9. Smart Money

No longer content to leave economic development to government agencies, tens of thousands of business and property owners in more than 1,200 North American locations have taken the reins themselves by setting up business improvement districts. Their focus: improving property values, adding jobs, and increasing their own profits.

This movement toward self-help management has been going on for 20 years, mostly in the downtowns of major cities. But business improvement districts are now cropping up elsewhere as well for example, in highway commercial strips, university and hospital clusters, and even industrial areas. The districts described here grew from a local government plan or policy or are designed to implement plans or policies. Each required public-private cooperation.

Edge city

By the early 1990s, the diverse owners of the 1, 800-acre commercial center along Mercury Boulevard in Hampton, Virginia, knew they were losing market share to newer, larger retail areas elsewhere in the Tidewater region. Hampton’s vast edge city includes Hampton’s Coliseum, hotels and restaurants, and more than three million square feet of retail space.

To stay competitive, Mercury Boulevard property owners in 1995 took the advice of Richard Bradley, then president of the International Downtown Association, and decided to work with a consulting team to consider setting up a business improvement district. The city favored the idea because the tax revenue it was collecting from Mercury Boulevard businesses was topping out at $17.8 million and showed signs of slipping. When approved by the city in 1996, Coliseum Central became one of the first districts in the U.S. located in a large commercial area oriented to highway, rather than to central business district, markets.

With an organization and financing in place, the district’s executive director, Peter Gozza, convinced his board that the area needed a plan to convert 1,800 acres of asphalt and aging commercial buildings” into a popular center for the entire Hampton Roads area. The 20-year blueprint for revitalization, written in 1996, has five major proposals, one of them being that Mercury Boulevard should be narrowed and landscaped. The other four: a pedestrian mall near a new movie complex, an entertainment- retail center near the Coliseum, an environmental center on 60 wooded acres, and a boat canal. Preliminary plans for the waterway show a canal leading from the lake at the Hampton Coliseum into the heart of the shopping district, after the fashion of San Antonio’s Riverwalk.

Gozza is now using the plan to solicit state and federal funds for this $60 million project. One possibility is to link the development with an extension of Interstate 664, which will need stormwater retention ponds.

Like a downtown, Coliseum Central must draw customers attracted to a locale, not just an individual store. So Gozza is trying to create a sense of identity for the area-something that has been missing until now. One innovation is “Courtesy Kids,” four teams of four teenagers each, who serve as a hospitality force, carry packages, open doors, sing, and clean up. These talented young people have given merchants a more positive view of teenagers and have made the area friendlier for shoppers.

Some may question why a tool of downtown revitalization should be used to bolster a suburban development. But Hampton’s political and business leaders felt there was no competition between Coliseum Central-with its highly mobile regional market-and the city’s small, waterfront-oriented downtown (which has its own business improvement district).

It’s institutional

University City District in West Philadelphia grew from a tragedy. Only after a University of Pennsylvania faculty member was killed there in 1996 did the concept of a district emerge.

University City lies immediately west of Philadelphia’s popular Center City-a two square- mile area where many university people live. Center City’s business improvement district provides cleaning, security, and landscaping services that are among the best in the nation, enhancing attractions such as theater, nightclubs, restaurants, hotels, office towers, and department stores. The contrast between the two locations could not be greater. While University City houses the beautifully restored Thirtieth Street Station and three attractive campuses Penn, Drexel University, and the Philadelphia College of Pharmacy and Sciences-most of the remaining 100 blocks there are marginal. Once proud residential streets are poorly lighted and choked with weed trees, and beyond these streets and the campuses are acres of parking lots, roaring traffic, ugly vending trucks, and graffiti.

John Fry, executive vice president of the University of Pennsylvania, launched the remediation effort in 1996 by hiring consultants and visiting the heads of major nonprofit groups and public agencies, securing their agreement to participate in what soon became cleanup, security, visual improvements, and marketing. So little commerce remained in University City at that point that business representatives were not included at first. But after four months a nonprofit corporation was formed and a five-year budget created.

The University City District’s nearly $4 million annual expenses are being shared under a series of multiyear voluntary agreements by the two universities and the pharmacy college, the University of Pennsylvania Health System, the University City Science Center, Amtrak, the West Philadelphia Partnership (an alliance of neighbor hood organizations), and several multifamily residential property owners. In addition, University City District will seek state and federal funding for infrastructure, visual improvements, and signage. Paul Steinke, formerly with Philadelphia’s Center City District, was appointed executive director of the University City District in September, 1997.

