24. How Little We Know

After more than a quarter century of experience, we seem to know a great deal about business improvement districts. There are more than 1000 of them in the US, Canada, Europe and beyond. They are unusual among economic development tools in that they are business organized, managed and financed.  They represent working partnerships with local governments which, while the governments must approve BID financing, they leave the decisions as to programs and governance in the hands of business led boards of directors, most of which are organized as non profit corporations. They have proven popular in large urban centers, industrial areas,  small towns and neighborhood commercial areas, in part because of the statutory flexibility in the use of their revenues. While customer attraction is probably the most common BID program, some BIDs have formed and operated supplementary  bus systems, others participate vigorously in local planning and still others purchase, rehabilitate and rent properties.  A compulsory charge assures that all benefitting properties share the costs. There are no freeloaders.

A great deal has been said about the accomplishments of the BID movement throughout the world.  The affirmative case has been well made; the criticisms not so well. So, it seems strange decades after the benefit district concept was first adapted by Canadian merchants  that we should know so little about what BIDs can and can’t, should and shouldn’t do. In terms of researched evidence, we have much to be modest about. Little has been put forward with convincing evidence regarding BID outcomes. Coincidence continues to overwhelm causation.

Some academics continue to write about presumed negative experience. BIDs are claimed to compound the problems of the homeless; they take customers from other neighborhoods. Others applaud BIDs because they see them as “privatizing government”, a mistaken conclusion. The authors are well educated but they are indulging their political biases; there is no research behind these opinions.

One exception produced provocative, useful, relevant insights. Econsult’s  2009 “Commercial Corridor” study tested BIDs against economic outcomes, indicating that self help BIDs out performed a half dozen City subsidies in such important central purposes as new business generation, sales, etc. But the study was limited to Philadelphia.

Another exception–NYU’s Furman Center– studied the real estate benefits of BIDs in New York City, finding that large BIDs (only) showed significantly improved property  values over comparable areas without BIDs.

Crime and Fear

However, even well planned and executed research on related subjects provide little wisdom about BIDs. The known studies on crime missed the point of BIDs or missed the era in which these findings might have been useful or failed to consider other obvious variables—not lighting, not strength of the business district, not pedestrian volumes, not even police presence and certainly not uniformed BID funded Ambassadors. A comprehensive 2009 review of research on urban crime and a compendium of urban crime research in a book about city issues (also published last year) don’t mention BIDs. Crime research concentrates on residential neighborhoods—“Do you ever fear walking in your neighborhood after dark?”

We found no useful research on BIDs and fear. We really don’t know what, if any, BID activities reduce fear, nor what other influences are at work. Has there been any researched changes in fear in commercial areas—with and without BIDs—and can BIDs be identified as significant actors in fear reduction?

Why BIDs?

Researchers and other writers infrequently test BIDs against common goals, being satisfied with looking at inputs—eg., how much did they spend? How many  bgs of litter did they remove? The purpose of BIDs is to improve business profitability  and property values. How can one identify progress or compare outcomes if some believe that their purpose is to fight crime or to clean sidewalks  and many see no common purposes at all?

The  owners who pay for BID services should reasonably expect economic gains greater than their payments in property based assessments. The purpose of BIDs is not to relieve local governments of responsibilities properly charged to general taxpayers. Nor are they intended to fill gaps in work of the local garden club or to organize annual golf tournaments. BIDs are formed to help their stakeholders  make money.BID services are means to economic ends, they are not BID purposes.

Services as Means

1. Cleaning

The most visible BID service is cleaning pavements. The earliest US BIDs were formed principally in large cities, places that evidenced extraordinary peak hour pedestrian volumes– 7000-10,000 in Times Square—and in consequence extraordinary volumes of litter. Most BIDs, however,  are not in large cities; most are in  low density places in suburbs and small cities fortunate to see 100 pedestrians at peak hour. Fewer people on foot, correspondingly less litter. To accumulate enough litter to become an  economic burden requires a lot of litterbugs. Perhaps ten percent of BIDs have sufficient volume to warrant daily sweeping. Those without much litter have been known to create uniformed sweeper squads simply because they are visible reminders to ratepayers that they are getting something for their charges. BID advertizing the BID.

The typical cleaning team takes a fifth of BID budgets, irrespective of the visible condition of the sidewalks. Cleaning litter free pavements is a common excess. While it is often claimed that daily sidewalk  cleaning is essential to attracting or retaining businesses or customers, we have not found any research to support this assertion.

Why are BIDs spending so much on sweeping? Are there no other costs they can assume that will make merchants richer and properties more valuable? Should municipalities share these costs?

Ambassadors and Fear

More expensive is the program intended to reassure pedestrians, sometimes claimed to deter crime and sometimes to  make the BID an apparent  force in reducing crime. Early urban BIDs couldn’t convince the police to put more cops in commercial centers because they didn’t have enough crime.  Even if there wasn’t much crime , BID planners invented unarmed, radio equipped, uniformed people who looked  somewhat like police to combat fear of  crime.

