Investing in “A City on the Rise”: Lessons for a Collaborative Approach to Revitalization

May 6, 2020 | By Jen Collins and Ryan Goss

This is part of our ‘Impact in Action’ series, co-produced with the Centre for Public Impact, highlighting innovative models and lessons for driving positive community impact through investment and development projects across America. Read the other stories from Baltimore, MD and Kannapolis, NC.

A central valley city on the rise

Merced, California is a city of many slogans. Known as the Gateway to Yosemite, Merced’s 83,000 residents are nestled just 80 miles west of the Yosemite park entrance and a two-hour drive southeast of San Francisco. Though it is located on the outskirts of these attractions, Merced is sometimes forgotten – a sentiment poignantly captured on the Chamber of Commerce website which reads, Merced. Who Knew? But, in recent years, Mayor Mike Murphy has introduced a new slogan for his city, one that reminds of past economic struggles and paints a vision for a prosperous future: Merced: A City on the Rise.

Although Merced has seen steady economic growth in the decade following the 2008 Recession, a closer look reveals a truth shared by communities in the state and across the country: not all have not benefited equally from the last decade of economic growth. This truth stands to worsen as the impacts of COVID-19 damage local economies and exacerbate pre-existing geographic and racial inequalities.

Merced’s renaissance – one forged through key private and public investments – reveals important lessons that could help communities chart a course towards renewal.


Guiding Principles for Impact in Low-Income Communities

Alongside its partners, the Beeck Center created the Opportunity Zone Reporting Impact Framework, a voluntary guideline designed to define best practices for investors and fund managers looking to invest in low-income communities through incentives such as Opportunity Zones (OZ). In the sections that follow, we explore the redevelopment projects in Merced, extracting the lessons to help communities and investors bring the five guiding principles of effective and equitable investments to life:

    1. Community Engagement
    2. Equity
    3. Transparency
    4. Measurement
    5. Outcomes

A city grows quieter

Merced’s story between the 1940s and 1990s is one of a hard-working community with a bustling Main Street. As with many counties in California’s central valley, Merced’s regional economy was, and is, powered by agriculture. Merced county is the fifth top producer in the state, growing 90% of California’s sweet potatoes and generating $500 million annually in almond sales alone. For fifty years, the city of Merced also revolved around a large Air Force base and its proximity to Yosemite. These assets funneled consumers downtown, where military families and park visitors were frequent diners and shoppers along Merced’s Main Street. Celebrities such as Marilyn Monroe, Natalie Wood, and President John F. Kennedy would pass through town, often checking-in at the downtown Hotel Tioga. Just down the road, the 1920s art deco Manzier theater housed decades of live stage shows and indie film screenings. According to Merced’s Chamber of Commerce President Sara Cribari Hill, “30 years ago, downtown was the place to be.”

But Merced soon saw economic changes. In 1995, Castle Air Force base shut its doors, damaging local retail and real estate markets. A decade later, in the midst of the Great Recession, Merced saw one of the nation’s worst declines in housing prices. In the surrounding county, increasing globalization made the agriculture-powered economy particularly susceptible to economic downturns and trade wars.

Today, in downtown Merced, Main Street is much quieter than it once was. The Tioga – now an apartment building – as well as the Manzier theater have struggled with ownership turnover. As one resident described it, downtown became a “place in waiting.” In 2017, seven census tracts – mostly clustered in downtown Merced – were marked as Opportunity Zones. A further look into these zones reveals economic troubles.


Along certain indicators of economic health, downtown Merced has lagged California and the U.S. averages

MetricDowntown Merced Opportunity ZoneCalifornia AverageNational Average
Growth of per Capita Income

(% change in 5 years)
4.3%6.5%6.8%
Net New Businesses Growth7.6%35.2%34.4%
Labor Market Engagement

Composite metric that measures employment, labor force participation, and % with bachelor degree
13%19.8%23.8%
Minority / Women-owned Business

As a percentage of all businesses
3.2%5.1%5.2%
*A commitment to measurement is one the five guiding principles of equitable and effective investments. Through tools such as Mastercard Center for Inclusive Growth Inclusive Growth Score, you can track the degree to which the environment, economy and community in a given census tract benefit from equitable growth.
Source: Mastercard Center for Inclusive Growth, Inclusive Growth Score

But, if you look even closer, it’s clear that Merced has signs of promise.

An Integrated Model for Economic Revitalization

The old way of thinking

Community development projects often fail unless they are connected to the community’s economic priorities and a regional growth strategy. For example, when a 10,000 person capacity convention center opened in downtown Niagara Falls in the 1970s, the surrounding downtown infrastructure was ill-equipped to provide visitors with a cohesive one-stop-shop for dining, lodging, and entertainment. In 2002, the city replaced the convention center with a casino, and while it brought many dining and entertainment options, it remained disconnected to the community around it.

Niagara Falls has since taken steps to create a more economically integrated community, but the lesson from the area’s stagnant growth remains true: when investment strategies in under-developed communities focus on revitalizing single buildings and businesses, rather than strengthening blocks or ecosystems of activity, they often fail to unlock a community’s economic potential.

A multi-stage strategy takes shape in Merced

For years, Merced seemed destined for a similar fate. But recently, the community has begun to bounce back. In 2005, Merced became home to the latest University of California campus: UC Merced, which rests a few miles outside downtown. In the subsequent years, UC Merced has become the fastest growing public research university in the nation. “People saw Merced was growing but not fast enough to keep pace,” shares Ed Klotzbier, the Vice Chancellor UC Merced, “So we did something unprecedented.” Through an innovative public-private financing model, the university launched a $1.3 billion redevelopment effort to double UC Merced’s campus by 2020.