University City District may now be one of a kind-an improvement district that is not dependent on municipal property tax assessments. But inquiries from comparable areas elsewhere in the country indicate interest where several institutions can support a district even when commercial properties are absent.

Industrial site

The Bunker Hill Special Improvement District in Paterson, New Jersey, is one of the few business improvement districts based in an industrial area. Now three years old, the district’s management corporation consists of a nine-member board whose industrial property owners (plus a city council member, as mandated by New Jersey law) administers a $175,000 annual budget. Every member of the group is a volunteer; there are no paid employees.

Both Fortune 500 companies and international firms are represented among the 200 property owners in the district. John Ressie of the Bascom Corporation is chairman of the district’s board.

Sixty percent of the group’s revenues are spent on security, about 30 percent on sanitation and beautification, and the balance on public relations and special projects. A private security service provides 24-hour mobile service within the square mile service area. When the district’s burglar alarm is activated, security guards typically arrive before the police do. Other tasks the district has undertaken include graffiti cleaning, fence repair, and fighting dumping by roofers and others.

When the district was being organized, opposition came from some of the industrial property owners, residents (who were to be charged a $5 annual fee), and one city council member, who objected to business improvement district assessments on principle. Once the district was approved, however, residents were dropped from the project and the idea became so popular that the city formed a second district, this one downtown.

New Jersey law is the most flexible in the nation with regard to assessment formulas, specifying only that there needs to be a relationship between charges and benefits. Some districts use square footage, share of property taxes, or type of use as the basis for assessment. Districts do not have independent bonding authority, although long-term capital improvements can be financed through business improvement district assessments with municipal bonding authority. Ressie says that the board of the Bunker Hill district will seek grants, not bonds, to finance infrastructure improvements there.

Ongoing operating expenses are financed through payments based on assessed valuation, with a minimum annual payment of $125 per property. Each assessment represents the property’s share of the district’s total assessed valuation. Owners of large properties may pay between $10,000 and $12,000 a year.

Entertainment venue

Lark Street in Albany, New York-separated from downtown by the massive state office complex-is a pleasant mix of restaurants, specialty shops, residential buildings, and a supermarket. By 1995 this 10-block-long area had become somewhat shabby but still had plenty of energy.

Early support for a business improvement district came from George Leveille, the city’s director of economic development. Sharon Ward, a former city alderman, and Lark Street businessman Tom Rowland co-chaired the planning phase. A consulting team hired by the city found that local people were especially interested in nighttime security, parking improvements, holiday lights, and joint advertising directed at state and private office workers.

When opposition surfaced from the adjacent Townsend Park neighborhood, this area was excluded from the service area. The Lark Street business improvement district, the city’s first, was approved by the city council in 1995.

By the fall of 1997 the Lark Street Neighborhood District Management Association had survived the turnover of both the chairman and the director and now has a lot of successes under its belt. Executive director Vicky Stoneman and board chairman Bill Allen have made the district a major force in revitalizing the area, despite a shrinking budget. Property reassessments have reduced the district’s annual revenues from $90,000 in 1995 to $70,000 in 1997.

The district contracts with Homeless and Travelers Aid for sidewalk cleaning four hours daily. A local security firm provides uniformed officers, who patrol on foot during the evenings from May to September. The extra security people have been helpful in moving panhandlers, breaking up fights, dispersing teenagers, and responding to merchants’ complaints.

Reflecting a common theme among business improvement districts in commercial areas, entertainment and cultural offerings are important here. “Art on Lark” attracts artists and craftspeople for a weeklong event in the spring. In September, “Larkfest” offers three stages of live entertainment with special presentations for children. And holiday events are offered in October and December.

What’s coming up

Because the downtowns of most large cities already have business improvement districts, the next decade’s growth will necessarily include nontraditional settings-very small places, nonprofit clusters, industrial areas, and highway strips. New York City and Philadelphia each already have half a dozen small business improvement districts with yearly budgets of under $100,000.

Look, too, for more partnerships with residents, more concern for public open space, and more programs that serve residential properties where property values are high. These efforts might better be called “civic improvement districts.”

Expect more hybrid financing, with greater attention being given to combinations of commercial property assessments and multiyear voluntary agreements, like University City’s, where the institutions share common problems and can agree on a unified program to enhance their environment.

Where the conventional wisdom once held that universities, residents, business interests, and industrial firms must be kept apart, planners can now be more ambitious in proposing business improvement districts to solve common problems. The notion that one size fits all is obsolete—if, indeed, it was ever valid. A new generation of business improvement districts is coming.

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