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BIDS GO GLOBAL

BUSINESS IMPROVEMENT DISTRICTS ARE HELPING REVITALIZE AREAS WORLDWIDE

By Steve McLinden

Business improvement districts are becoming quite the global phenomenon. After some 35 years of successful application in North America, countries elsewhere in the world are creating BIDs by the dozens, buoyed by a wealth of success stories and increasing evidence that BID property values tend to rise well above market norms. Today there are roughly 1,700 BIDs worldwide, with hundreds more still forming.

In essence, the BID is an urban-revitalization device that is proving its mettle as an economic tool too. A BID is formed when a group of property owners or tenants in a neighborhood agree to tax themselves to fund basic safety and sanitation services or a range of improvements: tree plantings, pocket parks, street lighting, unified signage and event promotions. Some BIDs take things a step further, such as New York City’s 34th Street Partnership, which has a full-time retail designer and a full-time attorney to assist tenants.

The first BID was established in 1970 in Toronto and still exists as the retail-oriented Bloor West Village Business Improvement District, one of 60 BIDs in the well-coifed city. New York City has 56, providing services to at least 70,000 businesses throughout the five boroughs.

“The concept of a BID started slowly but has picked up a lot of momentum in North America and around the world,” said Lawrence Houstoun, principal of Atlantic Group, a Cranberry, N.J., urban consulting firm, and author of the Urban Land Institute book, Business Improvement Districts. “And I don’t think the number of districts is even close to what it will be one day.” Most of the world’s BIDs are retail-driven, though office and industrial BIDs have become increasingly common, says Houstoun.

The most recognized U.S. BID may be the 15-year-old Times Square Business Improvement District, which is credited with transforming that once-crime-ridden New York City neighborhood into a safer shopping and tourism district of some 1,500 businesses.

Property owners within BID boundaries are enjoying benefits. A study on New York City BIDs conducted by New York University’s Furman Center for Real Estate and Urban Policy indicates that commercial properties increase in value by up to 15 percent after a BID forms.

In downtown Los Angeles the 700 property owners in the 90-block Fashion District BID have seen values more than triple since its 1996 formation in that former industrial area. From 2003 to 2006 alone, real estate prices there have risen from $198.10 per square foot to $481.68 per square foot even as occupancy has increased from 94.7 percent to 97.6 percent.

Only about a half dozen U.S. BIDs have failed, and most are routinely renewed by petition to the city, says Houstoun. “If you don’t feel your pockets are being picked, you tend to support them,” Houstoun said. “Even a fairly large property won’t pay much more than $2 a day.”

When a BID takes root, its assessments become mandatory and are collected by the city like other taxes. The difference is that the funds are returned to BID management groups for district use. Though most U.S. BIDs assess property owners, in Great Britain (which leads Europe with 54 BIDS) the BID tenants are more likely to receive the bill. There are other differences. U.S. BIDs are up for renewal every 10 years, while the European ones are typically renewed every five years.

When the 26-year-old Downtown Denver BID, which manages the 16th Street Mall, was renewed in 2001, some three-quarters of the property owners signed off on it, says the BID’s manager, John Desmond, vice president of urban planning for the Downtown Denver Partnership. In the process, the district was expanded from a 70-block radius to 120 blocks, a budget spike that allowed the hiring of “downtown ambassadors” to be the eyes and ears of the police. “They look out for drug dealers or problems with the homeless or others who might be a deterrent to customer and tenants,” Desmond said. As in most BIDs, property owner participation is mandatory, though those expenses are sometimes passed along to tenants in the leases, Desmond says.

In New York City, annual BID assessments range from $53,000 for the 180th Street BID in the borough of Queens to $11.3 million for the Downtown Alliance in the borough of Manhattan.

Philadelphia’s 120-block Center City District, founded in 1990, has one of the biggest BID budgets in the U.S., at $14 million a year. About 60 percent of the revenue is spent on cleanliness and safety, with the balance devoted to research, planning, retail attraction and such innovations as facade-improvement matching grant programs.

