By Chris Bernardo, President/CEO, Commercial District Services LLC
Delivering value and having an impact with limited resources is always a challenge. Smaller BIDs are often presented with issues similar to the municipalities in which they operate. The problem can often be traced to the imbalance created between the funds needed to provide a level of service that will create meaningful impact and the assessment revenue generated to create the budget.
Even if an assessment formula is based on something other than the property’s valuation, for instance the amount of linear frontage of a property, the BID assessment amount still has to be reasonable and reflect the economics of local property ownership and business operations.
The goal isn’t to have an assessment district at any and all costs; the value proposition for the real estate stakeholders is for them to organize and work collectively to create their own economies of scale. By leveraging their own resources through an assessment district, they can fund supplemental and add-on services that stabilize property values, spur new public and private investment, and ultimately, increase the value of the investment that both property and business owners have made.
Here are some principles that guide our thinking when putting together a workplan and budget for a newly formed BID or a BID that is looking for a reboot:
Focus on building trust, not an institution – The District Management Corporations that manage Business Improvement Districts need to be accountable. They represent the interests of all stakeholder groups and are responsible for creating consensus to define success for the district, outlining the programs and services to achieve success, and ensuring there is a sufficient budget to fund the programs and services. They’re not the star of the movie…the stakeholders, real estate assets, public spaces and common areas that connect everyone are the headliners of the show.
It requires discipline to keep the focus on programming and investment. The district doesn’t need fancy titles, big offices, or expensive annual meetings…it doesn’t even always need direct employees. Outsourced management that transfers the office/employee/taxes/insurance costs to a responsible contractor is a highly effective way to ensure that assessment funding is quickly reinvested back into the district; allowing for more robust programming and even creating an important capital reserve fund for larger future projects.
We generally recommend that organizations use 20% as a rule of thumb when considering how much of the total budget be applied to Administration and General Operations (management, insurance, audit, bookkeeping, legal, supplies) especially for BIDs with assessment budgets of $350,000 or less. Office space, unless donated by a stakeholder or provided by the municipality, can be an unnecessary expense that provides little return to the assessment paying stakeholders. We suggest dedicating funding every year towards creating an annual capital reserve fund of 2%-3% of the total budget which allows the organization to be flexible and anticipate emergency services like snow removal, capital investments like streetscape amenities, or other one-time costs that may be important to the stakeholders over time.
Prioritize high-impact activities first – Cleaning, Sanitation, and Police/Code Enforcement are three focus areas that provide an immediate, beneficial impact to a District. It offers a layered approach that builds trust, provides a visible sign of what change feels like, and offers a glimpse of what is possible in the future. It’s some of the most vital work that a BID can do and it sets the foundation for economic development. When sidewalks are clean, trash cans are empty, graffiti is absent, and public safety is prioritized, people and companies will show greater investment interest. We recommend applying 50%-60% of the total budget to quality-of-life related activities.
Focus on the tangible – How the public space makes people feel is the most important marketing program there is— it’s instagram in living color. Therefore, focusing on the physical environment is a key component to adding value and creating change. Clean and modern building signage, beautiful and well maintained planters, decorative light pole banners, seasonal decorations, and activated public spaces support the investments made by property owners and business owners and it provides daily real-life messaging to residents and visitors. We recommend that 20%-30% of the budget be dedicated to capital investments, landscaping, and space activation activities to support small business retailers, property owners, and residents.
In conclusion, size doesn’t matter. Significant change can be accomplished by small and mid-sized business improvement districts. If priorities are set appropriately and investments are made in the key areas of quality-of-life enhancement and physical beautification, then the collective power of local stakeholders can be fully realized.