Business Improvement Districts as Public Service Partners

Cities Look for Innovation to Offset Declining Budgets, Increased Demands on Public Services

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Mary Hoehne
May 19, 2015

Cities continue to experience economic decline as they try to recoup from the Great Recession, restore assessed property valuations, attract new businesses (often in the downtown area) and fight for larger shares in ever decreasing state budgets. The struggle with budgets leads to a decrease in the ability to provide additional services to neighborhoods. The result is a lot of stress on departments that have increased needs and decreased resources. Business improvement districts (BID) emerge as a partner to address the larger demands on public services.

BIDs charge property owners surtaxes determined by the BID board of directors and approved by the municipality. The monies are targeted toward safety, sanitation, beautification, marketing and area promotion along with economic development and retention strategies. BIDs originally were created in downtown districts to revitalize downtown areas. Today they exist in areas with large socioeconomic disparity, low property values, extreme crime and mixed uses of commercial property. Monies collected are concentrated in the BID only area and address the most pressing needs as defined by the neighborhood. The need can be high in cities where there are inefficiencies in service delivery and inequality in services provided.

Prevalence of New Federalism

There is a concern that the BID model has made it simpler for municipal government to take on an attitude that if a neighborhood demands more services it must provide the funds—an action termed the new federalism. Some argue the success of the BID model demonstrates a superiority of the private sector, while others praise the ingenuity of the public sector in designing new governing bodies and giving them authority to provide resources deemed necessary.

The insertion of the BID model within urban government has transferred responsibility for many previous public services to private actors. This has created a new form of governance operating externally from the state. Some term it a municipality within the city or a sub-municipality. More and more, BIDs take on monitoring the neighborhood, controlling criminal behavior, maintaining and improving public space and creating a new tax. BIDs do not wait for the city to react when a problem is identified. BIDs invest in their own area and react quickly to the needs; they don’t need to get a piece of a shrinking budget from the municipality.

Concerns about BIDs

However, there is concern that BIDs do not seek consensus building, are non-representative of the entire area and are elitist because only neighborhoods with concentrations of higher valued properties can create BIDs with enough income to make a difference and improve an area. There is also a concern that BIDs help to strengthen the inequalities within urban neighborhoods. BIDs have been accused of not being accountable to the residents and not being accountable to the municipality.

Are Cities Using BIDs?

The creation of working BIDs might cause the city to redirect public services from the BID district to other parts of the city, thus removing the allocated portion of the city’s budget formerly directed to that neighborhood. This could result in a negative loss of services for that area despite the additional assessment for the BID. If the city no longer needs to worry about upkeep of medians, sidewalks, planters and streets located in a BID district, the resources formerly provided are redirected to other non-BID neighborhoods. BIDs often employ ambassadors and security personnel on the streets which eventually might encourage the city to redirect the police foot patrols to another neighborhood without BID security control. The BIDs are expected to perform all the business outreach, thus doing the job of city development personnel.

There is a concern that municipalities encourage BID creation, knowing the BID will fill the need for public services and thus assist the city in responding to needs minimally met in other areas. Allotment of tax dollars and amount of services provided becomes skewed and the private businesses find it necessary to pay more into the BID to receive equitable service now privately contracted by the BID governing board.

The outrage has been about BID accountability. Perhaps the cities with BIDs must also be more accountable to how equitably they continue to provide public service to the tax payers within the BID district.

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Author: Mary Hoehne is the executive director of the Granville Business Improvement District in Milwaukee, Wisconsin. The Granville BID includes more than 375 properties and is an assortment of more than 75 manufacturers, large auto dealers, various stores, some urban blight, a solid middle class and a huge area of subsidized housing. Ms. Hoehne is also working on her doctorate in public administration from Walden University. Her research topic addresses the role of BIDs. Ms. Hoehne can be reached at [email protected]. 

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