25. Lost Lessons from U.S. BIDs

Originally seen as uniformed security personnel, increasingly these "Ambassadors" have taken on other key roles collecting data and informing pedestrians.

Introduction

Although Business Improvement Districts (BIDs) were not invented in the United States, they have certainly flourished here. They exist in commercial areas of all sizes and types and in remarkable and growing numbers. There are probably more than 900 serving city centers, urban neighborhoods, suburban and other small town centers and there are even a few in industrial areas and out of town shopping centers. Most operate as non profit corporations, the balance as government entities.  Their governance structures vary and there are substantial differences in their compulsory charges. They are distinctive among economic development tools in that the beneficiaries share the costs and manage the allocation of their revenues.

All in all, they appear to be an intriguing universe for possible research. Do they produce the economic gains for which they are adopted? What seem to be the most promising examples? A couple of limited studies regarding their relationship to crime exist and one study compares a half dozen  government  programs for reviving commercial corridors in a single city (concluding that self financing BID districts produce better economic results than the city’s subsidy programs). Nevertheless, a broader examination of BID benefits has yet to produce answers to fundamental questions about this widely applied tool. They continue to be formed and reauthorized based on very little evidence of their productivity.

Their positive reputation is largely based on the most widely known examples, almost entirely the five per cent of all US BIDs whose assessment revenues yield more than $1million annually and principally confined to New York City, Philadelphia and Washington, DC. In this small cohort, assessed properties are the most valuable in the municipality and may number 1000 or more.  Not only are these BIDs wealthier (a few collect nearly $20million annually), but the conditions they face and the tools they apply differ greatly from those of the typical BID. Most large BIDs not only deal with mammoth amounts of litter, they offer shoppers, visitors and employees some reassurance regarding potential crime. Many can float their own bonds for public improvements and use these funds to relight their sidewalks and to create and improve  public spaces. They can afford substantial and effective marketing to maintain and improve the image of the district. Thanks in part to the latter, these are the examples  most often used to explain BIDs at home and abroad. Unfortunately, this image is far from representative.

Most American BIDs neither need the safe and clean services so evident in the large urban BIDs, nor could they afford them. Property values and the return on investments are far lower in most districts and the number of assessed properties can be as few as 50, producing modest revenue bases. Most US BIDs are devoted primarily to various forms of marketing and improving the district’s appearance.

The presumptive test of American BIDs is the extent to which they contribute significantly to each district’s economic progress. BIDs should advance the profitability of the businesses and the value of the properties whose compulsory charges support the programs, improvements and management. A study team from the London School of Economics said simply and usefully that in agreeing to a multi-year assessment property owners should assume that this will produce more benefit than it will cost.

Perhaps the most pervasive flaw in BIDs, large and small, is the tendency to proceed from year to year without serious reconsideration, producing the same remedies in recession times as in prosperous years. Few ask if the significant investment in uniformed security personnel is warranted. Does their presence actually produce more foot traffic, attract new and stronger businesses? Do consumers even know this expensive service exists? Do contemporary consumer surveys reveal that fear of crime reduces trips by visitors and shoppers?  Is this as important to consumers as desired stores, convenience or other values?

Too Much Cleaning

Early BIDs tapped into a hidden thirst among the middle class for commercial areas totally devoid of litter. The American standard of tidiness had become imitation Downtowns in the Disney resorts. When there was little BIDs could do about crime notoriety or depressed real estate values, at least they could do something everyone understood. They could clean the pavements and many did and continue to do so irrespective of the pavements’ conditions.

In extreme cases such as New York’s Times Square sidewalks were so choked with litter that it probably did depress real estate values and business profitability. Waste strewn pavements were unpopular with employees and visitors who were inclined to assume a place that dirty was basically out of control and thus probably unsafe as well. This rationale enabled Times Square’s first BID Director, Gretchen Dykstra, to successfully propose round the clock sidewalk cleaning, an expenditure that she equated with bringing back the crowds to this world famous location.

Municipal Windfall

Sidewalk waste doesn’t emerge on commercial districts like rain; it is carried and distributed by pedestrians. The more pedestrians, the more litter. At some point the accumulation is greater than public toleration. US municipalities are not required to clean sidewalks; the task is left to property owners, in this case BIDs acting for all owners.            BIDs represent a pleasant windfall for localities. Most trash on streets, which governments are obligated to clean, comes from sidewalks. Removal of sidewalk litter is paid for through a surcharge absorbed by BID businesses and/or property owners, a cost for which officials need not solicit approval by their voters.

Many BIDs contract this work to private enterprises whose employees wear BID logoed garments and use and maintain specially designed mechanical sidewalk sweepers. When contracts are let with competitive bidding, qualified firms often perform equal service for less than the cost to BIDs if they purchased and maintained the equipment and hired and managed the employees themselves.  Some BIDs use these jobs to provide work experience for welfare recipients or former addicts and prison inmates. Experienced cleaning service firms can handle this dimension as well. In general, contracting out this work carries with it little risk and requires less supervisory time by BID officials. Unless they contract the work, small BIDs find themselves burdened with the need to oversee daily operational details, supervising employees and the need to store and maintain the often cranky sweeping machines in working order.

Regardless of how casual or arbitrary the initial decision to clean at a given frequency, the schedule is rarely revised.  Some BID planners appear to believe that sidewalk sweeping is an essential component of being a BID; without it, what are you? Some new BIDs start sweeping as soon as possible so that the ratepayers will see that they are getting something in return for their fees. The uniformed sweepers serve as an expensive ad for BID benefits. Other services, such as marketing, are less visible in the early months and there are often pressures to do something quickly. Once started, sweeping is rarely cut back irrespective of changing conditions or other potential claimants for BID funds. It is common for BIDs to devote 30% of their assessment revenues to sidewalk cleaning without asking what, if anything, is the value added? BIDs tend to equate success with inputs, such as more bags of litter collected this year over last. By this measure, they can readily judge themselves successes.

