Making BIDs on the Future

Is the way that Angelenos shop and socialize on the verge of a revolution?

Perhaps so, if Business Improvement Districts (BIDs) continue their near exponential growth, with 1997 expected to be a critical year in launching such efforts in the city of Los Angeles.

The idea for such districts reportedly started in ancient Rome, when emperor Julius Caesar assessed a road maintenance charge on chariot drivers using his roads.

In the ‘60s, downtown merchants, realizing that they were losing business to suburban malls, assessed themselves an additional charge to finance parking lots for their customers--the first modern-day BIDs.

Caesar’s idea remained in this state until the early ‘90s. Then, merchants hard hit by the recession and the downsizing of government services discovered that BIDs might hold the key to their salvation.

The districts, they realized, provided a way to upgrade the business environment and get shoppers to linger in the newly created “destinations.” Best of all, merchants would not have to tangle with City Hall over each new improvement, said Mike Vitkievicz, special assessments manager for the Los Angeles city clerk’s office.

The trend toward BIDs accelerated two years ago with the passage of a bill authored by Assemblyman Louis Caldera (D-Los Angeles). The bill was modeled on successful efforts in Baltimore, Philadelphia, Portland and Denver, where property owners, rather than merchants, have the primary stake in a district’s success.

Previously, a majority of merchants had to vote to form a BID, and agree to renew it each year.

The bill shifted responsibility for the district primarily to property owners who couldn’t easily pack up and leave if the road got bumpy. In addition, under Caldera’s plan, a district is renewed every five years, giving it a more stable base, Vitkievicz said.

The Caldera bill coincided with the availability of about $1 million in federal, state and city seed money to Los Angeles businesses interested in exploring districts. In the past several months, Los Angeles’ BIDs in the garment district, Hollywood, San Pedro, the Mid-Wilshire area and Westwood Village were joined by 32 more proposed districts.

The proposed BIDs range from Brentwood to Crenshaw, from Encino to Lincoln Heights, Larchmont Village to Little Tokyo, Studio City to Woodland Hills. The proposed districts span communities along the geographical, social and economic breadth of the city. Most of the proposed districts expect to finalize their plans over the next year and come up for City Council approval, Vitkievicz said.

Upon approval, property owners will have agreed to self-assessed surcharges to enhance their areas. Such enhancements could include more frequent trash disposal, tree planting, repaving of streets and the hiring of security guards. Enhancements also may include the sponsoring of farmers markets, art fairs, concerts, street performers, and commission of artwork.

Ed Henning, a Whittier-based consultant facilitating BID formation in Brentwood, Larchmont Village and Los Feliz, calls the improvements “very tangible and apparent, a kind of rapid-response mechanism tailored to each district’s needs. This is not tax money shunted down a hole.”

But a successful district has a much wider impact than simply improving the retail climate. A successful BID generates additional tax revenues and frees up money in municipal coffers for other community needs, which may include heightened police patrols and increased maintenance of parks, Henning said.

The success of Santa Monica’s Third Street Promenade was followed by refurbishment of nearby Palisades Park and the upgrade of the adjoining Santa Monica Pier, where an amusement park opened in June. As a result, the district, the park and the pier all feed off one another, creating a more pedestrian-oriented downtown.

Santa Monica is exploring “how the prosperity on Third Street can be made to spill over to Second, Fourth, Fifth and Sixth streets,” said Mayor Pam O’Connor. “We’re looking at this as a seed to grow downtown.”

The challenge generated by Third Street, she said, is that the rents of incoming high-end stores are squeezing out established community-oriented businesses. In response, the city is encouraging those businesses to relocate on the adjoining streets, allowing Santa Monica to keep its multitiered mix.

A successful BID not only raises commercial property values, but the value of adjoining neighborhoods as well. A BID also may help individualize an area.

“Every business district wants to create a sense of arrival and individuality, unlike many of the malls,” Henning said. “Stand in the Glendale Galleria and you don’t know if you’re there or in Fox Hills Mall or in some other shopping center. Stand in a successful BID, and you’ve got a sense of place.”

The districts, however, are not without their problems. Small BIDs generally have high administrative overheadand their growth is dependent on the success of the district.

Thus, a smaller BID may spend 50% of its assessments into overhead, as opposed to a larger district, which may have to spend 10%. The break-even point is about 20% for overhead costs, Henning said.

In addition, a district may fail if merchants cannot agree on what they want or if they believe they are assessing themselves for enhanced services the city should be providing. These disagreements were primarily responsible for the demise of a district along downtown Broadway, Vitkievicz said.

Creating a district is no easy task.

“Say the merchants in a proposed BID decide they want more trees,” Vitkievicz said. ‘Then the question becomes, what kind of trees do they want? And what size trees? And where are the trees to be planted? And how much are they willing to pay per tree?”

Repeat the same discussion, dissension, proposals and counterproposals with each proposed enhancement in a district, and meetings often dissolve into tumult, Vitkievicz said.

But where districts have been successful, they’ve been a gold mine. Thus, Santa Monica is already looking to replicate the success of Third Street Promenade on nearby Main Street and on Montana Avenue, further reinforcing the downtown area. Old Town Pasadena has attracted so many businesses that its BID has placed a moratorium on new restaurants, Henning said.

One city’s scraps, however, are another city’s feast. Thus, one of Eagle Rock’s incentives in forming a BID is precisely the prospect of capturing Pasadena’s overflow to revitalize its own business district, he said.

In time, Los Angeles may even harness the power of BIDs to help revive the inner city. In South-Central, for example, the city is considering matching funds put up by merchants with equal grants, jump-starting the revival process, Vitkievicz said.

“We’re very encouraged that a number of different cities throughout the state have started to use BIDs,” said Jim Gelb, Caldera’s chief of staff. “A lot of cities in California have been undergoing tremendous difficulties downtown. This is an important tool in helping stem those difficulties.

“It’s not a cure-all. But used imaginatively and with commitment, it gives often frustrated local business people a chance to take action and turn around their struggling businesses.”

Thus, no matter what neighborhood you live, no matter where you work, there’s probably a BID in your future. And the results may well help reshape the way many communities see themselves, and how they come together to shop, play and socialize.