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Bloor West Village in Toronto created the world’s first BID in 1970, but the trend was slow to catch on. In the late-‘80s and early-‘90s, central business districts in New York, Philadelphia, Minneapolis, and Denver all created BIDs. Spurred by these cities’ successes, hundreds of downtown districts in the U.S. have since created BIDs. By some estimates, over ten thousand BIDs now exist across the globe. Today, smaller and more specialized business districts outside a city’s central core are creating BIDs as well.

Tailoring a BID to a Specific Location

Although they share common characteristics, each BID emphasizes different services, depending on the size of the district, real estate market, and political climate (see chart). Paul Levy, the President and CEO of Philadelphia’s Center City District, has consulted on the formation of over 50 BIDs across the country. “A BID is not a one-size-fits-all model,” he says. “You cannot copy a plan from one city to another.”

New York City’s 34th Street Partnership, for example, began in 1992 as an effort to clean up the district, but eventually expanded its services to planning and design. According to Daniel Biederman, the president of the BID, 34th Street had been filthy, and piles of trash lined the streets. “Literally overnight, the garbage disappeared once the BID began its services,” he said. To this day, you will rarely see trash in the district. Expanding upon its initial success, the BID has since improved streetscape aesthetics by standardizing the design of newspaper stands, street lamps, planters, and way-finding signs. More recent efforts have included widening sidewalk space around Herald Square and Penn Station, two heavily trafficked destinations in the district.

Birmingham’s City Action Partnership (CAP) was formed in 1995 to make the Alabama city’s downtown safer. CAP provides officers who patrol the streets on bicycles and electric carts and provide visitors, workers, and residents personal escorts at night upon request. To aid stranded motorists who may feel unsafe, CAP also offers fast and free service for flat tires or broken-down vehicles. Now that CAP has improved the safety—both real and perceived—in downtown Birmingham, the BID has added cleaning services and will likely expand to marketing and planning in the next five years.

In Iowa, Des Moines’ Downtown Community Alliance, or DCA, has focused primarily on marketing. The DCA promotes Des Moines as an attractive location for companies and residents based on its affordable cost of living, educated workforce, Midwestern atmosphere, and comfortable quality of life. The success of Des Moines’ DCA led it to partner with a regional organization that promotes the metropolitan region as a whole (a relationship that is unique among BIDs). According to Kerty Levy, president and CEO of the DCA, “People’s interest in downtown has grown exponentially, and we recognized a more efficient way to accomplish our mutual goals with limited resources [through the regional partnership].”

San Diego’s downtown BID, operated by an agency called Downtown Partnership, supplements the traditional “clean, safe, and attractive” services with social outreach. Its Community Court program offers community service in lieu of jail time for quality-of-life crimes, such as public intoxication, that are committed within the district. Community Court, along with welfare-to-work programs (which San Diego’s BID may add in future years) and other social outreach programs, are becoming more and more prevalent in BIDs across the country.

Although their services vary, these four BIDs have made their districts more appealing for visitors, workers, and residents. 34th Street in Manhattan, at least in the BID area from Park Avenue to Tenth Avenue, has become a major shopping destination for the region. Whereas customers previously came only to shop at Macy’s, they now traverse a linear corridor that offers as many stores as a suburban shopping mall, with the added conveniences, attractions, and experiences of an urban district. In downtown Birmingham, CAP has contributed to the “growth and renaissance” of the area. According to Theresa Thorne, the CAP Director, “residential units downtown have doubled from 500 to 1,000 units, with another 1,000 in the pipeline.” Some developers of those new units explicitly stated they would not have built without the CAP program in place. In Des Moines, the downtown has received a face-lift, and Kerty Levy points to waterfront revitalization, arts festivals, and new housing development as evidence of increased interest in downtown. Finally, in San Diego, both the traditional clean and safe services and the added social programs have helped make downtown viable for both business and residents.

How BIDs Are Formed

Typically, the private sector spearheads the effort to create a BID when the municipal services do not meet the needs of the businesses in the area. The BID is created through an agreement with, or authorization by, the local governing authority. Usually this authorization comes in the form of legislation in which the municipality agrees to maintain a baseline level of service, and the BID becomes responsible for any services above and beyond that baseline level. In Philadelphia, for example, Ron Rubin, the largest property owner downtown, led the effort to create the Center City District BID. Rubin was already paying to maintain his properties as clean and safe “islands” within a dirty and dangerous downtown. In 1990, he convinced his fellow property owners that, to succeed as a whole, they had to change the image of the entire downtown core by all paying for services beyond the city’s ability.

