Editor's note: This is the second story in a three-part series that examines the evolution of business in downtown Fairfield and Westport. The first installment focused on commercial changes in recent years. This installment investigates the economic and political factors in each town that contributed to those changes. The final feature, which will run Friday, will look at private sector and Town Hall proposals that could transform both communities' downtowns in the future.

National Hall stands serenely on the west bank of the Saugatuck River in downtown Westport. The red-brick Italianate building stands still during the day, and equally so at night when no lights beam from its historic windows.

Its last occupant, the bed-and-breakfast Inn at National Hall, closed last March. Two months before, the Westport Representative Town Meeting voted to overturn a decision by the Planning and Zoning Commission that would have allowed office space on the building's ground floor. That move sparked a Town Hall maelstrom that included a brief threat of legal action by the P&Z. While the furor has since abated, the National Hall still languishes without tenants. Other buildings adjacent and across the street from the building also house empty storefronts.

Fairfield faced a similar predicament when its own downtown commercial landmark -- the Fairfield Store -- closed in 1996. Redevelopment of that site, however, and subsequent developments in Fairfield Center proved much less contentious than the future of National Hall.

Fairfield town officials and local business owners point to a collaborative relationship between the public and private sectors that helped breathe new life into the property at Post and Reef roads, and also catalyzed subsequent economic growth downtown.

Downtown revitalization was a central part of Fairfield First Selectman Kenneth Flatto's platform when he was first elected to the position in 1997.

"People felt Fairfield Center was really suffering," he says. "There was definitely a consensus that it was struggling."

To spur growth, the town created a series of public-private partnerships. In 1998, the town approved a deal with Starwood Ceruzzi, then owners of the former Fairfield Store property. The agreement stipulated the town would subsidize Starwood Ceruzzi's construction of a new parking garage behind the building in return for the town's right to lease spaces in the structure for free public parking.

In 2002, the town entered into another revenue-sharing agreement, this time with the Fairfield Theatre Co. That deal allowed the company to lease a former Sanford Street factory -- which most recently had housed the town's recreation center -- for a nominal fee, provided that it paid for renovations to the building.

"I'm a real believer that arts and culture helps stimulate a business district and helps sustain it during a bad economic climate," Flatto says.

Westport, however, suffered a reversal of fortune in downtown vibrancy when its Fine Arts movie theaters on Post Road East closed in 1998, says David Waldman, president of the David Adam Realty property management firm.

The demise of that downtown institution, he says, coupled with rising rental rates for downtown properties, further pushed the dynamic toward national retail outlets in that area.

Waldman's company is, in fact, the landlord for several national stores in downtown Westport, such as Gap and Patagonia. He argues, however, that the downtown economy needs more diversification.

"Do I think it's thriving now?" he asks rhetorically about the town center. "No. It's kind of chugging along."

But rising rents also attracted wealthier tenants who "made it possible to get a vast infusion of capital" in downtown Westport, says Drew Friedman, landlord of the Main Street building that houses the BBQ restaurant, Bobby Q's.

Friedman, who has owned property in downtown Westport since 1969, says chain stores have a competitive advantage because they are often willing to pay for capital improvements. In contrast to mom-and-pop businesses, Friedman says it would not be unusual for a Gap outlet to pay more than $1 million to outfit a property with a new air-conditioning system.

The recession, however, weakened even the influx of trendy national retailers to downtown Westport, says David Fugitt, a partner in the Westport-based Vidal Wettenstein commercial real estate firm.

"There were very few vacancies five years ago, he says. "When something would come up, especially on Main Street, there were usually several businesses waiting in line and oftentimes bidding for space."

By contrast, Fugitt says the current retail vacancy rate in Westport is more than 10 percent.

"Now, walking down Main Street, you can see there are a number of vacant shops," he adds.

Fairfield Center, conversely, has generally had more success in weathering the economic downturn, with retail vacancy rates running below 5 percent in 2009 and 2010.

Business leaders in Fairfield say pursuing mixed-used development was critical to attracting and keeping tenants in buildings. At the recently renovated Brick Walk Promenade, for instance, apartments now sit atop the JoS. A. Bank men's clothing store.

"People want to live in downtown Fairfield now," says Al Kleban, the founder of Kleban Properties, which owns the Brick Walk, as well as the Fairfield Center Building. "That is sort of a new experience for downtown Fairfield."

More residential properties in Fairfield Center in the past decade also coincided with a marked increase in the number of downtown restaurants.

Regulatory changes passed by Town Hall facilitated that rise. In 1993, the Town Plan and Zoning Commission repealed a long-standing regulation that mandated a 1,500-foot distance between eating and drinking establishments with patron bars.

"That certainly did open up the opportunity for more restaurants," says Jim Wendt, assistant planning director at Fairfield's Planning and Zoning Department.

Partly as a result of that change, Flatto estimates there are now about five times as many restaurants in Fairfield compared with when he took office in 1997.

That proliferation has also benefited independently owned stores.

"That increase in foot traffic has made this recession relatively painless for us," says Bob Sussman, co-owner of Fairfield Center Jewelers on Post Road.

But the rise of Fairfield Center should not be construed as a product of government direction of the local economy, says Mark Barnhart, Fairfield's director of community and economic development.

"Most of these guys -- they've been around and they know their business," he says of Fairfield business owners. "We're not going to be telling them how to build a better mousetrap."

The differences in the Fairfield and Westport economies also stem from contrasting philosophies about the role of business in those towns, says John Gerlach, an associate economics and finance professor at Sacred Heart University.

"Fairfield is more like Stamford. It's more of a commercial center," he says. "People that live there understand that and don't mind that. In fact. they're happy with that.

Gerlach says that Westport though belongs to a group of Fairfield County towns such as Greenwich, Darien and New Canaan that perceive their downtown economies differently.

"They just want to have the minimum number of stores," he says. "They're not interested in growth, per se."

In Westport, business owners and Town Hall officials generally do not share Gerlach's assessment. They do mostly acknowledge -- even taking into account the differences between the two towns' populations -- that downtown Westport is much less active in the evening compared with Fairfield Center.

"If people are looking for that rah-rah nightlife stuff, we're just not there right now," says Bob LeRose, owner of the Bobby Q's barbecue restaurant on Main Street.

LeRose notes though that his establishment -- the only one on Main Street that offers late-night live music -- has posted annual revenue increases, even during the recession.

But more evening attractions as well as some regulatory reform are needed to ensure the long-term economic viability of downtown Westport, says Larry Bradley, the town's planning and zoning director.

To that end, the town's Planning and Zoning Commission in August eliminated a long-standing regulation that mandated a 1,500-foot gap between establishments with patron bars. The commission also recently relaxed parking regulations for downtown dining places and jettisoned a series of requirements for staging several types of outdoor events. Further changes to encourage downtown vibrancy are also under consideration by the commission, including a change to zoning regulations that would essentially bar new bank offices from the town's center.

"That synergy that a lot of towns have -- we've lost a lot of that," Bradley says of Westport. "It'd be good to get some of that back."