39. BIDs: Partnering for Economic Development

Business Improvement Districts (BIDs), now a 30-year phenomenon in the United States and Canada, represent a major force in urban economic development. Nevertheless, BIDs remain largely outside the organizations and literature of mainstream economic development. Although there are more than 1,000 of these entities in North America devoted to business attraction and retention in commercial areas (with a few in industrial settings), they rarely have significant working attachment to government or non-profit economic development organizations.

BIDs also function in Australia, New Zealand, and South Africa and BID-like systems exist in hundreds or communities in the United Kingdom. BID legislation has recently been enacted in Ireland and plans are underway for district activities in a half dozen places in Dublin alone. This article defines BIDs, through illustrations of BID activities, indicates the contribution they make to local economic development, and identifies tested methods for strengthening them.

DEFINING BIDS

Led by non-profit boards of directors dominated by business interests, there are probably 10,000 private sector volumeer men and women – developers, retailers, office mangers, hOleliers, restaurateurs – directly engaged in planning and governing the services and physical improvements. These are business people making business decisions to improve business districts.

A BID is a device by which two or more owners of businesses or properties cooperate to share responsibility for funding and managing programs designed to improve profitability and property values, removing obstacles and capitalizing on opportunities. Private sector interests set cost-sharing formula approved by local governments. The property assessments (in some countries business taxes) are collected with the power of local fiscal authority. The fees thus applied are inclusive, multiyear, and compulsory. They are affordable because rate-payers set the rates and because all benefitting properties (or businesses) share the costs. BIDs can be seen as an expression of cooperative capitalism.

The BID philosophy embraces two seemingly opposite convictions. First, B1Ds are correctly seen as evidence of business self help. Almost all BIDs are launched by private sector people and all are governed by boards that are preponderantly business and property owners.

At the same time, BIDs operate best in partnership relationships with organizations having corresponding and complementary objectives. The partnership element is less widely recognized by BID leaders. As BIDs mature and aspire to greater results. especially those operating in small centers, it is important that they join forces with municipalities – for example. to create needed infrastructure or to solve parking requirements. Similarly, BIDs can, through reciprocal working arrangements with economic development entities, strengthen existing businesses and attract new ones. (See Table 1)

ECONOMIC DEVELOPMENT AND REDEVELOPMENT

Sometimes maintaining an attractive urban environment and a good marketing program is not sufficient to meet the needs and potential of a commercial center. Taking the initiative to organize a BID-financed economic visioning process or the preparation of a redevelopment concept plan can be influential. Many state laws authorize BIDs to buy, upgrade, redevelop and sell real estate. Use of this authority usually works best based on a partnership with economic development and redevelopment agencies and non-profil corporations, where they exist. In some circumstances, BIDs have managed to succeed even where such entities do not exist. For example, a New Jersey BID created a second district overlapping the first in order to finance infrastructure needed to attract a new anchor commercial center. A BID in a small city in Montana purchased a five-story bUilding with EDA financial assistance, rehabbed it, created and sold commercial condos and used the balance of the space for its own office.

Some state laws authorize BIDs to float bonds to finance capital improvements. Many BIDs use their own funds to leverage state and local investments in physical improvements, including streetscapes, lighting, and parking improvements. BIDs often lead in creating vision or concept planning, leading to redevelopment. Several BIDs have led planning for minor league baseball stadiums.

Smatl BIDs can achieve impressive economic results. The dollar value of construction investment (the value of permits issued) in the (Maplewood, NJ) Village Special Improvement District continues its strong . showing. Since the SID (Special Improvement District used in New Jersey) was started in 1997, values have risen Significantly, an indicator of the success of the district measured in terms of reinvestment and the confidence that store and property owners now have in the area’s long-term profitability. (See Exhibit 1)

A determined group of industrial business and property owners in Philadelphia created a BID which is retaining businesses through several measures. An earlier visioning process helped set the course of this group, followed by persistence and patience. To give the area improved identity, attractive gateway and building signs have been installed with 75 percent matching funds from the District (see photos). The BID’s persistent advocacy has produced $1 million worth of city-financed infrastructure improvements. Among the essential changes was rebuilding curbs and drains to enable modem trucks to make deliveries via nineteenth century streets. An early visioning process helped set the course of this group.

