Betting on BIDs

Downtown business owners in Bergenfield, N.J., population 28,000, shared the goals of many downtown commercial property owners: They wanted the area cleaned up and revitalized with new businesses and convenient parking. Opting for what has become a typical solution, in March 1998, they formed a Special Improvement District (SID).

As a result, Bergenfield has installed new signage, planters and lighting; improved maintenance in its downtown; and lowered vacancy rates 3 points. Additionally, in a SID-organized arrangement, a number of property owners have signed a 10-year agreement allowing the borough to standardize and maintain private parking lots.

Across the country, metropolitan areas have followed a similar plan and attempted to revitalize their communities with benefit assessment districts, commonly called Business Improvement Districts (BIDs). Smaller cities, outlying areas and industrial sectors also have formed BIDs, while established districts are expanding their services.

BID basics

A Business Improvement District is a funding mechanism that property owners can use to provide supplementary services for their district through a commercial property assessment. The city collects the funds and returns them to the BID management organization, frequently a nonprofit or quasi-governmental entity. Services often include maintenance, security and marketing. BIDs may be called Special Service Districts or Community Improvement Districts. While a few residential and industrial BIDs exist, most focus on commercial property.

“Successful BIDs are business-initiated, planned and led,” says Lawrence Houstoun, a principal for the Atlantic Group, a Cranbury, N.J.-based urban development consulting firm. “Communities with divided property ownership and a willingness to work together to solve problems may benefit from forming a BID.” Houstoun has organized 40 BIDs, managed six and authored a manual on the subject.

State enabling legislation is necessary for BID formation. According to a study by Jerry Mitchell, professor of public administration at Baruch College in New York, 42 states have enabling statutes, although not all have active BIDs. New York, North Carolina, Wisconsin and California have the most BIDs; several states, including West Virginia, New Mexico, Hawaii and Montana, are currently working on enabling legislation.

(While BID consultants have estimated that more than 1,000 BIDs exist, Mitchell’s study has located fewer than 500. He does not count small town BID-like departments that are part of the city government, such as planning commissions, since they do not act as separate entities.)

Most BIDs also must be approved by local officials; many require proof of business community support. A sponsoring organization, such as a chamber of commerce or a public-private partnership, typically demonstrates business community support for a BID by gathering sufficient supportive petitions or proving an absence of substantial protest.

Most property owners will not give support to the BID until an assessment and services are agreed upon. State law may limit the kind of assessment allowed and the scope of BID activities. The city council typically reviews the budget for approved BIDs. A board, which might include property owners, business owners, residents and local government representation, oversees the organization.

BID activities

No matter where they are located, BIDs have traditionally included “clean and safe” projects in their activities. For example, Philadelphia’s 80-block Center City District (CCD), once the heart of “Filthydelphia,” now uses mechanical sidewalk sweepers early each morning, deploys uniformed cleaning crews daily, provides a monthly sidewalk powerwash and periodically removes graffiti.

The CCD maintenance program also partners with organizations that help formerly homeless citizens by hiring them as trainees. Additionally, it hires welfare-to-work program participants. Since 1992, more than 400 people have been trained.

The CCD’s “safe” component includes 40 uniformed community service representatives (CSRs) that the SSD employs to provide information for visitors and to make downtown secure. While CSRs cannot detain offenders, each has a two-way radio that allows him to report problems to the police.

The “safe” component of the CCD includes housing a police substation in CCD offices. Police and CSRs have joint roll call; track crime with computer mapping; and coordinate deployment to increase the security. Other BIDs support local police efforts by providing equipment or financing extra patrols.

Many BIDs also are expanding into services other than the “clean and safe” functions, says Christine Burdick, principal for Burdick and Associates, a Chicago-based downtown revitalization consulting firm. “Initially, clean and safe is most basic,” she says. “Once it’s done, it’s done; then the challenge is taking on the other things.”

More and more, BIDs are moving beyond “nuts and bolts” work to marketing and redevelopment. For example, the new BID organized by Downtown Boulder (Colo.) Incorporated was created partially in response to a planned regional mall. While Downtown Boulder Executive Director Marilyn Haas says that a BID has been discussed for years, the looming September 2000 opening of the mall focused the downtown business community’s efforts.

The BID will likely supply maintenance and ambassadors for downtown. Plans also call for consumer marketing efforts – including busboards, news-print and direct mail – before and during the mall’s opening.

