Business Improvement Districts

Business Improvement Districts

by Lawrence O. Houstoun Jr., Howard Kozloff
Business Improvement Districts

Business Improvement Districts

by Lawrence O. Houstoun Jr., Howard Kozloff

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Overview

This practical guide covers the best practices for planning, organizing, and financing BIDs; the services they provide; and how they are operated and managed. Includes case study examples.

Product Details

ISBN-13: 9780874202106
Publisher: Urban Land Institute
Publication date: 04/01/2012
Sold by: Barnes & Noble
Format: eBook
Pages: 248
File size: 9 MB

About the Author

Lawrence O. Houstoun Jr. is a principal with the Atlantic Group Consulting Firm. Director of development strategies at Hart Howerton in New York; lecturer at University of Pennsylvania in urban studies.

Read an Excerpt

Business Improvement Districts


By Lawrence O. Houstoun, Stanley Obert

Urban Land Institute

Copyright © 2003 ULI-the Urban Land Institute
All rights reserved.
ISBN: 978-0-87420-210-6



CHAPTER 1

Introduction


Paul R. Levy

Something extraordinary has been happening in North American cities for close to 20 years: Normally tax-averse businesspeople — corporate leaders, property owners and managers, and small retailers — are choosing to be assessed an extra mandatory charge in order to finance business improvement districts (BIDs).

In the 1990s, U.S. town and city centers of all sizes rode the wave of national prosperity, many with the support of BIDs working to improve the area's safety and appearance; to enhance its image and competitiveness; to boost office, hotel, and retail occupancy; to animate streets; and to foster a resurgence in city-center housing. Even in the recession that accelerated after the terrorist attacks of September 11, 2001, property owners across the country have continued to form, support, and renew these mainly private sector organizations, suggesting the durability of BIDs.

A 1999 survey, conducted by Jerry Mitchell, a professor at the School of Public Affairs of the City University of New York's Baruch College, documented the existence of at least 404 BIDs in the United States that spend in excess of $100 million annually to improve commercial centers (see figure 1–1). Industry experts estimate that there are another 400 improvement districts in Canadian cities, where BIDs were invented in the 1970s (see "The Invention of BIDs" on page 68).

As cities throughout the world experience the decentralizing effects of the automobile and sprawling development, interest in BIDs is growing. In post-apartheid South Africa, American style BIDs are being organized in an effort to stabilize urban centers that are confronting great political and economic change and white flight. In Australia and New Zealand, local authorities are imposing "special rates" or "separate rates" in the face of competition from new shopping malls.

In some countries without a legal basis for BIDs — including Holland, France, Belgium, Sweden, and Japan — local governments, businesses, and property owners are experimenting with town center management, including the coordination of sanitation, safety, transportation, parking, and promotional services for the city center in response to challenges from out-of-town malls. National legislation that is expected to be approved in the United Kingdom and Ireland will give British and Irish cities a legal basis for funding BIDs, which are currently being organized in London, Dublin, and other cities.


Definition of BIDs

Having originated in North America, BIDs are now emerging in countries with different political frameworks and approaches to taxation. Despite many differences in their details, all BIDs are fundamentally a legal mechanism to raise funds to enhance the management of a particular place. Bradley Segal, a Denver-based consultant who has helped organize many BIDs, offers the following definition: "A BID is based upon the benefit district concept, which allows for an assessment on property within a defined geographic boundary. Revenues from this assessment are directed back to the defined area to finance a myriad of enhanced services, including security, maintenance, marketing, economic development, parking, and special events." While BIDs in North America are usually funded by an assessment on real property, mirroring traditions of local taxation, in the United Kingdom they will be funded by a tax on businesses.

To broaden the definition to include trends emerging outside North America, Lawrence Houstoun, this book's author, suggests five essential characteristics:

* A BID is a system by which the owners of two or more private properties or businesses cooperate to share the costs of solving common problems or realizing economic opportunities associated with their place. BIDs represent systems of cooperation among private sector or institutional interests that may involve only a few or thousands of properties and businesses, in which representatives agree to a formula for cost-sharing and for managing the implementation of plans that they have helped shape. Private sector representatives lead in planning the BID for which they will have responsibility.

* A BID has a sustainable funding system making possible formulation of multiyear plans and budgets. Unlike traditional voluntary merchant associations, BIDs in the United States are almost always grounded on an assessment on real property, while in other countries assessments are often levied on businesses. Once adopted and until repealed, the BID assessment is like a municipal tax, enforceable with the full power of government behind its collection. The strength of BIDs, as distinguished, for example, from North American, Australian, or New Zealand "main street" projects, is the assurance that funds will be available, depending on local authorization, for five, ten, or 20 years, providing confidence to owners and investors, enabling multiyear contracts with vendors and professional staff, and, occasionally, providing the ability to issue bonds for capital improvements.

