The wave of business improvement districts that has swept Los Angeles as a way to revitalize rundown commercial and industrial areas appears to be slowing, as local merchants and property owners study the effectiveness of the concept.
In the city of Los Angeles, not a single new BID has been proposed this year, according to Michael Vitkievicz, manager of the special assessments unit of the City Clerk’s Office.
That’s despite the fact that the city has set aside an additional $1 million in seed money to be disbursed as matching funds to groups trying to form new BIDs. So far, there have been no takers.
“There is an unspoken attitude in the business community and the council that’s saying, ‘Let’s wait and see how these progress before we decide to go ahead with our own effort,’ ” Vitkievicz said. “They are taking a breathing space to see how the existing ones and the ones in the pipeline perform.”
The good economy contributes to the evaporation of applications, according to BID consultant Nancy Hormann. In good times, merchants and property owners have less incentive to form BIDs because their sales and rents are already increasing at a healthy clip. It’s often not until they see sales and rents slowing or falling that they want to take action to reverse the trend.
Also, city officials and consultants say, the backlog of BIDs in the approval pipeline may itself be acting as a deterrent to other communities launching BID-formation efforts.
“There is a lack of resources to move these things through the pipeline more quickly,” said Debbie La Franchi, assistant deputy mayor for economic development. “Some business communities may not want to commit to a two- or three-year process.”
Instead, a few are incorporating themselves into existing districts. Two BIDs have already been expanded: the Hollywood Entertainment District and the Fashion District. And, the Downtown Center BID which covers Bunker Hill and the Financial District is considering expanding down Figueroa Street to the Staples Center arena now under construction.
Six BIDs have been approved so far this year, and eight more are expected in the next six months. Once those are approved, L.A. will have 25 BIDs, up from 11 just a year ago. In addition, 19 more BIDs are in the pipeline and headed for approval in late 1999 or early 2000. To date, only New York has more BIDs.
“We have seen a gold rush of BIDs over the last year or so. By the time this next round of BIDs now in the pipeline goes through, 50 to 60 neighborhoods in L.A. will have looked at BIDs and perhaps as many as 40 of them will have formed BIDs,” said Larry Kosmont, a local BID consultant.
In recent years, cities across the country have embraced these districts as a tool for revitalizing rundown areas. And no city, with the exception of New York, has embraced BIDs more fervently than Los Angeles. The concept involves merchants or property owners within an area agreeing to tax themselves to fund cleanup, safety and marketing programs.
From downtown to Century Boulevard near L.A. International Airport to Van Nuys, groups of merchants and property owners launched campaigns to persuade their fellow business and property owners to tax themselves to pay for sidewalk cleaning, crime-fighting patrols and marketing efforts, the three “bread-and-butter” BID functions.
Other cities around L.A. County including Santa Monica, Pasadena and Long Beach also have been BID enthusiasts. Two of these have proven extremely successful: Third Street Promenade in Santa Monica and the Old Town district of Pasadena.
There are two types of BIDs: business-based and property-based. Merchant-based BIDs, which have been around for at least a decade, levy annual assessments on businesses operating within the district. Under state law, the city must hold a hearing each year to reauthorize the BID; it can only be dissolved if a majority of the business owners protest the assessment.
Property-based BIDs target property owners and can be set up for terms of up to five years without reauthorization. They are expected to become the dominant BID form as property owners tend to have deeper pockets and are more willing to assess themselves to improve their neighborhoods.
Local consultants and city officials say it’s too early to judge whether these districts are producing the higher sales and lease rates that their proponents hope for. The city doesn’t start collecting assessments until the January after they are approved, which means the eight BIDs approved last year only started collecting funds this past January. The six BIDs established so far this year haven’t yet collected a penny in assessments.
Once the money starts flowing, it usually takes several months to get service contracts awarded. Even then, it typically takes several more months before the programs fully kick in and results are detectable.
Nonetheless, the results are beginning to trickle in. Last week, the Hollywood Entertainment District BID released the first study quantifying improvements in economic performance within its boundaries.
The study, conducted by Economic Research Associates, found that restaurant and coffee-shop revenues in the district increased 14 percent during 1997, the BID’s first full year. Hotel revenues increased 6 percent, while total taxable retail sales went up 5 percent. Business volume at the three multiplex cinemas increased 22 percent. On the office side, the study found that property owners this year are reporting lease rates up to 25 percent greater than the rates received in prior years.
David Wilcox, senior vice president at Economic Research, said much of the business improvement can be traced to the overall economy. He estimated that about one-fourth of the improvements were the direct result of the BID, which encompasses six blocks on Hollywood Boulevard between La Brea and Highland avenues.
To date, there has been no comprehensive study on the results produced by the BIDs. Vitkievicz said his office plans to conduct such a study, sometime next year. “This will begin to tell us how these BIDs are faring,” he said.
BIDs are popular with many property owners, who see them as a way of supplementing city services and sprucing up their neighborhoods. One such owner is Peklar Pilavjian, a member of L.A. United Investment Co. LLC, which owns the St. Vincent Jewelry Center in downtown.
“Since the Downtown Center BID has been running, we’ve received comments from our tenants that the streets are cleaner and safer,” Pilavjian said. “They feel better about their businesses. And if this affects the morale of the tenants, it should be spreading to the customers.”
