the lack of capacity at the local government level often means these resources go untapped, because developers don’t know how to connect the dots and potentially high-impact projects don’t move forward.

Bringing public-private partnerships to fruition often means aligning mismatched timelines of Federal, State, local government, private sector, and philanthropic funding and/or incentives in various parts of the capital stack. In these instances, flexible, short and mid-term capital that is designed to enable a project to move forward while approvals or other processes occur in parallel can mean the difference between success or failure of high-impact projects. This is especially true in real-estate related areas, such as affordable housing, commercial re/development, and related infrastructure (utilities, access infrastructure, etc.).

SECTION 3: COMMUNITIES

The Western North Carolina region, beyond its remarkable natural and cultural resources, benefits from a strong and enduring entrepreneurial dynamic, as evidenced by the tens of thousands of small businesses in the region, and drives a strong commitment to place and community. This dynamic reality has given rise to a diverse community of individuals, organizations and institutions dedicated to investing in the growth and success of these enterprises and the communities they are both grounded in and serve.

The North Carolina State Group identified three types of downtowns that show the most promise for downtown development – NC Main Street Communities, Diverse Business Districts, and NonMain Street Communities in Transition - with a focus toward ensuring finished developments remain or are sold within the communities.

Main Street Communities

Beginning in Main Street Communities may be a good place to create economic engine strongholds that can help fuel the region and give lower-capacity communities a better starting point during Phase II of implementation. Thanks to the robust NC Main Street Program (the third largest in the country), these designated communities have access to a higher level of training opportunities, support and assistance for engaging local businesses and building owners, access to experts in state historic tax credits (SHPO), access to grant programs for things such as lighting, streetscapes, signage and facade improvement, and other unique resources that are not available in undesignated downtowns. They also often have “boots on the ground” in the form of a Main Street Director, who offers place-based capacity essential to community input, convening, planning, and project development. Work in these communities would need to be well-coordinated with NC Main Street program offerings to ensure it is complementary and additive.

• Murphy

• Sylva

• Waynesville

• Brevard

• Hendersonville

• Tryon

• Rutherfordton

• Forest City

• North Wilkesboro

• Boone

• Lenoir

Diverse Business Districts

• Hickory

• Newton

• Valdese

• Morganton

• Marion

• Spruce Pine

• Mocksville

• Elkin

• Pilot Mountain

• Mount Airy

• Shelby

Similarly, there are several cultural or racial business districts where development would also benefit communities in lasting, meaningful ways. Four of these communities have been represented meaningfully by actors in the ADDI research and plan development.

WNC’s Black, Latino, and American Indian Business Districts:

• Eagle and Market Streets, called “The Block” (Asheville)

• Shiloh Neighborhood (Asheville)

• Burton Street Community (Asheville)

• Emma Community (Asheville)

Non-MS Downtowns in Transition

• 7th Avenue (Hendersonville)

• West Marion (Marion)

• Grahamtown (Forest City)

• Qualla Boundary, Eastern Band of Cherokee Indian

It is also worth noting that there are numerous non-Main Street communities, including small towns and even unincorporated areas, that are outliers in the sense of their current level of downtown development activity or clear potential. In these communities, there is often a rapid transformation from a downtown with little economic activity and real estate development, to a downtown suddenly attracting investor attention and competition for storefront space. Examples of these intransition communities include:

• Old Fort (McDowell)

• Burnsville (Yancey)

• Canton (Haywood)

• Marshall and Mars Hill (Madison)

• Franklin (Macon)

• Bryson City (Swain)

Councils of Government Regions and Level of Development Activity

Region: Southwestern Commission

Medium Level of Development with Promising Projects: Haywood, Jackson

Low Level of Development with Promising Projects: Cherokee, Macon

Low Levels of Development + Low Readiness: Clay, Graham, Swain

Region: Land of Sky

High Level of Development + High Potential: Buncombe, Transylvania, Henderson

Low Level of Development with Promising Projects: Madison

Region: Foothills

Medium Level of Development + Promising Projects: McDowell

Low Level of Development with Promising Projects: Rutherford, Polk, Cleveland

Region: High Country

High Level of Development + Promising Projects: Watauga

Medium Level of Development + Promising Projects: Wilkes

Low Level of Development + Promising Projects: Alleghany, Ashe, Yancey, Mitchell

Low Level of Development + Low Readiness: Avery

Region: Western Piedmont

High Level of Development + Promising Projects: Catawba

Medium Level of Development + Promising Projects: Burke, Caldwell

Low Level of Development + Low Readiness: Alexander

Hurricane Helene Impacts

The NC State Group had recently met for the final time in the planning process when Tropical Storm Helene hit WNC with devastating effect. WNC partners pivoted to local response efforts, using whatever personal and professional resources they had to help with rapidly evolving recovery needs. Many of WNC’s downtowns were entirely flooded, thousands of buildings were damaged or destroyed, and thousands of businesses and residents lost everything. Due to infrastructure damage, recovery resources had to be organized across a dispersed network, with Asheville neighborhoods and rural downtowns serving as the epicenters of locally-rooted recovery efforts. Volunteers, residents, and recovery agencies have steadily worked side by side to restore their beloved downtowns. Much redevelopment, renovations, and new construction will be necessary.

The need for community-oriented downtown developer capacity, support networks, technical assistance, flexible financing, training, and collaboration is more apparent and acute than ever. There is a real threat of local ownership and management of downtown buildings declining in WNC, as speculative investors and outside developers look to take advantage of local distress and uncertain economic outlook to buy up downtown properties on the cheap. WNC partners will do what we can to keep our downtowns rooted by local ownership and geared towards community benefit, but it will be a struggle. As with so many other things this storm has revealed, the region would be in a fundamentally better place to rebound from this if ADDI were a few years farther along in the work to strengthen locally-led downtown developers and development. Going forward, we must do what we can to keep our downtowns rooted by local ownership and geared towards community benefit, in WNC and across Appalachia.

SECTION 4: POLICY SCAN

North Carolina surveyed policy experts from across the region via the Councils of Government (COGs) and Economic Developers. They reported that North Carolina has a supportive mix of state and local policies to support downtown development. There are a few areas in particular where improvements are warranted.

Policy Recommendations

Implementation and Capacity-Building for investment mechanisms.

1. Tax Increment Financing (TIFs)

TIFs are technically available in NC, but have been severely underutilized. (In fact, one respondent questioned if they had ever been successfully utilized anywhere in NC.) Neighboring states are using this mechanism regularly and with great success to their downtown development initiatives, particularly in SC.

Real estate tax abatements

Real estate tax abatements are reliant on local policy and differ from one county to the next. Even where they are available, they are not well-understood or equitably accessed. Consumers can buy a property that already has an abatement or can purchase an eligible property, make the required improvements, and apply for the abatement. Through NC Dept of Revenue, relevant groups can apply for Property Tax Exemption or Exclusion if they meet the criteria to qualify. This is potentially a mechanism that could be expanded.

2. Capacity-Building for Development Support

State-Funded Main Street Program

NC State Legislature de-funded the Main Street program in the early 2000s. The cost of staffing and programming falls exclusively on the towns that house Main Street programs. The requirements to maintain the designation are constantly increasing, putting additional administrative cost and burden on local communities and municipal budgets. Main Street Directors were once the economic hub and knowledge-disseminators for downtown development.

3. Building Codes

There does seem to be need for a more centralized statewide policy standard for dilapidated and vacant buildings. For an overview of available policies that local governments could implement, see here.

Virginia State Report

Southwest Virginia includes 25 counties and over 55 cities and towns within the Appalachian Regional Commission’s region. The Virginia State Group, made up of 13 members from eight organizations, was led by Kim Davis and Billie Roberts from the Friends of Southwest Virginia. While findings reflect available information and insights from group members, the data and analysis should not be considered definitive due to the ambiguous and evolving nature of the “downtown development space”.

SECTION 1: DEVELOPERS

The Developers section of the Virginia State Report provides a detailed overview of developers and developer organizations engaged in downtown and community development throughout the state. The data is organized into detailed entries for each developer and developer organization, including their name, primary contact person, and essential contact information (email and phone number). For each organization, the report outlines their geographic area of focus, the type of entity they represent (such as private, non-profit, community development corporation, public/municipality, etc.), and provides an overview of their track record, highlighting completed and ongoing projects, as well as their areas of expertise, if applicable.

The developers are classified as either Established or Emerging, with additional subcategories for Emerging Developers to better capture their development stage. For Established Developers, the report identifies whether they could serve as mentors, co-developers, or technical assistance (TA) providers, showcasing their potential to support other entities in the development ecosystem. Conversely, for Emerging Developers, the report assesses their needs, indicating whether they benefit from increased capacity or dedicated support. Any specific support needs they have identified or expressed are documented, providing insights into strategies for enhancing their capabilities and fostering successful development outcomes.

The challenges, barriers, and needs that developers face in Southwest Virginia have been assessed through a comprehensive review of the region’s development landscape, focusing on the factors that impact redevelopment efforts in various sectors. This report draws from a comprehensive review of various development projects across the region, spanning multiple sectors such as real estate development, downtown revitalization, construction, environmental consulting, and historic

preservation. The analysis highlights the primary gaps and barriers that developers encounter, which hinder progress and limit the effectiveness of redevelopment efforts in the Appalachian region.