* A BID is authorized by government through legislation that defines the organization's purpose, governing structure, functions, and limits. While BIDs usually are led by private sector interests and function relatively independently from government, the legal basis for their existence and fundraising capacity is derived from government. They are enabled by government delegating certain powers and clearly signify a willingness, currently more prevalent in North America than elsewhere, of governments to "let go" and give the private sector greater responsibility for planning, financing, and managing the district.

* A BID is authorized to provide business and property-related services within its geographic boundaries. Unlike traditional special-benefit districts, whose purposes are exclusively capital and infrastructure improvements, BIDs are authorized to perform a wide variety of management, administrative, and marketing services. Varying state, provincial, or national laws may define different parameters for their authority and mission, but all BIDs function as ongoing management companies.

* A BID may be managed by an organization that is either a quasi-public agency or a nonprofit corporation. In either case, oversight is the responsibility of a board of directors that may reflect the diversity of the community, but whose membership is dominated by the business and property interests who are responsible for paying the lion's share of the assessment or rate.


Why BIDs Are Created

BIDs represent a concerted effort by business leaders to establish well-funded, professional organizations that can work to change perceptions of their district, to surmount the limits of public resources, and to respond to challenges from regional malls or other competitive developments.

When business or institutional leaders decide to reach into their pockets to fund a BID, they are departing from business as usual. This decision can be motivated by a variety of events, but essentially what primes an area for starting a BID is either fear or opportunity.

Fear galvanizes commercial interests into action. It may be prompted by a large employer leaving town, the closing of a historic department store, the opening of a suburban mall that threatens to empty downtown streets, a gradual loss of amenities, widely held perceptions of crime and blight that reduce the area's drawing power, or general concerns about chronic decline. Often the inattention of local government to the area's problems — for example, its failure to create a budget to maintain recent streetscape improvements, its lack of response to an exploding bazaar of street vendors, or its inability to remove encampments of homeless people from alleys — spurs the formation of BIDs.

Opportunity also takes many forms. Sometimes the opening of a convention center, concert hall, or sports facility, or the scheduling of a major event such as the Olympics or the Final Four playoffs can prompt an epiphany among downtown leaders: Company's coming, but we're not ready for prime time.

These immediate causes for the formation of most North American BIDs play out in the context of development trends that have generally shaped metropolitan regions since 1960:

* the movement of people out of cities;

* the proliferation of suburban shopping centers, office campuses, theme parks, and entertainment centers; and

* the steady erosion of downtown's and main street's share of shoppers and workers.


To Create a Sustainable Funding Base

In the days when downtowns dominated their regions, widespread participation of merchants and property owners gave their associations the power to shape urban investments. But with the dominance of national chains, real estate investment trusts, and absentee ownership, these voluntary organizations usually lack strong leaders and rarely can sustain themselves on member contributions. Without a BID, downtown's diverse property owners have no legal means for acting in concert and no guaranteed base from which to fund a response to declining market share.

Jerry Mitchell's 1999 survey found that 60 percent of BIDs in the United States had been created since 1990 and 28 percent since 1995. Obviously, business leaders have taken to heart the central dictum of the new federalism: If you want it, you are going to have to fund it yourself.

The founding chairman of Philadelphia's Center City District, Ron Rubin, the downtown's largest property owner in 1990, was clear that the motivation for forming the BID was business self-interest. Rubin, who also owns and manages suburban shopping centers, sold his peers on the concept of mandatory BID assessments with the following argument: "I already provide cleaning, security, and promotional services for my 15 office buildings and shopping centers downtown, so I don't need this for my properties. But if my buildings are islands of cleanliness and safety in the midst of a downtown that is widely perceived as dangerous and dirty, then I can't succeed and neither can you."

Or, as the business advocates for the Pittsburgh Downtown Partnership argued in a 1996 brochure in response to the asset-manager mentality of institutional property owners who initially opposed the district: "The value of your property is not determined solely by the investments you've made in your property. Rather, a major portion of your property value is derived from how investors, businesses, and visitors view the entire downtown as a business, retail, and cultural center."

A report based on an examination of North American BIDs by researchers from the London School of Economics explains the rise of BIDs as an exercise in self-interest:

The motivation for property owners to establish a BID and thereby impose a compulsory levy on themselves is that the expected commercial return will exceed their personal contribution. The growth in BID formations across the United States reflects the recognition by property owners that the value of their asset (i.e., their property) depends to a significant extent on the surrounding environment. ... In promoting their commercial self-interest, property owners will be prepared to invest in their surroundings to the extent that it benefits their property. In practice this means that property owners will only be willing to join a collective scheme such as a BID if there is agreement on which aspects of local environmental decline need to be tackled and how this should be approached.


To Respond to Declining Public Resources

Cities are facing not only stronger and more sophisticated competition from suburbs, but also a loss in political power that means diminished financial resources. More than half of the members of the U.S. Congress represent suburban districts, which has resulted in a cutback in federal dollars for urban districts. By the late 1980s, most urban mayors were confronting an explosion of social problems — AIDS, crack cocaine, teenage pregnancy, and homelessness — with declining resources.

