What can BIDs do for you?

BY SCOTT BURK, ESQ.

It’s a question a lot of property owners and commercial tenants have regarding Business Improvement Districts (BIDs). This is especially true in New York City, which has 67 BIDs across its five boroughs – the largest such citywide network in the world.

So what is a BID? Each BID is a partnership between private property and business owners and the public district in which they are located. Much like the communal maintenance programs in malls and shopping centers, owners pool their resources to enhance the image and value of their specific commercial area. Property owners are levied with a special assessment scaled to fit their property type based on factors such as frontage, square footage, and corner locations (tax exempt and residential owners typically pay a nominal $1 annual fee). Once collected, this assessment goes toward paying for additional services that develop, maintain, and promote that commercial district beyond those municipal services provided by the city.

Like many of our national movements, the first steps towards forming a network of BIDs in NYC began in the 1960s and ‘70s. In an attempt to compensate for inadequate public resources, New York citizens wanted additional funds to keep up with the worsening conditions of the city’s commercial districts. By 1976, the city agreed to make capital improvements provided property owners would foot the bill. Thus, the first Special Assessment District (SAD), Fulton Mall in Downtown Brooklyn, was formed.

Five years later, state and city legislators passed measures allowing other owners and districts to create their own SAD, only renamed to fit its current acronym, BID. The bill required significant support from the community before a BID proposal could even reach the legislative process necessary to be formed; NYC mandates at least 50 percent of property owners in the area must be in support of a BID proposal for it to move forward. Still, it wasn’t until 1984 that the first official BID – 14th Street-Union Square – as we know it today came into existence.

Since its inception, the BID program has contributed $930 million towards neighborhoods throughout the five boroughs. Today, these assessments add up to $100 million annually in services to more than 70,000 NYC businesses; individual BIDs operate with budgets that range from $53,000 to $11 million. Services include cleaning streets and sidewalks, removing graffiti, adding public safety officers to improve security, landscaping parks and open space with newly planted trees and flowers, creating special events, putting up holiday decorations, and making capital improvements by adding brighter streetlights, more trash receptacles, and other streetscape infrastructure.

Despite this bevy of services, many tenants, particularly small business owners, are hesitant to embrace NYC’s BID program, mostly because property owners are able to structure leases such that the tenants pay the assessment fee. While an added cost for a business situated within the boundaries of a BID, the price is a fair one, as commercial tenants are the primary beneficiaries of supplementary BID services. In addition to profiting from increased foot traffic, businesses receive the bulk of the BID’s promotional advertising efforts, offsetting the assessment costs passed down from property owners.

While there is a perception that the general improvements to the commercial district can attract national and institutional tenants, thereby pricing out local businesses that can’t match the increased rental costs larger retailers are able to afford, any such fears are largely unfounded. In reality, the market dictates incoming tenants and the terms of their lease agreements, not the BID, leaving it to the owner’s discretion which tenant is best. Furthermore, by rejuvenating local retail corridors, BIDs help create new jobs and provide greater amenities to the neighborhood, and attract more potential customers as NYC residents visit from other parts of the city (just look at Bay Ridge). As the district sees improvement, everyone benefits from the rising tide, big or small.

According to a 2007 study by the New York University Furman Center for Real Estate & Urban Policy, property values are markedly higher (28.3 percent) within a BID compared to those outside its boundaries. The most telling statistic of all, however, is that no BID in NYC has ever been repealed.

Driven by the entire community, the formation of a BID is a serious sign that your neighborhood is ready to take the next step in its commercial development. A BID’s positive influences will benefit the entire area from owners and tenants to tourists and residents, a collective betterment that can be a powerful force in transforming an emerging market into an established one, or in further improving an already successful commercial district.

In other words, that three letter acronym BID can do a lot for you, your business, and your community.

Scott Burk, Esq., is Managing Director of the CPEX Mixed-Use Investment Sales Team.