Summary

Southwest Virginia is home to around 10 emerging developers and 19 established developers, including private developers, public entities, municipalities, and non-profits. These developers specialize in a variety of areas, with some focused on real estate development and construction, while others concentrate on historic preservation and urban revitalization. Overall, Southwest Virginia presents a mixed landscape of developer activity and capacity. Large mainstream developers are active in the interstate corridor of I-81 and the larger towns (e.g. Roanoke, Bristol, Christiansburg), while most towns struggle to attract developer attention for smaller or boutique projects (with success stories like St. Paul). Like other states, Southwest Virginia is challenged by the “missing middle” of local developers with the interest and capacity to take on multiple small to medium sized development projects.

The barriers for developers in Southwest Virginia are:

• Inability to access capital, particularly for smaller projects and in early stages, and for emerging developers without their own sources of capital

• Inadequate technical expertise (including environmental consulting, advanced construction techniques, and energy infrastructure development)

• Lack of coordination between stakeholders such as local governments, private developers, and community organizations

• Challenges related to pre-construction planning and zoning

• Shortage of skilled labor (including construction management, energy infrastructure, and historic preservation)

• Obstacles for smaller developers to access state historic tax credit program

• Difficulty incorporating sustainable practices and green building materials into projects

The needs of developers in Southwest Virginia are:

• Flexible capital with streamlined and accessible funding mechanisms (especially for smaller or emerging developers)

• Specialized technical assistance and consulting services

• Improved coordination and collaborative framework across numerous relevant programs

• Streamlined permitting process and updated zoning regulations

• Workforce development for the construction trades

• Improved access to state historic tax credits for smaller developers

• Increased focus and education on sustainable development practices and building materials

• Collaborative development and partnership models

Key Gaps, Barriers, and Needs

1. Access to Capital

• Barrier: One of the most significant barriers faced by developers in Southwest Virginia is limited access to capital. Many projects, particularly in rural and economically distressed areas, struggle to secure the necessary funding to move forward. This is exacerbated by the region’s reliance on declining industries, such as coal, which has left a void in available financial resources.

• Need: Enhanced capital access is critical. Developers require more streamlined and accessible funding mechanisms, including federal and state grants, private investments, and alternative financing options such as New Markets Tax Credits (NMTCs) and Opportunity Zone funding. These mechanisms would help bridge the financial gap and enable developers to undertake and complete significant projects.

2. Technical Expertise

• Barrier: Another critical gap is the lack of technical expertise, particularly in specialized areas such as environmental consulting, advanced construction techniques, and energy infrastructure development. This deficit limits the ability of developers to plan and execute projects that meet modern standards of efficiency and regulatory compliance.

• Need: There is a pressing need for specialized technical assistance and consulting services. Developers would greatly benefit from access to expertise in areas such as energy efficiency, sustainable building practices, advanced manufacturing, and environmental impact assessments.

3. Coordination and Collaboration

• Barrier: The lack of coordination among various stakeholders, including local governments, private developers, and community organizations, presents a significant barrier to successful project

execution. This fragmentation often leads to inefficiencies, delays, and missed opportunities for synergistic collaborations.

• Need: Improved coordination and collaboration are essential for the successful implementation of development projects. There needs to be a concerted effort to establish clear communication channels, foster partnerships, and create a collaborative framework that brings together all relevant stakeholders

4. Pre-Construction Planning and Zoning Challenges

• Barrier: Many developers, particularly in emerging markets, face challenges related to preconstruction planning and zoning. These challenges can include complex permitting processes, outdated zoning laws, and a lack of pre-construction support from local governments.

• Need: There is a need for streamlined permitting processes and updated zoning regulations that align with modern development needs. Additionally, developers would benefit from preconstruction planning support, including site assessments, feasibility studies, and infrastructure planning. This would help reduce delays and ensure that projects are completed on time and within budget.

5. Workforce Development and Capacity Building

• Barrier: The region faces a shortage of skilled labor, particularly in specialized areas such as construction management, energy infrastructure, and historic preservation. This shortage is compounded by the lack of capacity-building programs that can provide the necessary training and certifications for local workers.

• Need: Workforce development is crucial for the success of long-term development projects. There is a need for targeted training programs that equip local workers with the skills required to meet the demands of modern construction, real estate development, and rural revitalization projects. Partnering with local educational institutions and workforce development boards could help address this gap.

6. Sustainable Development

• Barrier: Developers in the region often struggle with incorporating resource efficient practices into their projects, primarily due to a lack of knowledge, resources, and incentives. Environmental sustainability is critical in a region that is transitioning from coal-based industries.

• Need: There is a need for increased focus on sustainable development practices, including energy efficiency, and waste reduction. Developers would benefit from access to resources and incentives that encourage resource efficient practices. Additionally, guidance from environmental consulting firms can help developers navigate complex environmental regulations and implement resource efficient solutions.

The Appalachian Downtown Development Initiative (ADDI) plays a vital role in identifying and addressing the gaps, barriers, and needs that developers face in the Appalachian Regional Commission footprint in Virginia. By focusing on access to capital, technical expertise, coordination, workforce development, and resource efficient practices, the ADDI can help create a more supportive environment for developers. This, in turn, will contribute to the long-term economic revitalization of the region, ensuring that the Appalachian Regional Commission footprint in Virginia’s communities are well-positioned for growth and development.

SECTION 2: ECONOMIC DEVELOPMENT ORGANIZATIONS

The economic development organization analysis highlights the key challenges and needs related to downtown development, economic diversification, and sustainable growth, while identifying strategic opportunities to enhance the economic vitality and quality of life across this region.

Summary

Southwest Virginia has over 30 organizations that support downtown development with a variety of priorities such as historic preservation, regional economic growth, regional planning, and workforce development. The types of organizations include state programs, regional organizations, local government agencies, nonprofits, and educational institutions and cover varied geographic footprints.

The gaps for economic development organizations in Southwest Virginia are:

• A handful of capital providers with inconsistent coverage of the region

• Lack of technical expertise and capacity

• Shortage of skilled workers

• Inadequate infrastructure including transportation networks, broadband, and utilities

• Reliance on declining industries such as coal mining and traditional manufacturing

• Lack of sustainable development expertise and best practices

• Limited collaboration among stakeholders (public, private, nonprofit)

• Coordination across specialized tax credit programs

The needs for economic development organizations in Southwest Virginia are:

• Enhanced capital access programs

• Public-private partnerships

• Targeted technical assistance

• Capacity building

• Industry-specific training programs

• Workforce retention strategies

• Comprehensive infrastructure investment

• Zoning and permitting reforms

• Strategic economic diversification initiatives including tourism, advanced manufacturing, and local agriculture

• Support for small business and entrepreneurs

• Regional coordination mechanisms

• Support in navigating New Markets Tax Credits, Historic Tax Credits, and Opportunity Zones and awareness of potential unintended consequences

• Collaborative development models

1. Access to Capital

• Gaps: Limited access to capital is a critical issue throughout the ARC’s Virginia footprint, particularly in economically distressed and rural areas. Many small towns and rural communities, such as those in the coalfield regions of Southwest Virginia, struggle to secure funding for development projects. This funding gap hampers efforts to diversify local economies, upgrade infrastructure, and promote sustainable growth.

• Needs:

Enhanced Capital Access Programs: There is a pressing need for more accessible and flexible capital access programs, including state and federal grants, low-interest loans, and private investment opportunities. Expanding the reach of the Virginia Coalfield Economic Development Authority (VCEDA) and other financial institutions could provide critical support to areas in need.

Public-Private Partnerships: Encouraging public-private partnerships could help bridge the capital gap by leveraging private sector investment in conjunction with public funding. This approach could be particularly beneficial for large-scale infrastructure and downtown revitalization projects.

2. Technical Expertise and Capacity Building

• Gaps: Across the ARC’s Virginia footprint, many communities and organizations lack the technical expertise necessary to effectively plan, implement, and manage development projects. This gap is especially significant in specialized areas such as historic preservation, advanced manufacturing, and sustainable practices.

• Needs:

Targeted Technical Assistance: There is a strong need for targeted technical assistance programs that can provide expert guidance in key areas, such as environmental consulting, energy efficiency, and advanced construction techniques. Expanding the role of organizations like Dewberry Engineers, Inc., and TRC Companies could help address this need.

Capacity Building Initiatives: Many smaller towns and rural communities, including those in the coalfields and along SWVA region, would benefit from capacity-building initiatives. These programs should focus on enhancing local governments’ ability to manage complex projects, navigate regulatory environments, and engage in strategic planning.

3. Workforce Development

• Gaps: The shortage of a skilled workforce is a significant barrier to economic development throughout the ARC’s Virginia footprint. This shortage is particularly acute in regions transitioning from traditional industries like coal mining to emerging sectors and hospitality and service industries as well.

• Needs:

Industry-Specific Training Programs: There is a need for workforce training programs tailored to the specific needs of emerging industries. The Southwest Virginia Workforce Development Board and other regional workforce entities should collaborate with local educational institutions to create training curricula that align with industry demands.

Workforce Retention Strategies: In addition to training, there is a need for strategies to retain skilled workers within the region. This could include incentives for local employment, career advancement opportunities, and initiatives to improve the overall quality of life in these communities.

4. Infrastructure Development

• Gaps: Inadequate infrastructure is a persistent challenge across much of the ARC’s Virginia footprint. This includes outdated transportation networks, insufficient broadband connectivity, and inadequate utility services. These issues are particularly problematic in rural and mountainous areas, where the cost of infrastructure development is often prohibitive.

• Needs:

Comprehensive Infrastructure Investment: There is a need for comprehensive investment in infrastructure development, including roads, bridges, broadband, water and sewer systems, and energy infrastructure. Targeted investment in these areas could significantly enhance the region’s attractiveness to businesses and improve residents’ quality of life.

