Our economic development team at work in Douglas, Arizona

We’re spending the rest of this summer talking about our data-driven, equity-focused approach to economic development and producing prosperous, resilient places—from the team that makes it happen. Catch up with the full series of posts, essays, and reports on this page.

The economic development team at SGA often works with communities to identify strategies for economic revitalization — especially in their downtown areas. Through both market analysis and gathering of local stakeholders, SGA worked with the city of Douglas, Arizona to identify the best plan of action to produce economic, health, and environmental benefits for the community. 

Smart Growth America often looks to an area’s downtown area as the first piece of economic revitalization. We ask how many residents live there? How many businesses operate in the area? We view having a vital downtown area with pedestrian foot traffic as vital for the economic health of an area. The agglomeration of economic activity can produce economic, health, and environmental benefits for a region at large. 

These principles led SGA to Douglas, Arizona, a city of about 16,000 people in southeast Arizona that formed in the early 20th century to support a booming copper smelting industry. The last plant closed in 1987 and the city has been working ever since to transform and revitalize its economy. As a border town between the United States and Mexico, its current major economic drive is the Raul Hector Castro Land Port of Entry (LPOE) facility which connects the people of Douglas and Agua Prieta, the city on the Mexican side of the border. The border crossing also provides a critical point of passage for the City of Douglas. It is the second busiest LPOE in Arizona for commercial traffic. 

Mining and agriculture remain key industries for the international regional economy and this impacts the quality of life for both the citizens of Douglas and Agua Prieta. These industries rely on heavy and oversized vehicles, which can impede traffic flow in both cities along the LPOE, and contribute to noise and safety concerns for pedestrians and residents that live near the border crossing. Furthermore, the border crossing is in close proximity to the downtowns of both cities, which constrains the facility and limits the range of options for expanding it.

The issue led the U.S. Customs and Border Patrol (CBP) and the General Services Administration (GSA) to study the feasibility of various solutions for improving the LPOE. The CBP and GSA concluded a feasibility study in 2019 that identified a “two-port solution” as the preferred approach to meeting the CBP’s needs. GSA expects to construct a second standalone commercial port before 2028 about four miles west of Douglas on 80 acres of land donated by the city. This will require GSA to plan for new port infrastructure, services, and amenities to support the team that will construct the new port and modernize the existing port.

Tackling the problem

While the city of Douglas supports the plan, local officials have expressed concern that the new port could draw economic activity out of the downtown area—which had ongoing efforts to attract infill development to vacant properties. 

Given these dynamics, the GSA partnered with the U.S. Environmental Protection Agency’s Office of Community Revitalization to provide planning assistance for Douglas and technical support to the port project team. The assistance helped Douglas explore strategies for leveraging the land port of entry projects for economic development consistent with the city’s vision for the future. While the new commercial port can bring economic benefits for Douglas and the region, the city wants to ensure that the areas around the old port continue to thrive while at the same time encouraging commercial and industrial business growth around the new port. Therefore, the key strategies and actions focused on how to ensure long term vibrancy in downtown Douglas with infill development and placemaking investments. 

The city explored these key topics through a workshop that occurred over five virtual work sessions between September 15 and 25, 2020. The sessions brought together many local elected and appointed officials, state and federal officials, and business and institutional leaders with an interest in the downtown and the new port areas. The city and the RPG/SGA team supporting the workshop also created web content and solicited public input via a survey that received more than 100 responses. The workshop explored existing conditions through a locally led tour, issues and opportunities related to downtown revitalization and the new port area, strategies supportive of the city’s goals, and specific actions the city can take over the next two to three years to support its vision of future growth and development. 

The wide variety of stakeholders at these meetings gave SGA a more holistic view of the community, and helped give examples and context to the market analysis we performed prior. With the combination of analysis and discussions among local stakeholders, the team procured a set of strategies and actions agreed upon by the workshop participants from the community. 

The workshop also featured discussions focused on the new port area and the need to work closely with partners to plan for development in that area. Prior to the work sessions, the team also conducted a market analysis to inform the strategies and actions that were discussed during the workshop and agreed upon. The analysis generally points to the need to concentrate the city’s downtown revitalization efforts on a relatively small area most likely to attract investment in the near term. The team also presented findings and strategies related to the built environment and transforming downtown Douglas over time into a more walkable place. This research informed discussions among local stakeholders that led to the following set of strategies and actions agreed upon by the workshop participants. 

What’s to come for Douglas

The following includes the results from our market analysis findings — and what we summarized to be the most viable economic future for Douglas. 

Economic growth can come from Douglas’ proximity to and relationship with Mexico

We conducted a “SWOT” analysis to evaluate the city’s strengths, weaknesses, opportunities, and threats. It indicated that Douglas has a strong base to generate economic growth such as the strong relationship with the border crossing of Agua Prieta and the employment generating Land Port of Entry. It also demonstrated that border restrictions, real estate volatility, and rural location provide challenges for the city to overcome.