What would happen if the service were reduced by half? One suburban BID stopped cleaning for several months because the mechanical sweeper was out of service (a common experience). Few ratepayers complained. A survey of assessment payers , however, rated sidewalk cleaning low among BID priorities for the coming year. Still, the board determined to keep the same daily cleaning schedule. Foot traffic and retail offerings continued to decline, but the pavements remained pristine.  Might the funds reserved for sweeping have been better used to draw more customers?

About 70% of sidewalk litter is related to things people put in their mouths, food, food wrappers, chewing gum and tobacco, most prominently. Litter tends to accumulate in places such as bus stops where students gather and near places where take out food is sold. A proposal in Newark, NJ to increase the BID fee where properties included take out food shops was justified on the basis of the added cost of cleaning associated with these locations, but the idea was lost in the approval process.

Cleaning vs Being Clean

Starting before BIDs came, New York City organized a periodic inspection of the amount of litter in each commercial center and ranked conditions A, B, etc. Times Square, since becoming a BID, tends to be among the best performers, a point they include in their publicity. Few BIDs try education or regular inspections and ratings as antidotes to accumulating waste.

Might there be other options to the heavy burden BIDs take on for cleaning? There are precedents. Some have agreements with local governments that pay BIDs to clean public places other than sidewalks.  At the next reauthorization, might the BID make a case to shift some or all of cleaning  costs to the local authority,  devoting the savings to a BID economic development or marketing  benefit beyond the local government’s abilities. A stronger business attraction program  could increase governmental as well as BID revenues. Most, however, are content to clean.

Who’s Afraid of Urban Crime?

In the early days of BID formation, the American media were packed with urban crime stories, many mistakenly implying that town and city centers were awash with criminals threatening people and property. Generally, commercial districts were victims, if not of high crime rates (most town centers had the  lowest in their jurisdictions), then of fear. The presence of homeless and panhandlers was associated with the presence of criminals (surveys in major cities continue to list their presence as a major shopper complaint). Fear was so pervasive that commercial property owners invested in solid steel gates to cover shop windows (rather than in repairs and paint or brighter lights), sales dropped, merchants moved away and property values declined. Downtown looked like a war zone.  Something similar was going on in urban industrial areas where crime rates were (and largely are) higher.

Walking Patrols: Commercial Areas

It would have been difficult in that atmosphere to sell a BID successfully in major urban centers without some commitment to deal with urban crime. US BIDs and the Town Center Management programs in British towns and cities offered something their municipalities could not or would not, someone who looked like a police officer walking a beat. These BID employees were and are usual well trained, equipped with radios connected to their central offices (and by this route to police stations) and  wear distinctive uniforms. Sold as “the eyes and ears of the police department”, they were intended to fill some of the need for walking police and they were claimed to be crime preventers simply because of their presence. These Ambassadors, Wardens or Rangers are usually trained to help with emergencies, provide first aid, report on district conditions and answer questions. IN less dense areas, they often patrol on bikes.

They also have the advantage of costing about half of the usual rate for a police officer if one were hired by a BID. In Philadelphia, the Daily News reported the full cost of a sworn, fully equipped officer to be $160,000 (1998). The full cost for an Ambassador including training, supervision and equipment then was typically $35,000 annually.

With reduced concern about crime in commercial centers, these staff people have increasingly assumed a kind of sidewalk marketing role, sometimes the only people to whom visitors speak.  One BID uses jerseys with the invitation printed on the back, “Ask Me”. As their mission shifts, their presence in BIDs remains at about the same levels as during their earlier crime deterrent days.

Reported crime in the US has declined to about where it was in the 1970s and surveys no longer show crime as the public’s first or second highest concern. Nevertheless, there has been remarkably little reconsideration much less research regarding the worth of this BID investment at any stage of its evolution. One exception, City Avenue BID in Philadelphia cooperated with a university study team which  advised that BID anti-crime measures did not drive crime into adjoining neighborhoods. No one seems to know, however, if Ambassadors lessen crime or lessen fear of crime. No one seems to care, despite the sizeable segments of BID budgets (typically 20% to 35%%) they represent. A RAND Corp. study reported that certain types of crime (mainly robbery) were lower in areas served by Los Angeles BIDs. The analysis, however, did not deal with the role of Ambassadors, lighting or close circuit television and the conclusions could have been influenced by differences associated with places where owners organized BIDs and those that did not, a point the authors acknowledged. The mere presence of BIDs “is not systematically associated with reduced incidence of youth violence,” the authors note. BID sponsored sidewalk surveys may suggest that fear has declined but these reports don’t distinguish between the effect of Ambassadors, closed circuit TV, better lighting, fewer panhandlers or general reduction in crime and in media reports. Recent literature dealing with the decline in urban crime rarely mentions  BIDs, much less attribute the more favorable conditions to them.

Driving Patrols: Industrial Areas

The situation in industrial areas in the US and in Britain is similar. While crime and fear of crime in these precincts does not deter shoppers, it is an added economic burden. Break ins are more common and business operators are often loath to invite customers to their locations because they so often look like places abandoned to criminals. Employers in industrial areas often have a hard time hiring staff, so widespread is the negative reputation of their districts.  Safe places for employee cars and abundant exterior lighting are common needs.

One of the oldest in the US, in Paterson, NJ, has a weekly clean up service to avert unsightly dumping, considered a sign of high crime. In a measure often imitated by other industrial BIDs, some landscaping is also provided. While the board of directors initially handled all the administrative responsibilities, they later hired a half time manager. Off hour patrols in vans are handled by a private contractor. The BID reports that their supplementary security teams are often at the scene of incidents before the city police.