In addition to focusing on consumer marketing, many BIDs are focusing on redevelopment and marketing downtown properties for sale or lease. For example, the Green Bay (Wis.) Improvement District was created to help market downtown properties assembled by the city.

Houstoun states that while not all communities include the traditional “clean and safe” activities in their BID programs, almost every organization promotes the district. “Marketing is the growing trend,” he says.

Secrets of success

To ensure that a proposed BID will help solve local problems, communities discussing a district might consider the following advicefrom BID consultants, directors and business community supporters.

1. Make sure that a BID is a good option. Brad Segal, president of Progressive Urban Management Associates, a Denver-based community development consulting firm, suggests that a BID’s success depends upon private sector leadership; a supportive local government; adequate financial resources and staff support; and a public/private partnership.

2. Check for state enabling laws. State laws may determine a BID’s formation process or limit BID activities; Houstoun recommends checking them carefully. BIDs that wish to expand their services also may need to make sure that state laws allow for proposed activities. City attorneys, BID consultants or counsel for business associations may be able to help check the statutes.

3. Get good advice. Many BID veterans emphasize the importance of hiring a consultant with formation experience.

4. Evaluate funding sources for formation and operation. Houstoun stresses that BIDs function best when the business communities hire the consultants and take the lead in securing funding. However, especially in smaller communities, governments and/or private funding may be needed for formation and for operating expenses, says Donald Hunter, president of Hunter Interests, an Annapolis, Md.-based economic and real estate development firm.

Segal suggests that, during formation, the organization should find a mixture of public and private funding sources to avoid the appearance that a special interest group is driving the process. Options might include: challenge grants; soft loans against future proceedings; community development block grants; and in-kind contributions of staff and equipment from universities, businesses, government and civic organizations.

5. Create a strong foundation. “It’s important, whether it’s a municipality or private group, to have a full-time administrator to set up the BID,” says Carol Karls, former program manager for the Green Bay Chamber of Commerce, which spearheaded a 1997 BID formation. Elizabeth Jackson, president of the International Downtown Association, Washington, D.C., says an existing organization, such as the chamber of commerce, can add credibility to a BID campaign.

6. Build support. BID formation can take up to 18 months, and participants should not expect instant community support. Securing support early is essential, Hunter says, because the most common problem in BID formation is that organizers do not deal with opposition before a city council vote.

Meeting with skeptics can provide unexpected benefits to communities. For example, Bergenfield found that property owners on the district’s edges resisted the assessment because they did not need the same level of service as more centrally located businesses. Organizers divided the district into three sections with lower assessments for those on the outskirts, and the BID received sufficient support.

7. Start small. Paul Levy, executive director of Philadelphia’s CCD, advises new BIDs to start with specific local problems. “Don’t get into blanket copycatting; pay careful attention to the local area, and work together to market your needs,” he says. 8. Plan for success.

Half of the BIDs surveyed by Mitchell do no benchmarking. Since many BIDs have as few as two staff members overseeing all programs, lack of time may be the reason.Levy says that attention to benchmarking has helped the CCD stay focused on meeting the expectations of the business community. The organization has used extensive benchmarking, including annual customer satisfaction surveys, a crime survey, and retail occupancy and pedestrian counts.

Hesitations

While the prevailing opinion is that BIDs improve their districts, local officials often have reservations. According to Robert McNulty, founder of Partners for Livable Communities, a Washington, D.C.-based community improvement organization, frequent concerns are that the BID is taking over public duties, that wealthier citizens are getting better services, or that the business community is criticizing city services.

But BIDs provide supplementary services that less heavily trafficked areas may not need, Houstoun says. Segal states that, while the original goal of BIDs was to counter decreasing municipal services, they now focus on competing with shopping malls and office parks. BIDs frequently focus on marketing, which Houstoun emphasizes was never exclusively a city service.

Despite those reservations, many local governments and business communities continue to bet heavily on BIDs. The funding mechanism is regarded by BID proponents as a useful structure that can help property owners, business owners and local governments achieve common goals.

That unifying characteristic of BIDs gives them their ability to help solve common problems. “The marvel and the goodness of BIDs and their phenomenon is that they are truly community-based,” Burdick says. “[BIDs consist of] people who might not otherwise be able to work together, getting together for a common goal.”