BUSINESS IMPROVEMENT DISTRICT

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WHAT IS A BUSINESS IMPROVEMENT DISTRICT (BID)?
WHAT ARE THE BENEFITS OF CREATING A BID?
HOW TO CREATE A BID?
WEB RESOURCES

WHAT IS A BUSINESS IMPROVEMENT DISTRICT (BID)?

A Business Improvement District is one widely accepted method to transform central business districts into vibrant, successful shopping areas. Specifically, a Business Improvement District is a publicly sanctioned, privately managed association that supplements public services to improve specific retail and commercial areas. BID associations are based upon a self-help doctrine, which provides for financing its multi-year operations through self-taxing mechanisms authorized by the municipality’s legislative body. Its purpose is to improve the business climate and economic vitality of downtown areas and represents a partnership between property owners and shopkeepers on one hand and the City Hall on the other.

BIDs originated in North America and are being used successfully in more than 400 American and 300 Canadian cities, as well as in the United Kingdom, South Africa and New Zealand. However, in Eastern Europe this concept is still quite new and has only been implemented in a few cities in Albania, Serbia, and Romania.

BIDs do what the city and the business community agree is important for improving the business climate and quality of life within the BID area and, in so doing, to attract residents to patronize the retail shops and commercial services. Among these activities may be the following:

1. Urban design: managing façade improvement and lighting programs, in cooperation with the city.
2. Capital improvements: working with the city to install pedestrian-friendly lighting and street furniture, including benches, kiosks and decorative garbage bins; planting and maintaining trees and seasonal flower displays; making infrastructure investments into water and sewage systems, gas, heating or telecommunication.
3. Parking and transportation management: improving public parking arrangements, maintaining bus shelters.
4. Maintenance: collecting garbage, removing litter and graffiti, washing sidewalks and shoveling snow, along with cutting grass and planting flowers in public places.
5. Public space regulation: managing sidewalk vending and street performances; providing for convenient vehicle loading and unloading.
6. Public safety: hiring of guards; agreement with state police concerning more often presence of policemen in the area; monitoring system.
7. Consumer marketing: producing festivals and events, coordinating sales promotions, producing maps and newsletters, improving signage and enhancing the BID’s image through advertising campaigns; agreeing to longer hours of store operations to accommodate needs of customers.

BIDs are distinguished by two factors: public financing and private management. However, the merchants and property owners are responsible for financing the operations of the BID organization, maintaining the improvements and managing ongoing promotion and marketing activities. The result is a permanent partnership between the city and its merchants and property owners.

The BID concept requires acceptance by property owners and merchants of a self-financing system, which must meet several tests critical to such acceptance and to the BID’s future success:

• The merchants’ and property owners’ voluntary contributions, in the form of special taxes or self-assessments, authorized by municipal legislation, in other cases in the form of membership fees, must ensure predictable multi-year revenues, which are adequate to address problems that cannot be solved quickly, and to attract competent professional staff.
• Taxes/assessments and fees must be related to the benefits received. There must be a general agreement among the shopkeepers and property owners that the services and physical improvements increase the value of commercial properties, improve business conditions and increase number of visitors and shoppers in the zone.
• Taxes/assessments and fees must be fair and affordable. All who benefits must share the costs. If all beneficiaries pay, the cost to each is typically small. Therefore the high share of BID members among business owners is required in case no self-assessment is possible.
• The BID financing system must result in the private business sector, with ongoing support from the city administration, being primarily responsible for the quality of the shopping district’s physical environment and its effective functioning, for marketing activities and appropriate maintenance.

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WHAT ARE THE BENEFITS OF CREATING A BID?

