Frequently Asked Questions about Improvement District (ID) Programs

• What is a Business (Special, Downtown) Improvement District? (BID, SID, DID are synonymous.)
• Why would a community consider creating an Improvement District?
• What can the District Management Corporation of a BID/SID/DID do that the municipal government, the Chamber of Commerce, or an Economic Development Committee cannot?
• How does having an Improvement district relate to our Main Street Program, Chamber or Economic Development Commission?
• How many Improvement Districts are in New Jersey?
• Who controls a BID?
• Who determines planning, programs and spending?
• What role do individual businesses have in determining and implementing BID plans?
• What examples can you give us that an Executive Director would do?
• Are there any other benefits to becoming a BID?
• How is a DMC of a BID funded?
• What say does the individual business owner have in setting the annual tax rate?
• Does the BID have a termination date?
• Is there a downside to creating a BID?
• In what other ways would our community benefit from a BID?
• Is a District Management Corporation a public or private entity in the eyes of the State?

• What is a Business (Special, Downtown) Improvement District? (BID, SID, DID are synonymous.)
  

  An improvement district is a defined area, generally in the central business district of a downtown or a mixed-use corridor in a larger city, that is authorized by state law and created by an ordinance of the local government to collect a special assessment on the commercial properties and/or businesses in that area. That assessment is granted to a municipally-assigned District Management Corporation (DMC). This entity is typically a non-profit organization, separate and distinct from the municipality itself. The DMC, which is typically governed by a board comprised of at least 50%+1 business & property owner stakeholders, sets the agenda, priority, and initiatives of the organization, in addition to hiring and supervising staff, and determining the annual budget and assessment amount. In a sense, the business community becomes self-governing: private resources from the stakeholders are assessed and used as determined by the businesses to fulfill what they see as the greatest needs of the downtown area. The improvement district (whether "business," or "special," or "downtown" or some other name) is a model for management of the municipal commercial corridor. It is authorized by state law (the Pedestrian Mall and Special Improvement District Act, N.J.S.A. 40:56-65, et seq.) to be formed by ordinance in any municipality in New Jersey. The improvement district provides a mechanism for the businesses of a community to organize as a single entity, to raise funds for activities that supplement municipal services, and to manage themselves to become a more effective shopping/dining/commercial destination. The Improvement District itself is effectively a boundary of affected properties and businesses, and is defined by municipal ordinance.

   

  
• Why would a community consider creating an Improvement District?
  

  A community may be experiencing a growing awareness that commerce in does not function as well as it could; that it does not draw the number or variety of shoppers that it should; and that the quality of the shopping, dining, and other commercial experience there is not as appealing as it could be for residents, visitors, and others. A community may see this as a mechanism to improve the economic, physical, social, and civic value of the commercial district in question. Downtown Management is a tool that enables private and public stakeholders to meet the needs, goals and vision of the district, its properties, businesses and communities. In enables a collective, organized response to problems as well as opportunities, leveraging the district’s assets to mitigate its issues. Having an Improvement District as a municipally-mandated funding structure enables Downtown Management to be more focused on meeting the needs of its district stakeholders and less focused on seeking revenue for projects and operations. A downtown commercial district is similar to an outdoor mall, with a variety of commercial businesses and property owners. Additionally the downtown includes local government, other publically-owned property (including streets, etc.) and various non-commercial uses. In the mall setting there is one property owner of all of the commercial real estate and that single owner sets the hours, events, leases, cleaning, business retention and recruitment activities, etc. All businesses leasing in the mall comply with the rules and pay a Common Area Maintenance Fee to underwrite the above activities or else they will default on their lease. For downtowns and neighborhood commercial corridors, an Improvement District creates a commonly-derived pool of resources that is leveraged collectively by the DMC to increase the economic, physical and social values of the district.

  
• What can the District Management Corporation of a BID/SID/DID do that the municipal government, the Chamber of Commerce, or an Economic Development Committee cannot?
  

  The best way to illustrate this distinction is by example of the shopping mall: every mall is a collection of stores and eateries that were selected by plan based on their appeal to the local marketplace, and placed in their respective locations within the mall by careful design. They operate under common hours of business, they all contribute to an annual marketing program for which they all benefit, and they share in the costs of special events, improvements, provision of security (that supplements local police support), and even the maintenance of common areas. They can do this because the entire mall is owned by a single owner; the commercial buildings in a typical community are all owned by various owners.

