In a very real sense, the BID was
"invented" by business communities themselves. The concept of special
assessment districts dates to the Roman empire. However, the idea of paying for
special benefits as a form of local economic development in California is
generally based on a state statute known as "The Parking and Business
Improvement Area Law of 1965." This statute expanded on earlier assessment
legislation designed to provide for public improvements such as street lights
and provided the framework for later models. Also in 1965, the first version of
the contemporary BID emerged in Canada. The Bloor West Village Business
Improvement Area in downtown Toronto became a model for economic stimulation
and was copies in various forms by hundreds of communities, including many in
new York City. Currently in California, the establishment of business
improvement districts is authorized by two state laws: one which allows for the
creation of merchant based special assessment districts and one which allows
for property based districts. In both cases, a majority of business owners of
commercial property owners in a given area decide to acquire special benefits
and to pay for those benefits themselves. In this way, individual communities
are able to have a direct voice regarding the economic activity in their area
and can exercise considerable control.
WHAT IS A BUSINESS IMPROVEMENT DISTRICT?
A business improvement district is a geographically
defined area in which services, activities and programs are paid for through a
special assessment which is charged to all members within the district in order
to equitably distribute the benefits received and the costs incurred to provide
the agreed-upon services, activities and programs. The assessment money is
collected by the City or by the County through a special contractual
arrangement with the city. Because the assessment funds collected in a given
district cannot legally be spent outside of that BID, the City creates a trust
fund for each BID, with funds periodically released to support operations.
WHAT ARE AREA-SPECIFIC PROGRAMS?
In a Business Improvement District, a special assessment pays for programs and
services which are tailored to the area defined by the BID by representatives
of the BID. A variety of activities and improvements are authorized for BIDs
and defined by state law. Collectively, these services, activities and programs
are referred to as "improvements." For example, BIDs may collectively
decide to fund a concerted marketing or promotional effort to attract, develop
and retain both new and existing businesses, as well as to encourage tourism or
increase an established customer base. Such "area-specific programs"
have a variety of sues. For example, a single business or property owner may
not possess the capital required to effectively promote the business or
commercial property. However, the financial leverage obtained from the
collective assessment revenue of dozens, or hundreds, of business or property
owners can provide for marketing campaign capable of producing significant
results.
WHAT IS THE CITY'S ROLE IN PROVIDING THESE IMPROVEMENTS?
The City's primary
role is to exercise its municipal authority to levy the assessment on behalf of
the BID community. By having the City assess all affected parties, the BID
receives funds from everyone receiving the improvements. Persons or entities
who would otherwise refuse to participate, thus burdening the remaining BID
members, do participate. Similarly, the city's BID billing process minimizes
the number of members in the district who receive benefits without paying for
them. The City requires that a nonprofit corporation be designated as the agent
responsible for procuring the BID improvements. The nonprofit corporation
("service provider") is then contractually obligated to provide to
the City financial reports which disclose financial activity associated with
use of the assessment funds. The city is also authorized to audit or otherwise
review the financial condition of the BID. In this way the City assists the BID
membership with oversight and review, so that the special assessment is used
according to the intentions of the business community.
The three main differences are: (1) the type of assessable parties, (2) the forms of required ratification, and (3) the lifespan of the districts.
(1) ASSESSABLE PARTIES. Merchant based BIDs allow improvement assessments to be charged to business owners, defined as engaged in any type of business. Property based BIDs allow assessments to be levied upon property owners, defined as any person shown as the owner of the land on the last equalized assessment roll or otherwise known to be the owner of the land by the City Council.
(2) RATIFICATION. Both types of business improvement district require a ratification procedure to be completed; however, the procedure to calculate the support level differs between the two BID types.
Merchant based BIDs are established through a process which involves public hearings before the City Council and the opportunity to protest against district establishment. Experience has demonstrated that greater community involvement with formation of the district results in less opposition to the project. Establishment ratification occurs by tabulating the opposing/protest documents filed with the City. The district may be established if protest level does not equal fifty percent of the assessment value. Merchant based BIDs must also be ratified or "reconfirmed" annually after each funded operating period in order to receive funds to continue operations. The City Council reviews the BID operations as described on the BID Annual Report and receives any suggestions, complaints, public comments or requests for changes to the district's activities. If a majority protest does not occur the City council, subject to approval by the Mayor, may then authorize the next year's assessment to be levied, thereby providing funding for the operation of the district.
