By Brad Segal and Kristin
Lowell, California BID Network
Business Improvement Districts (BIDs) allow business districts to establish an assessment that generates revenue to support enhanced services including maintenance, security, marketing and economic development. Two types of BID mechanisms exist under California law. One, the “Business Improvement Area” (BIA), has been used widely in the State and provides for an assessment on business licenses. The newer “property-based business improvement district” (PBID) provides for an assessment on commercial property. This article looks at PBIDs, their track record and untapped potential to improve business districts throughout California.
Property-Based Business Improvement Districts (PBID) are allowing California business owners to control their own destinies. A PBID creates a self-imposed, self-governed assessment on property within a defined geographic district. Proceeds from this assessment are used to provide services that specifically benefit those properties in the district. These additional services are intended to improve the overall viability of a business district.
Prior to 1994, business districts had some success providing additional services, such as marketing and streetscaping through Business Improvement Areas (BIA), in which funding for such amenities was provided by an additional fee added to annual business licenses. Due to the limited income generated through the business license fee, a BIA typically has a very narrow scope of services.
In California, the Property and Business District Law of 1994 paved the way for a whole new generation of PBID financing that could eventually replace the approximately 150 existing BIAs. Key provisions of this law include:
Allows for a wide range of service options, including security, maintenance, marketing, economic development, special events, etc.
Creates an advisory committee of property and business owners ensuring that a district is governed by those who pay.
Encourages services to be delivered by private non-profit organizations, as opposed to government.
Requires petition support from private property owners paying more than 50% of proposed property assessments.
Requires a cap on assessments and a maximum 5-year district life, requiring a new petition process to renew.
While PBIDs are relatively new to California, they have been used extensively throughout the rest of the U.S. and Canada over the past 25 years. The International Downtown Association estimates that 1,200 PBIDs currently exist in North America. Why was this concept late in coming to California? First, California generally enjoyed a robust economy until the early 1990s – we simply didn’t have the economic conditions to warrant an appetite for private sector payment of supplemental services. Secondly, the state’s redevelopment agencies have traditionally played a strong role in business district enhancement programs. This pattern has stifled private sector initiative to lead development efforts. Similar to other parts of the country, municipal cutbacks in basic services are now leading businesses to look for new ways to provide enhanced maintenance, security and marketing. Finally, many communities are finding that enhanced services through a PBID are critical to keeping downtowns and older business districts competitive with suburban shopping centers, office parks and big box retail.
Why form a PBID? The new PBIDs provide numerous advantages over BIAs:
q PBIDs engage property owners – stakeholders that tend to have a long-term investment and community improvement goals;
q PBIDs are administered more efficiently with a smaller and more stable base of ratepayers;
q PBIDs raise from 8 to 12 times more revenue than business-based BIAs;
q PBIDs can have a term of 5 years as opposed to one year for business-based BIAs, and pending state legislation may extend renewal terms to 10 years.
q PBIDs can offer different levels of services by geographic benefit zones;
q The PBID petition and 218 mail ballot processes require majority support from property owners – this provision compels greater involvement, creates a strong mandate for new services and is far less vulnerable to legal challenge.
Many California communities are exploring the formation of PBIDs to most effectively manage and market their downtown businesses. Since 1995, nearly 60 PBIDs have been formed in business districts throughout the State. A few of these communities are:
Urban Downtowns -- Downtown Sacramento: The first downtown PBID in California, this $1.4 million district provides annual funding for the Downtown Sacramento Partnership. Initiatives financed by the PBID include the Downtown Guides, a sidewalk maintenance program that includes district-wide power washing and an aggressive investor marketing program to attract new businesses to the central business district. Downtown Sacramento property owners overwhelmingly approved the first 5-year renewal of the PBID in 2000.
Suburban Downtowns – Downtown Chula Vista: Chula Vista is the latest California downtown to form a PBID, with approval from its City Council this past July. The new $310,000 PBID will finance economic development, marketing and enhanced maintenance services.
Neighborhood Business Districts – Oakland’s Lakeshore Avenue: This 3-block commercial business district is home to a PBID that supports a previously under-funded business association and capitalizes marketing, security and maintenance initiatives.
Suburban Commercial Corridors – Van Nuys Boulevard in Los Angeles: Serving a commercial corridor with a high concentration of automobile dealerships, the Van Nuys Boulevard Auto Row PBID provides an annual budget of nearly $300,000 for image enhancement programs, including marketing, signage and maintenance.
Although many districts have started the formation process only a fraction have been completed. This is due in large part to the limited availability of expertise to guide the formation process and communities launching the effort before thoroughly exploring their readiness to begin. Not every business community is a prime candidate for a PBID. Before a business district embarks on the process of forming a PBID, generally the following elements must be in place:
q Private sector leadership: PBIDs are most successful and effective when the process is driven by private sector leaders within a business district who will be affected by the assessment. This private sector leadership can either exist through a business organization or a less formal network of key stakeholders.
q Supportive local government: Demonstrating support by your local government is a delicate political game; their support, however, is essential. The cities of Los Angeles and Sacramento are examples of cities that have been extremely supportive of PBIDs as a citywide policy.
q Staff and financial resources: Formation of a PBID is a labor-intensive process that, depending upon the business district, can take from 9-18 months. Financial resources are necessary for computer hardware and software, marketing materials, consultants, legal counsel and unforeseen expenses. Staff support is required to compile property and business owner databases, create marketing materials, manage consultants, and coordinate volunteers.
q Public/private partnership. The success of a PBID formation effort depends largely on a viable public/private partnership. This partnership should aim initially to include all interests in the business district, and be driven by the private sector with the supportive local government visibly at the table.
The bottom line on PBIDs is that they can effectively complement a business district revitalization program, but they are not a panacea in and of themselves. A PBID provides funds to manage the environment of a business district. It can help stabilize a deteriorating market or guide a strong market. A PBID will not, however, change the underlying dynamics of the marketplace. It should be viewed as a market stabilizer or sweetener that enables the private sector to take a stronger role in the development of business districts.