Furthermore, the commercial areas of cities are getting a smaller share of the pie. Consider the case of Philadelphia. The downtown occupies just 3 percent of the city's total land area, but contains 80 percent of the city's commercial office space and 70 percent of its hotel rooms, provides 43 percent of the city's jobs, and generates 59 percent of all parking-meter revenue and 30 percent of all real estate taxes. But this economic engine is home to just 2 percent of the city's electorate. So it is understandable that when successive mayors and city councils lost general revenue sharing and other federal programs in the 1980s, they allocated scarce resources to neighborhoods where voters lived. Increased litter, more graffiti, and a rise in the number of homeless people in downtown were consequences. When the commercial office boom of the late 1980s ran headlong into this maelstrom of disorder and diminished public resources, local leaders like developer Ron Rubin saw a business improvement district as a necessity.


To Respond to Stronger Competition

When manufacturing was the mainstay of the economy, access to rivers and railroads or proximity to raw materials and markets mattered to the success of cities more than did the quality of the public environment and customer service. But in the highly competitive, postindustrial economy, quality-of-life issues have become paramount. Businesses, workers, residents, and tourists have many choices among locations and they will go where their options are greatest, the costs are competitive, and the amenities are best.

Suburban malls, office parks, and entertainment centers set the standards that customers now expect from city centers. They successfully compete with downtowns in large part because they are managed places with single owners. Retail tenants pay not only for the space they occupy, but also for common area maintenance (CAM) through a CAM fee. This surcharge pays for cleaning, security, the upkeep of interior public spaces, free and well-lighted parking lots, and a generous advertising budget. Equipped with up-to-date surveys on customer preferences and with information on what their competitors are doing, mall managers dictate operating hours and storefront design, control the placement and mix of their tenants, and frequently rearrange stores to optimize a center's performance. Suburban office campuses attract tenants with superior amenities, such as jogging trails, parklike landscaping, daycare, and athletic centers. Suburban or exurban theme parks attract families with their mix of uses, friendly staffs, and a high level of cleanliness.

Noting the widespread failure of new pedestrian malls in downtowns, the late urbanist William H. Whyte advised cities to focus on the management, not the architecture, of shopping malls: "Some cities are trying to compete with the shopping malls by copying the physical form of them. ... What they should be copying is the centralized management of them: their ability to coordinate tenant selection, promotion, leasing, and market research."

Management rather than service delivery is the appropriate lens through which to view BIDs. Within their boundaries, BIDs overcome the disadvantages of fragmented ownership and are to the district's public spaces what mall managers are to mall common areas. BIDs share the costs of common area maintenance and advocate for downtown's interests. In small cities like Milburn, New Jersey, they organize retailers to cooperate in promotions. In downtown Denver, the BID coordinates the pick-ups of private trash haulers and public sanitation agencies. In New York City, the Bryant Park Restoration Corporation worked through meetings with recreation, sanitation, police, and transportation agencies to develop a unified response to a troubled place and create in its stead an award-winning park.


What BIDs Do

BIDs gather under one roof the diverse disciplines of crime prevention, public area maintenance, marketing, landscape architecture, and urban design for a coordinated approach to district improvement.

Most BIDs are organized to supplement, not replace, municipal services. Many BIDs start with a narrow focus — usually on clean and safe services or on consumer marketing. But as BIDs have matured, grown more sophisticated, and evolved in very different settings, the range of typical BID services has expanded dramatically. Among the wide assortment of programs that a BID might undertake, according to a list compiled by Richard Bradley, formerly president of the International Downtown Association and now executive director of the Downtown DC Business Improvement District in Washington, D.C., are the following:

* District Maintenance. Includes the removal of litter and graffiti, the power-washing of sidewalks, shoveling snow, cutting grass, trimming trees, and planting flowers in public places.

* Security. Includes the deployment of uniformed security personnel for extra eyes and ears on the street and uniformed hospitality personnel (sometimes called "ambassadors" or "guides"), the installation of electronic security equipment, and cooperative arrangements with the police — for example, contributions of special police equipment, such as bicycles, or joint participation in the operation of computerized crime-tracking systems.


(Continues...)

Excerpted from Business Improvement Districts by Lawrence O. Houstoun, Stanley Obert. Copyright © 2003 ULI-the Urban Land Institute. Excerpted by permission of Urban Land Institute.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Table of Contents

Contents

Foreword,
Chapter 1 | Introduction, by Paul R. Levy,
Chapter 2 | Legal Foundations,
Chapter 3 | Planning and Organizing a BID,
Chapter 4 | Managing a BID for Success,
Chapter 5 | Small BIDs,
Chapter 6 | Outlook, Issues, and Trends,
Chapter 7 | Case Studies,
Index of BIDs,
Index of Topics,

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