Industrial area BIDs exist in Milwaukee, WI, New York City, Irvington, NJ and in more than a dozen sites in England. One New York industrial BID, formed to improve local safety in dark and threatening blocks, operated for several years until the crime situation improved. The security teams were dropped, but the BID authorizing  statute remained on the books in case a crime resurgence developed.

While paying for supplementary security, industrial BIDs also work to make their districts look like safe places. A spokesman for the BID in Philadelphia’s Port Richmond area said, “People use the area as a garbage can. We have a major problem when people come from out of town and see the graffiti and drug dealing. They cancel the interviews before we get started.” To make the place look safe, the  BID has replaced signs, created a secure parking lot, widened corners for tractor trailer trucks, installed security fences, and removed 200,000 dumped tires from sidewalks, curbs and yards.

One Philadelphia industrial area spent $120,000 to purchase and install high tech security cameras. The cameras record faces and license plates up to three blocks away. While use in the US has been much less than in the UK, the latest cameras do not require monitoring. Police use the recorded information when an incident occurs within their range. Tapes are automatically cleaned after an agreed upon period.

Hiring Off Duty Police

Some BIDs invest in off duty police, irrespective of the cost. The basic BID law in New Orleans requires that any BID work be performed by city employees, including security. A similar requirement produced mounted police in Denver, CO, although many BID leaders feel that this creates a negative image for a district. The fear of crime among prospective shoppers was so pronounced in Hollywood, CA that the BID hired uniformed officers. The large BID at Rosslyn, VA, with an annual budget of $2 million, responded to employers’ concern about safety as employees left their offices en route to parking and transit. A half shift starting at 4 pm engages armed, uniformed police at key locations.  Many town and city BIDs in South Africa employ supplementary police in shopping districts.

It is not clear whether employing off duty police or using retired officers to manage Ambassador squads results in more attention by police departments to BID needs, although many believe this is the case.

A few new, small BIDs in commercial areas are adopting close circuit television systems, more affordable than Ambassadors and reflecting the increased needs for after dark businesses. Restaurant operators love them, although it is not clear that customers are generally aware of this protection.

Ambassadors are likely to be retained despite the absence of confirming research as to their benefits. The growth in BIDs, however, will produce few additional ones with the impetus and the BID funds to produce new Ambassador teams. More BID-police cooperation around BID financed CCTV systems is a likely eventuality as small BIDs in small places predominate.

Too Little Marketing

Marketing, including research and communication, is the most common BID service and serves as the voices  and ears of districts. Marketing  promotes the place, and stays in touch with  businesses, investors, shoppers, visitors, residents and employees. In a competitive market, BIDs can’t afford to let countless other voices drown out its message.

BID marketing can have three main purposes:

  1. Attract investors including strong business operators;
  2. Attract customers to retail and service enterprises and cater to employees.
  3. Attract households to live there

Two common flaws in BID marketing are:

  1. Insufficient funding. In competition with nearby shopping centers as well as other commercial districts, the BID voice is too often too weak. Local people rarely know all that older commercial areas offer, have never tried the BID shopping and/or assume that old impressions are still valid—poor parking, no new shops, crime, etc—despite recent improvements. Realtors often are unfamiliar with older properties, BID incentives, improved prospects, new directional signage, etc. Even large BIDs rarely allocate sufficient funds for marketing; in large urban centers there is even more competition for people’s attention.
  2. Lack of marketing strategies. With limited funds, BIDs too often simply tell the world about themselves or the next public event.  Rarely are marketing funds directed at specific market segments—residents within two miles, families, seniors, back-to-schoolers, holiday gift seekers, diners, etc. Too often, BIDs spend  much time and limited funds on communications and special events that have no important BID purposes.

In promoting the BID, especially prior to reauthorization, attention may be directed at major achievements (Downtown Washington took credit for helping shape the Park Service’s plan to improve the Washington Mall).  The DC BID also credited itself with an estimated $50 million in local spending by visitors resulting from its management of the Cherry Blossom Festival. Too often, however, they report mere inputs as if they are important—“We collected 7500 bags of trash monthly”. Is it a lot? Is it important?

Beyond the BID organization, BIDs may also promote the district as a commercial center. Downtown DC’s annual report noted the new Harman Center for the Performing Arts and quoted the Mayor as saying that the commercial center was responsible for “90% of the net new jobs.” The report notes that Downtown taxes pay for 58% of the school district’s local budget and that almost 500 new housing units were built in Downtown in the previous year.

BID Director Richard Bradley, a pioneer in the American BID movement, says that the American capital is “no longer perceived as ‘dull, dirty and dangerous’” and is now providing “an international model of urban ingenuity”.

Contemporary BID marketing avoids the inferences in the early years when promotional material appeared to take credit for widespread crime reductions that were also occurring in places without BIDs.

A major advance in BID marketing has occurred among hundreds of BIDs with small budgets. Many have inexpensive arrangements with professional marketing and graphics firms that have greatly improved their published products. Another improvement is the use of email as a device for getting the message out frequently, reminding customers of what is available (“merchant of the month”, seasonal sales, new business, farmers’ market opening, etc.).

BIDs intent on expanding retail sales need to consider what markets they will pursue. Two that frequently deserve more targeted attention than they receive are customers within and near the commercial center. Convenience is a major factor in shopping location decisions. Those closest to shops, services and dining are the ones most likely to spend the most. Depending on how extensive are the opportunities to shop and dine (can they purchase food or clothing within walking range?), middle income households can spend $25,000 per year and office workers $3,000. Both markets can be difficult, but not impossible, to reach with BID promotional materials, but well worth the effort.

Downtown spending is not a drive-through experience. A customer already on foot, one who walks past shops and dining spots, is the best subject for targeted marketing. BIDs need to encourage commercial signage that can be easily read from across the street and ease street crossing with favorable traffic controls to improve the efficiency of districts as places to spend.

