Business Improvement Districts

by

Robert Stokes, Julia Martinez

• LAST REVIEWED: 15 October 2020
• LAST MODIFIED: 15 October 2020
• DOI: 10.1093/obo/9780190922481-0009

Introduction

Business improvement districts (BIDs) are a form of special purpose government that utilize special assessments on real property to deliver services to a spatially defined commercial area. The first BIDs emerged in North America in the early to mid-1970s. They grew tremendously in the early 1990s, with some current estimates exceeding 1,500 BIDs globally as of 2018. While the legal and administrative process to create and govern BIDs varies in the United States based on state laws and local ordinances, they are typically created through a vote of affected property owners after some period of public disclosure and hearings. BIDs vary widely in their geographic size and capacity for assessment collection, ranging from $20 million-plus annual budgets and covering entire central business districts, to sub-$100,000 budgets with service areas that cover a few blocks of a neighborhood commercial strip. Assessments are typically collected by local governments and then passed on to BID operating organizations, which are usually governed by nonprofit organizations. Many BIDs also augment their assessment budgets through gifts, grants, contracts, and fees for services. These funds are used to support services that often include some mix of common area sanitation, security, marketing, and landscaping. Many large US cities have extensively used BIDs as an economic development tool, with cities such as New York, Chicago, and Los Angeles each having over forty BIDs. The growth of BIDs has been linked to set of larger of fiscal, social, and economic problems that cities faced during the era of economic restructuring and deindustrialization. BIDs filled a void left by many city governments’ inability to organize, fund, and manage services directed toward the problems facing many commercial areas, which often included crime, homelessness, and disorderly public environments. As BIDs have matured and are now a common feature of the urban landscape, they have grown in their capacities as organizations, with some comprehensive organizations fulfilling more ambitious functions related to infrastructure provision, social service coordination, urban planning, and public space management. Academic work around BIDs has been pursued by researchers and theorists across law, social science, and public affairs literatures. The dominant themes in academic work on BIDs has been organized around their various forms and functions; their accountability to the public; their effectiveness, especially in the areas of crime prevention and economic development; and social equity issues, with special attention often given to their interaction with homeless populations.

Formative Work on BIDs

The first known BID was created in Toronto, Ontario, in 1970. In the United States, the first BID came to life in New Orleans, Louisiana, in 1975. New York City was an early adopter of BIDs, with three developed in the 1970s. By the early 2000s, BIDs had become a common policy intervention for cities. Early academic and journalistic work like Pack 1992, Mallet 1994, and MacDonald 1996 focuses on explaining the deteriorating urban fiscal, social, and physical conditions that led to their development, while writing on the nature of their governance arrangements (see Briffault 1999, cited under Governance of BIDs). An early promotional book on BIDs, Houston 1997, is co-published by the Urban Land Institute and the International Downtown Association (IDA). Founded in 1954, the IDA emerged in the 1990s as a BID advocacy organization, helping to spread the popularity of BIDs in the United States and globally. Early academic work on BIDs described the nature and contours of emerging partnerships between downtown BIDs and public policing agencies. These revealed some of the prospects and challenges of integrating the private security functions of BIDs with public policing agencies, as in Greene, et al. 1995 (cited under Impact of BIDs on Crime and Disorder). Early legal scholarship on BIDs like Barr 1997 (cited under Governance of BIDs) tended to focus on the efforts of some larger BIDs to provide services to homeless individuals. Mitchell 2001 was one of the first national surveys of BIDs in the United States. Identifying 404 BIDs in the United States at the time, Mitchell reported that most were managed by nonprofit organizations, At the time, most BIDs services involved marketing, maintenance, capital improvements, and policy advocacy, with far fewer involved in providing security and social services. In a final section titled “The Future of BIDs,” Mitchell is optimistic that BIDs can improve the fortunes of commercial districts as long as they continued to focus on their core strengths of place promotion, management, and advocacy. Like many early analysts of BIDs, Mitchell’s main concern over BIDs was related to their accountability to public values and the public itself: values such as equity of access to public space, a voice for residents and renters in policy decisions, and open governance systems. As BIDs grew in number, scope, and type, Gross 2005; Stokes 2007; and MacDonald, et al. 2010 report on the emergence of various BID forms and presented typologies. Finally, works by economists like Brooks and Strange 2011 in California and Meltzer 2012 in New York City test the various factors that led to BID formation over time and space while Lee 2016 utilizes a comparative case method to study BID formation dynamics in Los Angeles.

• Brooks, Leah, and W. Strange. “The Micro-Empirics of Collective Action: The Case for Business Improvement Districts.” Journal of Public Economics 95 (2011): 1358–1372.

  DOI: 10.1016/j.jpubeco.2011.05.015

  Brooks and Strange perform a micro-level analysis on the formation of BIDs, considering all processes of collective action in the analysis, beginning with the initial organization of BID proponents and nonproponents, the voting results, and the impact on property values over the years. The study suggests “anchor participants,” such as large commercial agents, are the major actors in BIDs. Authors propose ideal agreements that must be in place for the BID to succeed.