Figure 1. Douglas, Arizona SWOT Analysis

– Stable employment base with Land Port of Entry 
– Growing median household income in area
– Strong relationships across the US-Mexico border allowing access to larger market
– Strong federal government presence in employment

– Economic dependence on Agua Prieta 
– High vacancy rates for income generating properties
– High percentage of workforce employed in retail and public administration industries
– Rural location makes tourism difficult

– Access to Agua Prieta market gives a strong base for retail activity
– Federal investment provides stable base of employment to generate economic development
– Zoning code rewrite provides ability to adapt land to needs of businesses and residents
– Border restrictions limiting the number of crossings in a given year
– COVID-19 pandemic could limit number of border crossings in a given year
– High percentage of employment in retail sector holds down wages and makes local economy dependent on unstable sector

Invest in downtown

The following charts demonstrate that rents for all four real estate sectors evaluated—office, retail, multifamily, and industrial—experienced increases over the last ten years. The low growth of retail rents are consistent with national trends. Meanwhile, growing office and industrial rents demonstrate potential demand for additional space dedicated to these uses in the city. The per year vacancy rate changes are volatile across the office sector. It was recently increasing by an average of 2.9 percent per year, but declined in the past several years. The other three evaluated sectors all declined indicating a volatility in the Douglas real estate market in recent years. It provides the city with opportunity for investment around the new port of entry with Mexico and the downtown area as the market has indicated it can support rising rents and has demonstrated lower vacancy rates.

Figures 2 and 3. Change in Market Rents and Market Vacancy, Douglas Arizona, 2010 – 2019

Source: CoStar, March 2020

The research team also conducted a “fiscal hot spot analysis” for the city. A property’s value is often influenced by the value of surrounding properties either positively or negatively. A fiscal hot spot analysis looks at the property values within a set boundary and identifies areas where there are statistically significant clusters of higher or lower valued land. This analysis demonstrates where an area is generating its greatest economic impact on a per acre basis. It also provides a guide for where additional development is suitable for an area. Areas within or immediately adjacent to a cluster of hotspots will likely yield a higher economic return than areas that cluster lower value properties. 

The research team also evaluated the parcels in the Douglas on a per acre basis. This analysis revealed the average per acre property values range from $180 to $6.7 million. As displayed in Figure 4, five main hot spots were found in Douglas, four of which are in primarily residential areas, and one encompasses a large portion of downtown including North G Avenue and East 10th Street (see Figure 6). It was found that high value properties are clustered together, typical of most communities throughout the United States. The same strengths found in the SWOT Analysis – the strong relationship with Agua Prieta and the Land Port of Entry – provide opportunity for continued infill development and economic growth concentrated in the downtown Douglas area. As Figure 5 demonstrates, 2.2 percent of Douglas’s land area within hot spots accounts for 15.4 percent of the land value—presenting an opportunity for downtown investment. 

Figure 4. Fiscal Hot Spot Analysis of Douglas, AZ

Source: Cochise County, Arizona

Figure 5. Fiscal Hot Spot Analysis Land Area and Land Value Ratios

Source: Cochise County, Arizona

Use more flexible zoning to revitalize the downtown area

Bringing these analyses together pointed to potential in the Central Business District (CBD) for future development. The volatility of the real estate market and the clustering of high value properties in this area indicate unmet demand for downtown revitalization and growth. To explore that further, the team conducted an analysis of the zoning code. The research team identified specific zoning reforms for the city to consider. These include: 

  1. Reduce large minimum lot requirements. 
  2. Less restrictive land use (38 percent of land is zoned single family residential). 
  3. Allow for more mixed-use development. 
  4. Make the zoning code more user friendly and more supportive of the type of development the city desires. 

However, even without changes, Douglas’ downtown provides the backbone for a revitalized mixed-use commercial district. Figure 6 below demonstrates what is possible under current zoning for several underutilized lots in the core of the central business district — 40 new residential units and two new commercial buildings.

Figure 6. Potential CBD Development

The key findings of the market study, fiscal hotspot analysis, and zoning audit highlight the challenges and opportunities Douglas has with the construction of the new commercial LPOE. The challenges to address are leveraging the LPOE project to bring in additional residents and visitors to the city and to promote the assets the city has. 

To maximize the potential of the downtown area, stakeholders could focus on the higher performing areas that have development opportunities under current zoning guidelines. Utilizing what is currently possible under this zoning and targeting this development in areas already generating an economic return, will produce the fastest results to assist in the revitalization of the downtown area and leverage the investment. . This downtown revitalization can even promote greater economic growth throughout the region around Douglas.

This is just one case study of how Smart Growth America’s economic development team works with local communities “on the ground” to build better communities and support sustainable economic growth. Learn more about the team’s other work here

Economic development