Well managed BIDs invest only the minimum amounts of time and money in public events, as useful as the best can be. The annual arts festival is a major money maker for the Manayunk Development Corp (BID) in Philadelphia and warrants employing a skilled events manager. Some of the large BIDs realized, however,  that they were investing excessively in events with marginal returns. The Trenton, NJ BID, inherited responsibility for a popular summer festival that attracted thousands to park space outside the district. Preparing for this occasion occupied one person for an entire year and produced few or no customers to the Downtown shops. Politically, however, they were stuck with it. Many BID sponsored public events have only a vague economic purpose. One BID director gradually scaled back the district’s spending for a popular golf outing, observing that the cost in terms of her time spent outweighed the return to the district.

Commercial districts have been described as collections of magnets, the more magnets the more customers they attract. Too little BID attention is geared to making districts stronger commercial magnets.  The storefronts may not be beautiful, but people will come if the offerings are strong.  Too little of the marketing budget is typically spent on attracting investors and businesses. A periodic illustrated report on commercial real estate, including data on available properties, is a must and a rarity.  The semi-annual real estate breakfast to launch these reports is a companion necessity. BIDs can report monthly on real estate opportunities in their newsletters and can:

Package real estate data—demographics, pedestrian and traffic counts, changes in district real estate values (Maplewood NJ is a good example)—for realtors and investors.

Promote BID financial incentives—bonuses for attracting desired businesses, grants and loans for exterior and interior modifications, rent supplements.

Tell the world about new businesses and the various work the BID is undertaking to help businesses—better parking and parking signs, business directories at key locations, liberalization of commercial signs, etc.

Supposing a BID substantially reduced or eliminated sidewalk cleaning, thereby freeing 10% or even 30% of its budget for other priorities.  What BID activities would best produce more profitable businesses and improved property values? What would be the most strategically useful investments? Without question, business attraction should be –but rarely is—at the top of the list.

One suburban BID debated whether or not to continue its share of holiday advertising. A board member with substantial media experience argued not to waste such funds on the grounds that the BID had so little money for marketing (about 10% of its annual budget) compared with the nearby shopping mall that it wasn’t worth trying to capture local attention. The amount available, given advertising rates in various media, would at best pay for a short period on local radio. The advice was: don’t bother with media purchases unless the BID has enough financial muscle to do it well.  Lacking a clear priority for business attraction, the marketing budget was too small to be productive in the major shopping season of the year.

Retail oriented BIDs need to sell the district as the primary product, leaving the tasks of promoting individual shops to the owners. Among large BIDs, the 34th Street district in New York City has an enviable record in this regard, managed by a skilled and experienced professional.

Baltimore and some others have run successful programs to attract and retain office employers. Office buildings typically produce more revenues than they cost to serve; BID revenues decline as property values decline, depending on the cost sharing formula. Business attraction, often promoted as a BID priority, is rarely matched with real results.

Research

Among the most important uses of marketing funds are various forms of research. For relatively little, BIDs can purchase demographic data that can inform their marketing investments and shape the concept of their trade area, now and in the future. Is there a high proportion of children? Of seniors? Of singles? What can be learned from visitors regarding what they like and dislike? Consumer surveys can identify what alternative shopping areas are preferred and why. Intercept surveys within the BID can be useful and are relatively inexpensive. More expensive and more useful are telephone surveys because they reach the people who do not come to the BID district and can tease out the reasons why. Philadelphia’s Center City District found that the first two reasons for not coming to the district were concerns about parking and about homeless and panhandlers on the sidewalks. A survey of households recently taking up residence there reported that “walking to work” and “safe neighborhood” were the principal reasons for picking the Downtown as their place to live.  A Buffalo survey found that retail diversity was the principal Downtown deficiency. Millburn, NJ discovered that customer service was their principal asset and parking availability, contrary to merchant complaints, was only in the mid range of customer concerns. Many surveys report that many trips are foregone because stores are not open when people want to shop. In each of these cases, remedial measures improved circumstances. Any research program is rare among small BIDs and even large ones tend to neglect the need to know what their own stakeholders and consumers are thinking.

Selecting a brand may be part of a BID marketing effort.  Occasionally, BIDs err. A mixed use district—cheese steaks, clothing shops, top restaurants, weekly farmers’ markets , a new hardware store —is the main stem in a neighborhood known  for its Italian-American population. Nevertheless, they use an Indian as their brand because the Avenue has an Indian name. Will that image sell dresses, dinners or hardware? Probably not.

Several large BIDs have created magazines that accept advertizing payments.  Rosslyn VA, has an outstanding one that helps warm the image of the district’s constantly expanding collection of modern office and residential towers. Through its affiliate and sponsoring non profit, the publication is sent to the homes of surrounding residential neighborhoods, a dense collection of voters and consumers. It is probably no accident that, when the BID went back to the Arlington, VA government for reauthorization a year early, the total BID budget was doubled.

Beyond increasing the budget for marketing, the main need of most BIDs is a professionally prepared plan. In the specific context of the district, what should be emphasized? Is a theme needed? Would special colors help? Is a brand practical and useful? Where will be the best buys in terms of media exposure? What should the BID avoid? What opportunities are there for attracting free media attention? Merchant of the month? Most attractive fix-up of the year? Best advertising by a business? Customer interviews? Progress in relighting the sidewalks? Installation of the new fountain? Contest winners?

Nevertheless, experts can be wrong. An expensive public relations study advised one BID to rename its commercial center (long called “Downtown”) “Copper Square”, a reference to the mining industry that had dominated the region. Safe and clean employee uniforms became  copper colored. Promotional pieces were printed on copper colored paper. Banners were copper colored. It didn’t catch on and the expensive theme was abandoned.

New BIDs in the UK include many with catchy and appropriate names—Better Bankside in London, Stylish Glasgow in Scotland.