Zoning and Permitting Reforms: Modernizing zoning regulations and streamlining the permitting process would help facilitate development projects, particularly those involving new technologies and sustainable practices. This would also reduce delays and costs associated with infrastructure development.

5. Economic Diversification

• Gaps: Many parts of the ARC’s Virginia footprint remain heavily reliant on declining industries, such as coal mining and traditional manufacturing. This reliance has left communities vulnerable to economic downturns and has hindered efforts to attract new industries and investment.

• Needs:

Strategic Diversification Initiatives: There is a critical need for strategic initiatives aimed at diversifying the regional economy. This includes promoting sectors such as advanced manufacturing, sustainable agriculture, and tourism. Regional planning bodies, including various planning district commissions, should continue to take the lead in driving these initiatives. Support for Small Businesses and Entrepreneurs: Small businesses and entrepreneurs are essential to economic diversification. Expanding support for these groups, through initiatives like the Virginia Small Business Development Centers could help stimulate innovation and create new job opportunities in certain sectors.

6. Resource Efficient Development Practices

• Gaps: While there is growing recognition of the importance of resource efficient development, many communities in the ARC’s Virginia footprint lack the resources and expertise to implement these practices effectively. This is particularly true in areas like energy efficiency and sustainable land use.

• Needs:

Resource Efficient Development Support: There is a need for increased support for resource efficient development initiatives, particularly those that focus on energy efficiency and sustainable agriculture. Organizations like Appalachian Sustainable Development and the Virginia Department of Housing & Community Development could provide crucial assistance in these areas.

Environmental Preservation and Conservation: Protecting the natural environment is critical to the long-term sustainability of the region. Expanding programs that promote environmental preservation and conservation, such as those offered by the Clinch Valley Soil and Water Conservation District, could help balance economic development with environmental stewardship.

7. Coordination and Collaboration

• Gaps: Efforts to revitalize downtown areas and promote economic development across the ARC’s Virginia footprint are often fragmented, with limited coordination among key stakeholders. This fragmentation can lead to inefficiencies, duplicated efforts, and missed opportunities for collaboration.

• Needs:

Regional Coordination Mechanisms: Establishing stronger regional coordination mechanisms could help align the efforts of local governments, private developers, non-profit organizations, and other stakeholders. This could include the creation of regional task forces or steering committees focused on specific development goals.

Collaborative Development Models: Encouraging collaborative development models, such as public-private partnerships and multi-stakeholder coalitions, could enhance the effectiveness of downtown revitalization and economic development initiatives. These models should be designed to leverage the strengths of each partner while addressing common challenges.

The Appalachian Downtown Development Initiative is uniquely positioned to address the critical gaps and needs identified in this expanded analysis. By focusing on enhancing access to capital, providing targeted technical assistance, improving workforce development, investing in infrastructure, promoting economic diversification, supporting sustainable development practices, and fostering regional collaboration, the ADDI can play a pivotal role in revitalizing downtown areas and promoting sustainable economic growth across the ARC’s Virginia footprint. Addressing these challenges will require a coordinated, multi-faceted approach, but the potential benefits including job creation and economic diversification are substantial and far-reaching.

SECTION 3: COMMUNITIES

The Appalachian Regional Commission’s (ARC) Virginia footprint encompasses a diverse range of communities with varying levels of economic development activity and potential. The region includes urban centers, rural areas, and communities transitioning from traditional industries like coal mining to emerging sectors. This analysis focuses on identifying the geographic priorities for implementation based on the data provided, examining the differences in development activity and potential across the regions within the ARC’s Virginia footprint, including the LENOWISCO Planning District, Mount Rogers Planning District, Cumberland Plateau Planning District, New River Valley Planning District, West Piedmont Planning District, and the Roanoke Valley-Alleghany Regional Commission (RVARC).

Some planning districts are challenged by a historic reliance on the coal industry and basic infrastructure deficiencies, but with some bright spots of activity (e.g. LENOWISCO, Cumberland). Most of the region is predominantly rural, with a few localities accounting for the majority of economic activity (e.g. Mt. Rogers). Some parts of Southwest Virginia benefit from more diversified economies centered around small urban centers, with ongoing strategies to support agritourism, small business, workforce development, and more (New River Valley, Western Piedmont, RVARC). These generalizations include the caveat that there are major disparities in development activity and economic opportunity within each district, and even within a single county. With that in mind, the following recommendations should be considered as priorities for development in Southwest Virginia:

• Prioritize investment and expand redevelopment efforts in cities and towns that have a foundation for growth, some local support or ongoing development strategies, and economic sectors that contribute to downtowns:

• Town of Abingdon

• Town of Big Stone Gap

• Town of Floyd

• Town of Haysi

• Town of Marion

• City of Martinsville

• City of Norton

• Communities in Pulaski County

• City of Roanoke

• Town of Tazewell

• Enhance infrastructure and provide technical assistance as a foundation for eventual downtown development activity in under-resources towns and communities such as:

• Town of Appalachia

• Town of Dungannon

• Communities in Bland County

• Communities in Buchanan County

• Communities in Dickenson County

• Communities in Giles County

• Communities in Smyth County

Geographic Priorities and Variance in Development Activity

1. LENOWISCO Planning District

• Geographic Area: Includes Wise, Lee, and Scott Counties, and the City of Norton.

• Current Activity Level: The LENOWISCO area exhibits moderate to low levels of development activity, with a few notable exceptions. Big Stone Gap and Norton have ongoing redevelopment projects, while other areas like Appalachia and Gate City have moderate potential but limited active projects.

• Development Potential: The region’s development potential is hampered by a combination of economic challenges, including the decline of the coal industry, limited access to capital, and infrastructural deficiencies. However, ongoing efforts like the Miners Park upgrades in Wise County indicate a willingness to pursue revitalization.

• Geographic Priorities: Prioritize investment in the Town of Big Stone Gap and the City of Norton, where ongoing projects suggest a foundation for further growth. Focus on enhancing infrastructure and providing technical assistance in more rural areas like Appalachia and Dungannon to stimulate economic activity.

2. Mount Rogers Planning District

• Geographic Area: Encompasses Bland, Carroll, Grayson, Smyth, Washington, and Wythe Counties.

• Current Activity Level: This region demonstrates a mix of moderate to active development activity, particularly in towns like Marion and Abingdon, which are actively pursuing downtown redevelopment and local business support initiatives.

• Development Potential: The presence of active redevelopment in Marion, coupled with the regional economic development efforts led by entities like the Mount Rogers Regional Partnership, indicates significant potential for growth. However, areas like Smyth County and Bland County lag in development activity, partly due to infrastructural and economic constraints.

• Geographic Priorities: Concentrate on sustaining and expanding redevelopment efforts in Marion and Abingdon. Address gaps in infrastructure and business support in less active areas like Smyth and Bland Counties to bring them up to par with more developed communities.

3. Cumberland Plateau Planning District

• Geographic Area: Includes Buchanan, Dickenson, Russell, and Tazewell Counties.

• Current Activity Level: The region shows low to moderate development activity, with towns like Haysi and Tazewell exhibiting ongoing redevelopment efforts. However, much of the district remains underdeveloped, with a heavy reliance on traditional industries.

• Development Potential: The area’s potential is tied to its natural resources and efforts to diversify the economy. Projects like the Riverfront Trail Improvements in Haysi are promising, but the region needs significant infrastructure upgrades and capital access to realize its full potential.

• Geographic Priorities: Focus on enhancing infrastructure and facilitating access to capital in underdeveloped areas like Buchanan and Dickenson Counties. Support ongoing redevelopment in Haysi and Tazewell by expanding technical assistance and fostering public-private partnerships.

4. New River Valley Planning District

• Geographic Area: Covers Floyd, Giles, Montgomery, Pulaski, and Radford.

• Current Activity Level: The New River Valley shows moderate to active development activity, particularly in Floyd and Pulaski Counties, where ongoing redevelopment projects are evident.

• Development Potential: The region benefits from a combination of urban centers and rural communities, offering a balanced mix of development potential. Floyd County, with its focus on agritourism and local business expansion, is a notable example of successful economic diversification.

• Geographic Priorities: Continue supporting redevelopment in Floyd and Pulaski Counties, while addressing the infrastructure and business support needs in more rural areas like Giles County. Encourage regional collaboration to leverage the strengths of the more developed urban centers.

5. West Piedmont Planning District

• Geographic Area: Franklin, Henry, Patrick, and Pittsylvania Counties; the Cities of Danville and Martinsville; and the Town of Rocky Mount. (Please note, Henry and Patrick Counties and the City of Martinsville are in the ARC region.)

• Current Activity Level: The West Piedmont area is characterized by high levels of development activity, particularly in Danville and Martinsville, where significant economic development projects are underway.

• Development Potential: The region has a strong foundation for continued growth, with robust support from local economic development agencies and ongoing redevelopment initiatives. However, rural areas within the district may require additional support to match the development pace of Danville and Martinsville.

• Geographic Priorities: Prioritize continued investment in Danville and Martinsville to sustain and expand current redevelopment efforts. Extend technical assistance and infrastructure development to surrounding rural areas to ensure equal growth across the district.

6. Roanoke Valley-Alleghany Regional Commission (RVARC)

• Geographic Area: Encompasses the City of Roanoke, Roanoke County, and surrounding areas.

• Current Activity Level: The RVARC area shows moderate to high levels of development activity, with a strong focus on urban revitalization and infrastructure improvements, particularly in the City of Roanoke. The presence of active redevelopment projects, such as downtown hotel developments and event center expansions, highlights the region’s commitment to economic growth.

