Business Improvement Districts (BIDs): The Basics

There are more than 70 BIDs shaping neighborhoods across New York City.

A business improvement district, or BID, is a mapped area within a city in which the property owners and commercial tenants pay an assessment to finance development, maintenance and promotion services in connection with the area’s commercial activity. In the words of the New York City Department of Small Business Services, a BID is “a public/private partnership in which property and business owners elect to make a collective contribution to the maintenance, development, and promotion of their commercial district.” The services BIDs provide vary, but are supplemental to those provided by the local government and are generally aimed at promoting retail and commercial businesses within the district. To that end, they can include street and sidewalk cleaning and sanitation, landscaping, security, capital projects, fundraising and charitable events and services, marketing and business attraction.

In New York City and generally across the country, BIDs are managed by dedicated 501(c)(3) nonprofit organizations specifically established for that purpose. Because BIDs are a form of public-private partnership, they can be a good tool for combining government’s ability to impose assessments, thereby ensuring reliable funding, with a private entity’s ability to work autonomously to provide efficient, tailored and transparent services in the district. Moreover, because of the way BIDs are authorized and managed, the assessments collected from a BID’s constituents cannot be diverted to projects or matters outside the BID, protecting BID services from the uncertainties associated with funding services city-wide or from a general fund. The city council collects the assessment revenue associated with each BID and disburses it to the applicable nonprofit organization, who uses the revenue to provide services to the district.

BIDs are generally authorized by state law. In New York, BIDs are authorized and the requirements laid out in Article 19A of the New York State General Municipal Law. In New York City, the requirements regulating BIDs as authorized by the General Municipal Law are codified in Title 25, Chapter 4 of the New York City Administrative Code and each BID is actually established pursuant to Title 25, Chapter 5 of the New York City Administrative Code. As 501(c)(3) nonprofit organizations, BIDs are also governed by each state’s nonprofit laws and the IRS requirements applicable to tax-exempt organizations. As with any corporation under New York State law, each BID is overseen by a board of directors comprised of commercial property owners, commercial tenants, residents and public officials (in New York City, the mayor, comptroller and applicable borough president and city council member are de facto members of the board); a majority of the board of directors must own property in the BID.

While BIDs are authorized and established under law and by lawmakers, residents of a would-be BID do the bulk of the work required to form a BID. The formation process in New York City involves performing an initial assessment of the neighborhood's suitability as a BID, organizing a steering committee to head the effort, collecting information and conducting neighborhood outreach. The steering committee holds public meetings with area residents and prepares and refines the “district plan,” which sets out the potential BID’s services, budgets and formula for calculating assessments. When the BID has an adequate level of local support, including from the local city council member, the steering committee submits the district plan, as modified following public input, and other documentation to the New York City Department of Small Business Services. From there, the BID plans undergo a public review process that includes review by the City Planning Commission, local borough board and community board, city council, mayor and other public officials as well as a public hearing.

The BID has shown itself to be a relatively flexible tool for commercial areas in New York City. Of the more than 70 BIDs across the city that have been established since the 1980s, some, such as the Times Square Alliance in Manhattan, function as multi-million dollar corporations, taking in a projected nearly-$20 million in fiscal year 2016 and working with the New York City Department of Transportation to oversee transformative projects such as the Times Square pedestrian plazas. Others use the BID framework to oversee smaller budgets (as little as $49,740 in FY 2014 by the 180th Street BID) in order to efficiently provide sanitation, security, beautification, marketing and other BID services.

For questions about BID formation, governance and other applicable legal requirements or incentives, please be in touch.