Many BIDs seem to function merely as a special services adjunct of local government (eg., safe and clean). If they are to serve the intended goals of improved business profitability and enhanced property values, however, they would better see themselves primarily as a marketing entity, selling the district as a great place to work, live, shop, visit and sometimes to study. Making the place popular leaves the individual businesses better positioned for their own promotion.

The talents among board members should represent the district’s best thinking on marketing and the marketing committee should have available talent beyond the BID staff.  The board should regularly reconsider how marketing funds are being spent, drawing on relevant research, and adjust the mix from year to year.  The best attitude is constructive dissatisfaction. Discard the less productive activities and replace them with more promising ones. BID boards too often fail to consider why they fail to attract strong new businesses or new customers and too seldom do they reconsider standing priorities.

Who Can Run This Thing?

Many BID directors prove to be miscast in this challenging role, while others without obvious qualifications nevertheless have proved successful.  There is no standard list of qualifications that fits all BID requirements. Certainly, the director must fit well with the current board and especially its officers. It is an advantage to have an enthusiastic personality. The director should understand and be at ease with the economic purposes of the BID.

In selecting a director, some experience and personal qualifications are more useful than others.

1. It is more useful to have a business background than one in government or the non profit sector. Indeed, the executive should be capable of thinking creatively of ways to generate private sector cooperation to enhance profits and property values. While one should not disqualify such applicants, it is a rare Chamber of Commerce director or city economic development expert who fits this qualification. Having paid rent, hired and fired staff and paid business taxes can, other qualifications given, earn important respect among those the BID is intended to help. A BID board chairman noted that his BID had employed three directors in five years, all of them from government and without any private sector experience. They all returned to government jobs and the current head has a business background.

2. It is more useful to be an effective communicator, in writing as well as verbally, in contrast to having management experience. Better to have been successful at selling an idea, an organization, a product than to have been a boss. Having solved some problems with creative solutions, showing evidence of being an innovator, is a valuable characteristic.

3. It is more useful to have experience working with a board of directors, not a common background, than having been in a hierarchical organization reporting to a superior.

4. It is more useful to have the ability to organize volunteers than to have some specified college or university degree.

5.  It is more useful to have experience recruiting businesses than to have managed public events.

6.  It is more useful to have a few significant accomplishments than whether the person is young or old.

Changing Directors

It is not fair and it is not wise to suddenly announce to the incumbent that he or she is fired. Too rarely do boards decide first to coach the incumbent in how performance could be improved.  If the person believes himself to have been treated badly, word gets around and may limit the pool of director applicants. Turnover is costly in many ways and is worth some effort to avert it.

One small BID had five directors in five years. At some point the board should have asked  itself what it is doing wrong. In the first case, the chair wanted to assume the day to day responsibilities properly left to the director. The board ended by removing both of them.  Later, the board contracted with the owner of a small public relations firm, an arrangement they ended because the board felt they were not getting enough value. Another was fired without warning because she was thought to be spending too much time at Main Street conferences and not enough “on the street”.

BID director is a tough job, but it should not drive a good incumbent away. There should, for example, be a clear understanding of how much time the director can reasonably be expected to spend on the job. This is perhaps more important with a part time staffer and in BIDs where weekend events will require the person’s regular presence. The board’s expectations need to be reviewed periodically and reasonable guidance provided.

Why Do Some BID Startups Fail?

Although the legal approval process for business improvement districts (BIDs) varies among jurisdictions, in all cases, proponents have created a business plan identifying goals and priorities ,specifying properties or businesses to be benefitted and charged a share of the operating costs. They then sell that plan to those who would share the costs, as well as to their municipal governing bodies.

While active BIDS are almost never abandoned, perhaps one in ten attempts at starting a BID in the US fails before it is launched. Little has been written about stillborn districts, although there are useful lessons to be learned. The non-statutory causes of pre-approved failure deserve greater attention and may improve the success rate of the business districts planned each year.

Some believe that BID formation that begins with local government (rather than with private sector people) is doomed. Experience shows, however, that public sector origins can sometimes be successful, as in Trenton, NJ or Jacksonville, FL or Upper Merion Township, PA. With  effective private-sector steering committees, a number of BIDs initiated by local governments have created positive private sector support and have functioned well for a decade or more.

A certain recipe for failure, however, is to allow the early discussion to focus on the compulsory fee before the benefit package has been defined. In response to the question of what the BID will cost an individual ratepayer, the correct and necessary answer has these components:

1. Can’t estimate the charge before BID programs are determined and a budget adopted;

2. Here are the charges that some other BIDs our size have adopted. These are equal to so much per month and so much per day.

3. Business  people don’t adopt charges stakeholders can’t afford.

3. That issue has been scheduled for discussion on (date) Please attend and participate.

Essential to Success

The factors that seem to make the greatest difference in success or failure in the BID approval process are: first, the leadership quality of the steering committee and the commitment of the members and, second, face-to-face contacts by steering committee members with affected property owners, to listen as well as to inform.

It is common to assume that a mailing or a meeting will serve as a successful selling campaign. That is rarely true. Nor can the business people send someone from City Hall, the Chamber, a consultant or other person to do the face to face selling. People who will be charged for the BID are rarely convinced to support a charge based on arguments made by someone who will not themselves paying it. Here are some experience examples.

Owners in West Chester, PA began BID planning with a broadly representative committee led by the chief executive of a locally-based insurance company, a recognized leader. One other committee member had been a persistent advocate of a BID that could to enliven this dormant business district. The preexisting supporting organization was the local chamber of commerce. The municipal economic development staff person helped with secretariat support.The BID addressed both existing problems (shrinking retail sector) and future opportunities (the prospect of a new downtown county office building would bring new customers).

The BID’s failure was tactical rather than policy-related. Although committee members agreed that face-to-face contacts with owners on the edge of the district were essential, few of the promised personal contacts were made. The owners of properties at the edge of the district did not attend input and information meetings, could not see the benefits to their properties and voted against the BID plan, vetoing it. The BID leadership’s commitment was sufficiently strong, however, that the BID plan was promptly reshaped with a smaller service area and successfully sold on the second try.