• Development Potential: The region’s potential is bolstered by its role as a central urban hub

in Southwest Virginia. The focus on business support, regional infrastructure development, and workforce development initiatives provides a solid foundation for sustained economic growth. However, the rural parts of the RVARC region may require additional support to fully benefit from the region’s overall development momentum.

• Geographic Priorities: Continue supporting urban revitalization efforts in Roanoke City and ensure that regional infrastructure projects are well-coordinated across the entire RVARC footprint. Address the needs of rural areas by enhancing business support services and infrastructure improvements to align with the urban centers’ growth.

Discussion of Geographic Differences

The variance in development activity and potential across the ARC’s Virginia footprint can largely be attributed to a combination of historical economic reliance on industries like coal mining, geographic isolation, and differences in local governance capacity. Regions like LENOWISCO and Cumberland Plateau, which have been more reliant on traditional industries, face greater challenges in transitioning to new economic paradigms. In contrast, areas like the New River Valley, West Piedmont, and RVARC, with more diverse economies and better infrastructure, are better positioned for sustained growth.

Geographic isolation in certain areas, such as the more rural parts of LENOWISCO and Cumberland Plateau, further exacerbates these challenges by limiting access to capital, technical expertise, and critical infrastructure. Meanwhile, regions with urban centers or proximity to educational institutions, such as the New River Valley, West Piedmont, and RVARC, benefit from greater resources and connectivity, leading to higher levels of development activity.

To optimize the economic impact of the Appalachian Downtown Development Initiative across the ARC’s Virginia footprint, it is essential to tailor strategies to the specific needs and potential of each region. This includes prioritizing infrastructure development in more isolated areas, enhancing access to capital and technical assistance in underdeveloped regions, and sustaining momentum in more developed areas through targeted investments and regional collaboration. By addressing these geographic disparities, the initiative can increase economic growth across Virginia’s Appalachian communities, ensuring that both urban and rural areas benefit from the region’s overall economic development efforts.

SECTION 4: POLICY SCAN

Supportive Policies

1. Downtown Revitalization Programs: Virginia has implemented various programs aimed at downtown revitalization, particularly in economically distressed regions. Initiatives like the Virginia Main Street Program provide grants and technical assistance to support local governments in enhancing their downtown areas. Historic tax credits have also been beneficial in encouraging the adaptive reuse of historic properties.

2. Small Business Support: The state offers several small business support programs, including access to grants, loans, and technical assistance. These programs are crucial in promoting entrepreneurship in areas and helping to support local economies that have traditionally relied on a single industry, such as coal mining.

3. Infrastructure Development Initiatives: Virginia has made strides in improving infrastructure, particularly in transportation and broadband. State and federal investments in these areas have helped reduce barriers to economic development in remote areas.

Restrictive Policies

1. Zoning and Land Use Regulations: One of the significant barriers to redevelopment is the restrictive zoning laws in many localities. These regulations often limit the adaptive reuse of existing buildings, making it difficult for developers to repurpose properties for new uses, especially in historic downtown areas.

2. Limited Local Government Capacity: Many rural areas in Virginia face challenges due to limited local government capacity. There is often a lack of resources and expertise needed to apply for and manage state and federal grants, which restricts the ability of these localities to fully benefit from available programs.

3. Financial Barriers: High costs associated with redevelopment projects, coupled with limited access to credit, pose significant challenges. Although there are supportive policies in place, the financial barriers often outweigh the benefits, particularly for small towns and rural communities.

Potential for More Beneficial Policies

1. Zoning Reform: There is a need for statewide zoning reform to facilitate redevelopment, especially in economically distressed areas. Simplifying the process for obtaining permits and approvals for adaptive reuse projects could stimulate more investment in downtown areas.

2. Increased State and Federal Funding: Expanding state and federal funding for infrastructure projects, particularly in broadband and transportation, would be highly beneficial. These investments are critical for enabling economic development in Virginia’s rural areas.

3. Workforce Development Initiatives: Strengthening partnerships between local governments, educational institutions, and private industry could enhance workforce development programs. There is potential to create targeted training programs aligned with emerging industries, such as clean energy and advanced manufacturing, which would support economic diversification.

4. Public-Private Partnerships: Encouraging more public-private partnerships could provide the necessary capital and expertise to address the challenges faced by rural communities. These partnerships could focus on redevelopment projects, small business support, and infrastructure improvements.

5. Incentives: Implementing incentives for businesses that adopt sustainable practices could align with Virginia’s goals for sustainable development. This could include tax credits, grants, or other financial incentives.

Virginia has a mix of supportive and restrictive policies that impact downtown development and economic revitalization, particularly in the Appalachian region. While there are strong programs in place, reforms in zoning laws, increased funding, and enhanced workforce development could significantly improve the economic landscape. By addressing these issues at the state, regional, and national levels, Virginia could foster a stronger economic environment for its rural communities.

New Market Tax Credits and Opportunity Zones in Virginia Rural Downtown Development

New Market Tax Credits (NMTCs) and Opportunity Zones (OZs) are two federal initiatives designed to spur economic development in distressed communities. Both programs offer substantial tax incentives to investors, making them powerful tools for revitalizing rural downtowns in Virginia. However, the effectiveness of these programs in truly benefiting rural areas, particularly in the context of downtown development, has been mixed.

New Market Tax Credits (NMTCs)

The NMTC program, established in 2000, aims to attract private investment to low-income communities by offering a 39% tax credit spread over seven years for investments made through Community Development Entities (CDEs). In Virginia, NMTCs have been instrumental in financing several rural downtown redevelopment projects by providing much-needed capital to areas that struggle to attract traditional investment.

Positive Impact of NMTCs:

• Increased Investment: NMTCs have brought millions of dollars into rural Virginia, funding projects that range from small business expansions to large-scale mixed-use developments. These investments have led to job creation, improved infrastructure, and revitalized commercial spaces.

• Flexibility: The NMTC program allows for a wide range of projects, including retail, housing, and community facilities, making it adaptable to the diverse needs of rural downtowns.

Challenges of NMTCs:

• Complexity and Access: The process of securing NMTC financing is complex, often requiring significant legal and financial expertise that small rural developers may lack. Additionally, CDEs tend to favor larger projects, which can leave smaller rural initiatives at a disadvantage.

• Concentration of Benefits: There is concern that NMTCs might disproportionately benefit more economically stable areas within distressed communities, rather than the most in need.

Opportunity Zones (OZs)

Established by the Tax Cuts and Jobs Act of 2017, Opportunity Zones offer tax incentives for investments in designated low-income areas. Investors can defer, reduce, or eliminate capital gains taxes by investing in OZs through Qualified Opportunity Funds (QOFs).

Positive Impact of OZs:

• Attracting Investment: OZs have attracted significant attention and capital to Virginia’s rural areas, providing an incentive for developers to consider projects in regions they might otherwise overlook. This has the potential to stimulate economic growth and revitalization in rural downtowns.

• Long-Term Commitment: The structure of OZs encourages long-term investment, as the most significant tax benefits are realized after holding the investment for ten years. This can lead to sustained economic development rather than short-term gains.

Challenges of OZs:

• Risk of Displacement: There is concern that the influx of investment in OZs could lead to gentrification, potentially displacing low-income residents and small businesses that the program is intended to help. This risk is particularly pronounced in rural areas where economic conditions are fragile.

• Uneven Benefits: Not all Opportunity Zones are created equal. Some rural areas may struggle to attract investment despite the designation, while others, particularly those closer to urban centers, may see more significant benefits. This could exacerbate existing disparities between different rural communities.

Both New Market Tax Credits and Opportunity Zones offer valuable tools for revitalizing rural downtowns in Virginia. However, their success largely depends on how well they are implemented and whether they can overcome the inherent challenges of complexity, access, and potential displacement. Policymakers and community leaders must carefully navigate these issues to ensure

that the benefits of these programs are equitably distributed and truly support the long-term development of Virginia’s rural areas.

The Importance of Historic Tax Credits in Virginia Rural Downtown Development

Historic tax credits (HTCs) have long been a cornerstone in the revitalization of Virginia’s rural downtowns. These incentives, both at the federal and state levels, play a critical role in making the preservation and redevelopment of historic buildings financially feasible. However, changes introduced in 2017 to the way these tax credits are reimbursed have created significant challenges for small-scale developers, who are often the lifeblood of revitalization efforts in Virginia’s rural communities.

The Role of Historic Tax Credits in Rural Development

Historic tax credits provide a vital financial incentive for the rehabilitation of historic buildings. The federal HTC offers a 20% credit on qualified rehabilitation expenses, while Virginia’s state HTC provides an additional 25% credit. These credits effectively reduce the cost of preserving historic structures, which are often more expensive to renovate than building new structures.

In Virginia’s rural areas, where economic development resources are often scarce, HTCs can be the difference between a project moving forward or stalling. They encourage the reuse of existing buildings, which helps maintain the historical character of downtown areas, stimulates local economies, and can lead to increased property values and tourism.

Impact of the 2017 Tax Code Change

In 2017, the Tax Cuts and Jobs Act (TCJA) introduced a significant change to the federal HTC program. Before this legislation, developers could claim the entire 20% federal tax credit in the year the project was completed. However, under the new law, the credit must be spread out over five years, which delays the return on investment for developers.