  The BID allows the businesses of a municipality to operate more like the businesses in a mall, managed by a single group rather than by each individual merchant on his or her own. The BID operates with a funded budget, and pursues a strategy to grow business by managing the appearance, the marketing, the events, for the commercial corridor in ways that the municipality, the Chamber of Commerce or the Business Development Committee cannot do. State law also grants the DMC of the BID a variety of powers and capabilities for improving and enhancing the viability of the district, unless otherwise constrained by the municipality’s enabling ordinance for the BID.

  
• How does having an Improvement district relate to our Main Street Program, Chamber or Economic Development Commission?
  

  A local Main Street Program that has been serving as the de facto DMC for the downtown district typically does many of the above functions. However it may have lack the consistent and sustainable funding base and formal municipal authority to fully achieve some of the above goals. Assigning an already effective Main Street Program as the DMC of an Improvement District (or adding a Main Street Program to an existing Improvement District) is often a very successful approach to ensuring ongoing success in your downtown.

  
• How many Improvement Districts are in New Jersey?
  

  Since enactment of the law allowing them in 1984, New Jersey has witnessed the formation of about 90 BIDs. Currently known active Improvement Districts in an estimated 67 municipalities over 19 counties. Some of the earliest BIDs formed are among the most successful, and still very active in the program, more than 20 years later: Cranford, NJ was the first improvement district, and downtown Cranford is the epitome of successful revitalization. Westfield (2004) and Montclair (2015) have both won the Great American Main Street Award® for successful revitalization and downtown management. Englewood was among the first 6 business improvement districts, and the commercial growth that they have experienced is nothing short of astonishing. There are also instances where Improvement Districts have ceased to exist, typically due to their failure to create a consensus and stakeholder buy in, through poor management and results, and/or local political issues.

  
• Who controls a BID?
  

  The assessments from the BID are controlled by a District Management Corporation (DMC), a group of stakeholders from the community, who function as a Board of Directors and who ultimately supervise downline teams or committees that implement projects for the district’s benefit. We recommend that the DMC Board be now fewer than 7 and no more than 13 members in size. In the spirit of the State Law, the Board should be made up of at least 50%+1 business and property owners and also include one municipal official, with other stakeholders such as residents and local institutions, as applicable. The DMC would hire an Executive Director to implement its programs working with the teams/committees. The Executive Director would be accountable to the Board of the DMC.

  
• Who determines planning, programs and spending?
  

  The District Management Corporation would set policy for the BID, and direct all planning, programs, and spending. They would craft a budget each year for this purpose, and that budget would be submitted to the municipal government body for approval. In other words, while the functional operations of the Improvement District are led by the DMC, each year the municipal body approves (or denies) the DMC (Improvement District) assessment budget. Therefore, maintaining a collaborative public-private partnership is essential.

  
• What role do individual businesses have in determining and implementing BID plans?
  

  It is the owners and operators of businesses in the community that will serve on the Board of Directors of the DMC. Also, the DMC will operate in the open, with meetings that are open to business people (and other members of the public) to attend and participate. The private sector leads the effort, sets the policies and goals, and ultimately puts in the time, talent and treasure to meet those goals over time. The DMC needs to earn the cooperation of property owners, local business owners and operators, and will naturally want to operate with their consensus where possible.

  
• What examples can you give us that an Executive Director would do?
  

  The Executive Director would function as the full-time manager for community’s business district, carrying out the policy directives set by the DMC Board. He or she would work with the DMC’s Board, teams or committees to create and implement the programs recommended for economic revitalization, which might include recruitment of new businesses, storefront façade and sign improvement, events to stimulate foot traffic, marketing programs, shopper parking initiatives, wayfinding signage development, public relations for the district, and more.

  
• Are there any other benefits to becoming a BID?
  

  Yes. In addition to the results that the DMC will obtain for commercial revitalization, the municipality would now become more eligible for State grant funds, as the State favors the formation of Improvement Districts, and will give grant award priority to a BID applicant over a non-BID applicant for grants related to economic development. The DCA also has an interest-free loan program (the Downtown Business Improvement Zone Loan Fund, or "DBIZ") with awards up to $600,000 that is offered only to Business Improvement Districts.

  
• How is a DMC of a BID funded?
  

   

  A DMC can be funded in a variety of ways. One method provided by State law is through assessment on commercial properties within the district. Other communities create their Improvement District assessments with business licensing fees, assessments based on linear footage of properties, or business use types. Some communities fund their improvement district through an appropriation from the municipal budget, without creating a separate assessment. The State law broadly allows for local self-determination regarding the funding mechanisms, provided that those who are assessed receive direct benefits for those assessments. Typically we recommended a multi-tiered combination of funds to ensure the success and sustainability of the DMC of the Improvement District:

  1. An assessment on the properties within the ID (as commercial property owners and the businesses who lease from them will derive a direct benefit);
  2. Sponsorships, Memberships (voluntary), and other private sector methods from other stakeholders who care about the district (in effect, a voluntary assessment or earned income);
  3. An appropriation from the municipal budget and or in-kind municipal investment (as all residents of the community will see an improvement to their quality of life with a revitalized business district); and
  4. For some projects, State, County and other grants may be able to supplement the DMC funding.

