Wednesday, June 15, 2011

Five Reasons Why Business Improvement Districts are Good Public Policy

These days, it seems that Business Improvement Districts (BIDs) are increasingly under attack. While I can only speak anecdotally, I continue to come across communities facing challenges to BID formation, challenges that would have seemed unlikely just a few years ago.

It stands to reason that in the current economic climate, BID formation inevitably slows down as property and business owners express justifiable concern about their bottom line. Yet a wholesale rejection of BIDs is a short-sighted effort to staunch losses that only results in a deeper hole by reducing the resources available to stabilize and enhance downtown communities. Like any asset, downtown requires on-going improvements and investments to compete against newer, shinier shopping environments. Moreover, consumers continue to keep close track of discretionary spending, which means more competition for fewer dollars. It is precisely this cut-throat competitive environment that makes BIDs an extremely valuable tool for downtown in their efforts to attract shoppers.

Here are five reasons why BIDs remain a good option for downtown revitalization.

1. BIDs leverage additional monies for commercial district revitalization. BID staff become advocates for their districts, able to make compelling arguments on behalf of business and property owners for additional investment. They often set the stage for investment by doing the planning and consensus building often needed to attract public funding. 'Shovel-ready' projects that have public support are in the best position to attract limited public dollars. BIDs can also submit grant proposals, and the BID structure allows for the receipt and distribution of grant dollars that otherwise might go to other communities.

2. BIDs provide a mechanism for collaboration by local merchants. BIDs provide a valuable forum for merchants and property owners to discuss ways to work together more closely for their mutual benefit. Collaborative marketing and district-wide events are mainstays of many  BID programs - and good marketing can only happen with the input of local business owners.

3. BIDs help stabilize and can help increase property values. And don't just take my word for it. In 2006, Philadelphia LISC and the William Penn foundation funded an econometric study of 265 commercial corridors in Philadelphia. The goal was to provide a quantifiable measure of the impact of various activities on the commercial district environment. The findings provide hard data to support the conclusion that BIDs are good for property values. What they found was that there was a consistent and strong relationship between real estate values and the formation of BIDs. In fact, a well managed corridor is a positive amenity, resulting in up to a 30% price premium for properties located within the district.

4. BIDs help drive overall retail sales for the district and retail sales growth for individual businesses. Another finding from the 2006 LISC/Penn study was the "strong relationship" between BIDs and retail sales for both the district and individual businesses as compared to districts without BIDs.

5. BIDs prevent the the free-rider syndrome. Downtowns are unlike single-owner shopping centers. In shopping centers, businesses pay Common Area Maintenance (CAM) charges for things like security, maintenance and upgrades overtime. This mandatory charge ensures that every beneficiary contributes contributes. As we know, many property owners, acting independently and in their own self-interest, often choose to forgo common contributions anticipating that their neighborhoods will pick up their slack - this is the quintessential 'free-rider' problem which can be avoided under the BID structure.

While BIDs are certainly not the panacea for all downtown ills, they provide a structure that is critical to both on-going management and accountability from all sectors. Even when times are bad - and perhaps particularly when times are bad - we cannot ignore the need for management and investment in our downtowns.


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