Keywords

Jel Classification

1 Introduction

The aim of this research is to identify different aspects of the legal structures of Business Improvement District Organizations in Europe and the economic/social impact that BID models have in local communities.

BIDs are a form of public/private partnership where property and business owners choose to contribute financially to the development, maintenance, and promotion of the area where the business is located (Lloyd et al. 2003; Favro and Toto 2016).

Business Improvement Districts is a place making mechanism introduced 40 years ago in Toronto, Canada. Consumers were abandoning downtown to visit shopping malls, mainly constructed in the provincial areas of the cities. For this reason, the business community of the downtown engaged in a collective funding scheme, which would serve to revitalize, merchandize, increase the number of events/attractions, and provide better public services for the public space where the businesses were located. The model was exported eventually in the United States of America some years later. During the last 20 years, the BIDs pioneers in Europe have been UK and Germany, the latter mainly sponsored by the German Chamber of Commerce (DIHK).

The BID model has been adapted in different variations in some countries around the world. Some of the most locally customized variations of BIDs are found in Australia, New Zealand, and South Africa. Some countries now have their own “BID legacy”, in other countries— especially in Europe—the instrument is still new, such as Germany. In England and Wales, BIDs are regulated based by law since 2004. During the last 16 years, however, over 50 BIDs have been set up in city centers and in commercial and industrial areas. One of the differences of the North American model with European adaptions is that the business owners are liable for the levy and not the landlords/property owners.

A legal basis for BID has also been introduced in the Netherlands. The Investments Zones (BIZ) Experiments Act entered into force in May 2009 in the Netherlands. Entrepreneurs in a BIZ can invest together in an economically attractive and secure environment. In January 2015, this law, “The Investments Zones” (BIZ) became permanent.

There are only a few BIDs in Sweden. Usually, property owners initiate the establishment of BIDs. Currently, there is no specific legislation governing cooperation under the BID model. However, there are several BID-inspired collaboration projects that are based on voluntary membership and are often run as non-for-profit associations.

The UK was the first country to set up a BID in Europe. The largest BID in London is called the New West End Company and operates on Bond Street, Oxford Street and Regent Street. In the UK, PM Tony Blair was one of the driving forces behind the creation of BIDs and BID legislation was introduced in late 2004–05. Planning work and pilot projects started in the early 2000s and legislation in England was finalized in September 2004. The need for improvements in the public environment was an important reason for drafting legislation for BID creation. The English BID model has been given a slightly different form compared to the US with more influence from the state and the municipality rather than more autonomous decision making from property/business owners.

This study continues with comparative analysis of legislation models in Europe for countries that have a BID Law in place. Section 3 introduces similar forms of organizations like Business Improvement Districts in European countries, who have not approved any legislation on Business Improvement District so far. Section 4 gives an overview of BID model in Albania. Next section introduces findings from previous research regarding the social and economic impact of Business Improvement Districts as a form of organization in Local communities. The last section summarizes the concluding remarks.

2 Comparative Analysis of Bid Models in Europe

This section introduces the comparative analysis of the regulatory characteristics for European countries where BID is used as a form of organization. Specifically, the regulatory differences are structured as per the following criteria:

  • Is there a specific law regulating BIDs?

  • Has the local/central government the authority by law to delegate a (specific) public service to BIDs or other business organizations with focus place making.

  • Based on the legislative framework, is the local government allowed to finance the activities (i.e., services, marketing, events, admin costs) of BIDs

  • Who has the right to vote for the establishment of BIDs?

  • What is the duration of a BID?

  • In case a BID\is established, do the members of the organization have the right/obligation to pay a levy.

  • What are the criteria used to calculate the amount of the levy in case it applies?

  • What are the collection mechanisms for the levy? Does the local government help collect it?

The empirical research has been conducted with the support of the Albanian Assembly. Through the ECPRD Network of the European Parliament, the Albanian Assembly sent the questionnaire regarding the regulatory differences mentioned above to all members of the network. Twenty responses were received, out of which four countries in EU confirmed that they have established BID as a management form, and four other countries in the EU confirmed that they have established similar practices to Business Improvement District. Table 1 lists the BID regulatory differences between Germany, Netherlands, UK, and Sweden.

