Business Improvement Districts

BIDs (also known in some countries as city improvement districts or CIDs) have successfully leveraged private funding in cities to catalyze urban regeneration. Indeed, well-managed BIDs have contributed to increased property values, improved sales for local retailers, and decreased commercial vacancy rates.

A BID is a PPP in which property and business owners elect to make a collective contribution to maintenance, development, and/or promotion of their commercial district. A majority of property owners must agree to fund the BID through an extra assessment. The core concept is modeled on the shared maintenance program of many suburban shopping centers. Malls are typically single properties managed by one entity that sublets retail square footage to multiple tenants. Tenants pay a common area maintenance fee to fund services that enhance the appearance of common areas and provide cooperative advertising for the mall and its stores.

Among the benefits of the BID structure is that it creates a reliable funding source for supplemental services and programs, such as public safety, or marketing of a neighborhood brand. Because they are self-managed and funded by the owners themselves, BIDs typically offer the ability to respond more quickly than the public sector to the changing needs of the business community.

Canada, South Africa, the United Kingdom, and the United States are among the countries in which BIDs have been created. In many cases, they have contributed to the turnaround of inner-city areas. Some BIDs have focused on public safety, whereas others have focused on area branding and investment promotion. Among the most dramatic urban transformations that a BID helped facilitate was Bryant Park, a modestly sized, nine-acre site adjacent to the majestic main library located in midtown Manhattan. This site had become a lost urban amenity in the 1970s, going so far as to turn into an open-air drug market. In the early 1980s, several prominent area business executives—including the chairmen of Time Inc. and Rockefeller Brothers Fund—invested in a master plan to reconfigure and upgrade the park. This in turn led the charge to create a BID that would fund and maintain upgrades, such as paths, lighting, fountains, restaurants, and temporary food kiosks. All were designed with the goal of bringing people back to the park. BID members (including land and business owners) benefited from higher office rents and property values. As a result of these infrastructure investments, the area had a significant reduction in crime. With ongoing attention to on-site programming, Bryant Park has become a major social center in New York City, with more than 6 million visitors annually.

Certain conditions must be in place in order for a BID to be an appropriate tool to facilitate regeneration. Most critically, a designated area must have existing local property owners who consider it a worthwhile endeavor to contribute additional funds toward the maintenance and investment in their district. In some cities, public infrastructure and upgrade needs may be so high that a BID would not offer sufficient value. For instance, a BID would not be useful in closing the financing gap for a large-scale development project, as the timing of the revenues it generates would not match the up-front requirements of major capital investments.

The Furman Center (2013) claims that in America where the BID model is used, “bigger means better” in terms of the successful BIDs. Their findings confirm that “large-office BIDs have large and positive impacts on commercial property values, but smaller BIDs have little discernable impact.” Regarding property values, BIDs have a significantly more positive impact on commercial property values with an average value increase of approximately 15 percentage points. Given this (and other reasons), the authors suggest that the city should direct its efforts to forming BIDs in larger, denser environments.

In South Africa, Johannesburg’s private sector has been a pioneer in using CIDs in its inner city. Specifically, CIDs have been used to finance necessary services and infrastructure. For more information about the Johannesburg experience, see box in this section.

City improvement districts in Johannesburg, South Africa

In Johannesburg, city improvement districts (CID) are defined geographic areas in which property owners agree to pay for supplementary services and improvements in their urban environment. These services can include security measures, urban area upgrades, litter collection, and design and upkeep of public spaces. In addition, some CIDs also take on additional and complementary services including web-based communication and information systems connecting all businesses in the area; programs to attract businesses; environmental upgrades; business retention; branding and marketing of the CID precinct area; or events management to attract more people to the CID area.

In South Africa, a CID can be formed when a petition is filed by at least 51 percent of the property owners in the geographic area and then approved by the municipality. Once a CID is enacted, the property owners are required to pay a CID levy for additional services. The CID levy is compulsory and is calculated based on the value of the individual property and applied pro rata. CIDs are established for an initial period of three years but can extend indefinitely unless members file for a change of the original business plan. The CID levy is collected by the municipal council on behalf of CIDs, and then transferred to the CID without any deductions. In some other cases, the council authorizes the CID to collect the levies on its own.

A board of directors elected from the member property owners governs the CIDs. They control the area within the terms of their original business plan. Although nonvoting members of the board may be included, such as a councillor, tenant, or other stakeholder, property owners must be in the majority. The board usually comprises property owners, business owners, representatives of residents’ organizations (if relevant), and representatives of the local authority. The board then selects an urban management company to manage the daily functions of the CID and implement the business plan.

There are three different CID typologies used in Johannesburg. They include legislated CIDs, voluntary CIDs, and special project CIDs. The legislated CIDs’ responsibilities and functions have been noted above. Voluntary CIDs and special project CIDs do not fall under the CID legislation. Thus, they are not based on a legally binding agreement between property owners and operate voluntarily.

CIDs are said to have changed the look, feel, and function of a number of areas in Johannesburg’s inner city. They have also been subject to both criticism and praise since their inception. Some suggest that little attention has been paid to the growing spatial inequalities that CIDs create, as well as the risk of fragmentation both politically and fiscally—both of which have particular resonance in the post-apartheid context. Some concerns have also been expressed that corporate interests may be promoted to the detriment of addressing social issues (Peyroux 2008). Furthermore, others note that the widening of social and spatial inequalities can occur in the CIDs, given that “property owners in lower-income areas cannot afford the additional fees for privatized services” (Miraftab 2007).