For large, well-capitalized developers, this change was a manageable inconvenience. However, for small-scale developers in rural areas—who often have limited access to capital—this change can be detrimental. The delay in receiving the full benefit of the tax credit can disrupt cash flow, making it more difficult to finance the initial stages of a project. This is especially problematic in rural Virginia, where developers may already face higher costs of financing and lower profit margins due to the smaller market size.

Negative Impacts on Small Developers

Small developers, who often spearhead projects in Virginia’s rural downtowns, are disproportionately affected by this change. These developers typically do not have the high net worth or access to the capital markets that larger developers might have. As a result, the change in the reimbursement schedule can significantly reduce the financial viability of their projects. This can lead to fewer completed projects, stalled redevelopment efforts, and an overall slowdown in the revitalization of rural downtowns.

Statistical Evidence

According to the National Park Service, which administers the federal HTC, Virginia has consistently ranked among the top states for HTC usage, particularly in rural areas. A study by the Virginia Department of Historic Resources found that every $1 of state HTC generates approximately $4.20 in economic activity. Moreover, rural areas saw a particularly strong impact from these credits, as they often lack alternative sources of economic stimulus .

The reduction in the immediate value of the tax credit has caused some developers to scale back or delay projects. A 2018 survey by the National Trust for Historic Preservation found that 65% of small developers reported a negative impact on their ability to finance projects due to the changes in the HTC program .

Historic tax credits remain an essential tool for rural downtown development in Virginia. However, the changes introduced in 2017 have made it more difficult for small developers—who are often the key players in these revitalization efforts—to access the capital they need to move forward with projects. Policymakers should consider the unique challenges faced by rural developers and explore ways to mitigate the impact of the HTC reimbursement changes, ensuring that these vital incentives continue to support the preservation and economic development of Virginia’s historic rural downtowns.

West Virginia State Report

SECTION 1: DEVELOPERS

At the start of this planning process, the WV State Group expected that one of the key challenges facing the state was the lack of developers serving West Virginia. Surprisingly, we were able to identify a significant number of developers serving the state, though the capacity of those developers varied widely.

In total, the State Group was able to identify 33 individual developers, including for-profit, nonprofit and individuals. The State Group prioritized developers to hold interviews with from this larger list. Eleven (11) total interviews were completed with developers.

In addition to identifying developers, the WV State Group categorized developers based on capacity classifications. This classification system went through multiple iterations, including adjusting based on the classification system provided by the NC State Group, which we liked. In total, we identified 6 categories of developer capacity: (1) One-Hit Wonders; (2) Rising Stars; (3) Gold Artists; (4) Platinum Artists; (5) Diamond Artists; (6) Non Mission-Driven Developers. These are further classified into 3 categories: (a) Accidental Developers; (b) Emerging Developers; (c) Experienced Developers.

There is significant overlap between developers across all categories, which further complicates analysis. Additionally, the capacity of developers to move from Accidental or Emerging Developers to Experienced Developers depends highly on the developer’s leadership and interest in further expansion. Similarly, some developers seem poised to move down to a lower-capacity classification (from Rising Star to One-Hit Wonder) based on project challenges with their first project.

We were able to classify identified developers across the categories as:

• One-Hit Wonders: 8 developers 5 individuals; 3 organizations

• Rising Stars: 9 developers 2 individuals; 7 organizations

• Gold Artists: 4 developers 1 individual; 2 organizations; 1 company

• Platinum Artists: 7 developers 2 individuals; 1 organization; 5 companies

• Diamond Artists: 1 developer 1 company

4 developers we did not have enough knowledge about to classify.

Finally, the Platinum and Diamond classified developers may be non mission-driven developers. Further research would be needed to know which of these developers would be best positioned to be experienced developer mentors in an ADDI program.

From the eleven interviews we completed, multiple key barriers were identified, which are discussed in detail below. These included: Property Access and Sales Price; Market Rate Tenants; and multiple Capital Access Barriers.

PROPERTY ACCESS + TENANT BARRIERS

BARRIER: PROPERTY ACCESS +

SALE PRICES

Developers cite accessing re-developable properties as a continuous impediment and obstacle to downtown development throughout West Virginia. This includes a significant inability of developers to secure funding based on the appraised value of the property, owners inflating property costs to a degree that is prohibitive toward developers, and properties not being utilized in ways that align with local visions and priorities for downtown development objectives. This is an impediment to investment as lending institutions are usually only able to underwrite a debt product, such as a mortgage loan, for up to 80% of the appraised value of the property.

Multiple developers, public and private, have noted that property owners’ asking prices typically significantly exceed the total appraised value of the property, thus making financing exceedingly difficult. Community development support organizations, such as Woodlands Development, Inc., have occasionally remitted the remainder of the property cost on behalf of developers in order to effectively get prime properties into reuse. In rare cases, such as in Wellsburg, long-term relationship building has eventually led to properties being gifted or sold at a reasonable price.

BARRIER: MARKET RATE TENANT AVAILABILITY

Several experienced and active private developers have stated that the ability to attract market rate tenants, both for commercial and residential properties, drastically impacts the types of

projects they are willing to undertake. Lack of incentives for developers unable to court lucrative tenants impacts projects’ profitability while also dissuading further investment in downtown areas. Often, without pre-established anchor tenants, multiple downtown properties stagnate due to uncertainty about the prospective profitability.

Examples of strategies and barriers relating to this challenge include:

• Woodlands Development only undertakes redevelopment projects that include housing because housing tenants are stable and provide steady income to cover the cost of the project. In fact, they state that they expect there not to be market rate tenants in their downtown properties and that mixed used development with housing is the most successful strategy they have to drive downtown development in rural and distressed areas.

• Omni Associate, while desiring to develop more mixed-use properties to complement their focus on historic tax credit eligible properties, focuses on properties that will attract the most lucrative anchor tenants and normally will not undertake a development without a preestablished tenant because of their for-profit status.

• Both Preston County and Barbour County economic development authorities cite lack of lucrative anchor tenants as a negative factor when courting financing from national banks, when acquiring floodplain insurance, and in keeping local customers present in downtown areas for extended periods of time.

Property management challenges were also cited by multiple developers, including managing housing tenants, small business tenants and larger projects like theaters and hotels. Significant support is often needed for small business tenants within downtown redevelopment projects, which many developers do not provide directly and this may lead to rapid turnover in businesses in these properties.

Finally, developers will often utilize tax credits, mainly historical in this context, to offset project costs. However, developers are then limited in their ability to transfer property as the utilization of historic tax credits requires long-term ownership of the property during their duration, and it therefore cannot be transferred while active.

CAPITAL ACCESS BARRIERS

BARRIER: ACCESS TO PUBLIC FUNDING FOR PRIVATE DEVELOPERS

Private developers also cite a lack of public funding opportunities available to for-profit entities as a significant barrier to further development.

Omni Associates and Wishneff & Associates noted that decreased eligibility for privately developed projects puts increased strain on project budgets due to their increased operating costs, lack of available tax abatement programs, and potential project changes to comply with funding opportunities, if eligible. With a stated lack of available public funding sources for private development activities, and an overall lack of dedicated Community Development Block Grant funding, developers are concerned over reciprocal local efforts and dedicated funds to complement their efforts in downtown areas.

Additionally, private developers are concerned over growing costs to their own enterprise as it relates to lack of tax exempt status when completing public good projects, lack of coordinated activities with local government entities, and inability to solicit funding due to the absence of local development strategies in their market area.

BARRIER: CREATING EFFECTIVE CAPITAL STACKS

Other capital access issues also present significant challenges to public and private developers.

As cited by the overwhelming majority of regional planning and development councils (RPDC) and economic development authorities (EDA), most localities lack the ability to access both traditional and nontraditional forms of capital and to create effective capital stacks to finance projects to completion. In most scenarios, the EDAs and RPDCs will work with localities to develop this capital stack in the absence of a community development support organization or an established public or private development partner.

Some localities have built the technical skills to effectively develop complex capital stacks for redevelopment projects on their own, but, overall, these cities should be considered outliers. These localities include Huntington, Morgantown, Elkins, Charleston, Buckhannon, Oak Hill, and Fayetteville. Public development authorities cite these localities as those with a demonstrated history of being able to create funding packages for downtown-related projects autonomously, but that does not necessarily prohibit partnership with those entities on certain projects.

This lack of capital access is exacerbated by limited recurring, multi-year appropriations that could otherwise be utilized to finance projects. Public development entities, such as county and municipal development authorities and RPDCs, receive minimal appropriations from the state government or county to conduct their business. This, in turn, necessitates that they focus on larger infrastructure projects to create revenue for their organization’s operations. Similarly, the diminished fiscal situations in many of those localities means that there is limited, or nonexistent, excess revenue to serve as matching funds for publicly funded projects.

BARRIER: COMMUNITY DEVELOPMENT BLOCK GRANT FUNDING

One large impediment cited by all public developers without a Department of Housing and Urban Development (HUD) Community Development Block Grant (CDBG) entitlement community was the ability to effectively plan for multi-year development.

HUD’s CDBG entitlement communities receive annual, recurring revenue via the program on a formula basis. West Virginia currently only has nine entitlement communities. These include Beckley, Charleston, Huntington, Martinsburg, Morgantown, Parkersburg, Vienna, Weirton, and Wheeling. These additional appropriations are dedicated toward community development programs within these localities.

Without this designation, localities are competing statewide for a continually diminishing sum of funds which takes an exceedingly increasing amount of their time to apply for. These funding opportunities also come with stringent matching percentages, up to 25%. These factors have forced several public developers to abandon solicitation of CDBG funding due to its affordability and tenuous time commitments. This is further exacerbated by the state-level restrictions of CDBG funding’s allowable uses when compared with surrounding states, such as prohibitions on usage for mixed-use development and downtown facade projects.