The Philadelphia BID functions without its own staff person. Volumeer businessman Alan Woodruff says that the next project will be to improve “the look” of the place to business prospects. A subsidized facade program will be pursued this year. BID advocacy has freed up a property now controlled by the City for which Woodruff believes they have an interested user.

In other examples of BID activities, the industrial BID in the Bunker Hill section of Paterson, NJ , keeps the place clean and employs a private firm to assure day, night and weekend safety Landscaping has convened me old warehouse-railroad area into something resembling a suburban business park. The Atlantic City, NJ, district has gradually transformed dozens of vacant lots into attractive temporary parks. They remain for sale, but they enhance the commercial environment while redevelopment awaits.

BIDs in Australia and Austria are being used as tourism promotion instruments. The old city of Salzburg has its own BID whose director, Inga Homey, relies on a business tax and municipal contributions to keep the crowds coming and happy.

The district in central Morristown, NJ, has been a significant force in leading redevelopment, including organizing municipal support for a parking garage that stimulated added redevelopment. Responding to complaints about crime, the Hollywood, CA, district employs armed, off-duty police employees, a technique that has brought back shoppers and diners.

Most BIDs work to altract strong new businesses. Exhibit 2 identifies techniques that have proven successful.

Business recruitment, this central and essential BID responsibility, can and should be accomplished in partnership with economic development entities. Although BIDs typically operate in geographically more limited areas than do municipal, county, regional or state economic development agencies, working partnerships are nevertheless possible.

STRENGTHENING BID PERFORMANCE

With the experience of having worked with more than 60 BIDs over 15 years, a series of approaches have emerged for keeping BIDs fresh and growing. These approaches help avoid the great waste of resources that can occur when the boards and managers ignore opportunities for improving local economic conditions and/or collaborations with economic development organizations.

Fresh Start

The best BIDs use the opportunity presented in most BID statutes LO rethink the BID as part of the process of seeking re-approval by the municipality every five years. As part of that process, the Washington, (DC) DownLOwn BID adopted several new programs including planning a bus circulation system. With the added services, the BID board proposed and the city approved an increase in the rate of property assessment.

Goals

The five-year reamhorizalion poim is also a good lime to reconsider and, when appropriate, reset district goals. One BID in a large Virginia office district adopted the following overall goal:

The Business Improvement District for Rosslyn is designed to enhance property values, increase business profitability and improve the appearance, convenience and day and night appeal of the commercial district for employees, resi dents, shoppers and visitors.

A detailed subordinate set of goals is represented by the following part of the BID plan prepared for a shopping district in Philadelphia:

Goal: Make Chestnut Hill “Business Friendly”

  • Create Welcome Package for new businesses (Services, Events, Parking, Security)
  • Develop events appropriate for professional firms to show that they are an important part of the business district
  • Hire consultant to look at current parking system and “bring it all under one roof”
  • Create more parking lots in the lower hill area
  • Install off-premises directional signs for Bethlehem Pike businesses that can’t be seen from Germantown Avenue
  • Employ hospitality persons/hosts to welcome and guide visitors
  • Gear events for children, families

In implementing BID goals, reauthorization planners need to review services that have been provided for the previous four or five years to see the extent to which certain problems have been wholly or partly solved or negative conditions reduced. Perhaps efficiencies have been introduced. Some funds might then be redirected, for example, from sidewalk cleaning to landscape maintenance, as was the case with Center City District in Philadelphia.

Collecting Missing Revenue

Most BID laws do not authorize assessments applied to tax-exempt properties. Where some or all of the services provided will actually benefit such properties – especially health and educational institutions – smart BID leaders include these entities in their initial planning or re-planning for reauthorization. Tax-exempt property representatives will usually acknowledge responsibility to share in the costs of improvements. Even if these contributions are less than what would be paid if the properties were taxable, the costs shared voluntarily represent a decided improvement over zero payments. The best arrangement is an agreement to make annual contributions for five years on the basis of a voluntary multi-year agreement (VMA). BIDs can often add 10-20 percent to their total revenues by closing this often overlooked revenue gap.