There is significant evidence from hundreds of cities indicating that BIDs have had great success in creating economically viable, attractive downtown shopping areas that attract and retain businesses, generate jobs and improve the quality of life for those who use the districts. Some specific benefits of BIDs include:

• Merchants, shopkeepers and service providers will be able to set and implement their own priorities. They will benefit most directly from BID operations since all BID activities are directed towards increasing retail and commercial activities within the zone by making the area more attractive, convenient, and desirable as a shopping destination. Increased business activity will make it possible for the stores to increase the quality and quantity of the merchandise they sell and to increase their profits.
• Property owners will see increased value of their properties, which will follow from the higher level of retail and commercial activity within the downtown area. This will occur whether the buildings are occupied by shopkeepers, who will be able to pay higher rents, or as apartment buildings, whose tenants will want to live in a clean, attractive, dynamic part of the city.
• Urban dwellers will enjoy a pleasant, safe, and easily accessible environment with a wide choice of shops and facilities, which will encourage them to remain residents within the city.
• Public officials will be seen as being concerned about improving the quality of life and providing safe, clean, pleasant shopping areas – all of which creates positive political perceptions.
• The city will become more attractive and competitive, thus encouraging non-residents and tourists to visit and spend their money in the city, as well as Ukrainian and foreign investors to be more favorably inclined towards considering the city for job-creating investments.

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HOW TO CREATE A BID?

A. Plan

1. Organize the process

When the city and its businesses decide to establish a BID zone, it must first identify a designated BID area and specify its boundaries. There are several principles to be taken into consideration by the city when identifying the boundaries. The area must be zoned for commercial or light industrial use. It must be a recognized commercial area with retail on the ground floor and, possibly, residential units above and may include residential houses with commercial overlay. It also should include some space for relaxation (benches, gardens). However, the BID zone should not be created where the area is more residential than commercial. The zone must be large enough to constitute a critical mass of merchants and property owners (usually 100 – 150), but small enough to enable every member to see results of common work and be seen from outside as a unified shopping destination. The BID zone should have “walking friendly” dimensions since it is always easier to enlarge the BID area than to downsize it.

The next step is for community leaders from the private and public sectors to be identified and organized into a Steering Committee, which will be responsible for creating the BID, using a strategic planning process to address all organizational issues. The process is always easier when well-respected business people are involved in preparatory work from the very beginning, thus building public credibility and support for a new and, in many ways, revolutionary idea. The strategic planning process will develop the consensus necessary to create the BID and should be facilitated by trained professionals retained by the municipality for this purpose.

The Steering Committee should consist of between 10 and 15 leaders, mostly from the private business sector operating within the BID zone, and including a few key public officials, aand citizens. Its role is to complete all work necessary for the BID’s founding, including drafting of the statute of the newly formed association, agreement on financing mechanisms and principles, development of the strategic plan, including action plans for capital improvements and marketing and maintenance, and selling the BID idea to other stakeholders and future members.

The Steering Committee will also determine the basis of BID membership. That is whether members will be individuals or/and legal entities, and whether membership will be limited to merchants and property owners in the BID area or whether local government representatives and state institutions may also participate. In close cooperation with mayor and other local government representatives, the Steering Committee will negotiate the extent of local government support for BID, including financial contributions for capital improvements, organizational help and political support.

2. Conduct a situational analysis

Compiling a database of information on all properties within the BID zone is a task to be undertaken at the very beginning of the process. The following information should be available:

• Number and area of houses
• Number and type of businesses
• Ownership structure
• Assessed taxes and communal fees

There are also some basic questions to be answered during the analytical period, e.g.: Are there any special problems in the area that discourage its development as a retail and commercial destination? What is the state of buildings in the BID zone? What kind of public transportation and parking are available within the zone? What is the quality and frequency of municipal services – street cleaning, snow removal, waste disposal, among others?

At the same time two surveys should be conducted in the proposed BID area to provide information and insights to be used in the BID strategic planning process:

• survey of existing and potential shoppers to determine interest, motivations and perceptions of citizens about the BID area as a shopping destination, and
• survey of business owners and entrepreneurs to determine problems, attitudes and further plans of those who invest, employ people and run businesses in the BID.

