Cities Backing Restaurants as Lures; Lowell Takes Chance on Cafe to Attract People as Well as Investment

Boston Globe Review
By Robert Gavin, Globe Staff  |  October 9, 2005

Cities backing restaurants as lures
Lowell takes chance on cafe to attract people as well as investment

LOWELL -- In a city of blue-collar traditions and meat-and-potato appetites, Heidi Feinstein wanted to open an organic restaurant offering a signature dish of smoked tofu, brown rice, steamed vegetables, and dark greens -- with a recommended side helping of flax oil.

Alley Trela (left) and Kim Hall made vegetable drinks
at Life Alive, a Lowell cafe that got a loan from the city.
(Bill Greene/ Globe Staff)

Local skeptics had warned her: ''This is a drinking town." But Feinstein took a chance, and she found a lender willing to take one, too.

Today, about a year after opening, sales are running 20 percent ahead of projections, and her Life Alive Urban Oasis & Organic Cafe bustles with artists, students, health-conscious baby boomers, and even police officers.

Feinstein's adventurous lender is the city of Lowell, and her cafe provides an example of why restaurants are becoming a tool in development. Restaurants are not only job providers; they are also increasingly seen as amenities to attract people to cities, particularly the educated, affluent, and entrepreneurial.

As a result, cities are finding ways to do what banks have traditionally avoided: They finance these notoriously risky businesses. Boston, for example, has provided about $500,000 in grants and loans to 22 new or expanding restaurants as part of a year-old initiative to increase activity in business districts.

In Providence, city and state agencies provided about $750,000 in financing to help a popular restaurant to leave Federal Hill to anchor revitalization efforts in the old shopping district.

In Lowell, where developers are converting old mills into loft-style condos, the city and its partner, the nonprofit Lowell Development and Financial Corp., launched a loan program four years ago aimed at enlivening the downtown area.

So far, the program has provided about $1.5 million in low-cost financing to almost a dozen restaurants and cafes.''We're trying to change demographics," said Matthew Coggins, Lowell's assistant city manager for planning and development.

''Instead of saying, 'How do we get companies to come here?' " he added, ''we're asking, 'How do we get people to live here?' "

Lowell's efforts reflect the latest thinking in urban development, which increasingly is focused on making cities attractive places to live.

Richard Florida, a professor in the School of Public Policy at George Mason University outside Washington, D.C., and author of the best-selling ''Rise of the Creative Class," has popularized this idea. He argues that in a global economy, where brainpower is a precious commodity, cities that attract and hold onto a smart, entrepreneurial ''creative class" are likely to prosper.

Edward Glaeser, a professor of economics at Harvard, made similar arguments in a paper that was published in 2000, about two years before Florida's book appeared.

In the paper, Glaeser coined the term ''consumer city" to describe the demand for urban living -- illustrated by rapidly rising housing prices -- even as more people worked outside the city.

Glaeser and coauthors concluded that the futures of cities will increasingly depend on their ability to lure well-off residents, whose spending on goods and services spur activity. And places likely to succeed are those that can offer high-quality amenities, from mild climates to safe streets to ''restaurants, theaters, and an attractive mix of social partners."

As Boston's soaring housing prices have made Lowell an affordable alternative, this one-time center of textile and, later, minicomputer production fits the profile of an emerging consumer city.

For example, fewer than one-third of Lowell residents worked in the city in 2000, compared with more than half in 1980, according to the University of Massachusetts Donahue Institute.

Meanwhile, Lowell has worked to improve its consumer appeal over the years, upgrading and adding performance venues, creating an arts district, and attracting museums and professional sports teams, including a minor league affiliate of the Red Sox, the single-A Lowell Spinners. Adding more restaurants to the mix was considered another critical piece.

''People were coming to the theater, or a game, and then leaving," said James Cook, executive director of the Lowell Development and Financial Corp. ''We wanted to keep them here," Cook added.

Seeded with about $750,000 from a federal community development block grant, and supplemented by the Lowell Development and Financial Corp. and several local banks, in 2001 the city established a revolving loan program for local businesses. That effort has become known as the Downtown Venture Fund.

The program offers restaurants or retail shops up to $200,000 in financing, a 6 percent interest rate, and a one-year grace period before payments are due. About two-thirds of $2.5 million in loans have gone to restaurants, from sandwich shops to coffee shops to an upscale Italian eatery.

Among those that are opening: Caffe Paradiso, which also has locations in Boston's North End and Cambridge's Harvard Square. Still, some specialists said, Lowell has embarked on a risky strategy, since restaurants have very high failure rates.

About 60 percent of restaurants fail in the first three years, according to studies, compared with less than half of all new businesses, restaurants included. On the other hand, said Stephan Weiler, an assistant vice president and economist at the Kansas City Federal Reserve Bank, local governments sometimes have to take risks.

In a paper published in 2000, Weiler credited the revival of a blighted section of Denver's downtown in the late 1980s in part to the city's willingness to use a revolving loan fund to help a brew pub, which included a restaurant, to open in that area.

As the brew pub succeeded, and attracted people to the area, others followed, including retailers, artist galleries, and housing developers. ''Restaurants are notoriously difficult businesses, and a lot of whether they work has to do with timing," Weiler said. ''But they can be a piece of the puzzle."

In Lowell, where hundreds of downtown condominiums are coming onto the market, some with prices reaching $500,000, officials and restaurateurs think their timing might be right, too. On a recent warm day here, Oscar De Stefano, owner of the Caffe Paradiso, looked out on busy outdoor tables, where customers sipped espressos and capuccinos, and lunched on a variety of Italian specialties.

''The North End thrives because of its amalgam of restaurants," DeStefano said in an interview. ''Lowell is just at the beginning, but the wheel is turning."