Business Improvement Districts and Contemporary Local Governance

Historical Progression of Business Improvement Districts

The establishment of BIDs dates back to 1970, when the first BID was implemented in Toronto, Ontario, Canada (Houstoun 2003). Since 1970, this number has risen to over 800 in the United States and Canada (Morçöl et al. 2017). More recently, the improvement district model has spread to cities across the globe in sovereign states that include the United Kingdom, Germany, Sweden, South Africa, and Australia (Peyroux, Pütz, and Glasze 2012). In the United States, socioeconomic changes taking place in cities beginning in the 1980s were paramount in shaping the future trajectory of BIDs in urban spaces. Increasing patterns of suburbanization and manufacturing decline during the 1980s and 1990s resulted in the deterioration of urban neighborhoods throughout the United States. As residents and jobs began to leave cities, tax revenue to support public services begin to diminish as well. Shifting demographics and federal economic policies that disintegrated funding for urban areas resulted in cities searching for a new model for urban management.

As a result of the changing demographic and economic factors facing local government, improvement districts became a natural option for many urban communities to support during this time. One of the primary aspects of BIDs that allowed them to attract community supporters was the ability to address the particular needs of distinct neighborhoods and communities within cities. Particularly in larger cities, BIDs allow commercial areas outside of the central business district to articulate the needs of property owners and tailor organizational efforts accordingly (Briffault 1999). This flexibility created an opportunity for urban neighborhoods to design and implement supplementary services for public spaces more expediently than previously possible (Mallett 1994).

Improvement districts are also part of a larger movement in modern local governance. Citizen demand for innovative approaches to community development requires local government to redevelop the structure of public management (Hambleton 2000). The challenges of a changing global economic structure are requiring local government to respond to the shortcomings in federal ability to address localized issues by incorporating public and private actors into matters of social and economic development (Rhodes 1997). BIDs are a form of public-private partnership that follows this methodological and theoretical transfer from traditional urban management to contemporary urban management that values innovation and expedient service delivery.

Another driving element of this shift in managing communities and urban spaces focuses on economic development and job creation, in addition to public service delivery (Harvey 1989). The ability for BIDs to provide an increased revenue stream for community development projects and services, while bypassing many of the regulation placed on the public sector, created an attractive model following the loss of jobs and tax revenue for many urban areas. Creative entrepreneurship, which has increasingly driven the organizational goals of improvement districts (Mitchell 2009), has been utilized within modern public-private partnerships. While there has always been an inherent possibility of falling short of benchmarks during the development and implementation of public policy measures, the idea of innovative prospects for revitalizing communities by blurring the lines between the public and private sectors is a primary example of how BIDs are bridging the gap between the roles of public and private actors to address changes in towns and cities in recent decades.

The increasingly competitive nature of development in urban areas requires novel forms of public management and local governance to address the distinct needs of residents and business owners (Lloyd and Peel 2008). In Atlanta, the improvement district model has transformed transportation networks by restructuring roadways to reduce traffic congestion (Ewoh and Zimmerman 2010) while in Los Angeles improvement districts have augmented public spaces through the provision of additional security and sanitation services (MacDonald, Stokes, and Bluthenthal 2010). Many of these changes have been in response to the distinct needs of individual communities, and data from New York City has exhibited the form, function, and operating practices of BIDs fulfill different function dependent on their relative size (Gross 2005).

In New York City, the Grand Central Partnership business improvement district in Midtown, Manhattan has an annual assessment budget of nearly $13 million, and represents 826 individual businesses. The Grand Central Business Improvement District is one of the largest improvement districts in the world, and covers an area primarily comprised of high-rise, multi-family housing complexes, as well as high-end business and real estate that includes the Metlife Building, the Chrysler Building, and Grand Central Terminal (Grand Central Partnership Business Improvement District 2020). In contrast, the 180th Street Business Improvement District in Jamaica, Queens has an annual assessment budget of approximately $75,000 and represents 27 businesses. The 180th Street Business Improvement District focuses upon co-existing with the residential community, which is comprised primarily of single-family homes, and funding is primarily allocated toward reconstructing area roads, improving technological access for district non-profits, and reducing graffiti on area buildings (180th Street Business Improvement District 2020).