A BID proposal in Norristown, PA started in the municipal planning office, the body that served as the secretariat and steering committee organizer. The decision process and the steering committee’s limited awareness of BID potential relied more on the selected  consultant than would normally be the case and the municipal government staff support was limited by competing responsibilities and staff turnover. Nor was there a preexisting private-sector supporting organization. Unusual problems arose in securing an accurate property owner list. The small city was famous for political feuding and longstanding grievances.

The proposed BID plan gave priority to security issues, a major image problem that deterred customers and investors. The campaign to sell the BID emphasized the need to overcome this problem with closed circuit TV (CCTV), patrolling ambassadors and close cooperation with police. The plan was a sensible one, was enthusiastically endorsed by the steering committee and should have proved popular. Norristown, however, is a community known more for political conflict than cooperation.

The BID failed, however, when a few owners organized in opposition. Steering committee members neglected most of the necessary face-to-face selling, enabling the opponents to exaggerate the costs and minimize its benefits. The opponents’ campaign produced more negative face-to-face contacts than contacts by pro-BID advocates. Defeated, the pro-BID group did not attempt a second effort.

When pressed with organized opposition, the best BID leaders negotiate and/or offer modifications to lessen opposition. What later proved to be one of America’s most effective small BIDs (Red Bank, NJ) was guilty of overreaching in the original BID plan. Opponents most distant from the center did not see themselves as part of the downtown. Seeing only their own enthusiasm, the proponents failed to go to the owners whose positions they incorrectly they believed they knew. The BID service-assessment area was reduced in the face of this opposition and the amended district plan then approved. In another instance, the leader of the opposition was added to the board of directors. It worked.

In contrast to examples where advocates failed to advocate, the industrial BID organized in West Bromwich, England, mobilized advocates and kept a running tally in their modest headquarters where the positions of each owner found through owner-to-owner interviews were tallied. The BID passed with a substantial majority.

What Outcomes Guide BID Decisions? Goals and Priorities

Business Improvement District (BID) leaders who wish to keep their organization focused, to stay abreast of changing conditions and BID operations, and to show evidence of success will adopt and use goals and corresponding measurements of change.  Goals and measurements are sometimes applied annually, in connection with yearly budget approvals; in other cases, they are major considerations in planning for the give-year authorization process.

Lacking clear and current economic goals or ignoring them in the BID decision process—annual budgets and multiyear reauthorization—leaves them without authority to resist adding a nice but not essential program here and another there. Overall, US BIDs are intended to improve business profitability and commercial property values. In contrast, a suburban BID for years dedicated substantial amounts of very limited staff time to organizing a golf outing which netted substantially less than the value of the executive’s time. Nice but tangential programs are common where there is not regular recognition in setting priorities that BIDs have economic purposes. Tending to flowers is probably not so important, for example, as improving parking arrangements or assuring adequate parking location signs.

There are good models. At the outset, the Downtown DC BID adopted sophisticated five-year goals and measurements under three major headings – making the District more “vibrant”, “inviting” and “beautiful”. Under each goal, the planners inserted a vision of what they expected to result and noted what outcomes would support each goal. Under “vibrant” the outcomes included:

Downtown will shine with busy streets, bustling stores, happening restaurants and bars. The new “living” Downtown brings with it more opportunities and options for visitors, residents, workers and businesses. New condos, movie theaters, stage plays, dancing, museums, and galleries make for a stimulating experience during office hours, evenings and weekends.

The first year activities consisted mainly in putting into place new financing tools. The following year’s goals included:

1. Promoting a critical mass of exciting Downtown retail space (100,000 to 200,000 square feet) on F and 7th Streets by marketing the Downtown Retail TIF Program to destination retailers

2. Working  with DC government to assure that the Downtown office market remains attractive to government, law firms, associations, financial, communications service providers and other tenants

3. Conducting research on Downtown workers’ residency to better understand the connection between Downtown jobs and District neighborhoods

4. Conducting research into the purchasing power of Downtown employees and visitors to continue to build the case for Downtown economic development

Much of the BID’s ambitious agenda are activities with the participation and often leadership of the DC government. The BID’s agenda helped to influence municipal priorities. Looking back, listed accomplishments included:

1. Helped realize reduced crime rate of 17%

2.  Increased favorable safety rating (survey of Downtown people) to 87%

3.  Increased SAM (Ambassadors) assists 4% to 250,000

4. Launched an expanded Homeless Outreach Services Team (HOST) program

Using surveys to understand Downtowners’ perceptions is a valuable method of testing success. It is less obvious that an increase in assists by SAMs (Ambassadors) is evidence of success (does it mean there are more problems requiring attention? Another report of substantial reduction of reports of rat infestation seems more understandably a success.

The DC BID also tracks its progress on a block-by-block basis, periodically examining conditions of buildings, cleanliness, lighting and other factors affecting the environment for Downtown employees, residents, shoppers and visitors. Each category is rated according to the degree the subject location needs greater attention.

For example, under the goal of “Great Appearance”, ratings include presence of graffiti. Under “Cleanliness”, variables rated include “Litter throughout the area” and “Occasional litter on sidewalk”. The Lighting category includes rating for “Bulb candlepower insufficient” and “All or most fixtures in block in need of repair or missing”. Under “Street Activity/Behavior” ratings include “Disruptive Behavior” and “Illegal activity throughout the block”.