Property based BIDs are also established through a process involving public hearings before the City Council and written protest levels are tabulated as well. However, prior to tabulating the value of any protests received and in order to establish a property based BID, the project's supporters must collect petitions which support district establishment and which have been signed by a majority of the affected property owners. Property based districts may be authorized by the City to operate for between one and five years after which time the "reconfirmation" process, which is similar to the original establishment process, must be completed. If "reconfirmed", the district may operate for up to ten years. If a majority protest does not occur the City Council, may authorize establishment of the district and the levy of the assessment. In addition, the California Constitution requires that the City conduct and certify results of an assessment ballot procedure prior to the establishment or the reconfirmation of any property based BID.
(3) DISTRICT LIFE. Merchant based BIDs technically have a one year lifespan and property based BIDs operate over a ten year maximum lifespan.
WHAT ARE SOME OF THE FORMULAS USED FOR BID ASSESSMENTS?
There are several different formulas in use
throughout the City. The most popular formulas are those which most clearly
show a relationship between the amount paid and the benefits received; this is
the "nexus" concept which forms the basis for BID establishment.
Because the three most popular categories of property based BID-sponsored
activities are maintenance, security and marketing programs, the assessment
variables normally used are size/area of the property, linear or front footage
of the property, and square footage of improvements to the property. The most
popular type of program employed by merchant based BIDs is a combination of
marketing and public relations efforts. Because of this, the most frequently
used type of assessment is a flat rate, which can be scaled up or down
depending on the proximity of the business to the focal point of the marketing
efforts. Destination marketing has become an important function of those BIDs,
which feature restaurants and local attractions as well as a strong retail or
consumer business base. Therefore, the scaled flat rate is accepted as an
equitable assessment variable. Other formulas, such as number of employees in a
business, are being employed in some districts. An easily understandable
methodology is best.
The state laws regarding both merchant and
property based business improvement districts contain provisions for
identifying the components of the BID including boundaries, improvements or
activities provided, and other elements. In addition, both laws do allow for
the disestablishment of the district under certain conditions. BIDs are not
permanent institutions.
Generally, the programs to be provided by a BID are determined by the community
and are selected based on community needs and desires. The process of
determining community needs and desires typically involves the development of
questionnaires which are mailed to all business or property owners in the
proposed district. Focus groups and telephone surveys are also frequently used
to determine community priorities. Based upon the ranked responses of the
community, a picture begins to emerge which illustrates what the collective
community desires. Costs associated with delivering the most wanted
improvements then form the bases for the eventual BID assessment amount. The
process involves offering options and considering the affordability of program
delivery to those who would pay the assessment; eventually a compromise is
reached which, again through surveys, interviews, questionnaires and community
feedback, satisfies the majority of the proposed members.
The City benefits from the pride and satisfaction which results from
demonstrations of willingness by the diverse business communities throughout
the City to assume an increased level of authority regarding the improvement of
their own business "microclimates", as well as the responsibility for
managing those improvements. In terms of the city's costs to administer the
municipal issues and procedures which are a necessary part of the BID Program,
the charge to the BID is minimal. The City recovers a portion of the salaries
and other expenses directly related to the Program. The percentage of
assessment revenue, which is recovered by the city usually ranges from one to
three percent and is "capped" at a maximum of five percent. All other
city costs are absorbed by the city, and all remaining revenue returns to the
district.
Discuss the idea of self-funded collective improvements with our fellow
business or property owners. Perhaps many of them will agree that the BID idea
is worth considering, especially if you have common interests. Together, your
group of concerned business interests becomes the "proponents group"
which is a vital first step. Next, contact the local office of your City
Council member. Working together, your community leaders and your elected
officials can help to determine if the BID Program can work for you.
Reduced budgets and
limited funding to support localized improvements in cities throughout California
area reality. If you agree that your business community is capable of
attracting more customers, of realizing additional lease revenues and reduced
vacancies, or of capitalizing on your local entertainment and attractions, then
you should consider exploring the BID program. Because of its flexibility, the
BID concept has proven interesting to a very wide variety of business interests
throughout the city. The LA BID Program, for your community, could quite
possibly mean Being In the Driver's seat.
No. Business improvements district assessments are not taxes. BID assessments are vehicles which convey a special benefit upon those who pay. While it is true that all affected parties in a given district must pay the assessment, it is important to remember that the BID was established though the consent of a majority of those involved. The city does not attempt to establish a BID where there is not a substantial amount of support from the community. Because the formation of a BID is primarily a community-driven project, the City serves as a facilitator in the process. The City is willing to help those communities who desire to help themselves. The term "public-private partnership" in this case is not a misnomer. Rather, it indicates the positive spirit of the program and the attitude of the City.