While interlacing the roles of the public and private sectors has provided an innovative aspect of community development and economic revitalization, scholars must address the pertinent function that improvement districts serve in the changing landscape of public management. Evaluating the developing legal and political authority of BIDs to this point is an important element for analyzing the trajectory of formal roles that districts carry within communities. As improvement districts have expanded to cities throughout the United States, state laws and local policies have created divergent organizational structures from one state to another (Morçöl and Wolf 2010). Thus far, there has been little consensus on the specific role BIDs should play within the greater communities in which they are established, the accountability they have to community residents, and how to measure standards of transparency in their organizational decisions.

The geographic expansion of improvement districts in recent years has reflected the changing urban landscape and necessities for managing post-industrial cities. Over the span of five decades BIDs have developed from a concept into a globalized framework for achieving community development and economic revitalization in hundreds of cities. However, as BIDs continue to propagate across urban spaces community initiatives, laws, and public policy measures will need to continue to change along with BIDs to sustainably manage these public-private partnerships. In addition to the requisite initiatives, laws, and policies necessitated to follow the development of improvement district, these organizations have also required scholars to conceptualize the implications of BIDs on wide array of areas that include public management, local governance, economic revitalization, and community development. Improvement districts were originally established to address the dynamic needs of towns and cities, and thus far have continually progressed to shift away from traditional public management and reflect the growing confidence in public-private partnerships.

Business Improvement Districts: Boost or Barrier?

Business Improvement Districts have quickly become a central aspect to urban development and economic revitalization (Flinders 2005; Unger 2016). As a result, BIDs are the cornerstone of contemporary public-private partnerships taking place in urban spaces. This proliferation has led to BIDs receiving both support and praise among scholars. It has been argued that BIDs have helped efficiently deliver necessary public services to communities, respond to the specific needs of business owners and resident, and reduce crime in public spaces (Brooks 2008; P. Cook and MacDonald 2011; Hochleutner 2003; Mitchell 2001). However, some scholars also contend that BIDs limit democratic accountability, reduce public sector transparency, restrain citizens’ social capital, and increase socioeconomic inequalities within communities (Gorodnick 2000; Kennedy 1996; Lavery 1995; Lewis 2010).

The relative autonomy and efficiency with which BIDs are able to operate is a major aspect of their appeal for many supporters (Briffault 1999). By operating as private entities BIDs are able to bypass many of the bureaucratic regulations that local government officials are required to abide by, allowing BIDs to carry out projects more expediently. In terms of increasing community property values to provide financial returns to property owners and residents, this efficiency on the parts of improvement districts is particularly attractive (Pack 1992; Morçöl et al. 2017). However, it has also been posited that this efficiency comes at the expense of reducing democratic accountability to residents of urban areas (Zukin 1996). As opposed to the one person, one vote framework of electing local government officials, BIDs can be insulated from the residents of district to a greater extent since many are led by an organizationally appointed or elected Board of Directors.

Proponents also point to the firm financial footing on which BIDs operate (Siegel 1992). Improvement districts are able to create a consistent revenue stream that is similar to local government property taxes (Morçöl and Wolf 2010). The assessment revenue obtained by the BIDs are able to provide supplementary funding to local taxes, allowing communities to provide additional services and financing for development projects. Other revenue sources for improvement districts include programmed events, fundraising, contracting, parking, and grants. In New York City, over one quarter of improvement district revenue comes from these sources annually, on average (“NYC Business Improvement District Trends Report” 2020). During fiscal year 2018, the Coconut Grove improvement district, located just south of downtown Miami, received over $733,000 in revenue from parking fees, comprising over 40% of the district’s revenue (“Coconut Grove Business Improvement District Annual Report” 2018). The Downtown DC business improvement district in Washington, DC received $2.2 million in federal grant funding and contributions in 2018 to improve resources to reduce homelessness (Downtown DC Business Improvement District 2018).

