BATTLE CREEK — Targeted incentives are paving the way for renewed vibrancy in Battle Creek’s downtown district.
In addition to laying that groundwork, these incentives are paying off in the form of new craft breweries and restaurants moving into the downtown, which has experienced its share of highs and lows, like many other cities across the region.
In a break from the traditional incentives targeted at manufacturers or other large employers, Battle Creek Unlimited Inc. embarked on a new tactic in recent years, one aimed at improving the Southwest Michigan city’s retail industry.
“For years this organization and others have always incentivized manufacturers to come into our community,” said Joe Sobieralski, president and CEO of Battle Creek Unlimited. “But as the labor market has tightened and is tightening, there was a lot of feedback from residents about having a much more vibrant community.
“We thought that if we were good enough to incentivize manufacturers to come into the community, why not take the same approach with restaurants and brewpubs.”
After issuing a request for proposals in December 2017 to redevelop three buildings in downtown Battle Creek, BCU leadership decided to sweeten the pot by adding a $200,000 incentive for a new brewery or distillery to open in the city.
In April 2018, BCU selected New Holland Brewing Co. LLC as the recipient of its first incentive payout. The Holland- and Grand Rapids-based company is investing more than $1 million to renovate an 18,000-square-foot building at 64 W. Michigan Ave. for the location of its third brewery and taproom.
BCU awarded another $200,000 incentive to a brewery, which has not been publicly identified, Sobieralski said.
The county’s economic development agency also is poised to award a $200,000 incentive to a yet-to-be-determined restaurant operator. BCU received eight proposals after the restaurant incentive was announced in December. The companies responding to the RFP mostly came from outside of Michigan and none of them represented franchises or chains, according to Sobieralski, who said he expects to make a decision in the next month or so.
“We could incentivize manufacturers who would put 200 jobs in the community and people will hear about it for the first two months, but after that first two months, they’ll forget about it,” Sobieralski said. “With a brewery or restaurant, that’s something the community can touch and feel and see.”
He said other area employers understand that having a vibrant community will help them in the long run, particularly when it comes to attracting and retaining high-quality employees.
Officials with BCU arrived at the $200,000 amount for the incentives because they wanted something that would be large enough to be meaningful.
Companies qualifying for the incentives have to meet milestones including levels of jobs and investment, but recipients ultimately can decide how they will deploy the funds, Sobieralski said, noting BCU is not giving them directives.
“We are trying to make it as easy and valuable as possible for them,” he said. “The goal is to take a facility that’s dilapidated and underused and encouraging that the dollars be used toward the real estate end so that the incentive funds will ultimately have been used to improve the facility. We are making sure that the dollars stay with that facility.”
That way, even if the incentivized business leaves at some point, the property will be improved, Sobieralski said. The incentive funds are coming from excess revenues that BCU captures from investment and rental income.
Rich MacDonald, COO at the Portage-based development and property management firm The Hinman Co., said offering these types of incentives is necessary to attract businesses that will create vibrancy in a community.
“Joe’s idea for an incentive for a new brewery/distillery to locate in downtown Battle Creek was very effective,” MacDonald said. “He understood that the incentive needed to be focused and substantial in order for it to get the attention of a quality business like New Holland Brewing.”
Filling a gap
According to MacDonald, incentives are necessary when retail, restaurant and entertainment are unable to generate the sales volume necessary to pay expenses and opening costs and generate a reasonable profit.
“When sales volumes aren’t enough, this can be due to a flawed business model, the economy, poor location, excessive opening/capital costs, and a host of other influences like e-commerce and changing consumer interests,” MacDonald said. “In the case with most downtowns, incentives are generally necessary to help offset excessive opening/capital costs for new construction or major real estate remodels and to help subsidize sales volumes because the overall traffic needed to generate sustainable sales may be lacking.”
As with many downtowns, Battle Creek has buildings that will require significant renovation to become move-in ready for a business, said Linda Freybler, CEO of the Calhoun County Convention & Visitors Bureau.
“They just need upgrades and doing renovations is very expensive, so those incentives put us on a level playing field with surrounding communities that already have move-in ready spaces for businesses,” she said. “That’s been the struggle when a new restaurant or bar looks at downtown buildings that are just not ready to move into.”
Sobieralski said Battle Creek is a market that’s in transition, similar to where Grand Rapids and Kalamazoo were 20 to 30 years ago.
“The cost of construction may be one number and what happens when you get into the project may be another number. To get someone to invest and to be a part of that turnaround, those incentives have to be part of it,” Sobieralski said.
Consumers are showing strong interest in experiential retail both in urban and suburban settings, MacDonald said, adding that most downtowns in the region are having discussions about how to attract and retain high-quality retail, restaurants and entertainment as part of an overall plan to continue to feed and enhance the urban area.
“In the case with Joe and BCU, they were very specific with what they wanted, they offered a meaningful incentive, and they view themselves as a partner with similar goals for success,” MacDonald said. “I think other downtowns looking at ways to attract key retail and restaurants certainly are paying attention to the success Battle Creek has recently had.”
There has been some feedback from existing businesses that are not eligible for these incentives, according to sources contacted for this report. As a result, BCU leadership may be working on a program to address the needs of current business and property owners, Sobieralski said. Still, the overall feedback is that more businesses locating in the downtown district will increase traffic well past the 9-5 workday, he said.
“The goal for all downtowns is to someday not have to offer incentives, but for the foreseeable future, if a downtown in a secondary or tertiary market is looking for a specific missing retailer or restaurant, or a traffic generating anchor, it is very difficult to do so without a real strategic focus and meaningful financial incentives,” MacDonald said.
Freybler said she thinks the addition of restaurants and microbreweries will help her organization to attract more meetings and conventions.
“People are always looking for new places that they haven’t been before,” she said. “This will give them more choices about locations for an office dinner or a reception.”
Freybler said the city has been very successful in attracting amateur sports, which bring in teams and family and friends who want to go out and enjoy what Battle Creek has to offer. She said the revitalization efforts will give people more options.
“Battle Creek was the first city in Michigan to have a sports commission and a focus on amateur sports,” Freybler said. “This has been part of Battle Creek’s heritage certainly in the 1980s and well before that. People with the city had a vision to create Bailey Park, which is still one of the premier baseball and softball complexes in the state. It’s the same with Kellogg Arena and having that connected to a hotel ideally sized for amateur sports. Those are kind of two things that are great assets for us to recruit people for these events.”
Sobieralski thinks the downtown investments will help capture more disposable income from people coming to town for the events. As well, he said a more vibrant downtown also improves the city’s ability to attract people who might not otherwise make the drive.
“If it’s done right, you can reach an audience outside of your community,” he said. “Businesses may have a desire to develop a second, third or fourth location. Everyone knows Battle Creek, but as far as 60 to 100 miles out, people really don’t know what we have going on here. This is a way to reach out to other communities to let them know.”