Ready for the Smart(er) City: How Community Improvement Districts are Building the Future.
REPORT ABSTRACT
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INTRODUCTION
Community Improvement Districts (CIDs) CIDs are Public-Private Partnerships (PPPs) at the intersection of commercial real estate, infrastructure development, and urban finance. A type of special assessment district, CIDs enable real estate owners and developers to go beyond the traditional urban management models of street-level placemaking and business recruitment and retention. Instead, CIDs play major roles in identifying and developing the small- and large-scale infrastructure critical to the built environment.
CIDs are largely voluntary propositions by the private sector. While they have become increasingly effective over the past 30 years, evolving as development patterns and real estate trends change, the Georgia Institute of Technology, a preeminent research university in the United States, and Lexicon Strategies, a specialized consulting firm whose principal, Malaika Rivers, has decades of experience in CIDs, conducted a study to see just how equipped and impactful CIDs are given digital transformation and macroeconomic trends.
Considering a rapidly changing world, authors believe that organizational ecosystems that meet the needs of tomorrow’s infrastructure through hyper-local PPPs will help mitigate risk while pursuing innovations necessary for urban growth. Authors pay particular attention to technological innovation, as it has a tremendous impact on the built environment. As our nation’s economy becomes more reliant on evermore complex infrastructure, CIDs are a unique PPP model that could be positioned at the forefront of cities and economic centers to lead and drive change.
CONTEXT
The report explores how CIDs are a resilient, sustainable instrument, either structured with organizational capacity or as a finance tool, to handle a variety of changing environments, from “drivable suburban” to “walkable urban”. As the next phase of real estate and community development integrates advancements in technology, CIDs will continue to be at the forefront of shaping the built environment.
The report seeks to understand, inform, and foster continued dialogue. Subject areas include financial impacts to date, reasons to form CIDs, services offered, commercial activity center penetration, as well as trends in community-wide v. developer-centric CID models. Authors supplement this with insights into real estate values and land use. A third topic area provides a deeper understanding of the role CIDs may play in the future of smart cities, public innovation, and emerging technologies. As real estate developers and governments adapt to rapid technological changes, what role can CIDs play given the physical (infrastructure), digital (data), and social (people) frameworks necessary to accommodate these needs effectively, and how do they currently think, plan for, and drive innovation? Authors identify pilot programs, projects, or models that can be scaled across CID communities of various sizes, ultimately leading to the practical application of otherwise theoretical discussions.
By considering these facets in the context of the past and the present, the authors shed light on current impacts and future opportunities. Practitioners, stakeholders, and policymakers alike are able to make more informed decisions on sustainable infrastructure development and finance.
METHODOLOGY
To do this, the authors approach, analyze, and compare CIDs collectively, as well as pioneer a rich peer analysis concept to make relevant comparisons where none previously existed. Authors utilize the “peer group” concept as an important organizational framework within which to collect, visualize, and analyze data and to present findings. In the past, differences among CIDs character and composition limited comparisons with each other. The authors utilize a clustering algorithm to account for this, allowing the first CID group designation and analysis: “Established Markets”, “Pioneer Markets”, and “Industrial Markets”. This innovative peer analysis is particularly insightful as it reveals micro-trends that may otherwise be lost when averaged across all CIDs.
Further, the team performed interviews, interviews, third-party research, and public records searches to inform the process and the research results. The mechanics of the results had three broad aims: 1) create a comprehensive understanding of the evolution of CIDs, 2) create a comprehensive database that provides insights into their financial resource, operational and organizational functions, and their impacts, and 3) understand how CIDs are responding to technological innovation and co-opting “smart cities” concepts into their work.
The analysis was done within a particular region, specifically Metro Atlanta, Georgia, as this region has experienced substantial CID growth and development over the past three decades. Over the years, the region has observed a progressive acceleration of CID formation. Twenty-four new CIDs formed in the last 15 years (a four-fold increase over the first 15 years). Currently, 34 legal CIDs operate under 30 CID umbrella organizations. This provided a robust environment supporting different CID organizational models in a wide variety of commercial product types, from Class-A offices to dense industrial centers, making the information more applicable and relevant to private sector engagement. Altogether, the approach and corresponding results consider how CIDs can become partners in promoting innovative models for urban problem-solving, development, and finance.
FINDINGS
The three main findings are:
The CID PPP model is a powerful contributor to urban financing, particularly infrastructure development. In the study area, CIDs collectively represent more than $16 billion in assessed commercial property values (2019), amounting to $41 billion in Fair Market Value. On average, every $1 spent by a CID in the study area generates $5 in outside funding, a testament to their impact. Among respondents, almost $6 billion in infrastructure improvements have been added to communities over the decades.
This is a popular and growing PPP model for both enterprise and government. Between 2005 and 2020, the number of CIDs in the study area doubled to 34, with the most common driver being the ability to attract large sums of funding and investment. Although ultimately a private sector decision to form and activate, the public sector is playing a larger role in advocating CID formation, accounting for nearly 60% of the ones created between 2010 and 2020. Additionally, a large portion ( 89%) of those surveyed report plans to expand their programming to meet their evolving constituent markets and communities.
The CID PPP model lends itself to future technologies which inherently rely on infrastructure. Transportation in particular, is an active area for smart cities projects and a natural fit for CIDs. The triple forces of CIDs’ historical experiences in transportation improvements, smart cities advancements in the transportation space, and the relative ease of CIDs piloting new technologies means that CIDs are well positioned to try smart cities projects. Collecting and analyzing transportation data could naturally pave the way for collecting and analyzing other types of data that align with CID services and goals. This could lead to broader smart cities technologies and projects, including stronger digital connectivity as a means to collect data and provide application services.
CONCLUSION
As the first comprehensive review of CIDs, this study provides a foundational understanding of how they became an effective tool for commercial, community, and economic development and a unique model for public-private partnerships.
There is, however, still much to be learned about CIDs. How they continue to evolve through a global pandemic as well as through advancements in urban design, infrastructure, commercial real estate, and a host of other arenas remains to be seen. What is known is that CIDs are impactful socioeconomically, and their inherent resilience means they will continue to be so. While the potential of CIDs as a group has yet to be fully realized, this effort reveals they have much more in common than not, especially at the peer group level. Continued study of their development, including how they can more effectively reach their missions, will further enrich both policy- and decision-makers’ understandings of future opportunities.
AUTHORS & AFFILIATIONS
Malaika Rivers
Founder & President, Pontem Resources
Debra Lam, Managing Director, Smart Cities and Inclusive Innovation
Georgia Institute of Technology
Arthi Rao, PhD, MS-GIST, Research Scientist, Center for Quality Growth and Regional Development
Georgia Institute of Technology
Rachel Muller, Graduate Research Assistant, Smart Cities and Inclusive Innovation
Georgia Institute of Technology
With thanks to Lexicon Strategies.
PUBLICATION DATE
February 2021