In the lead up to the reauthorization, Downtown DC listed these “critical issues”:

1. Downtown is approaching build-out

2. The real estate market is heated

3. Key sites require decisions

4. Housing development is short of target

5. Downtown retail is evolving

6. Arts are in jeopardy

7. The new Convention Center requires hotels

8. Sites for office development are limited

9. Open space, streets and building need improvements

10. Auto circulation and parking are problems

Margaret Mullen, former director of the Downtown Phoenix, AR Partnership, led the organization of Phoenix’s exemplary quantitative system for measuring Downtown change and establishing objectives.  The process, which involved city agencies, has been continued under subsequent BID leadership.  The purposes of the Benchmarks projects are to:

1.Track trends that affect the overall health and vitality of downtown Phoenix

2.Gauge progress on the Downtown Phoenix Partnership’s work program

3. Set targets for future improvements and accomplishments

4. Establish criteria by which downtown revitalization efforts can be measured against those in other cities

An early report found that trackable revenues in three categories – retail, restaurants and bars, hotels and motels – increased 77 percent, from $64.6 million to $114.3 million.  The target set for the year 2000 was $150 million.  The percentage of people who thought that the availability of eating and drinking facilities was “excellent or good” increased from 50 percent to 58 percent (target was 67%), and the percentage of those who thought it was “poor or very poor” decreased from 17 percent to 11 percent (target was 8%).  The percentage who thought that the variety of arts and cultural activities was “ excellent or good” increased from 50 percent to 59% (target was 67%), and the percentage of those who thought it was “poor or very poor” decreased from 25 to 14 percent (target was 8%).  The percentage of downtown employees who would “very likely “ or “definitely interested” in living downtown if more housing options were available increased from 20 to 17 percent.

The upscale Chestnut Hill retail area functioned without a BID for 20 years. Additional competition and decline in shopping-as-an-outing consumers were among the factors to lead commercial property owners, some of whom operated retail enterprises, to consider a BID to add sustainable revenue for increased marketing. Owners traced the decline in number of cars parked at close-in parking and questioned shoppers regarding their preferences. The following are among the goals and supporting implementation measures adopted by the BID steering committee.

1.Goal:  Strengthen Local Economy

Objective: Attract New Customers to Chestnut Hill

Implementation:

1. Have different events (“Restaurant Night” or “Gallery Night” or “Discover a Block”) geared toward bringing people into the stores and not just onto the street

2. Cross marketing among stores

3. Gear events for children and families

2.  Goal:  Make Chestnut Hill Business Friendly

Objective: Attract Desirable New Business and Retain Current Business

Implementation:

1. Create Welcome Package for new Businesses (CHBA Services, Events, Parking, Security)

2. Develop events for professional firms to show that they are an important part of the business district

3. Hire consultant to look at current parking system and “bring it under one roof”

4. Create more parking in the Lower Hill

5. Directional signs for Bethlehem Pike

6. Employ hospitality persons/hosts to welcome and guide visitors.

Downtown Hampton, VA adopted nine quantified five-year objectives:

1. Twenty-five net new businesses

2. Twenty percent increase in new

3. Twenty-five percent increase in restaurant sales

4. Twenty percent increase in tourists

5. Twenty-five percent increase in boaters

6. Twenty-five percent increase in hotel gross receipts

7. Five percent or less vacancy for Class A office space

8. Eight percent or less vacancy for Class B office space

9. Twenty percent increase in commercial property values.

The Aramingo Avenue BID in Philadelphia, PA included goals in its business plan. In the next five years the BID would:

1. Improve property values and business profitability

2. Provide an attractive area for shoppers

3. Create a vigorous, cooperative marketing program that benefits all properties

4. Aggressively pursue grants for physical improvements

5. Operate through a non-profit corporation that includes the area’s diverse ownership

The Wilkes Barre, PA BID organized  in this small city included these objectives:>

1. Broad purpose. Provide supplementary security and maintenance of the public realm plus professional marketing to improve property values, increase commercial activity, expand job opportunities and enhance the competitive positions of the for-profit and not-for-profit corporations.

2. A new image. Through uniformed Ambassadors and CCTV, help police protect persons and property throughout the district, and, together with professional marketing, create a public image of downtown as a lively, convenient and safe place to live, work, shop, study and enjoy the amenities.

3. Increase business opportunities. Assist merchants to capitalize on the market opportunities that will be generated in the District.

4. Seek supplementary funding. Apply the opportunities available through the State Neighborhood Improvement District Act and through pursuit of special purpose grants that may be available through the State government. Through rehabilitation and redevelopment, upgrade underperforming properties to improve customer and investor opportunities and add job opportunities.

5. Multi-year revenues. Plan and apply a revenue system based on property assessments that is sufficient to meet the district’s needs, is equitable and affordable and is assured for five years.

6. Broad representation. Working with the statutory advisory committee members, guide the district’s work through a non-profit corporation with a board of Directors representing the diverse stakeholders within the district. Set annual goals and measure change.

7. Regional reputation. Produce greater convenience, amenity and security, and through professional public relations and marketing, become known as a friendly place.

Local Governments, the Too Silent Partners

The division of labor between BIDs and their municipal governments is sometimes explicit in state authorizing legislation and widely applied in jurisdictions where it is not. BIDs should “supplement, not replace municipal services”. BIDs should spend their funds when it is found that they need services performed in a different fashion, to a greater degree or sooner than fits the local situation. Pretty clear, these guides are seldom disputed by local officials and may have a soothing effect on potential ratepayers, reassuring them that the BID is not in reality a means by which the local government can raise funds without having to face the voters. A good public relations tool, but in practice the situation is often more cloudy.

The widespread funding of “supplementary security” personnel is one of the cloudy ones. These men and women are generally trained in part by police representatives. They are advertized as being “the eyes and ears of the police” and as having radio contact with police headquarters whereby they can report crimes witnessed or other conditions warranting police attention. At least two BIDs make much of the fact that their Ambassadors “stand roll call each morning” with the corresponding shift of patrolmen. The unarmed BID security staffs are housed in adjoining and connected offices, creation of which was financed by the BID. Making the point that the two organizations operate closely, the BIDs noted with pride that there have been some marriages between staff members and police personnel. Not all the joint experience is especially favorable. The police commander covering one New York City BID area decided his force no longer had to patrol there because the BID provided uniformed personnel, unarmed and without arrest powers.  Separate from BIDs, some police departments have their own “auxiliaries”, unarmed, uniformed personnel who augment sworn officers when needed. Taxpayers pay for these but in no known case do they pay for BID security personnel. A few BIDs hire off duty armed police. BID ratepayers absorb all these costs.