The legislation authorizing a BID usually requires approval by a majority of property owners. Once a new BID is formed, it establishes a series of bylaws that govern the amount and type of fees assessed to local property or business owners (commonly assessed as a percentage of property taxes or a per-square-foot basis), a board of directors, management of the BID, and the mission and goals of the BID. The ultimate objective is to transform the district into a place where visitors will want to linger and spend their money, tenants will pay premiums on rent, and the private enterprises will grow in value.

In places where a downtown business association pre-dates a new BID, the business association often serves as an operating agency for the BID. For example, San Diego’s Downtown Partnership continues to collect voluntary dues for marketing efforts, but it also collects mandatory assessments on behalf of the BID for the clean, safe, and attractive services.

Of course, no one wants to be locked into paying an extra “tax” indefinitely. Because property owners wish to be able to disband the BID if it proves unsuccessful, most new BIDs have a “sunset” clause. The clause stipulates that the BID must be re-approved by city council and/or property owners after five, ten, or twenty years. Support for most BIDs, however, only grows before the sunset clause comes due. Philadelphia’s Center City District, for example, was reauthorized in 1994 for twenty additional years, and again reauthorized in 2004 until 2025. In most districts, property owners reauthorize BIDs because the increases in sales and property values exceed the annual fees.

Addressing the Critics

Despite their success, BIDs have garnered serious criticism. The most common complaint challenges the need for private enterprise to supplement or replace those services that the local municipality should provide. After all, businesses and individuals already pay taxes to fund such services—why pay more?

One response is to see the added tax levied by the BID not as an expense, but rather as an investment that will yield returns in the form of increased property values, revenues, and growth. Most BIDs make a good return on this investment, and very successful BIDs can become completely self-sustaining, eliminating any need to draw from the public coffers. In that situation, the city can reallocate any money budgeted for the BID’s baseline services to a different line item, such as health services, education, or transportation. And as mentioned previously, a successful BID increases tax revenue through the growth in sales and economic activity, giving back to the public coffer.

Another common criticism is that of privatization. Opponents argue that municipalities are relinquishing control of public areas, whether parks, plazas, or entire neighborhoods, to private interests. While privatization is occurring on some level, it is important to bear in mind that agreements between BIDs and municipalities function like land leases in that the city does not surrender actual ownership of the area. Instead, the sunset clause, as mentioned earlier, provides time limits on the services. And because the municipality retains ownership, they often retain veto power over BID actions. Furthermore, while BIDs are often privately controlled, they usually provide public space free and open to all, in a more active environment that creates more and better public space than would exist in a city without them.

Although BIDs are not a panacea for urban decay, they have helped transform downtowns across the country during the past fifteen years. Dave Feehan, the president of the International Downtown Association, an organization that establishes best practices for BIDs, considers BIDs “extremely important to the revitalization of downtowns [across the United States].” Feehan argues many cities would not have experienced the growth and economic development that they have without BIDs, but notes that dropping crime rates and changing demographic trends have played a significant role as well.

Though concerns about privatization linger, data and studies increasingly demonstrate the benefits of BIDs to residents, businesses, and cities. This track record suggests that BIDs will continue to improve the landscape of business districts across the country.

34th Street Partnership: www.34thstreet.org

Center City District in Philadelphia: www.centercityphila.org

City Action Partnership in Birmingham: www.onb.org/citycenter/cc_caps.htm

Downtown Community Alliance in Des Moines: www.knowdowntown.com

Downtown Denver Partnership: www.downtowndenver.com

Downtown Los Angeles BID: www.downtownla.com

Downtown San Diego Partnership: www.downtownsandiego.org

Houstoun, Lawrence O. Business Improvement Districts. 2nd ed. Washington, D.C.: Urban Land Institute, 2003.

Hoyt, Lorlene. “The BID: An Internationally Diffused Approach for Revitalization.” Washington, D.C.: International Downtown Association, 2005.

This article appeared in the Summer 2006 issue of Next American City magazine. SUBSCRIBE NOW!