Business improvement districts (BIDs), also known as local improvement districts (LIDs), are special districts within a city that are overseen by a nonprofit entity. In the United States, BIDs are typically funded by an additional tax assessment, with the tax increase going toward improvements of the area. BIDs have been used in nearly 1,000 major cities and small towns throughout the United States, including most major U.S. cities that have multiple BIDs. New York City alone has 76 BIDs.
Background
Business improvement districts (BIDs) are private sector initiatives to improve the environment of a business district. Services financed by a BID are intended to enhance existing city services, not replace public works or economic development departments.
The districts are areas within a municipality where some form of revenue generation is legally enforced to provide services for area, beyond those offered by the municipal and county services. BID formation varies on a state-by-state level, and are also referred to as neighborhood improvement districts, special improvement districts, or local improvement districts. Depending on state statute, business improvement districts can be funded a variety of ways, including through a tax assessment or mill levy or Tax Increment Financing on property tax, and then managed by a nonprofit agency. BIDs provide an array of services to keep districts clean and managed to improve mix of activities, transportation, and aesthetics of public places. Business Improvement Districts became widely noted after their success in transforming Times Square and Union Square in New York City from places abandoned and filled with crime into dynamic neighborhoods. They are based on the premise that making attractive commercial districts will attract shoppers and make an environment conducive to thriving businesses.
The International Downtown Association (IDA) 2011 BID census report states that all US states except Wyoming, including the District of Columbia, have at least one BID. The 2011 IDA report states that, at the time, there were 1,002 BIDs in the United States. As of 2010, North Dakota passed senate bill 2356 to appeal section 40-22.1-01 of the North Dakota Century Code to allow special tax assessment districts in the state.
Often, BIDs are formed as a result of property owners in a defined district who seek funding for a variety of services, including governmental services such as cleaning and maintenance, non-governmental services such as marketing and promotion or beautification, and the implementation of capital investments. Most states rule that a BID must be governed by a board of directors that are composed of a certain percentage of property owners, business owners, and residents that are in the district, as well as public officials.
Benefits
Crime reduction
Studies have shown a reduction in crime within the district boundaries. One study found that there was a 12% reduction in robbery and an 8% total crime reduction within the boundaries of the BID in Los Angeles. There is no agreed upon standard for accountability for BID management organizations, but they are held accountable due to the limitations of what the budget can be appropriated to, making the abuse of power less likely. The small amount of stakeholders also limits the risk of corruption, with more individuals keeping watch of the activities managed by the BID
Increased property values
A Study of New York BIDs revealed that commercial properties within the defined areas of a business improvement district sold for 30.7 percent more than comparable properties in the same area but outside of the district boundaries. This study implies that the positive effects are exacerbated in larger BIDs, made of mostly office space, with larger budgets.
Criticisms
Accountability
Critics of Business Improvement Districts are concerned that there are few restrictions as to what the revenues going toward the BID will fund. With the limited restrictions, property owners within the district may be required to fund services that they do not particularly want or need. In many places, BIDs are independent organizations and are not required to report extensively to their local government and stakeholders. This lack of accountability can be concerning to residents and property owners paying the additional tax.
Crime spillover
Critics are also concerned about the spillover of crime that may be diverted, and then concentrated outside of the BID districts, particularly in larger cities with BIDs that focus on security and crime prevention.