Are business improvement districts the future of NYC?

Since it opened in 2015, the Bella Abzug Park on the West Side of Manhattan has offered visitors a wide array of cultural programming, including sculpture exhibitions, a film festival and free yoga, to go along with amenities like a café, outdoor seating and three fountains that can detect wind speed and shut off on their own. And the park is still only half finished. The second phase of construction, which is expected to cost $374 million, will ultimately link the expanded park to the public square of the Hudson Yards megadevelopment.

“It’s a high-end park,” said Robert Benfatto, president of the Hudson Yards Hell’s Kitchen Alliance, the business improvement district responsible for the park’s administration.

Benfatto recalled that in 2012 the developer “put together a design for the first three blocks of the park and they presented it to the Parks Department, who said it was a great design and they would take possession of it, but they wouldn’t maintain it.”

The parties agreed to form a business improvement district, or an area in which local property owners contribute to a fund in order to provide services beyond what the city provides – anything from street cleaning to capital projects to public events. To establish a BID, however, the majority of property owners and tenants in a proposed district must agree to a special assessment on commercial real estate. Since there was still no neighborhood around the park to support a self-imposed tax, the BID incorporated a swath of Hell’s Kitchen that fell outside the Garment District Alliance, a neighboring BID.

“Most BIDs, there’s a neighborhood and then the BID comes,” Benfatto said. “This was sort of … the BID came first, and the neighborhood is coming afterward.”

The idea of turning a public park over to private management was at one time controversial. When he formed the Bryant Park Restoration Corp., in 1980, Dan Biederman faced considerable resistance. “A lot of people from the civic community and the design world and preservation world opposed the Bryant Park project,” Biederman recalled. “It was torture to get through it.”

The end product, however, speaks for itself. When Biederman took over, Bryant Park was a shadow of its current self, a poster child for the blight of late 20th century American cities. On lawns where drug dealers once plied their trade, today you see office workers taking leisurely breaks, people playing music and tourists snapping pictures of this quintessentially New York locale.

As part of the private management deal, Biederman formed a BID to fund a portion of Bryant Park’s operations. At the time, high crime and deteriorating living conditions were driving residents and businesses out of the city, and BIDs were seen as an innovative tool that could help reverse that trend. Though there are prior examples in American history of special purpose private governments emerging within specific geographic areas, the modern BID originated in Toronto in 1970. Today, there are more than a thousand BIDs across the United States, with many more in other countries, such as Canada and England.

How the business improvement districts were formed

1970: First BID established in Toronto

1974: Downtown Development District in New Orleans, the first BID in the United States, is formed

1976: New York state passes legislation authorizing “special assessment districts”

1976: Fulton Mall, the oldest BID in New York City, is established under that law

1980: The Bryant Park Restoration Corp. is founded by Dan Biederman and Andrew Heiskell

1981-1982: New York City and state pass legislation permitting the formation of BIDs

1984: Con Edison and other property owners form the Union Square Partnership

1988: A few years after New York City Mayor Ed Koch convened business leaders to find a solution to the squalor around Grand Central Terminal, the Grand Central Partnership is formed

Biederman, who would go on to head the Grand Central Partnership and the 34th Street Partnership, is now seen as a pioneer in the field. Under his leadership, BIDs picked up litter, removed graffiti, borrowed money to fund capital projects, enhanced streetscapes, improved lighting, hired security guards to assist police, planted trees and took over public squares that had become run down.

Since their emergence in the 1980s, BIDs have been credited with helping to keep their districts clean and safe, and attracting new business during hard times.

“When you add on this other layer of investment, coordination and political wherewithal, you have this new connection to the government and that helps the neighborhood in terms of its development,” said Rachel Meltzer, an associate professor of urban policy at The New School’s Milano School of Policy, Management and Environment.