These surveys will help the Steering Committee and, eventually, the BID Association to identify steps to be taken to make the BID area more attractive for visitors.

This analytical phase of the strategic planning process will be completed with a SWOT analysis, which will identify the competitive strengths and weaknesses of the BID zone and review the external factors that will influence its growth and development.

3. Generate public interest and support

One of the main goals of the Steering Committee is to promote the BID idea and generate interest and active support from all shopkeepers and property owners within the BID zone. To accomplish this, public meetings will be organized approximately once a month so entrepreneurs from the BID area will be informed about progress and invited to participate in preparatory activities. This participation may include membership on task forces, which will create the action plans for the BID operations. Information will be provided regularly to the media, including local and regional TV and radio, so that information about the BID idea and the creation of the new BID organization will appear regularly.

An information sheet discussing the purpose of the BID, its area of operation and its proposed budget and services should be circulated to all shopkeepers, property owners and residents. Special attention should be paid to any merchants or owners, who express opposition to the BID proposition. They should be brought into the process and, if possible, persuaded to help shape the program to meet their needs and thus, overcome their objections.

4. Develop Action Plans

The Steering Committee will create two task forces that include merchants, property owners within the BID area and municipal representatives to prepare two consensus-based, action plans for the first year of BID operations:

1. capital improvement (“hardware”) plan; and
2. maintenance and marketing (“software”) plan.

The task forces will develop their action plans in three phases. First, broad goals defining the desired future of the BID will be developed. Second, specific objectives or projects will be agreed upon, which, when implemented, will enable the BID to reach its goals. In the third phase, the task forces will develop tasks, which are the actions that must be completed to achieve the goals and objectives. These tasks will assign responsibilities for carrying them out, determine time frames and identify needed resources. This will require careful analysis of the availability of required human and financial resources and agreement on a maintenance plan, which will identify costs necessary for cleaning, greenery maintenance, snow removal, etc., so that decisions on members’ fees can be made.

a. Capital improvement (“hardware”) plan

Physical improvements are needed in all BID zones and are most welcome. They make the area more attractive and this, in turn, attracts more shoppers and visitors. It is, therefore, important that Ukrainian municipalities offer to BID Steering Committees commitments to pay for needed physical improvements as part of the organizing activities.

There are two basic approaches to physical improvements:

1. Make quick changes and improvements where positive results are visible within a relatively short time frame (a few months). It is fairly easy to agree on a new look for the street and reconstruct or buy new street furniture such as street and sidewalk lighting, light poles, flag poles, directional and identification signage, banners, storefronts, information kiosks, bus stop shelters, street identification, parking facilities and telephone kiosks, benches, waste bins and flower beds. A unified look will be appreciated and will also help to market the BID area.
2. Make more comprehensive investments, usually infrastructure, where the results will be visible in a longer term. Ukrainian cities usually need huge investments into water and sewage lines, gas, heating telecommunication or parking. However, these works require long-term planning, often starting with a new physical master plan or at least regulation plan for the central zone. This will be followed by an architectonic study and technical project. At the same time financial resources will be collected. Since costs of such project usually exceed possibilities of the City, it is necessary to put together a pool of donors. Utility companies are logically among those most involved; other funds may come from the state or foreign donor agencies, local businesses and residents themselves. Public investment should always be used to leverage larger private investments.

b. Maintenance and marketing (“software”) plan

A core responsibility of all BID’s is to provide supplemental services beyond those provided by the municipality in the areas of cleanliness, security and marketing and promotion. BIDs tend to be innovative service providers. Their programs fit into three general categories: clean, safe, and attractive, yet BIDs create unique programs to respond directly to local needs.

BIDs maintain their areas by collecting garbage; removing litters and graffiti, cleaning sidewalks, removing snow; trimming trees, and maintaining the plantings and landscape.

