Arts and Culture Districts

Throughout history, artists have tended to congregate in certain cities, and some of these communities have produced powerful schools, such as the School of Athens, the School of Paris, and the New York School. Recognizing that artist groups can spur the economic redevelopment of depressed urban centers, modern economists and city planners are increasingly looking at ways to provide incentives for artists (fine and performing, composers and writers) to create what are called "creative clusters." Many of these incentives are tax breaks and tax credits, low-interest loans, and outright grants for developers who commit to renovating abandoned factory buildings within a geographically defined arts and culture district. These buildings can then be used as cinemas, theaters, art galleries, and museums, as well as for cafés, restaurants, bookstores, hotels, and other amenities that will attract tourists and visitors—whose spending will, in turn, generate revenues and help to create and sustain jobs.

In many cities building renovations have also been intended to provide studio and residential (or "live/work") units for artists, usually at affordable housing rates as set by the federal government. A couple of states have gone even further in their efforts to attract artists to their arts and culture districts. Both Maryland and Rhode Island, for instance, have legislated tax incentives specifically for artists, exempting them from the payment of state sales and income taxes for artworks produced and sold in special districts where the artists reside. The catch is that artists have to be eligible to receive these benefits. In other words, their art form must be one that is recognized by their state, and artists must go through an application procedure to receive the benefits offered.

"We were an old industrial town, seeing our industry moving south or to China," says Herb Weiss, the economic and cultural affairs officer for the city of Pawtucket, Rhode Island. Weiss notes that part of his job involves taking artists from other cities, states, and countries on tours of the downtown arts district.

To help ensure the economic redevelopment of downtown Providence, the city created a cabinet-level Department of Art, Culture & Tourism. The director of the department acts as an advocate for the interests of artists and arts organizations within the government; leads promotional efforts for the city's arts and tourist industries; identifies sources of funding and physical space for cultural endeavors; acts as an information clearinghouse for artists looking for affordable studio, live/work, performance, or rehearsal space; and works with other agency heads to remove roadblocks and spur artistic and economic initiatives.

Particularly noteworthy is the department's effort to provide artists with affordable residences or workspaces. To that end, it has worked with the city's planning department to arrange low- interest loans and even outright grants to real-estate developers renovating older structures for rent or sale to artists. "We have been hearing from more and more artists who want to move here," says Cliff Wood, the director of the Department of Art, Culture & Tourism. "It has created a lot of excitement in the city of Providence, as people can actually see the downtown area transforming itself, and it has generated a lot more tourism and revenue for the city."

Although Wood could not assign a dollar amount to the economic impact the arts and culture initiatives have had on the city, he noted that a lively cultural environment brings into town not only those people who are already arts enthusiasts but also "secondary and tertiary folks," who visit because they are intrigued by the city's unique arts environment.

Despite significant attention to planning, arts districts are still subject to the same types of demographic changes experienced by other communities. As artists help to broaden the appeal of a living area, real-estate values inevitably go up, and some artists may eventually find themselves priced out of the market. Other artists may find the appeal of live/work spaces in downtown areas to be short-lived as their families expand and they need not only more living space but also good school districts.

In the meantime, however, statewide tax assistance can benefit many artists, and such assistance is not limited to the arts districts of Maryland and Rhode Island. Nor does it come only in the form of studio/living space assistance. Six states—Connecticut, Kentucky, Maine, Montana, New Mexico, and North Carolina—permit an artist's death tax to be paid with artwork from the estate. Two additional states (California and Michigan) allow artists' heirs several years to raise funds for the payment of estate taxes, which enables heirs to hold off on selling artwork from the estate to secure liquid assets. Oregon, on the other hand, permits artists to deduct the full fair-market value of artwork donated to nonprofit institutions on state tax returns. Unfortunately, as of this publication date, none of these state initiatives has been matched at the federal level.