The Pros and Cons of Philadelphia’s Business Improvement Districts

Over the last fifteen years, business improvement districts (BIDs) have sprung up all over Philadelphia, attempting to mimic the success of the Center City District (CCD), Philadelphia’s first BID. Many of Philadelphia’s varied BIDs have brought noticeable improvements to many neighborhoods; however, successful BIDs have generally been found in well-off areas, while BIDs in poorer areas of the city have struggled to gain a footing. Such BIDs usually fail because the area does not generate enough assessment revenue to make a significant impact, suggesting a need for additional streams of revenue, whether from third-party organizations or the city itself.

The Center City District: Showing the Way

Philadelphia’s decline in population and economic clout has been well chronicled. Between 1950 and 2000, the city, suffering from outmoded infrastructure, cheap suburban land, and an uncompetitive tax structure, among other problems, lost 27 percent of its population and a third of its private sector labor force. In the past few years, however, an urban revival has reached both the central business district and several outlying neighborhoods. It is not a coincidence that Philadelphia’s revival has taken place during a period when BIDs have become increasingly prevalent. 

Widely recognized as one of the nation’s most effective BIDs, the CCD has helped drive downtown Philadelphia’s revival. In March 1991, the CCD’s brightly uniformed on-street workforce started sweeping sidewalks and, in coordination with City Police, patrolling downtown streets. Blessed with strong leadership, the CCD quickly moved on to spearhead numerous other initiatives. The CCD’s advocacy for real estate tax abatements on new housing construction has helped spark a downtown residential boom that has attracted national publicity. Its economic and demographic research has helped drive renewed vibrancy in the downtown’s restaurant and retail sectors. An innovative partnership with the city’s public school system is aimed at improving downtown’s educational offerings, which the CCD deems crucial to attracting and retaining middle-class families. And by partnering with local foundations and institutions, the CCD has recently installed lighting on downtown buildings and public sculptures. “We’ve installed $42 million in capital improvements in the downtown since 1998,” reports CCD President Paul R. Levy. All of this is secured by a consistent funding stream of millions of dollars in assessment revenue yearly from commercial properties within the CCD’s boundaries.

The CCD’s success inevitably prompted leaders in other city neighborhoods to wonder whether they could replicate the CCD model to address their own challenges. Early on, the CCD formed a working group to help other neighborhoods form BIDs, motivated both by a belief that the CCD’s success could be replicated and the pragmatic realization that the CCD’s help to create neighborhood BIDs could lessen any resentment about downtown’s success.

Replicating Success

With the help of the CCD, several major academic and medical institutions in West Philadelphia formed a BID, the University City District (UCD), the largest BID outside of downtown. As was the case with the Center City District, the UCD got its start by reducing crime and grime, and then moved quickly into neighborhood marketing efforts and streetscape improvements, producing a strong, positive impact on the neighborhood. In the UCD, funding came not from a mandatory assessment on real estate but from substantial voluntary contributions donated by the area’s non-profit institutions, most notably the University of Pennsylvania.

A few miles up the Schuylkill River, the former textile mill community of Manayunk also found success through a BID. In the early 1980s, its Main Street was nearly devoid of commercial activity. As time went on, the strip was reborn as a hotbed of upscale dining and shopping, sparking the gentrification of its surrounding residential neighborhoods. The Manayunk BID, which was developed to capture the assessment revenues of these thriving businesses, has successfully promoted Main Street shopping and dining while leveraging funding to improve its streetscape. “Manayunk became a BID late after the transformation to a nightlife and dining district was well established,” says Lawrence O. Houstoun, an urban development consultant who has helped create over 150 BIDs, most in New Jersey and Pennsylvania. The Manayunk BID used $150,000 in annual assessment revenues to lobby for grants and city funding totaling $10 million for physical improvements to Main Street, including new lighting, paving, and signage.

Also in Northwest Philadelphia, the tony retailers in Chestnut Hill formed a BID from a pre-existing organization that ran parking lots for shoppers at the upscale stores along Germantown Avenue. The BID revamped customer parking, making it more accessible and coherent. The BID also initiated a marketing program focused on popular promotions and special events. Perhaps most importantly, according to Houstoun, the BID has helped Chestnut Hill retailers adapt to a changing population. As the number of busy professionals in the neighborhood increased, the BID convinced more stores to open in the evenings and on Sundays.

A Call for Help: Struggling BIDs

Alongside successful BIDs in upscale and gentrifying communities like University City, Manayunk, and Chestnut Hill are struggling BIDs in areas that are less well-off. Because BIDs rely on mandatory or voluntary assessments from property or business owners, a weak commercial sector can limit a BID’s income. In the working-class Germantown neighborhood, a BID formed to serve its bustling but threadbare commercial district has struggled to survive on limited revenues generated by the depressed values of the real estate in its service area. The same holds true for the Passyunk Avenue BID in a moderate-income section of South Philadelphia, where a limited budget has constrained the BID from fulfilling its founders’ expectations.

BIDs in commercial or industrial areas have also experienced conflicting results. The City Avenue BID, which straddles two dif-ferent municipal jurisdictions, serves an auto-oriented commercial corridor and generates a healthy $1 million in annual assessments. David Cohen, a founding member and former Executive Director of the City Avenue BID, says the BID has provided a forum for greater cooperation among elected officials and municipal agencies on both sides of the city line and helped achieve a 40 percent drop in crime over five years in the BID service area. More difficult to achieve, says Cohen, was coordinated economic development, retail attraction, or streetscape improvement initiatives. “It was a real challenge to manage two jurisdictions on zoning issues and development projects,” recalls Cohen. He found that gas stations and fast food restaurants were not interested in suggestions for making their properties more attractive from an urban design perspective.

Houstoun, the BID consultant, believes that the impact of BIDs is also limited by lack of governmental support for BID development. He argues, “The City provides no support, really. If not for individual City Council members, there might be no BIDs at all.” By contrast, Houstoun cites the many ways in which New York City provides resources and support to help fledgling BID organizations become successful agents of change in their communities. “In Philadelphia,” Houstoun has observed, “the city economic development apparatus seems to be uninterested” in BIDs.

The record of BIDs in Philadelphia makes clear that neighborhoods without the resources of Center City or Chestnut Hill cannot sustain effective BIDs without external help. Even the CCD’s Levy recognizes that “Other revenue streams such as parking revenues and state and foundation grants need to be identified in order to have effective programs and services.” Without new outside funding, too many of Philadelphia’s BIDs will fail to perform at their potential. In the end, this hurts the neighborhoods—and the people—who need the economic development opportunities that BIDs can provide the most.

Center City District: www.centercityphila.org

University City District: www.ucityphila.org