Table 1 Summary of BID models in Germany, the Netherlands, the United Kingdom, and Sweden
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2.1 BID Models in Germany, the Netherlands, the United Kingdom, and Sweden

Table 1 shows that the BID model in Germany, Netherlands and UK are regulated by law. Germany and UK are able directly or indirectly to delegate part of public service budget to BID Associations in the respective areas. Such delegation is not possible in the Netherlands and Sweden.

Based on the legal framework of four countries listed in Table 1, since establishment of a BID would impose an additional levy on business of the area, a voting process must be in place. Most legal frameworks impose the need to participate at least 50% of the businesses in the voting process, and at least 50% of the votes should be in favor of establishing a BID Association.

Legal framework in Germany, Netherlands and UK has an explicit duration of the association up to five years. After five years, businesses have the right to revote on whether they want an association in place or not. Once BID Association is established, leavy payment becomes mandatory for three out of four countries under consideration, since BIDs in Sweden are not regulated by law and hence levy payment cannot be forced.

Various metrics are used for the purpose of levy calculation. Germany uses property space, Netherlands uses property tax, while UK uses the rent of the property or rental references in the area. In Germany, Netherlands, and UK the local government collects the levy and transfers collection periodically to the BID Association.

3 Comparative Analysis of Countries with Forms of Organizations Similar to the Bid Models in Europe

This section introduces characteristics of forms of organizations similar to business Improvement Districts in Europe. These forms of organizations are defined by name, the legislation served to regulate its functioning, and main characteristics. The countries included in the analysis are Greece, Romania, Slovenia and Spain. A summary of the findings is presented in Table 2.

Table 2 Other forms like BIDs in Europe
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Main characteristics of each form are as follows.

For Greece, the essential change with BIDs is the financing of Open Shopping Centers, which is publicly funded and from the European Regional Development Fund and national resources. But like BIDs, in this case, local businesses are also beneficiaries. Applicants can be Municipalities, in cooperation with trade associations, or chambers of commerce. No more than 20% of the applied budget can be used for the platform in support of local entrepreneurs, organizing events to promote the area, financing the decorations for common areas. Most of the fund goes to improving public infrastructure at Open shopping malls. A condition for benefiting from the fund is participation in the application, in the form of trade associations / chambers of commerce of at least 70% of the businesses in the area and at least 50 businesses in the intervention area. The deadline for the implementation of the project is 12 months.

In the case of Romania, the association aims to prepare and promote at all levels, projects for the regional development of common interest for the two related territorial administrative units, in the fields of social services, transport, environment, business environment, tourism and to provide the necessary funds. It should be aimed to jointly implement development projects of zonal or regional interest, or to jointly provide public services and the joint purchase of equipment for intervention in emergency situations.

The Town Center Management of Slovenia aims to ensure that the functions of the city center are developed and that they are not relocated outside its center. In these towns they have a city manager or coordinator for management of a city center and / or an association of city entrepreneurs in various forms. Many municipalities are involved in the TCM network, where they are carrying out various activities for the revitalization of urban city centers.

Most of Open Shopping Centers in Spain have a legal status of non-profit associations, while some can be private–public joint ventures, private companies, or foundations. In 45% of cases, the creation of Urban Shopping Centers responds to a proactive attitude of the entrepreneurs, who intend to be more competitive and improve the commercial area. They have a mixed funding model: public contributions + membership fees + other private income from service provision, sponsorships, events, etc.

4 BID Model in Albania

In Albania, there have been established nine Business Improvement Districts in eight different cities between 2011 and 2021. Initially there was just the support of a development organization, called the Albanian-American Development Foundation, who, in partnership with local and central government agencies, committed to:

  • Participate in the public infrastructure improvement of the intervention areas.

  • Establish an Association of businesses in the areas of intervention.

  • Support the businesses in the intervention with grants on private investments, following the infrastructure investment in the area,

  • Some of the local tariffs paid to the municipalities by the businesses in the intervention area will be returned to the association established, for

    • Improvement of public services

    • Marketing and attraction for the area

    • Event sponsoring, to increase the footfall in the intervention area.