As BIDs have evolved, scholars have acknowledged that improvement districts have been able to successfully regenerate and improve urban areas, while simultaneously illuminating how these districts can be seen as a concern by residents and community groups for shifting responsibilities of local government to private organizations (Steel and Symes 2005). It has been widely discussed how BIDs reflect a contemporary shift toward the privatization of many responsibilities in local governance previously seen as the authority of public actors (I. Cook 2009; Morçöl and Zimmermann 2006; Peyroux, Pütz, and Glasze 2012; Unger 2016; Ward 2007). Despite scholars sharing similar observations pertaining to the shifts in local governance that improvement districts reflect, there is disagreement surrounding whether this move toward certain aspects of privatization is a net positive or negative for communities, as well as how to conceptualize BIDs as actors in public management that occupy both the public and private sector (Morçöl and Zimmermann 2006)

The organizational independence through which BIDs are able operate has been argued to demonstrate the success of public-private partnerships and institutional innovation (Briffault 2010). Mitchell (2009) has posited that improvement districts achieve an important objective in public management by specifically filling the gaps between the public and private sectors by accomplishing distinctive tasks that each sector could not achieve on their own. This is supported by the Grossman’s (2008) assertion that improvement districts are an encouraging sign of creative entrepreneurship and inventive management in contemporary cities.

Research carried out by Caruso and Weber (2006) contrasts other scholars’ conclusions supporting the accountability and innovation that BIDs provide by finding that residents and local government officials have minimal oversight of BIDs, while pointing out that improvement districts are able to use public funds to pursue private agendas. MacDonald et al. (2013) also concluded that BIDs have the ability to act without the full consideration of resident interests as a result of being neither wholly private nor public entities. Lewis (2010) observed that BIDs can be successful in promoting urban revitalization, however they concurrently pose concerns that include intensifying socioeconomic and spatial inequalities, weakening municipal government, and restricting democratic accountability. It has also been shown that there is particular difficulty establishing BIDs in economically challenged areas and neighborhoods with large immigrant populations (Lee 2016), reflecting how wealthier neighborhoods may be at a particular advantage for successfully implementing the BID model.

Notably, a major point of contention pertaining to BIDs has been discussion surrounding issues of accountability. It has been difficult for scholars to move toward a consensus on the issue as a result of divergent sentiment on how to define and measure accountability. Hochleutner (2003) argues that the modest geographic area in which BIDs operate limits concerns surrounding their accountability while oversight by local government officials and unique organizational structure make them sufficiently accountable to business owners, property owners, and residents, and also points out how improvement districts are more accountable to residents than other alternatives for governing sub-local districts. However, Schaller and Modan (2005) point out that board members that lead BIDs are purposefully insulated from public accountability and democratic channels of accountability since they cannot be voted out of office by community residents. Mitchell (2001) contends that even though residents are unable to democratically elect BID boards, the property owners and representatives that comprise the boards ultimately seek to achieve the same goals for development as residents, offsetting the lack of democratic selection for board members.

Morçöl and Wolf (2010) discuss the difficulties of pinning down exactly who BIDs are accountable to, pointing out that local government, residents, business owners, visitors, and the homeless are all groups to which improvement districts could theoretically be held accountable. This illuminates the reality that scholars seeking to address the same issue of accountability pertaining to BIDs, can arrive at divergent conclusions as a result of to whom they argue improvement districts should be accountable and what their responsibilities should encompass. The concept of accountability is also difficult as a result of the public and private roles BIDs play in communities, since they are legally permitted to operate under state and local laws and generally provide annual reports to local governments, but are simultaneously insulated from many community members and wield certain governmental authority, despite operating as quasi-governmental entities.

Many scholars have been proponents of the shifting popularity toward BIDs as engines for urban development and revitalization, while filling a needed gap between the public and private sectors (Grossman 2008; Hochleutner 2003; Justice and Goldsmith 2006; Mitchell 2009). In addition to this, it has been relatively unchallenged that BIDs are can act more efficiently than local government at times and provide additional services that communities would not otherwise receive, with many studies that point to negative impacts of BIDs still finding that they are able to augment community services, at least to a limited extent (Lloyd et al. 2003; Pack 1992; Steel and Symes 2005). However, many scholars have pointed out that the benefits provided by BIDs are either limited or create greater issues for communities such as threatening democratic accountability, exacerbating socioeconomic inequalities, reducing residents’ social capital, and privatization services that should be the responsibility of local governments (Garodnick 2000; Kennedy 1996; Lavery 1995; Lewis 2010; Steel and Symes 2005). Overall, research to this point generally reflects that BIDs have the ability to augment public service delivery, reduce crime, and provide economic revitalization in urban communities, however these outcomes have the possibility of coming at the expense of reducing democratic accountability and transparency, limiting residents’ social capital, and contributing to economic inequality.

