'Private Governments' Can Reinvigorate Downtowns

Published January 1, 2001, The Post-Tribune

Across the country leaders are increasingly focusing on forming cross-municipal coalitions to address shared concerns, such as transportation and taxation. At the opposite pole, business districts are banding together to form small sub-municipal "private governments."

While Northwest Indiana's editorial boards have been actively promoting regionalization initiatives, less attention has been given to the potential of sub-municipal neighborhood groups, variously known as business improvement districts (BIDs), special assessment districts (SADs) and other acronyms, all of which are relatively similar and are collectively known as private governments.

New York City's Grand Central BID is one of the largest and best-known of these private governments, although small downtown groups are also turning to increasingly-activist BIDs to provide the services city governments are either unable or unwilling to provide, and the BID structure could be an excellent vehicle for the continued revitalization of downtowns in Northwest Indiana.

From time to time a green and yellow vacuum cart passes by my house in Philadelphia to suck up whatever leaves and trash may be on the sidewalk. The cart is provided by the University City District, a BID designed to provide the supplemental services that the neighborhood's two universities, dozens of businesses, and hundreds of residents found lacking.

Across the Schuylkill River , the Center City District's 40 highly-trained "safety ambassadors" provide directions to tourists, report crimes, and give first-aid when needed. These BIDs also provide capital improvements (such as benches and public street maps) and coordinate formal business-development and promotional activities. Some BIDs power-wash sidewalks in summer and remove snow from them in winter.

The BID is more formal than a downtown coalition or chamber of commerce. The former are plagued by free-rider problems and lack assessment capabilities; the latter often cover a range of businesses with heterogeneous needs spread across a large geographic area.

BIDs are typically distinguished by their being limited to one section of a city, such as a downtown or particular neighborhood, and the BIDs members tend to have homogenous needs for a set of public services. Residents and businesses, with appropriate enabling legislation, assess themselves an add-on to the property tax that is used to provide various services over and above what the municipal government provides. The services are administered by a board of directors that is completely independent of the local government.

In many cases, BIDs are a very direct response to a need for services not provided by the municipal government. Although many of Philadelphia's BIDs were organized following the City's near-declaration of bankruptcy in the early 1990s, their popularity has grown along with the City's fortunes.

Consider then Valparaiso, where municipal attention tends to focus on the fringes. Annexation and growth are the hot topics, and growth is focused on the big boxes and new neighborhoods at the city's edge.

Meanwhile, downtown Valparaiso has witnessed a quiet revitalization with several buildings being completely rebuilt and several new businesses locating downtown, although not every business and landlord is cooperating. For instance, the windows above the part-time law office of Mayor David Butterfield have been boarded-up for quite a long time, and the building's facade is quite dilapidated. (One can only wonder how much attention a mayor gives to downtown-specific services when his own office's facade is so in need of TLC.)

It's not an isolated problem. In a study of 105 BIDs nationwide, Janet Pack of the Wharton School found an "increased inability of local government to provide the required level and type of services the downtown requires."

The BID is not a perfect solution to these problems. BID members sometimes complain that because money is scarce and fungible, the municipality reduces services provided to the area covered by the BID. Pack also notes that outsiders may "fear that the political influence of the downtown community will be enhanced by the BID" and that the 'public' services provided by a BID should not be distributed based on ability to pay.

If anything, the combined movements towards the poles of cross-municipal regional coalitions and sub-municipal private governments may indicate the future decline of the city and county as the dominant forms of local government.

Reader-Columnist Adrian Jones of Valparaiso is a senior finance and real estate dual-concentration at the University of Pennsylvania.