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