  
• What say does the individual business owner have in setting the annual tax rate?
  

  Business owners will sit on the Board that sets the BID budget. Other business owners may speak to the budget and the related tax assessment both at the BID Board meetings, and at the Borough Council meetings in which the budget and tax rate are considered. Both of these are public meetings, and the business person has the right to voice an opinion there.

  
• Does the BID have a termination date?
  

  No, unless otherwise determined by the municipality, a BID is created by ordinance, which is local law, and that ordinance will not come with a termination date. However, it is also true that if the Borough finds that the BID is not meeting its expectations, then the Borough always has the option to modify or even refuse to fund the BID’s annual budget. Moreover, the Borough could terminate the BID or assign a new DMC by subsequent ordinances. It may be in the interest of those creating and Improvement District to include a 5 year sunset provision in the enabling ordinance. This will assure concerned stakeholders that every 5 years there will be a significant review of progress in addition to the annual budget review. Montclair has this clause in their ordinance and many states other than NJ, such as Pennsylvania, require it as well.

  
• Is there a downside to creating a BID?
  

  Like any other mechanism for working collectively, whether private business or non-profit or a government entity, the downsides to creating an Improvement District (and assigning or creating a DMC to manage it) can come from a variety of sources: poor management of projects or finances, politics, poor communication within the organization or with stakeholders, lack of effective leadership. That said, if the ID is not meeting expectations or doing illegal activities, for example, the municipality may simply shut down the assessment or re-assign the ID assessment to another DMC entity.

  Whenever a suggestion is made to make a new appropriation of money for a new expenditure, it’s reasonable to question whether that expenditure is really necessary. People who feel that business district management is not necessary would probably consider the allocation of money for an ID to be a waste. We believe that your business district needs to be managed in order to become more effective. It needs to pro-actively recruit new businesses; it needs to plan for a specific mix of retailers and restaurants rather than sit by and wait to see what comes along; and it needs to market itself based on its economic and other assets as well as its vision. Municipalities can use an ID to make all of that happen at a higher level and to ensure its sustainability into the future, one in which every downtown/community is competing for customers, investment, and tax ratables.

  
• In what other ways would our community benefit from a BID?
  

  There are many ways, but undoubtedly the most satisfying would be the improvement in the community’s quality of life. The BID will, over time, work to increase the economic, physical, social, and civic value of the district, attracting people to shop and enjoy themselves. The more appealing the commercial district becomes, the more of a destination that the community will become to outsiders who will want to partake in a traditional downtown shopping experience. The increase in business that results will make the district’s businesses prosper, and serve to increase property values. As property values increase, so will tax revenues to the municipality, enabling us to enjoy a return on our investment as taxpayers.

  
• Is a District Management Corporation a public or private entity in the eyes of the State?
  

  The debate regarding the public vs. private status of District Management Corporations assigned by municipal ordinance under (NJSA 40:55-65) has been an ongoing question across New Jersey for many years. Public record of the New Jersey Supreme Court’s opinion stated that Improvement Districts (BIDs, SIDs, DIDs) are an attempt to achieve privately what municipal government has struggled unsuccessfully to do alone as noted in the following cases: Second Roc-Jersey Associates v. Town of Morristown, 158 N.J. 581 (1999). See also Gonzalez v. Borough of Freehold (A-3476-92T2, June 30, 1994).

  NJ DCA’s Division of Local Government Services has assured our office that the State’s Deputy Attorney General’s (DAG’s) office of the State of New Jersey has not rendered an opinion on the question of whether or not all or some District Management Corporations should be considered public or private for several years. As such there is no additional clarity from the State with regard to this issue at this time. Please note that once a DAG decision is rendered, however, our offices will promote that outcome to all interested stakeholders, and update this section accordingly.

  As such, we recommend that the District Management Corporation, even to the extent that it wholly predates it’s assignment by ordinance as the DMC for the Improvement District and that it may have a fully incorporated State and Federal status as its own private non-profit organization, seek to meet the spirit of public entity polices such as the Open Public Records Act (OPRA) and Open Public Meetings Act (OPMA). In other words, the DMC should expect that others will seek to hold it accountable as a public entity and prepare accordingly.