Public development authorities without entitlement designations cite the challenges of multi-year planning, complying with the comprehensive development plans that the designation requires (in addition to other population and census metrics), and the restrictions on the program at the statelevel.

BARRIER: PARTNERSHIPS FOR TAX CREDIT DEALS

Funding challenges also persist regarding availability of local investment institutions.

Most private developers interviewed have stated 1) a desire to utilize local lenders to finance tax credits and 2) being required to work with out-of-state entities to successfully finance them. In some instances, developers have cited that local lenders are either not knowledgeable about tax credit programs, unable to finance the fully leveraged amount, or unwilling to take long term risks in certain geographic markets.

Several developers have stated that Truist Banks, Wesbanco Bank, First National Bank, First Exchange Bank, United Bank, Chase Bank, and other community banks are either valuable partners in financing tax credits, debt services, or hosting small business development related technical assistance. However, the sentiment that these institutions are unable to cover all existent financing needs remains. This includes traditional as well as nontraditional financing sources to include

tax credits, bridge loans, building purchase, and others that are not currently served by existing institutions or capital products.

The largest concern about banking access is around the financing of new market tax credits.

Sadd Brothers, an experienced and longtime developer in West Virginia, underwrites its new market tax credits with out-of-state institutions, and several budding developers, such as Unleash Tygart, state that financing new market tax credits is inaccessible due to the capital and eligibility thresholds despite having eligible projects. However, most developers interviewed acknowledge that they do not have projects in their portfolio that would qualify for a prospective new market tax credit. Other developers, such as Crawford Holdings, have found success in financing their tax credits internally by leveraging business assets available due to its vertical integration of accounting, business, banking and construction expertise. They have acknowledged that this is a unique arrangement.

DEVELOPER ENGAGEMENT WITH SUPPORT ORGANIZATIONS

None of the private developers interviewed cited any substantial gap in the technical assistance programs offered throughout the state. Most private developers were complementary and have participated in, or partnered with, the team-based coaching programs or the development support entities listed above. This includes robust participation in WV Brownfields Assistance Center programs, Opportunity Appalachia, WV Preservation Alliance, USDA Rural Development, and others.

Most gaps identified by private developers centered on capital access, development incentives, availability of property, and restrictions/attractiveness of public financing programs. Developers cited a lack of knowledge in municipal leaders not participating in team-based coaching programs about development fundamentals and their unwillingness to undergo training or engage in partnerships.

DEVELOPER RECOMMENDATIONS:

Property Access/Capital Products:

Program needs strong products for market redevelopment and stabilization and other capital access components for nascent and growing developers

a. Including stabilizing properties under redevelopment until they are sustainable at market rate, providing financing that traditional lenders will not, and incentivizing public-private partnerships with localities.

2. Local Government Engagement:

Program should prioritize developer interactions with local government entities and the capacity provided by economic development agencies

a. Local government entities, specifically EDAs, should be provided with project best practice information, training modules for developers should include guidance on local government engagement, and toolkits should be developed to increase local government understanding of project phases.

b. Lean on strong municipal partnerships where they are in place and support the development of municipal capacity through state partners, programs and technical resources.

c. This has been conceptualized and some work has been completed by the Downtown Appalachia programs and the work of the WVU Northern Brownfields Assistance Center.

3. Project Management:

Program design should include increased guidance and resources on specific project management skills and requirements for emerging developers.

a. This could include a roadmap for new developers to understand what are the steps to move forward a project successfully and could use some high level checklists, roadmaps, and other resources to help them understand local markets/contexts.

b. Provide resources or connections to project management support/training and property management support and strategies.

SECTION 2: ECONOMIC DEVELOPMENT ORGANIZATIONS

West Virginia has a wealth of economic development organizations, including local, county and regional economic development agencies and regional planning and development councils that serve the entire state. In total, we identified 52 economic development organizations serving the state. We held 13 individual interviews with these organizations. From these interviews, the following barriers to downtown redevelopment in West Virginia were identified.

Most economic development organizations we interviewed identified the barriers that developers noted (access to capital and access to properties) as critical barriers to downtown redevelopment. In addition, they also cited challenging local governments, municipal policy needs, and limited local government capacity as key reasons for diminished downtown development.

Identified barriers relating to local governments includes:

1. Restrictive zoning and land use regulations:

Overly restrictive zoning limits the types of allowable businesses and developments. Regulations

occasionally prohibit mixed-use developments in certain jurisdictions. Lengthy approval processes for zoning ordinance changes or other necessary permitting impose high transaction costs on developers who may in turn choose less complicated, and meaningful, projects.

2. Lack of investment in infrastructure:

A historic neglect of infrastructure not only makes downtown areas less appealing to investors, but it also necessitates that the locality invest heavily in these projects to the detriment of other downtown-related projects. This presents a cyclical concern for developers, as robust and adequate infrastructure is necessary to support downtown business districts, while immediate downtown business interests are being ignored in support of further infrastructure development.

3. Lack of Support for Local Business:

Many localities in the service areas in question are constrained in terms of available capital and personnel (staffing + technical capacity of current personnel). This, in turn, means that there are less grants, tax abatements, public loan opportunities, and other programs that would create mutually beneficial business conditions in downtown districts.

4. Inconsistent Planning and Community Engagement:

Localities often lack the ability, either due to financial conditions or knowledgeable personnel, to develop and adhere to downtown development plans, which leads to fragmented efforts that fail to garner large-scale community support. This complicates project development, as community identified priorities are often unknown and multiple projects are not being activated simultaneously toward a common goal. There are a number of community development support programs offered throughout West Virginia (as noted in the Communities tab), but these programs are typically time-bound, resource constrained and struggle to provide the multiyear (5+ year) support that is needed for long-term community engagement and planning implementation.

The need for, and absence of, comprehensive local and downtown-specific development plans is widely cited by both public and private developers. On the side of public developers, they struggle when pairing local leaders with available funding opportunities and technical assistance opportunities that create robust project pipelines. For private developers, they are often unable to solicit additional investment because they are unaware how, or if, their project aligns with local priorities. This also complicates any potential partnership between the developer and the locality because private developers, such as in Princeton for example, are unable to create agreements to meet mutual ends on public-private partnership projects.

Loan to value (LTV) programs and other creative financing options, if expanded, have been highlighted by developers as possible remediations to commonly experienced problems. To address the lack of capital and complicated tax credit procedures above, several developers highlighted key strategies that would be, or have proven to be, beneficial.

These include:

1. Tax credit transfer instruments:

Developers dealing in historic tax credit projects (Sadd Brothers, Wishneff + Associates, Crawford Holdings) cite the transfer of tax credits as a meaningful financial tool and a way to retire certain project-related debt. However, at the state-level, there is no meaningful instrument by which to certify ownership of tax credits. Currently, the only documentation necessary for sale is a one-page self-authenticating form to signify ownerships.

Developers have stated that an instrument issued through a commonly recognized authority would benefit their projects as it would allow state-level tax credits to be traded as commodity items more easily and would thus make projects more liquid.

2. Tax abatement programs:

Some counties in the state, such as Kanawha County, have programs where entities remit payment in lieu of taxes (PILOT). These programs usually require an agreement between the developers and the county and are beneficial because they freeze the property’s tax assessment at its pre-development levels. This, therefore, limits the tax burden of a project and increases the overhead of the project. Wishneff and Associates cites this local strategy as an integral aspect of their Atlas Building development but acknowledges that there is a significant barrier to its usage and that it may not be commonly practiced statewide.

Statewide simplification and knowledge would be beneficial to more knowledgeable developers. These programs are common in other states and counties, but there is not widespread knowledge about their usage. Other counties could consider adoption of these programs to encourage redevelopment projects.

PRIMARY SUPPORT PROVIDERS

Throughout the identification process, the West Virginia Working Group identified 13 primary support organizations that offer various programs across the state. Six of these organizations were active participants in the ADDI planning process.

Identified organizations supporting downtown redevelopment in West Virginia include:

• West Virginia Community Development Hub**

• RenewAll

• Northern Brownfields Assistance Center

• Southern Brownfields Assistance Center

• Advantage Valley

• Partner Community Capital, Inc.**

• West Virginia Main Street**

• Land Stewardship Corp**

• CommunityWorks

• West Virginia State Historic Preservation Office**

• Preservation Alliance of West Virginia**

• Coalfield Development Corporation

• Woodlands Development, Inc.

** denotes statewide entity

Of these entities, six operate statewide and are funded via regionally-focused public and/or private grant sources. They typically work with communities or developers on specific eligible projects that have been identified as community priorities. Several statewide entities have operated in various localities over time but historically segment their work on grant-specific or economically-specific regions due to shared industry, history, natural or recreational resources, etc. The West Virginia Community Development Hub, for example, currently focuses on the 12 southern counties through the USDA’s Rural Partners Network as well as the Mon Forest Towns region due to their shared industries, recreation and economic goals. Future regional focus will be grant dependent. Grantdriven organizations have an inherent limitation to provide the long-term support for regional and local redevelopment planning and implementation, which could be a gap that is filled by more place-based developers and development supporting organizations.

Other organizations have a more explicit, long-term local or regional focus, with most focusing on a variation of central and southern counties. Of the identified support organizations, support for long-term regional development is provided to Boone, Cabell, Clay, Jackson, Kanawha, Lincoln, Mason, Putnam, Wayne, Randolph, Barbour, and Tucker counties. No organizations listed as primary support organizations explicitly and solely focus on areas in North Central WV, the Eastern Panhandle, or the Northern Panhandle. The lack of identified groups in the northern part of the state and panhandles may be a reflection of network limitations and not a reflection of the capacity on the ground.

