Whose City? Fueling the Gentrification Machine through BID Urbanism

By Susanna Schaller

On September 16, 2016 Crains’ New York Business ran an article titled, “Shaping a Neighborhood's Destiny from the Shadows.” The article highlighted the work of business improvement districts (BIDs) in New York City.[1] At the story’s center stood Dan Biederman, the founder of the Bryant Park BID. In the early 1980s, the story notes, Biederman successfully organized local property owners and business owners to provide the “blueprint” for this much-hailed urban governance strategy. The prevailing narrative asserts that public private partnership (PPPs) institutionalized through BIDs saved the city from the “dystopian” conditions of the 1970s: rampant crime, homelessness and drug use undermining the viability of the City’s public realm and business districts.[2] In the context of federal policies that had systematically drawn the life out of central cities followed by federal retrenchment, urban visionaries and the downtown BIDs they led were framed by bipartisan consensus as savior organizations.

Creative Placemaking & Marketing, Newly Designed Inwood Banner on Broadway. Photo by author, February 24, 2018.

But, what exactly are BIDs? Technically, BIDs represent a variation of special district governance. BIDs make it possible for city governments to devolve the power to manage local assessments or “taxes” to a sub-municipal organization, which holds decision-making power over how these funds are spent.[3] Usually, BIDs are incorporated as non-profit organizations that receive and reinvest the mandatory assessment levied on local properties in a geographically defined district. Originally, the focus was on commercial properties, but increasingly residential properties are being assessed as well. But, BIDs operate in the shadows, rebranding, restructuring, monitoring and policing not just our downtown but also our neighborhood commercial districts. BIDs are also able to raise additional revenue by commercializing the physical space and brand of their districts and taking on debt. [4]

BID advocates advance a policy narrative that cloaks the BID tool in ostensibly colorblind[5] public choice principles and liberal economic tenets, especially localism. From this perspective, BIDs exemplify grassroots democracy at work: they empower local stakeholders, who can best identify district-specific problems, to raise funds and develop focused solutions. But BIDs do not simply manage the clean and safe programs or other supposedly “supplemental” services as advertised; in reality, BID policy entrepreneurs shape broader policy discussions and urban redevelopment plans as well as urban design and place activation strategies. I call this collective placemaking work of BIDs BID urbanism; in my recent book, Business Improvement Districts and the Contradictions of Placemaking: BID Urbanism in Washington, D.C., [6] I show how this BID Urbanism spurs multiple forms of displacement: political, economic, cultural, and ultimately physical.[7]

The COVID-19 pandemic, the Black Lives Matter uprisings, and the wave of activism to protest gentrification have once again unmasked the extreme inequities that are embedded in our urban landscapes and structure our politics. Over the past three decades BIDs have become one of the major drivers reinforcing this inequitable urban development pattern. Already in the 1950s, foreseeing the end of federal support for urban renewal, downtown business interests sought to create a form of public-private partnership that could embed their power in local governance structures. The goal was to institutionalize an urban placemaking regime to attract white suburban consumers and potential residents back into the city. So, the long history of racist policies and practices that underwrote white flight and created racialized property markets in the US does not stop with BID formation.[8] In fact, BIDs function to reproduce racial inequities. Yet, the dominant BID policy narrative continues to eschew this historical analysis.

Because they institutionalize a governance model that has deliberately tied local control and political voice to property ownership, BIDs are fundamentally flawed.[9] In my book I show how BIDs “oiled the gentrification machine” in Washington, DC.  In cities, like DC, they have accelerated the displacement of African Americans and Latinx communities from their neighborhoods while reclaiming spaces for white people.[10] BIDs achieve this as part of broader public private partnership governance and planning regimes. This BID urbanism secures, produces, and defends urban property markets to attract higher income residents, businesses and developers.[11] While DC was a latecomer to BIDs (it took the installation of the Fiscal Control Board in the mid-1990s to establish a BID-PPP regime), the epicenter of the BID movement has been New York City, where this governance strategy reaches back to the 1970s fiscal crisis.[12]

New York City is now home to over seventy-two BIDs. Here as in other cities, BIDs are usually marketed as organizations focused on supporting small businesses. However, BID organizing materials generally omit crucial information, obscuring how decision-making power of the varied “business” interests becomes institutionalized in a BID. One key obfuscation during initial BID-organizing initiatives often veils the true legal nature of BIDs, namely that in New York City by law “not less than a majority” of the votes on a BID’s board of directors are reserved for property owners, and these can be weighted by ownership of assessed value.[13] The idea is that those who “pay” the assessment have the right to derive the benefits and, thus, make decisions on how this tax is spent.[14] However, it is standard practice in commercial leases to pass this cost on to tenant businesses. Landlord and tenant interests do not always coincide, especially where a strategic measure of BID effectiveness, the pursuit of higher property values and lease rates, is concerned.[15] Consequently, BID priorities do not necessarily reflect the real needs of tenant businesses. Additionally, landlord interests, particularly in transitioning urban areas with a mix of property ownership, may not overlap either as large property investors are in a position to crowd or buy out smaller owners. Even tenant businesses have conflicting interests. Bars and clubs that attract large, “outside” audiences, requiring extra security and sanitation, often appreciate these traditional BID services; BIDs support their business models. Daytime and neighborhood-serving businesses, which often have smaller profit margins, end up subsidizing services for these more entertainment-oriented venues.[16] These various tensions among owners and tenants are prevalent in New York City.[17]

