BID whetter

US-inspired business improvement districts are being hailed as the answer to the UK’s declining town centres. Adrian Bland reports on the process

Business improvement districts (BIDs) are schemes intended to assist in the regeneration of town centres. They have been brought into use by the Business Improvement Districts (England) Regulations 2004 (the regulations). But despite the introductory hype, has the Government wasted an opportunity to deal with ‘grime and crime’ in English towns, or are BIDs the panacea to declining town centres that has been suggested?

These schemes have their origins back in the US of the 1980s. They have been used with great success in New York and Philadelphia to regenerate run-down areas. Anyone who has seen the improvements to Grand Central Station, or who has ventured out towards Bill Clinton’s offices in Harlem over the past five years, will be in no doubt that such schemes can work spectacularly well.

The Local Government Act 2003 set the legislative basis for similar schemes in the UK and the regulations introduced the detail. A BID is a partnership between a local authority and the local business community that develops and takes forward a project to benefit the trading environment and the public realm. A number of pilot schemes have been running with some success, notably in Birmingham. They are intended to tackle neglect, crime and vandalism, using the expertise of local authorities and funding from local businesses with obvious interests in seeing their areas cleaned up.

However, there are fundamental differences between the US and the UK BID models. In the New York model, those contributing to the funding of the BID are the owners and occupiers of the properties. Commercial owners and occupiers pay a commercial rate; owners of residential and vacant properties pay a reduced rate (not-for-profit and governmental owners are exempt). This means that the BID receives substantial and secure funding from multiple sources.

The basis of funding the BID in England is a levy on business premises in the specified area of the scheme. Only the business ratepayer contributes. This omits the landlord and residential owner from the requirement to pay. But the landlord will often have most to gain from the long-term upgrade of the area and the rising property values that can follow.

Ian Henderson, former head of Land Securities, has launched a BID proposal for London’s West End. He and other property industry leaders urged the Government, when preparing the draft regulations, to include landowners in the list of contributors – but to no avail. When the property industry is offering to hand over money and the Government is saying “no”, you have to think something is wrong.

The first BID to make it through the proposal stage, in Kingston upon Thames, went to the ballot stage. Business occupiers were asked on 15 November whether they wish to pay a 1 per cent levy for new services, such as more frequent street cleaning, better marketing and schemes to counter traffic congestion. The answer was “yes”, though this is subject to a 28-day challenge period during which complaints can be made to the Secretary of State. Kingston, however, is confident of starting work in the new year. These proposals are all designed to redress Kingston’s declining position in the league of shopping destinations. In the 22 pilot schemes, the actions funded by the levy have been many and various, ranging from graffiti removal to the employment of ‘red caps’ to patrol the streets.

Experience from the US models also points to a limitation on the effectiveness of BIDs in some areas. While BIDs are intended to assist in the regeneration of deprived and run-down areas, they do nevertheless require that a business community be in place as a seedbed on which to grow the BID. The ‘Step-by-Step Guide to Starting a BID’, published by the New York City Department of Small Business Services, confirms that the following are required for a neighbourhood to be appropriate for a BID: an adequate base of commercial property in the area; stable commercial occupancy rates; strong local support; and proposals for future development.

Severely deprived areas, lacking the adequate business base, are therefore not likely candidates for a BID. Yet they are the most obvious category of area needing the attention. Indeed, they may be further marginalised as other areas are upgraded.

It is true that BIDs have proved successful in the US. Nevertheless, there are concerns over the power exerted by BID bodies and the danger of ‘gentrification’, which results in the poorer businesses and residents being forced out by rising rents and prices following from the reduction in ‘grime and crime’.

It remains to be seen whether the journey of the BID concept, from New York of the 1980s to England of the 21st century, will bring the same success over here. The underlying principle is good, but the devil may lie in the Government’s detail.

Briefly, the steps required are that a BID proposer sets out the proposed arrangements for a BID and consults with the relevant people in an area in need of improvement. The BID proposer can be: a national non-domestic ratepayer (NNDR) in the relevant area; a person with a legal interest in land in the area; a company with one of its objects being the BID proposal; or the local authority responsible for billing the rate.

The consultation must reveal that at least 20 per cent of the NNDRs in the area consider that the BID arrangements should go to a ballot. If that threshold is met, the BID proposer sends the BID arrangements to the authority with a copy to the Office of the Deputy Prime Minster.

The regulations set out a strict timetable and requirements for a ballot, which include the need to advertise in local newspapers. Approval of the BID proposal requires two tests to be satisfied: a simple majority of those voting in favour of the BID proposal; and those voting must represent a majority by rateable value of the rateable properties of those voting (but not a majority of all properties in the BID area).

The BID proposer must have the funds available to cover the cost of a ballot. This could deter a number of potential proposers, although it may not be required to actually pay for the ballot. The billing authority has a limited power to veto a BID proposal approved by ballot where it considers that there is unfairness to a group of ratepayers.

Once the BID arrangements have been approved, they must be implemented within one year of the ballot by a contract between the billing authority and the BID body. The regulations stipulate what needs to be covered in the contract, such as a schedule of financial requirements, a list of representatives’ duties and obligations
and provisions for the termination or amendment of the BID arrangements.

The BID arrangements will set out how the levy is to be raised. This is not related to NNDR and the same rules do not apply. Most alterations to the BID arrangements will require a further ballot; some may be made without a ballot, but only in limited circumstances.

Adrian Bland is real estate group leader at Wragge & Co. Planning associate Jan Hebblethwaite assisted with this article