To promote safety, BIDs develop and support such crime prevention programs such as supplementary security guards, buying and installing electronic security systems, providing paid or volunteer security patrols, installing closed circuit television surveillance cameras.

BIDs originate projects and services to make commercial areas more attractive to visitors and residents. These range from executing marketing campaigns to implementing comprehensive streetscape improvement programs. Cooperative advertising, BID zone promotions and special events normally provided by a municipality are typical BID programs. BIDs often establish a special identity to be used in the promotion of the commercial area. For example, many BIDs hang colorful banners and flags throughout the district and build specific entrances into the zone, to bring attention to them and publicize their activities. Further, to create a positive image and cohesive identity, BIDs engage in self-promotion through such image advertising and public relations activities as designing organizational logos and web sites, publishing newsletters, and conducting safety fairs.

A marketing plan, including cultural and social events, special sales and discounts, will be prepared for the first year. The BID marketing plan will likely include various sales promotion techniques, such as: sales weekdays, happy hours, sales reduction coupons, etc. At the same time it usually involves many cultural, social and sports activities and events attracting new visitors and shoppers into the zone.

BIDs may also serve as units attracting new investors into the respective areas. This is especially important everywhere where vacant spaces (shops, offices) appear. BID can then use all known effective techniques to attract new tenants/owners to open their businesses within the zone starting with advertising, direct marketing, active promotion, participation at real estate fairs, etc.

5. Identify the sources for the BID Financing

BID operations are financed by BID assessments, which are special fees paid by business and property owners within the district. The amount paid by each commercial property owner is determined by a formula that each BID creates for its district during the formation process. The BID association should agree whether the membership fees will be based on business turnover, business (selling) space, number of employees or other criteria or whether it will be the same for each member.

Local government units can indirectly finance the BID by financing projects identified by the Steering Committee in the area, but only if they are related to public property.  Another important source of financing consists of funds attracted as grants: domestic, EU, USAID etc. In order to attract these funds and run different fund-raising events, a good proposal writing and fund-raising capacity has to be developed within the BID association.

B. Institutionalize the BID

To complete the process of creating and institutionalizing the BID, the Steering Committee will   organize the founding meeting of BID. The agenda will include:

• Preparation of Statute by Steering Committee with approval of a lawyer
• Election of the Board of Directors (number and system of representation to be   discussed at public meeting)
• Adoption of Activities Plan (prepared by task force) and budget (prepared by Steering Committee).

The BID Board will then be responsible for completing registration and other legal requirements. It will also be responsible for developing all BID members consensus-based self-assessment procedures, including assessment collection and remittance to BID.

The BID can register as a not-for-profit association of legal and/or natural persons. The BID Association can have as members only the legal entities in the area (businesses, institutions, organizations, parties etc.), or only the natural persons (business owners, residents, property owners or tenants) in the area, or a mixture of both legal and natural persons. The Statute of the Association will indicate the type of the association, the admission and monthly fee to be paid by the members, the number of votes of each type of members, the length of service as a Board member etc.

C. Operate the BID

The BID is managed by a Board of Directors (or Management Board), which will act as the “management entity” required by statute or the statute may designate a separate management entity to receive the funds and implement the improvement plan. The local municipality may establish rules and regulations governing the membership and powers of the BID Board of Directors. Typically BIDs provide for representation of property owners, retailers, residents, and corporations on their Board of Directors. Many BIDs include municipal officials or their appointees as Board members to strengthen communication and cooperation between the municipality and the BID. The number of Board members varies depending on the size of the district and the number of the members, but generally ranges between 5 and 20. Boards are usually elected by the BID membership, with a number of seats reserved for municipal representatives.

After the BID has been officially founded, the Board of Directors will do the following: hire an Executive Director, locate suitable office space, and enter into a contract with the city concerning financing. Implementation of the Action Plans can then begin.