One area that has seen its fortunes dramatically rise and fall over the years has been lower Manhattan. “The mid-1990s were sort of (a) dark time here,” said Jessica Lappin, president of the Alliance for Downtown New York, a BID serving lower Manhattan. “Vacancy rates were through the roof and the neighborhood was being written off.”

At the outset, the BID’s mission focused primarily on finding ways to clean up the streets and convince people that the district was a good place to invest.

“We had been making great progress and then obviously 9/11 was a huge setback for us in this neighborhood and the city,” Lappin said. “Then we were making good progress again, but then 2008 and the recession was a tough time.”

There are many ways in which a BID can help a neighborhood. In a city as large and diverse as New York, for instance, it can be a challenge for government agencies to identify and address the particular needs of a community.

“I think BIDs fill that gap actually quite nicely in the commercial space,” Meltzer said. “Literally, the executive directors are walking the streets. They know the store owners. There is a real local connection to the community that I think is important for neighborhoods and neighborhood development.”

This street-level engagement enables BIDs to offer local stakeholders as well as government officials a holistic view of the needs of a district.

“Our office regularly interacts with BIDs, as we do with all other organizations dedicated to making things better in Manhattan,” Manhattan Borough President Gale Brewer said in a statement. “We send staff to their board meetings – or attend ourselves – and strive for two-way communication about their most urgent challenges, and ours.”

There are currently 76 BIDs in New York City, half of which have formed since 2000. Over the years, many of the city’s BIDs have grown significantly in size, sophistication and ambition. While BIDs continue to provide core services around street cleanliness and public safety, some of the larger organizations have built research departments, enabling them to offer more sophisticated retail and tourist services. Many have launched ambitious quality-of-life initiatives and gotten involved in rezoning efforts.

Thanks in part to BIDs, over the past couple of decades, Manhattan, in particular, has made a remarkable turnaround, and the borough is now leveling up, with a new generation of skyscrapers offering proof of the island’s rising fortunes. All six BIDs with annual budgets exceeding $5 million are located in Manhattan, as are 20 of the 24 BIDs with budgets of more than $1 million. According to the New York City Department of Small Business Services, the agency that oversees the BID program, in fiscal year 2018 Manhattan’s 25 BIDs were responsible for $134.2 million in total investment in their respective districts.

But the city’s recent success has produced new challenges. Small-business owners, for instance, continue to be priced out of many neighborhoods due to the very improvements implemented by BIDs. By law, property owners must comprise a majority of a BID’s board members, which at times has led to questions around their motivations.

The NYC BID Association, an umbrella group representing the city’s BIDs, has opposed the Small Business Jobs Survival Act, which aims to offer protections for commercial tenants. The association told City & State a year ago that the proposed legislation could be “counter-productive with unintended, negative economic consequences” as well as “restrict the natural evolution of our commercial corridors which enables new products to come to market and new business owners – potentially immigrant and minority business owners – to gain a foothold.”

That is not to say BIDs are unresponsive to the needs of commercial tenants. On the contrary, many were created in large part to assist store owners struggling with issues like rampant crime and inhospitable streets. Today, the challenges may be very different: rising costs, changing customer bases, online competition – but many BIDs said they are still trying to help.

“All of the BID leaders I know appreciate that what makes New York New York is having this diversity of retail and having mom and pop shops next to big name stores,” Lappin said. “That’s part of the fabric of the city and we want everyone to succeed.”

Like other BIDs, the Alliance for Downtown New York offers services and workshops that help small-business owners navigate government rules and regulations, as well as share best practices. The group also launched a grant competition geared toward small businesses, with the goal of helping them compete online.

“I think there are BIDs in neighborhoods that now are just seeing signs of neighborhood change – or what people call ‘gentrification’ – and I think they are trying to manage it because there can be benefits and costs,” Meltzer said. “My sense is that, more than not, the BIDs are very community focused, very neighborhood focused, very focused on their constituency there.”