However, despite this lack of explicit organizational focus, several statewide entities have worked, or currently work, in the above mentioned geographies that do not have a long-term placebased supporting organization. For example, Weston, located in North Central WV, is an On-Trac community (through the WV Main Street program), a Hub coaching community, a BAD Buildings community, has a Downtown Appalachia project, and has created a land reuse agency (known in other states as a “land bank”).

Therefore, we cannot reasonably conclude that geographic gaps do not exist, but we can state that most localities have the opportunity to be served by one of the prospective statewide entities listed above if funding, program fit, community interest, and timeline are suitable. But taking advantage of the wealth of downtown development support programs depends on community leadership capacity and proactive engagement in those programs.

Most of the interviewed public developers have cited, on average, the same capital providers at the state and federal level with local variances for banking institutions, private financial partners, and community foundations. RPDC partners have cited that the US Economic Development Administration (EDA), US Department of Agriculture Rural Development (USDA-RD), Appalachian Regional Commission (ARC), West Virginia Department of Economic Development (WVDED), Department of Housing and Urban Development (HUD), West Virginia Department of Tourism, and the US Environmental Protection Agency (EPA) as agencies who they routinely receive capital from for downtown-related projects.

Experienced developers noted that they are interested in increased access to capital products, in serving as mentors to lower capacity developers if it is advantageous, and in receiving fees for their services.

Other capital providers include higher education institutions (e.g. Marshall University, Glenville State University, etc.), regional banking institutions (BC Bank, Freedom Bank, First National Bank, etc.), and national banks (Truist, Chase, etc.). Many public development authorities significantly rely on fees for contractual services (stormwater and wastewater grant administration), property sales, and local revenues to support their operations and downtown development projects.

Main Street West Virginia

Main Street West Virginia, the state-level entity that operates downtown revitalization programs that follow the National Main Street Center’s community-based approach, has several active partnerships in localities that are not covered by the other community development support organizations listed above. They also routinely focus on historic property redevelopment and rehabilitation. Due to these concerns, Main Street has expressed a concern about potential lack of technical expertise on-hand, at either Invest Appalachia or another entity who may assume administration of any resultant regional association, to manage historic properties and processes. They have requested more explicit clarity on who will manage those aspects of the program and how it will be operationalized.

Downtown Appalachia Working Group (DAWG)

The Downtown Appalachia Working Group (DAWG) is a statewide, collaborative group of organizations working on the ground in communities across West Virginia, providing technical assistance, and supporting access to funding for projects aimed at revitalizing one of West Virginia communities’ best assets: their downtown commercial cores, buildings, and historic properties. DAWG is focused on West Virginia only but the collaboration, goals, and progress of DAWG inspired the ADDI planning effort. The group formed in the early 2000s and has been meeting consistently quarterly on a basis for over 10 years.

Priorities for this group have included the need for the growth of more place-based, mission-driven developers in West Virginia, which was part of the spark of the ADDI planning process. Each of the organizations identified above, as well as about 20 other organizations, are active participants in this statewide network of community development organizations focused on downtown development.

In 2019, DAWG assessed the state of downtown redevelopment in West Virginia and saw both opportunities and significant, sometimes seemingly insurmountable challenges. Each of the organizations in the network was looking to make a visible change in West Virginia communities, working alongside local leaders and dozens of organizational partners. Despite this commitment, the pace of improvement was slow and often blocked by local capacity, generational turnover in the field, project complexity and access to financial resources.

Public entities often demonstrated a commitment to lead redevelopment but had difficulty in accessing acquisition funding to purchase properties before others purchased them and then failed to redevelop them and put them back into productive reuse that was community prioritized. This was further exacerbated by the issue of out of state property owners who owned dilapidated buildings and had no plans to rehabilitate, demolish, or redevelop them. The network found that it was clear that the public, nonprofit, and philanthropic community must step in to take on risks that the private sector would not. This would likely require pooling funds and demonstrating broad support, helping to spread the risk and make projects more achievable. A key strategy prioritized by the group was creating more community-based developers across the state. The focus and collaborative analysis of this group was the genesis of the ADDI project, and provided much of the in-depth analysis that sparked similar analyses in other ADDI states.

SUPPORT ORGANIZATION RECOMMENDATIONS:

1. Fairness in Stipends Provided to Emerging and Experienced Developers:

a. The WV State Working Group has elevated concerns regarding fairness of high payments to experienced developers that are already sustainable and profitable.

Therefore, the Working Group recommends that ADDI create structures to incentivize access to capital products for experienced developers and/or determine reasonable fees for their services that does not unduly diminish the financial investment available for emerging developers.

2. Training Needs for the Variety of Developer Capacity and Challenges:

a. The WV State Working Group recommends that Training opportunities suggested through ADDI include a mixed-pedagogy approach that includes both introductory, asynchronous learning opportunities and synchronous, group-based components to both encourage fairness, increased participation, and collaboration.

3. Build on the Statewide Connection + Network:

a. WV is well connected among its supporting organizations, including nonprofit partners, localities and economic development agencies. Build on this strong network to increase the effectiveness of the program and avoid duplicating state-based work that is already underway

4. Invest in Historic Redevelopment Expertise

a. A significant portion of redevelopment projects in WV downtowns are in historic properties. Expertise in historic property redevelopment challenges, needs and requirements will be critical to ADDI successfully working with and supporting the capacity building of developers in the state.

SECTION 3: COMMUNITIES

Reasons cited by public development authorities for downtown development readiness in communities included volume of developers, availability of investment, conducive local government officials, and available property for development.

Non Readiness variables included difficult local government leaders, lack of available capital, limited personnel for project feasibility and capital development, and lack of developers active in the area.

DEVELOPMENT READINESS CLASSIFICATION ANALYSIS

Through our analysis, research and interviews, we were not able to identify clear determining factors that explicitly relate a community’s location or geography to downtown development readiness. This is to say that we identified development-ready communities throughout the entire state, and all regions of the state had communities that were also identified as having “LOW” development readiness.

Most EDAs with multiple localities with downtown development districts, and all RPDCs have affirmed that communities within their service areas are on a spectrum of development readiness. No individual RPDC has explicitly identified development-ready/ non-development-ready communities.

Instead, variances clear to exist based upon whether local officials are engaged, if developers can complete profitable projects in the area, if EDAs are supporting downtown development strategies, and if properties are reasonably available to develop.

Communities that demonstrate ‘HIGH’ development potential include communities statewide that have and have not participated in community development support programs but have significant development projects underway.

Localities such as Beckley and Huntington have low participation in community development support programs but have high development potential and activity due to increased population, entitlement funding through HUD’s CDBG, technical expertise within their municipal governments, and active developers in the region.

Outside of the largest cities in the state, communities that are participating currently in one, or more, of the team-based community development support programs (Main Street, The Hub, Bad Buildings, Opportunity Appalachia, Downtown Appalachia, Fulcrum) are drastically more likely to have moderate or high development potential than those communities that have not.

Communities that maintain a high development potential are those with thriving or growing economic industries (e.g. recreation, health and wellness, tourism, etc.), significant historic investment in infrastructure and amenities, or proximity and access to other communities with significant resources. This is not exhaustive, but a general trend seen across communities.

Regardless of geography, private and public developers have identified community-based development priorities, market rate residential rentals, commercial, and mixed-use properties as their priorities moving forward. A significant majority of private developers working across the state have identified their intentional focus on historical tax credit eligible properties as the focus of their future development activities.

DEVELOPMENT READINESS REGIONALLY

(Based on Regional Planning Development Council Districts)

1. Region 1

a. Geographic area: McDowell, Wyoming, Raleigh, Summers, Mercer, and Monroe counties

b. Current activity level: Beckley (HIGH), Bluefield (HIGH), Hinton (HIGH), Princeton (HIGH), Union (LOW)

c. Regional Development Potential: Significant redevelopment underway in central localities within the region, particularly county seats and areas near the New River Gorge National Park. Development has been driven in this region by arts-based development strategies that have invested in small business development, and in development that takes advantage of the growing recreation and tourism economy. We saw no or extremely limited development in McDowell, Wyoming and Monroe counties. Region 1 has significant capacity through a strong RPDC and strong municipal and EDA leadership.

2. Region 2

a. Geographic area: Mingo, Logan, Lincoln, Wayne, Cabell, and Mason counties

b. Current activity level: Fort Gay (MOMENTUM), Huntington [Neighborhood CDCs] (HIGH), Huntington (HIGH), Kenova (LOW), Logan (HIGH), Matewan (MOMENTUM), Point Pleasant (HIGH), Wayne (LOW), Williamson (HIGH)

c. Regional Development Potential: Huntington is an outlier in this region, with redevelopment driven significantly by anchor institutions (university and hospital systems), and by a strong proactive municipal government. Development has stagnated in historically black communities within the city though. Smaller towns have high development potential or have momentum underway in large part through engagement in community development technical assistance programs, in particular the resources that have been provided through the ACT Now Coalition initiative and USDA Rural Partners Network. Finally, Point Pleasant redevelopment potential is driven by major new industry that has been recruited to the area by the state.