D. Legal Basis for Establishing Business Improvement Districts in Ukrainian Cities

Business Improvement District is a new notion for the Ukrainian law and legislation. At the same time, the existing Ukrainian legislation includes provisions, which allow the Ukrainian cities to establish Business Improvement Districts in certain parts of the city and create relevant community institutions for the improvement of business climate and economic vitality of both central and other city districts based on the principle of cooperation between private businesses and the local government.

Based on the analysis of the existing Ukrainian laws on city land use issues, urban planning and development, local self-government and city beautification, self-organization bodies, environment protection, etc., it is possible to identify the major legal framework for local governments and business entities in order to establish and operate a city Business Improvement Districts:

• create a Business Improvement District in compliance with the planning documentation, which is developed and appropriately authorized by the city council;
• utilize a zoning plan to deal with the issues of establishing a Business Improvement District on the city’s territory;
• self-organization in establishing and running a Business Improvement District;
• involvement of physical and legal entities in establishing and running a Business Improvement District;
• finance and organizational partnership between private real estate owners and the city authorities;
• compliance with law;
• ensure beautification in the Business Improvement District;
• self-organization of physical and legal entities for establishing a Business Improvement District;
• self-taxing of physical and legal entities for the purpose of the Business Improvement District;
• openness;
• elect self-organization bodies on the territory of the Business Improvement District;
• financial autonomy of the self-organization bodies on the territory of the Business Improvement District.

In compliance with the requirements of the existing Ukrainian legislation, establishing a Business Improvement District provides for fulfillment of a complex of organizational, planning, legal, financial and other activities, implementation of which anticipates certain consistency of actions of physical and legal entities, management bodies of the Business Improvement District and other stakeholders.

 With this regard, several consecutive stages can be determined:

1. In accordance with the Master Plan and other urban development documentation, local government bodies identify the place, where the Business Improvement District will be established.
2. Should the lack such documentation, then it has to develop and approved in the order established by law.
3. Identify the leaders and create self-organization bodies on the territory of the Business Improvement District.
4. In compliance with law, establish a system of local taxes and fees and the procedure for their collection on the territory of the Business Improvement District.
5. Approve by the city council the city beautification rules, including the on the territory of the Business Improvement District.
6. Organization and holding the meeting of the self-organization body on the territory of the Business Improvement District.
7. Create and register the self-organization body on the territory of the Business Improvement District.
8. Conclude an agreement between the city government and private entities on utilization of funding and material resources of legal and physical entities for the purpose of beautification of the territory of the Business Improvement District.

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WEB RESOURCES (In English)

http://www.grasp.ro/downloads/produse/en/Local Economic Development/Business Improvement Districts.doc

The website of the USAID/Romania GRASP project, implemented by Development Alternatives Inc. and The Berman Group. The site contains a publication titled Business Improvement Districts – A Guide to Establishing and Operating a BID in Romania. This guide is the primary information source for the above BID tool and includes case studies from the United States, Serbia, and Romania as well as sample Statutes for a BID Association.

http://www.planning.unc.edu/courses/261/actman/bidweb1.html

The website for the University of North Carolina at Chapel Hill urban planning course containing a section on Business Improvement Districts: A Practical Tool for the Revitalization of Downtown Neighborhoods. It provides BID examples and many relevant links and resources.

http://web.mit.edu/11.204/www/webportfolio/BID/

The website for a BID project at the Massachusetts Institute of Technology. It includes an extensive list of BID Web Sites.

http://www.businessofgovernment.org/pdfs/Mitchell.pdf

The website of The PriceWaterhouseCoopers Endowment for the Business of Government containing a report titled Business Improvement Districts and Innovative Service Delivery written by Jerry Mitchell, a professor at the School of Public Affairs at the City University of New York.

http://www.nyc.gov/html/sbs/html/bid.html

The website of the New York City Department of Small Business Services containing information of BIDs in New York City including a step-by-step guide of how to start a BID, a sample BID brochure, a BID needs survey of potential shoppers, and a best practices brochure.

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