The irony is that progressive cities continue to support BID expansion in the name of small business and local economic development. It is not surprising that the Bloomberg administration actively supported the growth of BIDs, but the de Blasio administration in the name of small business development also funded BID-organizing efforts in tandem with its controversial mandatory inclusionary housing (MIH) rezoning proposals.[18] In Northern Manhattan, an area comprising West Harlem, Washington Heights, and Inwood, for example, there have been rumors of BID expansion plans since 2013.[19] By 2016, Inwood, a predominantly Dominican neighborhood, became the target of an MIH rezoning strategy.

Washington Heights BID Sponsored Meeting Announcement, October 2018.

During public presentations, the City’s Economic Development Corporation (EDC) actively marketed the rezoning process as part of a broader “Inwood Planning Initiative.” A BID was squarely on the City’s agenda as part of this “Initiative.” The New York City’s Department of Small Business Services (SBS) had provided the nearby Washington Heights BID with over one million dollars to organize BID-like placemaking programs for Inwood.[20] These included the standard BID playbook: marketing, sanitation, banners and creative placemaking. Additionally, in 2018 during the public review process, only a few months before the City Council vote, Inwood was declared an opportunity zone.[21] This is how BID urbanism works. City agencies and public officials pave the way for and approve incentives for redevelopment while private partners, like BIDs, ramp up neighborhood marketing and rebranding efforts.

Washington Heights BID Sponsored Sanitation Services in Inwood, Dyckman Street, Photo by author, June 29, 2020 .

In 2016, Inwood had more than 316 businesses on three of its major commercial corridors, and at least three-quarters of these mostly immigrant-owned businesses could be classified as independently-owned.[22] At multiple meetings and in comments on the Environmental Review when neighborhood activists raised the specter of small business displacement,[23] SBS cited its placemaking initiatives in conjunction with micro-loans and workshops as proof of the City’s intention to help Inwood’s small businesses survive. A 2016 study funded by SBS, however, found that rent burdens were already a major concern among the 98 percent of local businesses.[24] Yet, neither the likely increase in property taxes, a probable outcome of a rezoning, nor the possibility of an added burden in the form of BID assessment payments, a predictable mechanism to sustain the already funded BID-like services over time, were transparently discussed during public hearings. Neighborhood organizers, seeing the writing on the wall, demanded that the City conduct a racial impact analysis as part of its public review and have successfully tied up the rezoning in litigation. But, because the City continues to deny its responsibility to assess disparate racial displacement trends and has appealed the case, the rezoning’s ultimate fate remains unclear.[25] Nevertheless, in Inwood, a BID in tandem with the opportunity zone designation still has the potential of harnessing the collective political voice and influence of property owners and investors to reposition the neighborhood in New York’s real estate market. [26]

BIDs have been stealthy creatures. They are being created to give property owner-landlords, not tenant-businesses, a collective voice in the organization that eventually manages the assessment budget. The avowal of a unitary voice, namely that BIDs pursue the interests of an amorphous local “business” constituency, shrouds their real nature. As long as they prove effective vehicles to manage neighborhoods as assets, they are go-to tools in the kit of contemporary growth-oriented urban regimes. BIDs are designed to sidestep the fact that neighborhood politics are fraught with conflicting interests and power differentials. More insidiously, the BID storyline of grassroots democracy and local civic engagement resurrects a core US governance ethos that has linked property ownership, local business civic engagement, and political influence. [27] This means they are not an innocuous revitalization strategy but a governance model that exacerbates the underlying inequitable structures this ethos has historically produced.

Susanna F. Schaller is Assistant Professor in Urban Studies and Planning in the Division of Interdisciplinary Studies at The City College of New York. She is also a certified planner. Her 2019 book Business Improvement Districts and the Contradictions of Placemaking: BID Urbanism in Washington, D.C. (University of Georgia Press) examines how private partnership regimes and BID urbanism have restructured Washington’s landscape and consolidated gentrification processes.

[1] Aaron Elstein, “Shaping a Neighborhood’s Destiny from the Shadows Business Improvement Districts Were Created to Rescue a Dirty, Crime-Ridden City. With Order Restored, Some Say It’s Time to Bid Them Goodbye,” Crains New York, September 29, 2016, http://www.crainsnewyork.com/article/20160918/REAL_ESTATE/160919896.

[2] Elstein.