Do these employees, often called Ambassadors, actually provide sufficient reassurance to warrant their considerable cost? Do they contribute directly to attracting more pedestrians? More customers? More sales?  Does this warrant 20-35% of assessment revenues? Do pedestrians see this presumed reassurance? Do miscreants avoid districts because they see uniformed patrollers?  Is this the most cost effective means of countering fear? Would closed circuit television do as well or better and at substantially less cost? More important, is there today anything like the fear of crime said to exist twenty years ago? With so much money involved, shouldn’t we care –greatly?

William H Whyte and Jane Jacobs wrote that even police on the sidewalks do not reassure the fearful—that outcome requires lots of people, not police, to reassure pedestrians. Today’s sidewalks are jammed compared with 20 years ago. Perhaps that is why it is believed to be substantially less fear in commercial centers. But we found no useful research on BIDs’ impact on fear.

A decade ago, the Times Square BID reported that crime was down 21%, but claimed no credit for it (“That’s the police’s job,” the director said.) In contrast,  a Philadelphia BID said its small security team “caused” a drop in crime in its bailiwick– BID self marketing? More likely coincidence than causation, but we don’t know.

Philadelphia’s University City District and a similar one in Baltimore were formed as the result of murders in residential neighborhoods, not commercial centers.  UCD devoted 35% of its early budgets to “public safety”, principally Ambassadors. If things are better now—less fear– how much should we credit the Ambassadors? The UCD financed police substation may have helped, although there is no before and after analysis on this. If this substation is clearly useful, should all BIDs seek similar arrangements? We don’t know.

Americans once obsessed about muggings; Gallup says today that the number one crime worry is “identity theft” (“mugging” now ranks six). Philadelphia’s Center City residents say the second most important reason for living here is “neighborhood safety.” The Downtown population has tripled. Do we need so much emphasis on crime? Are we teaching the media the wrong lessons? Of the urban fear that remains, how much is centered on commercial areas vs residential (which lack reassuring crowds on sidewalks and often comparable lighting)?  We don’t know.

If we missed some useful research on these questions– by qualified, disinterested professionals—let’s   republish it for a wider audience.

Marketing

BIDs do a pretty good job attracting people. Daytime special events are common and many offer outdoor movies and music after dark.

They rarely have much success , however, attracting investors, developers, strong merchants, new office businesses. Few even try. Can our business centers ever have too many successful businesses? Isn’t this what puts people on sidewalks, in stores and offices? After a quarter century, BIDs have much to learn from the shopping centers.

All BIDs are pitted against competitors, most of which can spend far more and produce better marketing. While the quality of marketing continues to improve, we have never found a BID to have too large a marketing budget. Many could benefit from a professional analysis of their marketing. What outcomes are realistic? How can they best leverage limited funds? Few have solid marketing plans.

A Center for BID Research

The institutions generically termed business improvement districts would benefit greatly from the support of one or more university based centers offering research and  publications of use to all those engaged in this widespread economic development tool. Sponsored by and/or linked to Drexel, Wisconsin and Rutgers Universities, all of which have important experience in the field, they might benefit BDs in the US, Canada and the growing number in Europe and beyond. It might be associated with the International Economic Development Council and/or the International Downtown Association and other NGOs abroad. The organization in the UK, British BIDs, tracks BID progress throughout the throughout the country  and offers important technical assistance, as does the Association for Town Center Management in London. In the US, no NGO or University has produced important publications useful to the practice of and the theory behind BIDs. None have asked what direction should  BIDs take in the next decade? The US vacuum is illustrated by the fact that most of the literature about BIDs (eg,“Are BIDs Working?”) is published in the journal of the Urban Land Institute, the research and education arm of the land developers.

Beyond research, there is much else that needs doing. In the US, BID directors may attend national conferences, there is virtually no resource to help board chairs and members. There are at least two known districts that have had four directors in five years, hiring and firing decisions were all board decisions. The organization, British BIDs, offers board member training at convenient sites throughout the country.

The chaos evidenced in a few BID’s financial accounts is a threat to all BIDs. Any kind of scandal can produce unpopular rule changes. One such media frenzy in New York City led to a BID director’s removal.

The five year reauthorization required by many state laws can reveal unexpected opposition. An otherwise well run BID, for example, did not keep owners informed of board meetings, feeding the notion that secrets were being kept from ratepayers. In the city council public hearing opponents charged that board members were profiting from BID service contracts. It turned out that the bi-laws contained no specific prohibition against conflicts of interest.

Too many BIDs simply copy the services and improvements adopted by other BIDs and many repeat programs without considering changing conditions, needs and opportunities.

One might have expected  that business dominated boards would produce useful challenges at budget time. Did this program produce as expected? Has it been cost effective? Would another approach work better or cost less? Does this program still warrant the old priority?

Why are there so few skeptics among board members? Perhaps because the compulsory  charges or the collective ambitions are low.

Benefit districts represent a concept that is remarkably flexible and adaptable. BIDs, however, are rarely innovative. A better understanding of what BIDs can do, as well as what they are doing, offers hope that better BIDs will emerge in the next decade, producing more cost effective solutions to diverse local economic opportunities.

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