Conclusions and Future Implications

Improvement districts have become a prolific aspect of public management in towns and cities since the 1980s. As BIDs extend to cities not only throughout the United States, but across the world, they will require scholars to continue analyzing the implications of BIDs on wide array of areas that include public management, local governance, economic revitalization, and urban development. The rising prominence of BIDs has drawn debate among scholars surrounding their influence on urban neighborhoods and local government. Thus far, research has remained mixed in its analysis of improvement districts. BIDs have received praise for inducing innovative thinking into public management, filling a needed gap between the public and private sectors in community development, augmenting public service delivery, reducing crime, and revitalizing economic conditions. Alternatively, improvement districts have been criticized from the outcomes of other studies for contributing to social and economic inequality, reducing democratic accountability, transparency and residents’ social capital, and privatizing public services.

Based on the current body of research, it appears that improvement districts are able to provide additional services that local governments would otherwise be unable to administer, such as additional sanitation and security measures, as well as achieving economic growth for certain segments of the community, particularly commercial property owners. However, it is also evident that these districts are not a magic bullet for all communities and areas that are most in need of community development and economic revitalization are likely to have smaller budgets and less political leverage than larger, wealthier districts. Additionally, it is important to note that BIDs will require a new set of standards for analysis and measurement since they occupy a space placed distinctly the public and private sectors. Future research must focus specifically on four key aspects pertaining to BIDs, which includes discerning to whom districts should be accountable, what standards should be utilized to measure the performance of improvement districts, the extent of formal license improvement districts should have in public management, and determining the qualities of communities that are best served by improvement districts.

This paper discussed the difficulties scholars reach when attempting to address what constitutes accountability and to whom BID should be accountable. Communities are comprised of various groups, which at times have divergent interests and distinct needs. BIDs provide a range of services and hold varying degrees of governmental authority, but their place between the public and private sectors contributes difficulty in terms of determining accountability. Public actors are designed to be accountable to the electorate, which encompasses each person within a given jurisdiction they represent, while private actors are designed to be accountable in terms of their bottom line (Mulgan 2000). Determination of to whom BIDs should be accountable will both assist in determining the role of BIDs in communities, as well as they place in the spectrum between the public and private sectors.

Discerning to whom BIDs should be accountable will also assist in developing accurate standards for performance measurement. Studies pertaining to BIDs have measured their effect on issues such as crime (Hoyt 2005; Macdonald et al. 2013), property values (Ellen et al. 2007), and tourism (Ratcliffe and Flanagan 2004), however if scholars, practitioners, and policy makers are unable to reach consensus on who BIDs should be accountable to we will be unable to determine if they are sufficiently and successfully serving those they are designed to benefit. Since BIDs are authorized under state law in the United States, organization structures and legal framework for districts differ in cities dependent on the state in which they are established. This can contribute to the difficulty for scholars to analyze the extent to which BIDs hold formal authority in public spaces. Today, analysis of the formal authority that improvement districts carry in communities is primarily confined within individual cities and states. While improvement districts across the United States are not uniform in their structure and the sub-national laws which apply to them, future research must continue to analyze the political, social, and economic implications improvement districts.

It will also be necessary to determine through future research which communities are best served by BIDs. Thus far, BIDs have generally been seen as either a solution or hindrance to urban areas without much consideration for differences between individual cities and neighborhoods. Can BIDs sufficiently and successfully serve the needs of all communities? Are BIDs only viable in certain communities or cities? Questions such as these will need to be addressed going forward. As BIDs are becoming increasingly prolific and influential in urban areas, scholarly research pertaining to their influence on public management, local governance, economic revitalization, and urban development will continue to be necessary.