A Different Kind of Bid
As a small business owner you’ve probably prepared many bids – or reviewed quite a few in the course of doing business.
This article isn’t about that kind of bid – it’s about a completely different way your business might – or might not – want to bid.
What we’re talking is a type of public-private partnership called a Business Improvement District – commonly referred to as a BID.
A BID is put together for the very purpose its name describes – to improve business. Specifically, a BID is designed to improve business in within a specified area. In this case property owners and business owners get together and agree to do something pretty phenomenal – charge themselves a fee (in the form of an assessment) and then work collectively to improve the neighborhood they do business in.
What a BID is Modeled After
In many respects a BID operates the same way a shopping mall does. Someone owns the property and then rents or leases retail space to individual business owners. Within the mall are common areas. Each individual business pays a fee which covers maintenance of the common area, pay for enhancements in the common areas to keep them attractive to customers, as well as cooperative advertising and activities promoting the mall and the individual stores it houses.
You can think of the stores in a BID district as the retail tenants at the mall. The common areas are the neighborhood (defined geographical area) that included in the BID. Similar to the arrangement between property owner and retail stores in the mall, businesses in the BID are assessed a fee – but in a BID the property owners are also assessed a fee. Again, similar to our mall example, these funds are used for maintenance, enhancement, and collective promotional activities.
Not a Tax
Some small business owners mistakenly think that BID represents a tax because it is collected by the city (or country.) However, as we all know, too often taxes are collected for one purpose by the government and then used for another. We also don’t directly manage or administrate funds collected via taxes. BID assessments are handled differently. The government collects the assessments, but that money is returned to BID managers to be used in the district.
A BID is also sometimes confused with a Merchant Association. However, there are major differences. The main difference is that the fees charged by a Merchant Association are voluntary. While a BID district is initially a voluntary collaborative between property and business owners, once it has been approved, the assessments become mandatory.
Paying mandatory BID assessment fees may seem to be a bad idea, but the upside is that, unlike a Merchant Association, BID districts have predictable and sustainable funding to provide services.
In order for a BID district to be formed it must be approved and, because it is a mandatory commitment once approved, most cities have prescribed strict processes for forming a BID. The highest priority that must be met is for there to be widespread support among both property owners as well as business in the area to be served.
Forming a BID isn’t overly complex, but there are many requirements that must be met. In general, there are three main steps for forming a bid:
- Planning - The government entity in charge of approving bids is contacted; a steering committee is formed; a database of businesses and property owners is put together; a needs assessment is performed.
- Outreach – A mailing is sent out to businesses and property owners; public meetings are held; results of public meetings are documented
- Approval Process – each city will have their own process, but it is at this stage the proposed BID district will be either approved or denied
If you think that forming a BID would benefit your business and your neighborhood, contact your city for further information.
Of course, don’t hesitate to pass our information along to anyone within your BID district if they need working capital.