A second possible source of funds beyond assessments can come from service agreements with federal, state or municipal governments. The federal government has clear procedures for BID agreements leading to payments for various cleaning or security services. Federal agenCies will not, however, pay for marketing, considered a private sector benefit. In Trenton, NJ, the BID secured an agreement with the state government for an annual payment of $180,000 to reflect the BID’s safe and clean program benefits for state employees.

How Much Is Enough Money?

BIDs come in all sizes. ranging from assessment-based annual budgets of $25,000 to ones with revenues of more than $12 million, the latter often including payments for bonds floated for capital improvements. At the lower end, very small BIDs typically are managed by local governments or preexisting non-profit corporations. such as community development corporations, which assign BID duties to a person with other responsibilities. In a place with, say, 250 commercial properties, BIDs should try to attain revenues of at least $200,000 per year. This will Gust) afford a good professional manager while also providing funds for purchased services such as those related to business and customer attraction – the mainstay of most small BIDs.

BIDs can achieve their goals via three routes -purchasing services and improvements, activities performed by staff and advocacy by the board of directors. The first type is exemplified by employing supplementary security personnel to deter crime and reassure pedestrians. The second, especially in a small BID, is illustrated by rime spent by the manager engaged in business recruitment. The advocacy role can be illustrated by proposing a new tax policy that, in one instance, resulted in conversion of a dozen obsolete office buildings into new hotels and apartments.

Enough money is deternlined by those who organize and manage the District; enough is whatever amount meets local priorities. This can be as little as $40,000, in at least one instance.

Transparency and Democracy

BIDs need to be careful to keep their affairs open and accessible, especially to the assessees. Some boards mistakenly believe they will avoid problems if they operate pretty much behind closed doors. Some don’t publish newsletters and others don’t periodically sample stakeholder opinions and wishes. Many BIDs authorize their boards to select members to fill all vacancies, failing to establish annual elections at which any member of the corporation may be elected to a seal and all can vote for open seats. When a difference arises regarding some policy or program, the absence of what people regard as essential democratic procedures can exacerbate the dispute. Better to keep the system open and responsive.

Pruning the Dead Wood

Some BIDs fail to grow and adapt. thereby losing the essential public support that they had when formed. One BID in an upstate New York town never progressed beyond the original. simple service of sidewalk cleaning. Needed improvements in the public realm were ignored. The same person had been chairman of the board for a decade during which he was unwilling to allow the BID to grow beyond the original limited mission.

In contrast, another New York city was stuck with poor board leadership. the result of early compromises accepted in order to secure BID support among a few larger property owners. A movement was organized to elect business and property owners to the board with more ambitious goals. in Brooklyn. more than a decade ago. the Fulton Mall Improvement Association witnessed such a stakeholder revolution, completely recasting the priorities of the BID.

CONCLUSION

BIDs are beginning to be recognized by a few economic development organizations as useful adjunct tools. The New Kensington Development Corp. in Philadelphia. for example. is planning such a district to provide financing for services not otherwise affordable. Earlier, the Manayunk Development Corp. in the same city adopted a BID solely for the purpose of leveraging state and local funds for physical improvements. Seven years later. the MDC managed to snare almost $10 million for capital projects ranging from relighting a bridge to pedestrian lights to creation of crosswalks.

Such partnerships may be part of the organization’s original planning or they may emerge from re-planning at the point at which the BID prepares for reauthorization. Either way, the combination of self-help initiative and partnership relationships can contribute significantly to both the districts economic successes and those of cooperating economic development organizations.

With broad authorization for action, BIDs are being used to share the costs of transportation improvements, they are saving downtown movie houses and they are being applied to the costs of redevelopment infrastructure. The statutory objectives of BIDs – improve business opportunities and commercial and industrial property values – are fundamental economic development objectives. While BIDs have not yet exploited their full potential in terms of the type or the scale of economic interventions of which they are legally capable. they are here to stay and growing daily in numbers and economic impact.

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