  • Businesses agreed to finance part of those activities through further contribution with a voluntary tariff to the association.

Considering the economic impact that the BID areas created, such as more than $85 M in added property value, 75% increase in business earnings, and more than 120% increase in footfall over the areas, a law regarding BID has been approved in 2020. An additional aspect to the law, on top of the organizational aspects mentioned above, is that, if, through election, businesses in a specific area would decide to establish a BID, a mandatory extra tariff will be implemented regarding BID activities, which will be collected by the municipality and be transferred to the account of the association. The mandatory extra tariff will be based on the business plan for the mandate of the BID, which, according to the law, is between three and seven years. Currently, the nine Business Improvement Districts are going through a transition process of legal transformation according to the new legal requirements.

5 Summary of the Main Findings of Some Studies on the Impact of BIDS

Referring to the study by Bakry, Nicole and Crystal (2018) for the Borough areas of Brooklyn in New York City, it is shown that for more than 30 years, BIDs have been used as a tool of economic development to promote and develop some areas with potential, usually in city centers. The problem, however, is that while BIDs have deliberate intentions, they have the potential to transform the entire area through rapidly increasing the real estate value. Experiences shared by key participants showed that BIDs, as a policy tool, can revitalize a neighborhood as intended, while also creating unwanted outcomes resulting from the unequal distribution of benefits and burden.

As owners and the government earn more, small businesses may face relocation. The findings of this study supported the initial assumptions that BIDs could be an important policy tool, albeit leaving negative impacts on certain groups. Findings from this research showed that like other public policies, BIDs create the dilemma of whose interests should be prioritized and whose perspectives should be used to determine whether BIDs have a negative impact on the urban landscape, acting as a means of changing the character of a neighborhood through the influx of wealthier residents and businesses. This study has described and discussed the process by which BIDs can completely transform a neighborhood starting with immediate impacts (improved physical appearance) and ending with sustainable impacts by which the area has become an expensive area of high level with a mixed building occupying the urban landscape.

The article by Hoyt and Gopal-Agge (2007) states that all BIDs are created with the consent of the municipalities based on the authority given by the relevant legislation. While these laws vary from country to country and even between states, as in the case of the United States, most require a vote to approve the BID institution for the area. Moreover, some responsibility is achieved by including clauses that limit the lifespan of a BID, usually to a few years. However, BIDs are very rarely distributed. Instead, as permitted by law, BIDs renew and extend their boundaries through an authorized standard process.

According to Hoyt's (2005) Philadelphia article, which contributes to the BID debate by identifying theories that support the model, developing a conceptual framework that examines the links between crime theories and BID services measure the impact of BID organizations in criminal activity in and around commercial areas, using statistical methods such as impact analysis. The results show that lower levels of property crime distinguish commercial areas with BID organizations compared to those without BIDs and that these lower rates are not related to the higher level of crime in the surrounding blocks.

Ellen, Schwartz and Voicutregon (2007) study the impact of BIDs on property values ​​in New York shows that, on average, BIDs generate positive impacts on commercial property values, a finding that is strong for alternative areas. However, there is a significant difference in the impact that different types of BIDs have. Specifically, large BIDs and those BIDs that consist primarily of office space have large and positive impacts on commercial property values. At the same time, smaller BIDs and those that mainly involve retail store space or industrial areas seem to have little impact. Budget differences seem to be deepening these changes (BIDs made up of office buildings tend to have significantly larger budgets than BIDs dominated by retail users.)

Morçöl and Wolf (2010), in their study show, first, an unclear line separation between the public and private spheres because of BIDs; second, BIDs are increasingly important actors in urban governance; third, BIDs engage in cooperative, conceptual relationships with local and central governments; and fourth, direct responsibility and management problems arise from their interdependent relationship with the local government. BIDs cannot exist without governments, but the fact that BIDs take on some of the responsibilities of local governments shows that local and central governments are becoming more dependent on local service providers.