[3] Richard Briffault, “A Government for Our Time? Business Improvement Districts and Urban Governance,” Columbia Law Review 99, no. 2 (March 1999): 410–11, https://doi.org/10.2307/1123583.

[4] Ingrid Gould Ellen, Amy Ellen Schwartz, and Ioan Voicu, “The Impact of Business Improvement Districts on Property Values: Evidence from New York City” (Furman Center for Real Estate & Urban Policy, 2007), https://furmancenter.org/files/publications/ImpactofBIDcombined_000_1_1.pdf.

[5] Eduardo Bonilla Silva, Racism without Racists: Colorblind Racism & Racial Inequality in Contemporary in America, 3rd Edition (New York: Roman and Littlefield, 2010).

[6] Susanna Schaller, Business Improvement Districts and the Contradictions of Placemaking: A Case Study of BID Urbanism in Washington, D.C. (Athens: University of Georgia Press, 2019).

[7] Mindy Thompson Fullilove and Rodrick Wallace, “Serial Forced Displacement in American Cities, 1916–2010,” Journal of Urban Health 88, no. 3 (June 2011): 381–89, https://doi.org/10.1007/s11524-011-9585-2.

[8] Richard Rothstein, The Color of Law: A Forgotten History of How Our Government Segregated America, First edition (New York ; London: Liveright Publishing Corporation, a division of W. W. Norton & Company, 2017).

[9] William J Mallett, “Managing the Post-Industrial City: Business Improvement Districts in the United States,” Area 26, no. 3 (1994): 276–87.

[10] Susanna Schaller, Business Improvement Districts and the Contradictions of Placemaking: A Case Study of BID Urbanism in Washington, D.C., 4.

[11] Schaller.

[12] New York City Department of Small Business Services SBS, “Business Improvement Districts Trends Report” (New York, N.Y, 2015).

[13] “New York City Administrative Code,” § 25-414 District Management Association. Article 25 - Land Use, Chapter 4: City Business Improvement Districts § (2020).

[14] Richard Briffault, “A Government for Our Time? Business Improvement Districts and Urban Governance,” Columbia Law Review 99, no. 2 (March 1999): 365, https://doi.org/10.2307/1123583.

[15] Ellen, Schwartz, and Voicu, “The Impact of Business Improvement Districts on Prop- Erty Values: Evidence from New York City.”

[16] Schaller, Business Improvement Districts and the Contradictions of Placemaking: A Case Study of BID Urbanism in Washington, D.C.

[17] Richard E Ocejo, Upscaling Downtown: From Bowery Saloons to Cocktail Bars in New York City, 2017, http://dx.doi.org/10.23943/princeton/9780691155166.001.0001.

[18] Department of Small Business Services, “Neighborhood 360° Grant – 2016 Project Categories,” 2016, http://www.nyc.gov/html/sbs/downloads/pdf/neighborhood_development/Neighborhood%20360/n360_program_components.pdf.

[19] Douglas Feiden, “Major Expansion of Business Improvement Districts Is Planned for Northern Manhattan |,” NY Daily News, April 25, 2013, http://www.nydailynews.com/new-york/manhattan/progress-bidness-wash-hts-article-1.1326741.

[20] Carolina Pichardo, “City Invests $1.2 Million to Boost Small Business, Beautification Projects,” DNAinfo New York, June 28, 2017. A website for Inwood, https://www.upininwood.nyc, with a map that coincided with the rezoning area, which went live during the rezoning process is now inactive (it seems to be on Facebook now).

[21] Sadef Kully, “New Federal Tax Program for Depressed Neighborhoods Stirs Hopes and Concerns,” City Limits, April 12, 2019, https://citylimits.org/2019/04/12/opportunity-zones-impact-nyc/.

[22] New York City Department of Small Business Services, “Neighborhood 360: Inwood Manhattan Commercial District Needs Assessment,” 2016, https://www1.nyc.gov/assets/sbs/downloads/pdf/neighborhoods/n360-cdna-inwood.pdf.

[23] Unified Inwood, September 29, 2017, “Comments on the Inwood Rezoning EIS Draft Statement of Work (DSOW) CEQR No. 17DME007M,” https://rtmteam.net/files/02Oct2017_Unified_Inwood_DSOW_Comnts4Distribution.pdf

[24] Department of Small Business Services.

[25] Elizabeth Kim, “In Huge Defeat For De Blasio, Judge Knocks Down Inwood Rezoning,” Gothamist, December 19, 2019, https://gothamist.com/news/huge-defeat-de-blasio-judge-knocks-down-inwood-rezoning.

[26] Alex Wittenberg, “The Biggest Problem With Opportunity Zones: The Biggest Problem With Opportunity Zones,” Bloomberg CityLab, June 25, 2020, https://www.bloomberg.com/news/articles/2020-06-25/opportunity-zones-don-t-work-can-they-be-fixed.

[27] Daniel J. Monti, The American City: A Social and Cultural History (Malden, Mass: Blackwell Publishers, 1999).