Though the main campus sits outside of downtown, the expansion stands to have a significant impact across the community. “We didn’t want to just be five miles outside of city proper,” Ed shares, “We also wanted to be right downtown. We wanted to let the community know that we’re here and that we’ll help create a place where our best and brightest will want to live.” Recognizing the importance of its downtown presence, the university built a three-story Downtown Center right across from City Hall.

As Mayor Mike Murphy learned, an integrated approach to revitalization requires more than a single institution. “We’ve had a tremendous amount of state investment in the form of UC Merced, and now we have a great deal of private sector investment,” says Mayor Murphy. “An important part of success is to have both public and private sector investment partners.” In 2018, construction began on a privately-funded $65 million multi-year renovation of three historic downtown landmarks: the Tioga Apartments, the Manzier Theater, and El Capitan Hotel, all of which rest within two blocks of one another.

Together, the university, the city, and private developers are creating a cohesive corridor of revitalization, reflecting elements of what community development experts call the street corner thesis. The thesis “focuses on creating a dense ecosystem of businesses, properties, and residences — mixed-income, mixed-purpose and mixed-use — at vital intersections or along historic business corridors of a community.” This multi-pronged approach reinforces the economic, social, and cultural importance of central community corridors. “Downtown is the heartbeat of our city,” reflects Mayor Murphy. “It’s everyone’s downtown. It’s where we gather as a community. It gives us a sense of place that reflects our goals, aspiration and values.”

Though construction on these development projects is not yet complete, downtown is already beginning to show signs of renewal.


The impacts of Merced’s economic renewal have begun to show positive signs in downtown Merced

MetricDowntown Merced Opportunity ZoneCalifornia AverageNational Average
Growth in Average Spending per Capita31.4%8.3%7.2%
Commercial Diversity

Change in business types as percentage of total possible business types
31.9%-0.7%20.1%
Overall Spend Growth

Growth of spending overall
73.4%19.2%12.7%
*A commitment to measuring and reporting outcomes is one the five guiding principles of equitable and effective investments.
Source: Mastercard Center for Inclusive Growth, Inclusive Growth Score

Lessons Learned & Recommendations

The journey towards a rejuvenated Merced is far from over, but the process to-date – along with six months of research into strategies for driving positive impact through private investment – yielded some valuable lessons for unlocking inclusive growth and economic recovery.


Opportunity to Impact: An Investment Assessment*

The Centre for Public Impact – alongside its advisors at Georgetown’s Beeck Center for Social Impact + Innovation – set out to better understand the process of generating positive community impact through private investment and development. The resulting tool, Opportunity to Impact, is a simple, yet rigorous guide for evaluating an investment project’s potential for positive impact. Some of the findings from this research is embedded in the section below.


Set impact objectives early

As redevelopment plans began coming to life in Merced, there was skepticism among some long-time residents. Indeed, in economically distressed communities across the nation, this trend holds. To convert skepticism into buy-in, open communication is required among public officials, developers, and investors alike.

A transparent process begins with setting clear objectives – early in the development process – for how the investment will translate into positive community impact. Investors, public officials, and residents should identify the specific impact results the investment aims to achieve – whether that includes bringing high-quality jobs, creating accessible housing options, supporting transportation connectivity, or improving lives in other lasting ways. These objectives should be set early in the process, align with a community’s economic development priorities, and address an area of clear community need. Creating a document to demonstrate a community’s economic development priorities – such as an Opportunity Zone prospectus – can be a valuable tool – for residents to showcase their needs and for investors to understand how projects fit into a broader strategy.

Refine the approach and gather feedback often

In order to achieve these impact objectives, it is critical to get feedback early on and throughout a project. A report from the Urban Land Institute featuring strategies for creating healthy urban corridors recommends establishing formal channels for communication and feedback with the community. It suggests surveying local businesses and residents to understand their needs and establishing teams to guide the redevelopment process in a particular corridor of the city. A redevelopment steering committee, for example, can play an important role in bringing voices to the table and guiding the vision for how business owners and community groups will each contribute to a vibrant neighborhood. In Merced, creating this forum would help the university community and residents weigh-in on how assets like the Manzier theater might serve their needs. In other places, a community benefits agreement has proven to be a useful mechanism of accountability between residents and developers.

Tell the story

Ultimately, unlocking a community’s economic potential revolves around communication. “Storytelling is hugely important,” reflects Merced’s Chamber of Commerce President Sara Cribari Hill. In order to convince others that Merced is indeed a city on the rise, “it’s critical to find new and interesting ways to tell our story – whether that’s through social media or through personal connections,” Sara reflects. This requires all actors to have a visible presence in the community, gaining feedback on how the downtown properties are addressing areas of community need at regular intervals in the development process.

Making a City Rise Together

The story of revitalization is never simple and never short. A deliberate effort between public officials, the state, developers, and residents must be marked by shared goals, open communication, and constant refinement. “It’s important to never lose sight of shared goals.” Mayor Murphy notes, “With that as the starting point, we can focus on how we achieve that.” Merced, as with many communities navigating the economic fall-out of a global pandemic, must continue writing its own story of renewal. But, with its commitment to collaboration, the city has the right pieces in place to once again make Merced “the place to be.”

Jen Collins is a Fellow-in-Residence for the Beeck Center. Follow her on Twitter @JenCollins24

Ryan Goss is a Senior Associate at the Centre for Public Impact, where his work focuses on helping governments and their partners improve people’s economic mobility and flourish over time. Follow him on Twitter @R_Goss1

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