43. Business Improvement Districts Reconsidered

Many early BIDs were formed in economically distressed centers

The Essence of BIDs

This collection of articles reflects 30 years of reflection on this remarkable device for local economic development. Business improvement districts (BIDs) are exceptional in that they are planned, managed and financed by private sector people with direct interest in the outcomes. Private sector leaders’ commitments rather than government grants or oversight are the foundations for these collaborative enterprises.

Economic self interest, Adam Smith successfully argued, is the wellspring of individual gain as well as national economies. Less often noted is his correlary: Cooperation among self interested individuals produces the highest economic gains. BIDs can be seen as a contemporary expression of an Eighteenth Century idea, a form of cooperative capitalism.

While these principles sometimes are lost in practice, BIDs are intended to serve the twin purposes of advancing business profitability and property values. They may spend large sums removing litter when this is an obvious impediment to economic progress. They may produce the first marketing devoted, not to individual businesses, but to the place in which the collection of businesses operate. While they were earlier often oriented to curing urban ills, increasingly they pursue opportunities that individual business cannot by themselves.

Early Criticism and Limited Research

Some of the early writings about BIDs were published by scholars with a political axe to grind. Some supported BIDs because they fit the authors’ preference for “privatizing governments”. Published before BIDs had functioned long enough to produce a record, others feared the power of organized property owners. It was claimed that BIDs would rob customers from less powerful neighbors or would push crime from the BIDs to places that could least afford it.  Some studies suggest that BIDs produce lower crime rates, although the authors tolerate the possibility that other, unacknowledged  factors may be at work. Further, these studies leave unanswered what it is about BIDs—with their diverse services operating in diverse circumstances—that produces the claimed outcomes. Do unarmed patrols actually reduce crime or fear? In all candor, no one knows.

While the convincing studies are few, some suggest that further research  may turn up facts that can usefully respond to the long standing question, “Do they work?” A study limited to commercial corridors in one city compared the results of a half dozen city grant programs tested against such hoped for outcomes as increased sales, more customers and lower store vacancies. The outcomes in the BID comparison areas were significantly better than in the locations without BIDs where the grants had been applied, although the reasons for the BIDs’ success were not explored. In another city, a study revealed that real estate values rose faster in large Districts than in places without BIDs. The improvement in small BID real estate values was less clear. We know that once tried they are almost never shut down. We don’t know very much about what it is that makes them work or which identifies money that would have been better spent in other ventures.

Widespread Acceptance and Adoption

Starting in Toronto, BIDs now have several decades of experience. There may be 1500 worldwide and they continue to be formed in North America and abroad. Almost never are they disbanded. Why are they popular in diverse locations with diverse problems and opportunities? The common thread appears to be two reasons: a belief among the organizers that the economic benefits will outweigh the costs to those paying the  compulsory charge and a recognition that the charge is a very small cost of business. The annual approval of the operating budget reflects satisfaction with the small investment involved. Indeed, if there is a common flaw in BID policies it is the infrequent reconsideration of priorities.

Abuses have been few. Fifteen years have passed since the dispute between a prominent Mayor and a well entrenched BID director made out-of- state headlines. Opponents have had little ammunition to shout down a BID plan because of the prospect of corruption. Most Districts have an open meeting policy and by laws prohibiting conflicts of interest.

Fresh Perspectives

One might also question why, despite dissimilar conditions and leadership, how often the same services are adopted, sidewalk cleaning being the most common example. There are some encouraging exceptions. A few have increased revenues and improved local conditions through strategic investments in real estate. One city authorized the BID to share sales tax returns, betting on success. A small town BID during the recent recession sold “currency” which consisted of built-in discounts for purchases. As pointed out by Professor Jerry Mitchell of Baruch University, however, many are content to pay to have the sidewalks swept in the groundless belief that this will stimulate private investment.

The experience and impressions behind these articles reflect a pleasant and stimulating professional life with stop offs in Dublin, IR; Londonderry, NI; London and West Bromwich, England; Dusseldorf, GE; Salzburg, AU; and dozens of commercial and industrial centers in North America. With broader exposure and with an opportunity to consider over time what appears sometimes to be misplaced faith in standard BID remedies, the author’s perspective is best thought of as one of reconsideration. A skeptic should be more valuable than a cheerleader. The BIDs themselves do pretty well at that.

Contents

An article from PublIc Management (ICMA) opens because it is consistent with the author’s most recent thinking. Several chapters follow providing arguments directed at what are seen as widely misplaced emphases as well as missed opportunities.

The earlier articles follow. These were mainly ones to explain North American BIDs to North Americans and later to trace the growth of BIDs in Europe, New Zealand and South Africa. In reconsidering these early works, my principle unease consists in a wish that I had been more critical earlier.

A few BIDs have installed cctv cameras where an effective security program is required

Many small BIDs whose evening business have problems reassuring customers have turned to closed circuit TV systems.

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