3. Region 3

a. Geographic area: Putnam, Kanawha, Boone, and Clay counties

b. Current activity level: Charleston (HIGH), Madison (MOMENTUM), Montgomery (MOMENTUM), Smithers (MOMENTUM)

c. Regional Development Potential: Similar to Region 2, Charleston is an outlier in its redevelopment activity as it is the state capital, has more access to private developers and has a strong, proactive municipal government. Similar to Huntington, development continues

to stagnate in the historically black community of the city though momentum is underway in that neighborhood.

Smaller cities within the region have momentum with their redevelopment activities, driven in large part by their participation in community development support activities and resources provided by the USDA Rural Partners Network.

4. Region 4

a. Geographic area: Fayette, Greenbrier, Nicholas, Webster, and Pocahontas counties.

b. Current activity level: Cowen (LOW), Fayetteville (HIGH), Marlinton (HIGH), Meadow River Valley (LOW), Montgomery (MOMENTUM), Oak Hill (HIGH), Richwood (HIGH), Ronceverte (MOMENTUM), Smithers (MOMENTUM), White Sulphur Springs (HIGH)

c. Regional Development Potential: Redevelopment potential is highly linked in this region to the growing recreation and tourism economy, particularly connected to the New River Gorge National Park, the new Summersville Lake State Park and the Monongahela Forest Towns initiative. Multiple development projects are happening in communities across the region, supported in large part by a high capacity RPDC and regional EDA. Towns that are identified as low development activity have growing capacity because of their participation in community development programs, positioning them for future development potential. The economic challenges of this region remain extremely high, despite the capacity and initiative in the region.

5. Region 5

a. Geographic area: Jackon, Roane, Calhoun, Wirt, Wood, Pleasants, Ritchie, and Tyler counties.

b. Current activity level: Parkersburg (HIGH), Ravenswood (MOMENTUM), Ripley (LOW)

c. Regional Development Potential: This region covers the most rural, distressed parts of West Virginia, and includes the Mid-Ohio Valley which has significant development activity happening along the state border with Ohio. In fact, the only development ready communities we identified in this region are in the Mid-Ohio Valley. The rest of the region is extremely difficult to undertake development in, as the towns are significantly smaller and more distressed than even the towns in Regions 1 and 2. This is because this is an area of the state that has never had significant economic activity so there is limited historic/built environment to capitalize on.

6. Region 6

a. Geographic area: Doddridge, Harrison, Taylor, Marion, Preston, and Monongalia counties

b. Current activity level: Clarksburg (HIGH), Fairmont (HIGH), Grafton (MOMENTUM), Kingwood (MOMENTUM), Mannington (MOMENTUM), Morgantown (HIGH), Rowlesburg (LOW), Shinnston (MOMENTUM)

c. Regional Development Potential: Development potential is this region is significant as this is the central growth corridor for the center of the state. Development is highly focused in cities along the I-79 corridor, including Clarksburg, Fairmont and Morgantown. In cities that are not directly on this corridor, development has been sparked by local engagement in community economic development support programs.

7. Region 7

a. Geographic area: Braxon, Gilmer, Lewis, Upshur, Barbour, Randolph, and Tucker counties

b. Current activity level: Belington (HIGH), Beverly (LOW), Davis (HIGH), Elkins (HIGH), Lewis County (MOMENTUM), Parsons (MOMENTUM), Philippi (MOMENTUM), Sutton (LOW), Thomas (HIGH), Weston (HIGH),

c. Regional Development Potential: Development readiness in this region has been primarily driven by the work of the place-based developer serving this region (Woodlands Development), and by a new highway corridor connecting this region with DC. Challenges still exist, particularly in communities that have seen previous community engagement and development efforts but have not participated recently and have lost local capacity (such as Sutton and Phillipi).

8. Region 8

a. Geographic area: Pendleton, Hardy, Grant, Mineral, and Hampshire counties

b. Current activity level: Franklin (HIGH), Petersburg (MOMENTUM), Wardensville (MOMENTUM)

c. Regional Development Potential: Development activity in this region has been sparked primarily through engagement with the Mon Forest Towns Initiative, which links recreational development with downtown redevelopment strategies at a regional level.

9. Region 9

a. Geographic area: Morgan, Berkeley, and Jefferson counties

b. Current activity level: Bath (LOW), Charles Town (HIGH), Martinsburg (HIGH)

c. Regional Development Potential: This is a unique region of the state, considered the bedroom community of the Washington DC metro region. High development activity is underway in multiple cities that have a higher median income because of this proximity to the nation’s capitol. The region is typically disconnected from state community economic

development support services and struggles to engage in state and regional development efforts. Two key resources have been boons for downtown redevelopment in this region, including Partner Community Capital and major developers in the Charles Town/Martinsburg area.

10. Region 10

a. Geographic area: Wetzel, Marshall, and Ohio counties

b. Current activity level: Moundsville (MOMENTUM), New Martinsville (HIGH), Wheeling (HIGH)

c. Regional Development Potential: This region’s development potential is driven largely by the metro area of Wheeling, its proximity to Pittsburgh, and by community development efforts in New Martinsville. Future development potential in this region is high.

11. Region 11

a. Geographic area: Brooke and Hancock counties

b. Current activity level: Weirton (HIGH), Wellsburg (HIGH), Follansbee (LOW), Chester (LOW

c. Regional Development Potential: Large, available industrial spaces due to declining steel and manufacturing industry. Areas for redevelopment and new industry (Form Energy), but limited tenants able to afford and maintain large, former industrial spaces.

SECTION 4: POLICY SCAN

Over the past decade, West Virginia and the broader Appalachian region have faced significant challenges in revitalizing their downtown areas, particularly in small towns with populations under 30,000. However, several policies have been identified as particularly beneficial for promoting downtown redevelopment, while others remain underutilized or not fully explored.

SURVEY FINDINGS

Survey data indicate that certain municipal policies are overwhelmingly considered beneficial for downtown redevelopment. Chief among these are tax incentives for historic development, funded grant programs, and downtown development/revitalization plans. Several developers stated that the state’s increased historic tax credit is the primary reason that they are undertaking development projects in West Virginia. However, the latter is not supported by most of the public and private developers interviewed, as they find local development haphazard and undirected often. These policies have garnered strong support due to their ability to stimulate investment, preserve historic character, and provide a structured approach to revitalization efforts.

Policies such as vacant and dilapidated building codes, tax incentives for non-historic development, and the creation of historic districts have also been highlighted as effective tools. These strategies not only enhance the aesthetic and functional appeal of downtown areas but also address the critical issue of blight, which can deter further investment. However, there is a clear need for further exploration and potential implementation of additional policies. Respondents indicated a desire for more information on tax incentives such as real estate tax abatements and the benefits of Complete Streets policies, which promote safer and more accessible transportation infrastructure. This is evidenced by developers with high expertise utilizing payment in lieu of taxes (PILOT) agreements with county governments to minimize their tax burden.

Despite the recognized benefits, there is a gap between the availability and actual utilization of these policies in West Virginia. Historic district designations, vacant and dilapidated building codes, and tax incentives for historic development are among the most utilized tools. However, policies aimed at streamlining permitting processes and comprehensive state-level downtown development strategies are notably underutilized. This underutilization may be due to a lack of awareness, administrative hurdles, or insufficient legislative support. In terms of legislative action, there has been minimal movement in passing laws specifically addressing downtown redevelopment in small towns. Only 12.5% of respondents were aware of any such legislative efforts, indicating a possible disparity in education or activity that would encourage and incentivize future growth.

Co-Developer Agreement Template

1. Development Services

• Negotiate agreements for architectural, engineering, testing or consulting services;

• Negotiate and oversee construction contracts, machinery or equipment installations;

• Identify sources of construction financing for the Project and negotiate the terms of such financing with lenders;

• Establish and implement appropriate administrative and financial controls for the design and construction of the Project, including

• coordination and administration of the Project architect, the general contractor, and other contractors, professionals and consultants;

• participation in conferences and project team meetings;

• review all requests for payments under any related agreement;

• ensure all permits and approvals are in place;

• ensure all insurance is secured and in place at all times;

• provide updates to all funders, lenders and partners as needed;

• Inspect the progress of construction of the Project;

• Obtain and maintain insurance coverage for the Project; (How is this different from the insurance bullet above?)

• Assemble and retain all contracts, agreements and other records;

2. Limitations and Restrictions

• Referencing what decisions can be made by single party, and which are made in consultation with both parties. 3. Accounts and Records

5. Development Fee

• Schedule of payments;

• Proportional structure of payments between parties.

Mentorship/Partnership Agreement Template

I. ESTABLISHMENT OF THE PARTNERSHIP

• Names, addresses, leadership

II. PURPOSE AND BUSINESS OF THE PARTNERSHIP

• Authority of the Partnership

III. REPRESENTATIONS, WARRANTIES AND COVENANTS; DUTIES AND OBLIGATIONS

• Single purpose entity

IV. PARTNERS, PARTNERSHIP INTERESTS AND OBLIGATIONS OF THE PARTNERSHIP

• Partners; Capital Contributions; Partnership Interests

• Return of Capital Contribution

• Delegation of Authority

• Indemnification of the Partnership

• Construction of the Project, Construction Cost Overruns, Operating Deficits

• Development Fee

• Selection of Management Agent; Terms of Management Agreement

• Loans to the Partnership

• Public Relations

V. PROFITS, LOSSES AND DISTRIBUTIONS

• Allocation of Profits and Losses Other Than From Capital Transactions

• Allocation of Profits and Losses from Capital Transactions

• Distributions: Net Cash Flow

• Distributions: Capital Transactions and Liquidation of Partnership Property

VI. SALE,

Photo by: Invest Appalachia