A Philadelphia Story

Philadelphia has revitalized in ways that would make many American cities jealous.

Rents remain fairly cheap compared to Chicago and New York but the downtown is bustling. At all times of day and night, the so-called "center city" district enjoys workers, shoppers, visitors and partiers. Suburbanites from rural areas and from out-of-state are moving downtown, and the population has increased tremendously over the last decade with childless couples, young people and students providing a large percentage of the growth.

Yet 16 years ago, there wasn't a single outdoor café in downtown Philadelphia. It was 1990. That year, something happened. Business owners, tenants, employers and city officials got together and decided to start a downtown Business Improvement District. Since then, the downtown has witnessed mad growth.

A Business Improvement District, or BID, is a partnership between local government and private businesses where investments are combined, coordinated, and focused to boost attractiveness, development, and promotion of a specifically defined commercial district.

Paul Levy, president of Philadelphia's business improvement area, dubbed the Center City District, said the BID concept can be a powerful tool to help spur revitalization in other Rustbelt cities of the Midwest, places like Detroit, Pittsburgh, and even Grand Rapids.

Grand Rapids' experience with the idea so far seems to backup Levy's claim. In 2001, the city established its first BID, known as the Downtown Alliance, in the heart of the urban core. The Alliance focuses on beautifying, marketing, and advocating for the central city. And it has played a crucial role in the reemergence of downtown Grand Rapids as a vibrant place to live and work. The downtown to date has experienced nearly $3.5 billion worth of reinvestment in new residences, offices, and retail space since 1990.

But the wave of redevelopment so far has failed to wash over the surrounding neighborhoods in a similarly meaningful and impactful way. Now civic leaders are exploring the possibility of extending the Business Improvement District concept to other areas of the city.

Neighborhood Ventures, a local economic development organization working to revitalize neighborhood business districts, recently received funding from the Grand Rapids Community Foundation to explore the possibility of implementing a BID in the Uptown district. The organization also is studying the potential of establishing Corridor Improvement Districts (CIDS), which capture and reinvest a certain amount of tax revenue from a local area into that local area, in the neighborhoods surrounding downtown Grand Rapids.

"The time is overdue for this city and its citizens to give aggressive attention to the climate in, and quality of, its neighborhood business areas, which are the face of each neighborhood and a reflection of our city and region as a whole," said Kimberly VanDyk, executive director of Neighborhood Ventures. "If we implemented CIDs and/or BIDs at the neighborhood level, we would definitely see a jump in the amount of energy and investment in these areas."

"It's happening all over the country," VanDyk added.

A Boost of Confidence
Philadelphia formed its Business Improvement District in 1990 when city business owners agreed to create a special taxing district; extra taxes would be levied on businesses in the 120-block area. The extra money would be used to clean up graffiti, beautify streets and sidewalks with seven-day-a-week uniformed service, enhance landscaping and lighting, and increase police protection in the area.

Now, the 3-square-mile area of the 100-square mile city is Philadelphia's economic engine, according to Paul Levy. The center city tax on more than 2,000 businesses raises $14 million a year for a wide range of amenities, including community service representatives outfitted with radios to notify police of problems.

"Little changes in the environment can create big psychological changes in how people think of downtown," Levy said.

Philly's BID strategy cleary is working:

• A 171 percent increase in outdoor eateries in the "center city" district since 2001. Today the city boasts 187 such establishments.
• Philly has gained more than 8,300 new residential units downtown and 11,000 new residents, for a total population of 88,000, since 1997, when a 10-year tax break was offered on residential development.
• Serious crime has been cut in half and auto theft was cut by 80 percent, Levy said. Nuisance crimes were greatly reduced with help from computerized crime mapping paid for by the BID.

"A ton of crimes get committed any place when the criminal thinks nobody is watching," Levy says.

But Levy said Business Improvement Districts provide more than physical improvements. Promotion and marketing of downtown are very important services too, he said.

"It has a disproportionately positive effect," Levy said of BIDs. "There's a gigantic psychological impact. When cities decline, there's a psychological decline. When there's a BID, in Philadelphia it built confidence in downtown."

Competitor Cities BID for Success
In many ways, Philadelphia isn't that much different than Detroit, Gary, Grand Rapids or other deindustrializing cities around the greater Great Lakes region. It's an old city that suffered when people fled to the suburbs decades ago and, more recently, when heavy industry began to downsize and relocate. These and other trends drained the vitality of the central city and in many cases abandonment set in. BIDS can help reverse the decline.

"BIDS take responsibility for the public environment in a way that has been neglected for a long time," Levy said. "Cleveland launched a BID in the spring, and things are so upbeat. They've dramatically improved the confidence of investors in downtown."

Detroit tried to create a business improvement district for its downtown several years ago. But the proposal lacked a critical mass of support. Some of the larger businesses were in favor of the project, but some of downtown's smaller shop owners were against paying an extra tax. They lobbied City Council, and at the ninth hour, the proposal failed.

Like Grand Rapids, Pittsburgh has had a BID for several years. Both cities could look to Philadelphia for encouragement in the benefits of expanding its district and the district's authority. In Detroit, such a BID could provide a major boost to efforts underway downtown.

"Pittsburgh is doing a lot of great things. They're doing a lot of the same reinvestment as Detroit. But Pittsburgh is far more compact and walkable. Detroit has done a lot, but it has a long way to go to animate the streets," Levy said.

Levy compared the work of the BID and its resulting increase in visitors to downtown to what happens in your home. "If you are depressed, you let your house turn into a mess. When you have company coming over, you clean up. You need to have company coming all the time to downtown because it puts a positive spin on things."

One Tool in the Toolbox
Of course major hurdles do exist, the first being that business owners must agree to pay more in taxes. Levy says when business owners ask, "Are you crazy?" proponents of the BID idea must answer, "What are the consequences for not paying for this? Do you want to continue to see downtown as a place that's dangerous and not a place to go?"

Secondly, there must be assurance from the city government that it will continue to provide the basic level of services — police, fire and etc. — when the BID begins to supplement those services, Levy said. "The city must agree not to pull the rug and cut services when there are supplemental services provided," he said.

Finally, business leadership is key. "You need a handful of leaders to step forward who say that this is something we need, and they start a parade that others follow," he said. "Big businesses have to pay the lion's share of this. That's always the big challenge. Everyone is cost-conscious today."

Philadelphia's BID started with simple goals — cleaning up and providing police protection, and later provided increased lighting, directional signs and landscaping.

A major element of the district was a 10-year tax abatement offered to developers converting properties to residential housing. Since then, 110 buildings have been converted, Levy said.

"We built from the simple, which was clean and safe, to promotion and marketing, to physical improvements," he said.

Cooperation from the city and state governments was key, Levy said. The governments collaborated to built a new downtown convention center.

BIDs are no panacea, Levy said. There are many factors that go into the revitalization of a downtown, but BIDS can provide important steps. "A BID doesn't change market realities. But a BID can make graffiti go away, it can eliminate fear and put crime behind you. It's one tool of many. You have to be focused on walkability and have a competitive tax structure. You have to have a competitive environment, because that's what the competition is doing."

Levy also said it is up to city business owners to take leadership. "BIDs take responsibility for the public environment in a way that has been neglected for a long time," Levy says. "You have to ask yourself, 'Do you want to continue on a steady market decline, or do you want to take on challenges and slowly reform your city?'"