Boston’s Back Streets Brings Economy Back to its Roots

Objective: This case study highlights how Boston’s Back Streets program, started in 2001, has helped support and preserve industrial activity amid Boston’s transition to a knowledge-based economy.

Major Participants: City of Boston, ICIC, Boston Consulting Group (BCG), Boston Local Development Corporation, Boston Industrial Development Financing Authority.

Background: Industrial activity declined in Boston as the city began to shift to a knowledge-based economy in the 1980s and 1990s. As the transition was occurring, the growth of financial services and health care industries meant that Back Street businesses, defined as small- and medium-sized industrial and commercial companies, were seen as less valuable. Yet these Back Street businesses, which include manufacturing, logistics, wholesale, construction, food processing and business and commercial services, provide well-paying jobs that help many inner city residents, especially those from immigrant families, climb the socioeconomic ladder. Back Street businesses have traditionally thrived in inner cities, given the competitive advantages of proximity to downtown, access to an eager local workforce, and ability to service large urban customers, and are an important piece of an inner city economy.

A study by ICIC and the Boston Consulting Group found that Back Street businesses are vital to Boston’s economy. There are more than 4,000 Back Street businesses in Boston that employ more than 100,000 people (21% of Boston’s workforce). Together, they annually pay over $30 million in taxes. Despite their importance, the presence of Back Street businesses in Boston’s land use has been declining for decades. In the face of competing uses, such as residential and retail, Boston’s industrial space declined 38% between 1962 and 1999. By the time a 2000 study was issued, only 3% of Boston’s land remained zoned for industrial use.

How it Happened: In the early 2000s, the City of Boston began a series of focus group sessions that brought together Back Street businesses to identify their concerns. During these focus groups, many of the business owners expressed frustration with Boston’s arduous permitting process. Others felt pressured by neighbors, who had been increasingly complaining about noise and traffic. Through these focus groups, the City learned that Back Street businesses were leaving the inner cities for Boston’s less expensive suburban areas that also were easier to navigate.

“The value of Back Street companies was so little understood that a thriving business could be driven out by a couple of neighbors complaining,” explains Alvaro Lima, former managing director of ICIC. “In some cases, complaints about traffic from abutters would result in a traffic re-routing that caused the business serious economic injury. But the economic well-being of a small industrial company was never a major consideration. They were below everyone’s radar screen.”

In response to these focus groups, Mayor Thomas Menino established the Boston Back Street Office (BSO) in November 2001. The BSO works with Boston’s Back Street businesses in four primary areas:

Land and Space: Considering more than 75% of Boston’s Back street businesses are located in one of eight industrial zones, The City agreed to increase their efforts to invest in these corridors. At the launch of the BSO, the City committed $5 million over 5 years to upgrade industrial roadways, sidewalks, lighting and other infrastructure. Given than only 3% of the existing land was zoned industrial, the City committed to preserving, if not expanding, industrial land. While the City does allows for land to be rezoned in cases where industrial zoning is not ideal for the rest of a neighborhood, it only does so if an equal amount of industrial land is added in a more appropriate location.

Navigation and Access: The BSO, through a series of workshops and open office hours, helps Back Street businesses navigate the local regulatory environment. For many small and mid-sized businesses, understanding the permitting and zoning processes can be difficult. The BSO seeks to make Boston an attractive and hospitable place for Back Street companies to do business by streamlining processes, assisting with location decisions, and through the use of Back Street District Business Managers (DBMs), providing information about the various business assistance programs.

Workforce: Access to a well-trained workforce is critical to the success of Back Street businesses. Back Street employment, provides higher wages than many retail jobs, has provided for the families of many immigrants. The BSO provides help in training local residents for Back Street employment through English-language and financial literacy courses, and well as hard-skill training that reduces risk for employers and saves operational costs.

Access to Capital: The City committed $1 million in new funds to the Boston Local Development Corporation, which provided small business loans, and pledged to raise its financing cap from $150,000 to $250,000 in order to better support Back Street businesses. The Boston Industrial Development Financing Authority also increased its marketing to Back Street businesses to increase awareness about various low-cost and tax-exempt bond programs.

Results for Local Economy: Through the BSO, hundreds of Back Street businesses have stayed in Boston. In 2013 alone, the Back Streets program worked with over 90 companies in Newmarket neighborhood, which has one of the largest industrial corridors. This effort resulted in the creation or retention of more than 700 jobs. Some of these businesses include Grand Ten Distilling, Boston Salads and the Boston Flower Exchange.

BSO’s organizing and advocacy ability is another of its vital roles. The BSO connects Back Street businesses, such as those in the food industry, to businesses in other sectors, such as Boston’s large corporate anchors or its hotels and hospitals. The BSO has been an advocacy leader for zoning updates for industrial corridors such as Newmarket to ensure that industrial land is preserved in the face of pressure from residential uses. The BSO is a voice for an important segment of the economy that was otherwise going unheard.

Back Street businesses have been especially important to the growth of Boston’s local food cluster, which relies heavily on the preservation of industrial space. To help, ICIC and its partner, Next Street, engaged in developing a food cluster strategy for Boston, which is helping firms like Pearl Meats grow in Newmarket. In the Newmarket, the food processing industry provides higher-paying inner city jobs that do not generally require high levels of education or English language capacity. It is a vital sector for inner city job growth.

Remaining Challenges: Despite the success of the Back Streets program, which has been heralded as a national model for industrial preservation, the Boston housing market remains incredibly strong and developers continue to build residential and retail in areas that were once reserved for industrial development. From 2004 to 2007, when the economy was particularly strong, non-industrial construction was especially pronounced in the Marine Industrial Park/South Boston Waterfront and Charlestown, which are two of Boston’s eight primary industrial districts. Industrial preservation has been most successful in Newmarket, Hyde Park and East Boston. The BSO has concentrated its effort in these districts, and recently launched weekly office hours in these districts to allow Back Street businesses to share their needs and concerns and receive special assistance concerning finance, zoning and permitting.

Despite the BSO’s efforts, industrial activity in the Boston region continues to decline. A 2012 Brookings Institution report finds that the Boston region has lost 94,000 manufacturing jobs over the past decade. This decline likely is reflective of the national economy. Still, the Boston region remains the 8th strongest manufacturing economy in the country, largely due to the proliferation of industrial activity around aerospace, electronics and pharmaceuticals. Jobs in these sectors pay an average of $110,000 per year and account for 40% of all manufacturing jobs in the Boston area. However, these jobs also require a high amount of skill and training. Stronger workforce development programs are needed to train inner city residents so that they can access these types of positions.

Lessons Learned: Understanding the needs of Back Street businesses is a critical first step toward improving their presence in Boston. Boston’s approach – bringing Back Street companies together through focus groups – was vital in terms of understanding the needs and challenges these businesses face. Furthermore, it was through this focus group process that City leaders learned that Back Street businesses were disconnected from both City government and one another. The focus groups often were the first time Back Street businesses, many of whom were operating in the same sub-industry or were competitors, interacted. The focus group both helped the City understand the needs of Back Street businesses and helped Back Street businesses to foster new relationships and create business opportunities.

Once the BSO opened, the use of District Business Managers (DBMs) has been critical to its success. DBMs are the first point of contact for many Back Street businesses, and they create personal relationships with business owners and provide on-going communication about City programs and new opportunities. DBMs provide a first-hand assessment of the company’s operations and help to identify current needs and future challenges. They also help firms navigate local bureaucracy and the red tape that often slows business growth.

To learn more about the importance of inner city industrial activity, see ICIC’s latest infographic.

For more information, visit Boston Back Streets at http://www.bostonredevelopmentauthority.org/