Another example involves financing capital improvements. Downtowns are typically ill lighted. The largest BID in Philadelphia paid for more than 2000 sidewalk lights, countless physical sidewalk improvements and landscaping, a multi-million dollar project that made a substantial difference in the district’s appeal, day and night. The board of directors could afford to pay off the BID backed bonds based on anticipated revenues (BID bonds are usually rated better than those of the city in which they operate) and they probably rightly expected that the city would not or could not handle these capital improvements believed to be necessary to the district’s future prosperity. Smaller BIDs often scrounge for grants to meet their desire for pedestrian scale lighting.

Three BIDs in Midtown Manhattan pooled their resources and financed the construction and maintenance of an innovative series of small parks created by redirecting or barring auto traffic along Broadway. One of these BIDs had earlier paid to brighten lighting throughout the theatre district. Another park was completely reconstructed, made safer and more entertaining through a BID financed by the adjoining commercial properties.

A third example implies that BIDs can purchase methods to overcome perceived flaws in normal judicial procedures. The creation of a special court that tries people committing nuisance crimes, such as graffiti, brings miscreants to justice far quicker than the normal court system is a BID creation tested in  New York and copied elsewhere. Perpetrators are more likely to be treated seriously in this special court than in the busier normal courts. Justice is swift and punishment more likely to fit the crime. A judgment may be ten days working for the BID cleaning, painting and helping make the place look better rather than jail time or dismissal.

All of these examples produced popular and successful results.  The large urban BIDs can raise a lot of money in districts with high valuation properties. As a generalization, however, should lighting, park construction and security be the financial responsibility of commercial property owners? Is  such a policy fair to parts of jurisdictions without the concentrated resources found in BID districts? Should property owners pay for a justice system that better fits their needs? If the BID program makes the point that a given program is necessary, should the commercial ratepayers have to assume the full costs forever?

Inputs vs Outcomes

What is success among BIDs? Too many seem to equate being busy with being productive. The annual reports that brag about the increased volumes of rubbish removed from district pavements by BID employees imply a common success measure. After ten or twenty years of this input, however, perhaps this is the wrong measure. Supposing the BID engaged in a five year program to enlist the public’s help in reducing the volume of litter produced. Could progressively less litter removed be considered better evidence of success? On the other hand, if fifteen years of pavement cleaning corresponds with progressively fewer pedestrians and lower rents, one might be excused for concluding  that clean pavements contribute to economic decline.

BIDs tended to take on what are normally considered local government responsibilities—public lighting, supplementary security, modifications of pavements, tending to local parks—because they had the funds to do so.  Might not examples of negotiated cost sharing with municipalities provide other measures of success? Should BID ratepayers negotiate a cost sharing arrangement for cleaning, security, public space maintenance? Perhaps those funds would better be spent in the interest of business profitability and enhanced property values if applied to the typically underfunded marketing budget, a service less well handled by government than by business-led BIDs.

Overall, American BIDs are enormous successes if judged only by the clear approval, year after year and reauthorization after reauthorization of the people who are paying for them through the compulsory charge. Foreign and domestic visitors tend to confine their inspections to the best managed and best promoted ones whose best behavior has encouraged hundreds of imitations. Still, these prototypes do not represent the entire situation. Other valuable lessons exist where BIDs do little more or different on their fifteenth year than on their first. American BIDs, once approved, are insufficiently challenged. In large measure this is traceable to a major consideration in the approval process: BIDs cost very little. They may not contribute much to sales and rents, but they are an affordable business expense.

Visitors beware! BIDs are run by people who are unlikely to confess to what they have failed to achieve or to describe changed conditions to which they have not adapted.  To understand this remarkable and popular tool, one must dig to uncover the lost lessons.

Bibliography

1.  Feehan, David and Felt, Marvin (Eds). Making Business Districts Work. Haworth Press. 2006

2. Hoyt, Lorlene.

“Do Business Improvement Districts Make a Difference?” Journal of Planning Education and Research. 2008

The Business Improvement District: An Internationally Diffused Approach for Revitalization. State University of New York Press. 1999

3. Mitchell, Jerry.

Business Improvement Districts and the Shape of American Cities. State University of New York Press. 2008

“Business Improvement Districts and Innovative Service Delivery” State University of New York.1999

4. Houstoun, Lawrence O.

BIDs: Business Improvement Districts (first and second editions) Urban Land Institute. 1997, 2003.

Business Improvement Districts Reconsidered.  International Downtown Association. December, 2009

”Are BIDs Working?” Urban Land. January, 1997

“Capitalist Tool”. Planning. January, 2004

”Business Improvement Districts Reach Europe”. Economic Development Journal. 2005

“Face Time” Downtown Idea Exchange. January 2007

“Residents, BIDs and Residential BIDs” Urban Land, 2008

“Business Improvement Districts and Urban Entertainment and Cultural Centers” American Planning Association. 2000.

“BIDs Face the Recession.” Downtown Idea Exchange. August, 2009

5. RAND, “Neighborhood Effects on Youth Violence “(in Los Angeles). 2009

6. MacDonald, Heather “Why Business Improvement Districts Work”. Manhattan Institute for Policy Research

7. Steinke, Paul. “The Pros and Cons of Philadelphia’s Business Improvement Districts”.

A few early BIDs were required to use public employees including police. Few, however, choose mounted officers.

Uniformed patrollers attract attention and can help people with many different needs

If there is one service in which most BIDs do not invest enough it is marketing

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