Waiting for Businesses to Lead in Improvement Districts? Think Again.
Commercial property owners and developers are the primary initiators of business improvement districts based on a 2021 report. Most were formed through the early efforts of these commercial investors as a means to protect and grow their property values.
Although Community Improvement Districts (CIDs) are directed by the property owners who pay the assessments that fund them, governments (and even residential groups) are getting in the game, too, and influencing their creation.
What was once considered to be an effort exclusive to commercial property owners has given way to other stakeholders. While 100% of CIDs were initiated primarily by the private sector in the earliest years, that number decreased to about 42%.
Given the broadening interest, communities wishing to pursue business improvement district formations should consider the opportunity, or perhaps the need, to engage more diverse stakeholders in the process.
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For years, businesses and governments in communities, both densely populated and those spread out, have joined forces. Their collective efforts leverage the resources of those most vested in the area's economic health and growth. Such public-private partnerships tackle mobility, public safety, cleanliness, as well as a host of other needs.
Known as business or community improvement districts (BIDs and CIDs), they can have immense impacts, attracting growth and investment to commercial areas.
Maybe you are an official with a city. Or maybe a chamber of commerce leader who wants to grow an important commercial corridor. After all, these are your economic drivers and typically represent the highest tax base. Some may see these partnerships and wonder how they get started. Metro Atlanta, a region with a rich history of CIDs, offers interesting insights. These districts build public infrastructure, which improves mobility and access. (Some of us still need to go to an office and eat out, right?) They beautify our streets and support crime prevention efforts, as well as a multitude of other initiatives that make communities more attractive. This, in turn, helps retain tenant businesses and improves the investment opportunities for the impacted landowners.
Because business improvement districts require approval from the commercial property owners, aren’t they the ones that initiate the district’s creation? In the early days, this model held true. Now, however, the lines are much more blurred.
The Rise of Public Sector Stakeholders
Research on metro Atlanta — a fast-growing, urbanized area with 34 CIDs — reveals that although commercial property owners take the lead, they are hardly the only ones. A variety of other stakeholders have influenced CID creation, including civic or business leadership, local governments, and even residential groups. Early initiators by decade include:
1988 - 1999: 100% primarily initiated by private sector
2000 - 2009: 67% primarily initiated by the private sector, the remaining 33% by a combination of both the private and public sectors
2010 - 2019: 42% primarily initiated by the private sector, the remaining 58% by a combination
While commercial property owners and developers were exclusively responsible for initiating CIDs back in the late ‘80s and ‘90s, this is less and less the case. Instead, the public sector, specifically local governments, is playing a greater role. Fewer than half of the CIDs formed in the last 10 years were attributed exclusively to commercial owners and developers (42%), while the majority (58%) were initiated through a collaboration of both the private and public sectors, including governments and other non-traditional stakeholders.
Who are the "others"? In this study, it included residential interests. This is particularly notable because in Georgia, CIDs are not set up for the benefit of residential property owners, be they single-family or multifamily. However, the fact that this stakeholder group is becoming somewhat influential is not entirely surprising. As commercial centers have transformed from single-use (such as office complex environments) to places that now have restaurants, shops, and apartments, CIDs have played a big role in creating these attractive growth conditions. Both multifamily and single-family properties benefit from CIDs' advocacy and investments just as the intended commercial properties do, although they are not paying into the CID system.
Today's Influencers
For CIDs that represent larger Class-A submarkets and are older than 20 years, the most influential stakeholder group was - and still is - commercial property owners. Nonetheless, over the years, some of these older CIDs report an increase in the role of local government. Included in this is an interesting group of stakeholders, universities, particularly those in walkable, urban areas. Like residential stakeholders, they do not pay CID assessments (assuming they are public institutions), and yet they should be treated as constituents given the size of their student and faculty populations.
Just like their counterparts in older, established submarkets, younger CIDs (1 to 10 years old) were most influenced by the early efforts of commercial property owners. However, these CIDs report a broader range of present-day stakeholders than the older CIDs. These broader stakeholders range from economic development agencies to churches. This is likely due to the greater mix of uses inherent in the real estate development patterns of the time in these commercial centers.
The Take-Aways
Does your commercial center need a boost? Or could benefit from becoming more organized to manage growth better? BIDs and CIDs could be a key part of that.
Understand your community stakeholders, and don’t assume improvement districts are initiated exclusively by the property owners in the area. Yes, they are the lynchpins to formation and management, but your city or county can play a big part in the early initiation. You may just find a variety of other stakeholders as influential partners in your effort to be best in class.