When Business Improvement District leaders approach Civitas to discuss their funding mechanism, the words we use most are “stability” and “sufficiency”. Does your organization have a stable budget? How reliable are your funding streams? Can those funds be diverted, or not renewed by vote of the City Council or Board of Supervisors? Does your organization have enough funding to adequately benefit the assessment payors?
In California, there are hundreds of Business Improvement Districts authorized under the Parking and Business Improvement District Law of 1989 (“89 Act”). Additionally, there are about 120 Business Improvement Districts established under the Property and Business Improvement District Law of 1994 (“94 Act”). Every year, more districts are established under the 94 Act for its ability to provide for stable and sufficient funding. Here are a few key differences between the two statutes and why your organization should consider converting your 89 Act District to a 94 Act District:
STABILITY
Districts authorized under the 89 Act provide stable funding through a business assessment on an annual basis. Organizations are able to plan and commit to annual projects. However, thinking beyond 365 days under the 89 Act is simply not an option, as these districts only have a one year term. As districts are exploring and expanding their breadth of place management and development for their communities, many activities require multi-year financial commitments. These financial commitments are ones that are unable to commit to under the 89 Act.
Stability of funding for place management and development can be secured over a five-year term when established under the 94 Act, on the first term, and up to ten years during its second term. Additionally, 94 Act Business Improvement Districts have long-term funding commitment capabilities due to their ability to bond assessment revenue for infrastructure development.
Districts established under the 94 Act designate funding for specific programs and services that must benefit the businesses paying the assessment. Programs and services must be supported by the paying businesses through a petition process to support a management district plan, outlining the district parameters. One of the district parameters that must be determined is the governance of the funding. The 94 Act stipulates that a non-profit organization be named as the Ownership Association. The Ownership Association is responsible for the management of the assessment revenue and the programs and services determined to benefit the assessed businesses for the set term of the district.
SUFFICIENCY
Place management and development programs and services require a significant investment to be impactful. Impactful, by definition, means “having a major effect.” A major effect for any business district is more business activity. Business activity can relate back to brand development, marketing, and placemaking activities, a more welcoming business corridor, and cleaner and safer streets. Additionally, infrastructure development can drive increase business activity. The cost to provide a district “dream bucket” of programs and services to increase business activity continues to stay stagnant which leads district leaders to cut programs and services rather than build on them.
In an analysis of Business Improvement Districts, Civitas found that a majority of districts under the 89 Act generate less than $100,000 per year from assessment revenues. Assessment rates for those districts are based on a fixed rate in relation to the types of businesses they are conducting. As an alternative, districts that have been established under the 94 Act generate more than $200,000 based on assessment rates that are tied to business activity. Civitas has found that assessment rates based on business activity provide quarterly feedback to the programs and services being provided and the direct benefit to the businesses. As business activity grows, example more sales in the district, the greater the assessment revenue collects, and the district is able to continue to provide more programs and services to strengthen business activity.
As we begin the New Year, now is the time to evaluate your current 89 Act Business Improvement District to see where improvements can be accomplished. Take this opportunity to engage your business community to discuss the success of the district and the future of your business corridor. What are the organizations goals for 2020? Would the organization be able to accomplish those goals with an update to your organizations Business Improvement District revenue? At Civitas, we are happy to help your organization explore the ability to improve your Business Improvement Districts funding revenue, to increase programs and services for your community.
Nichole Farley,
Director of Business Development & Client Engagement – Civitas