• Gross, Jill. “Business Improvement Districts in New York City’s Low-Income and High Income Neighborhoods.” Economic Development Quarterly 19 (2005): 74–189.

  DOI: 10.1177/0891242404273783

  Focusing on New York City, the author details the size, function and service bundles of BID across the city. Gross develops a trichotomy of the city’s BID types based on size, land use, and function: corporate, main street, and community. This typology formed an analytic framework for analysis of the BIDs that included nesting them within a socioeconomic community framework. Gross concludes with several practical suggestions for planners of smaller community BIDs.

• Houston, Lawrence. Business Improvement Districts. Washington, DC: ULI Books, 1997.

  The first book published solely focused on BIDs. Written by a planner and BID advocate, the volume introduces the BID concept and offers various case descriptions of BIDs in different type commercial areas. The book is replete with pictures and offers a noncontroversial discussion of BIDs in action.

• Lee, Wonhyung. “The Formation of Business Improvement Districts in Low-Income Immigrant Neighborhoods of Los Angeles.” Urban Affairs Review 52.6 (2016): 944–972.

  DOI: 10.1177/1078087415596241

  Comparing two neighborhoods in LA—MacArthur Park and the Byzantine Latino Quarter—during a BID formation process to examine the differences between successful and unsuccessful BID formations within low-income immigrant neighborhood, Lee’s research supports the notion of community organization capacity is an indicator of a successful BID formation. The research suggests the strong influence community organization has on BID processes, specifically religious institutions within communities.

• MacDonald, Heather. “Bids Really Work.” The City Journal (1996): 29–42.

  A journalist, MacDonald, writing for the conservative-leaning Manhattan Institute’s City Journal, makes a broad case for the benefits of BIDs in New Yok City. Writing at a time of increasing urban vitality and positive public safety trends in New York, MacDonald credits the city’s BIDs for producing a public value above their direct costs of city taxpayers and criticizes their detractors as being driven a broader political agenda.

• MacDonald, John, Robert Stokes, and Ricky Bluthenthal. “The Role of Community Context in Business District Revitalization Strategies: Business Improvement Districts in Los Angeles.” Public Performance & Management Review 33.3 (2010): 436–458.

  DOI: 10.2753/PMR1530-9576330307

  Examining BIDs in Los Angeles, the authors tested whether BIDs were offering services that were appropriate to local needs. Multiple methods, including an examination of BID budget data, a survey of BID directors, land use, crime, socio-demographic data, and a systematic social observation of physical and social disorder within BID districts are analyzed.

• Mallet, William. “Managing the Postindustrial City: Business Improvement Districts in the United States.” Area 26.3 (1994): 276–287.

  Mallett links the growth of BIDs to larger trends in urban redevelopment politics. Arguing that BID emerged to effectively protect massive public and private investments in urban centers during the 1970s and 1980s. The urban economic crisis, Mallett suggests, also led to declining city services and an incredible growth is crime and social problems such as homelessness. Thus, BIDs emerged to fill the place management need that could not be fulfilled by public bureaucracies.

• Meltzer, Rachel. “Understanding Business Improvement District Formation: An Analysis of Neighborhoods and Boundaries.” Journal of Urban Economics 71 (2012): 66–78.

  DOI: 10.1016/j.jue.2011.08.005

  Meltzer explores neighborhood BIDs and their businesses in New York City. The study utilizes micro-level and longitudinal data from New York City to analyze and estimate the likelihood of a BID forming within a particular neighborhood based on physical property characteristics and property values. A cautionary note provides if BIDs continue to lean toward more stable neighborhoods to only increase the neighborhood’s benefits, it will increase the pre-existing inequalities between stable and weaker neighborhoods.

• Mitchell, Jerry. “Business Improvement Districts and the ‘New’ Revitalization of Downtown.” Economic Development Quarterly 15.2 (2001): 115–123.

  DOI: 10.1177/089124240101500201

  Mitchell reports on the results of the first comprehensive national survey of BIDs. The survey (n = 264) catalogued BID management types, financing arrangements, and service bundles, controlled for by city size. He concludes by making a call for further research on BID performance.

• Pack, Janet Rothenberg. “BIDs, DIDs, SIDs, SADs: Private Government in Urban America.” The Brookings Review 10 (1992): 18–21.

  DOI: 10.2307/20080337

  In one of the earliest works on BIDs, Pack described what they do, how they fund services, and the benefits of their operations. Reporting on a survey that was generated by the International Downtown Association, Pack notes that most BIDs in the United States are new and thus have escaped scientific evaluation. She also touches on some of the issue of accountability and equity that will frame the work of many BID critics going forward.

• Stokes, Robert. “Business Improvement Districts and Small Business Advocacy: The Case of San Diego’s Citywide BID Program.” Economic Development Quarterly 21.3 (2007): 278–291.

  DOI: 10.1177/0891242407302325

  The author examines the case of San Diego, California, a city that pursued a robust BID program as part of a larger citywide small business support policy. Through examination of official records interviews and direct observation, the author reports on a novel program to support smaller, less capitalized business areas through the use of business license fees. The author also found BIDs had augmented their programs by producing extensive, nonassessment revenue streams.