The BID has helped transform a downtown area that in the 1980s earned its city the sobriquet “Filthadelphia” into a 24-hour, live-work-play district with nearly 2,500 retail properties, of which almost a third are eating and drinking establishments. “In the late ’80s and early ’90s, everyone was going home after work and the streets were empty,” said Paul Levy, president and CEO of the Center City District. “The downtown area was dirty, covered with graffiti and had the perception of being unsafe.” But the use of a funding vehicle that had been successfully put to work in suburban shopping centers changed that, Levy says. “It’s the same thing as the old mall common-area maintenance charge,” he said. “In downtown city centers it’s a way of taking diverse owners and unifying them.”

Rather than merely pass along fees to tenants as malls do, the Philadelphia BID had to shoulder the Herculean task of pulling together 2,100 property owners and then explaining the concept to them. “It sounds like a simple idea, but it’s a huge challenge,” said Levy. “We don’t own the real estate, and we don’t lease it. We just act as a surrogate for shopping center management.”

BIDs, which are also called business improvement areas (BIAs), business revitalization zones (BRZs) or community improvement districts (CIDs), can spur revitalizations in Detroit, Grand Rapids, Pittsburgh and other rust-belt cities, says Levy.

For all the supposed benefits, BIDs are not without their detractors, though. Critics charge that large BIDs are designed to drive poor people or street artists from public spaces and to price them out of adjacent residential space. New York City’s Grand Central Partnership faced just such a controversy because of its “homeless assistance” and security programs that targeted aggressive homeless people around Grand Central Terminal. The controversy subsided after the BID’s security patrols led to a 60 percent drop in crime.

The model is winding its way around the globe. Since 2002, business groups in Great Britain have tried to organize 65 BIDs, out of which they have successfully created those current 54, says Georgina Dawkins, an associate with London-based Partnership Solutions, a BID development and consulting group. The first BID to be renewed after an initial five-year term was the Heart of London, which encompasses retail and office space in the Piccadilly Circus and Leicester Square areas. The BID’s politicking helped turn 14 of 18 no votes in the initial 2002 election into yes votes in 2007. “We had endorsers and champions identified, and we galvanized 12 business champions [to assist] in the renewal effort,” Dawkins said.

Scotland is in the process of forming six pilot BIDs, including one for Bathgate Town Centre, a traditional, open-air Scottish retail center in West Lothian that is under redevelopment. Though tenants pay the assessments in England, Scotland is considering legislation that would assess the real estate owners, says Ian Davidson, the Scottish government’s project director for business improvement districts. “There is pressure from the private sector to include property owners, because we have seen that the property owner gets increased asset value,” Davidson said.

Research indicates that small, independent retailers in Scotland believe that they will benefit most from a BID, “because they see it as a modest investment that will give them a strong local voice,” Davidson said. A tourism BID, which Davidson says will be the first of its kind in the world, is in the works in Scotland. “We have a lot of rural towns, many with populations less than 3,000, which are heavily dependent on tourism, and some of these are coming together for a collective investment and vision,” he said.

In Germany Hamburg’s Neuer Wall has been the best-received BID in the country, says Stefan Kreutz, an urban planning instructor and researcher at HafenCity University, Hamburg. About 70 percent of the landowners in the retail district, which is under redevelopment after declines in pedestrian traffic, approved the BID. Besides cleanliness, safety, marketing and landscaping improvements, funds will go to marketing and to “the coaching of shopkeepers,” according to the BID’s Web site.

“Many other countries in Europe are discussing this instrument,” Kreutz said. “It has many merits.” HafenCity University is also studying how the model can be used in residential areas, as Housing Improvement Districts, he says.

Other countries with BIDs include Albania, Ireland, Jamaica, New Zealand, Serbia, South Africa and Wales. “Countries are really committed to driving these things through, because they have seen the benefits across the world,” said Davidson.

There is no limit to the size, stated aims or variety of the BIDs that can be created, says Houstoun. Some are organized around the efforts to save theaters or similar historic structures, while others are formed to spruce up sagging business parks. “We’ve seen that you can stretch the principle far and wide,” Houstoun said. “If you have organizers with vision who recognize a common need and common opportunity, then you have the beginning of a program that’s safe and clean and a little bit more. We haven’t seen the half of what they can do.”