In order to ensure that BIDs continue to meet the changing needs of property owners and tenants, the Citizens Budget Commission, a nonpartisan fiscal monitor, has called for standardized public reviews of their operations.

“Neighborhoods change over time, and the concerns change over time, and you want to ensure that the needs and goals and plans of the BIDs continue to align with what the property owners and business owners in the district are looking for,” said Ana Champeny, the Citizens Budget Commission’s director of city studies.

Unease about economic disparities has also grown in the decades since many BIDs began operating. The fact that new BIDs tend to form in communities already showing signs of vitality, as opposed to those that lack tax bases stable enough to support one, has led to concerns that BIDs allow rich areas to get richer, leaving poorer areas behind.

According to a 2007 study by the NYU Furman Center, “BIDs controlled by large, corporate interests might have more success in influencing the distribution of municipal resources than those dominated by small retail establishments.”

Communities that lack the wealth to form even a small BID, therefore, have one less platform from which to advocate for their needs.

“I would say if you have neighborhoods that are willing and able to pull together and do a BID – and they want to supplement and finance these services – then what the city should be doing is actually redirecting or pushing more funds into the areas that don’t have those BIDs,” Meltzer said. “Or if we really think that BIDs are the solution, then go and figure out a way to implement a model more systemically, so it doesn’t end up being an uneven distribution of this extra resource.”

In recent years, new BIDs have been forming predominantly in the city’s outer boroughs. A recent effort to expand an existing BID in Jackson Heights, Queens, was met with opposition from local merchants who feared it would lead to gentrification. In Manhattan, there is only one effort formally underway to create a new BID. Its most prominent supporter, New York City Councilman Ben Kallos, said potential gentrification is less of a problem than the gentrification that has already taken root in his district. The proposed BID would center around the East 86th Street corridor, where most of the property is “owned by large corporations, faceless LLCs and absentee landlords,” Kallos told City & State.

“As we have tried to reach out to businesses and landlords to sign on and support the business improvement district, we have so many LLCs, corporations and big-box stores that there is no there there,” Kallos said. “I have been in situations when I am calling pension funds from other states that own property in my district, and I have to talk to a state comptroller to see if they will sign off on our BID, and there is something wrong with that.”

According to Kallos, East 86th Street was once zoned for mom and pop stores. Only after that zoning was lifted did the large retailers move in. Kallos argues that a BID would help solve sanitation problems arising from the volume of foot traffic to and from the 86th Street subway station.

“If this was a typical neighborhood in this city, where you still have some semblance of mom and pop stores and landlords where you know who it is and you could talk to them, I could just call them and say, ‘Could you please do a better job cleaning up in front of your store, in front of your property? Can you please help us with planting here or there?’ And you’d have more of a community sense,” Kallos said.

“In my district,” he added, “there are just no human beings associated with most of the properties.”

A source familiar with the East 86th Street BID’s formation process confirmed that disengaged property owners have posed a challenge, but also noted that some large retailers have balked at paying the special assessment, which landlords usually pass on to commercial tenants in the lease. The BID’s steering committee devised a formula that would tax property based on commercial square footage and the assessed value, but some large retailers believe they are being asked to shoulder an excessive share of the burden, according to the source.

Some owners of small stores argue that, unlike large retailers, they are unable to absorb the additional cost. By law, a majority of support within a district is all that is needed to form a BID, but in practice the city often wants to see broader buy-in among stakeholders before giving its approval.

According to Michael Weiss, a consultant working on the current outreach effort, the East 86th Street BID has slightly surpassed 50% support. When determining whether or not to sign off on the BID, however, Weiss believes that the city would also take into consideration the absence of vocal opposition within the community – and he predicts that the process will enter into the legislative phase within the next few months.

“The business improvement district is already predominantly big-box stores, and I can’t get them to take care of their storefront or the block,” Kallos said. “This is government stepping in with the community to make sure that somebody is taking care of the neighborhood.”