According to Grossman (2014), BID does not only improve infrastructure, promotion/marketing, design, or economic revitalization. BIDs also make an impactful contribution in improving local governance. Ruffin (2014) conducts a cross network study of BID Models. The author finds that BID models applied in different local realities achieve different results, based on the local needs.

Grail et al. (2020) evidence that BIDs have an impact on the changing nature of retail business in the areas they are established. For the future, the authors suggest that resilience probability will increase with the inclusion of other stakeholders in governance, such as residents of the area. Furthermore, they suggest to local and central governments to change their role from BID Encouragers to BID Integrators to wider governance networks or new policies.

Kudla (2022) analysis of the literature on BIDS in two recent themes, BID Policy Mobilidy and BIDs and Social Regulation. Studies, according to the author, suggest that, as BID model encourages permeability, resilience limits neoliberal urban policies. In terms of social control, as the author summarizes the recent literature, BID organizations are built on a framework that administers in urban spaces are more attractive for consumer groups excluding the poor.

Vialli and Hammani (2020) analyze the impact on constellation of power in BID considering various urban governance actors such as city planning department, public housing, real estate companies, media, politicians, residents, and local businesses. The authors study a BID case in Sweden and conclude that improvements in terms of real estate value, attractiveness of the area and security are achieved by removing vulnerable individual of the society outside the BID area and disciplining residents and business behavior. In other words, the case study shows that issues are solved by removing social problems elsewhere rather than fixing them.

6 Conclusions

This study aims to conduct a comparative analysis on the way Business Improvement Districts are organized among different countries, and also show the main economic and social impacts these forms of organizations have produced, based on previous research. The first part of the study compared the form of the organization of BIDs in four countries, based on the legal framework, local government contribution, mandatory contribution from business/owners, duration, and ability of local govermnents to delegate. The second part of the study analysed forms of organizations similar to BIDs in countries where no BID framework is in place. The third part of the study presented an analytical review of existing literature regarding the social and economic impact of Business Improvement Districts in the life of local communities.

The legislative research concludes that, in the group of countries that have BIDs as a form of organization, three of the four countries (Germany, United Kingdom and the Netherlands) have a specific law and other regulations governing BIDs. Sweden has BIDs as a form of organization, but there is no legislation for it. The role of local government in delegating activities and their financing is different in these countries. Specifically, in Sweden, local government does not have the authority to delegate activities to BIDs. While in Germany, local governments are not allowed to fund their activities. In most cases, the maximum duration of a BID is 5 years (except in Sweden which is not defined). BID members also pay quotas in all four countries.

Regarding the group of countries, which have organization models similar to BIDs (Greece, Romania, Slovenia and Spain) two of them have Open Shopping Centers as a form of organization (Greece and Spain), while Slovenia uses the City Centers management model.

Main findings from previous research is mostly identified in the study of Bakry, Nicole and Crystal (2018) shows that BIDs, as a policy tool, are capable of revitalizing a neighborhood (as intended), but also create unwanted results due to the unequal distribution of benefits and burden. As homeowners and the government earn more, small businesses may face relocation. The authors have described and discussed the process through which BIDs can completely transform a neighborhood starting with immediate impacts (improved physical appearance) and concluding with sustainable impacts by which the area has become a expensive high-level zone. According to Hoyt (2005) article, lower levels of crime distinguish commercial areas with BID organizations compared to those without BIDs. Ellen, Schwartz and Voicutregon (2007) study on the impact of BIDs on property values ​​in New York shows that, on average, BIDs generate positive impacts on commercial property values. Morçöl and Wolf (2010) concluded that the fact that BIDs take over some of the responsibilities of local governments indicating that local and central governments are becoming more reliant on local service providers.

To the best of our knowledge, this is the first study that analyses how the BID Model is implemented legally and technically in different countries. More specifically, we define what is the role of the local government in the BID legal life, what are the terms of delegation of authority from local government to the BID, and what are the rights of a BID organization in Germany, Netherlands, UK and Sweeden in a comparative analysis framework. Moreover, this is the first study that aims to identify other similar legal forms applied in other EU countries, similar to BID, and what are their characteristics.