The business improvement district model first emerged in 1969 in Toronto,
Canada, and arrived to the United States in 1974 (Morcol, 2008). Its
development was preceded by years of private-sector efforts to revitalize
urban commercial districts. These organizing efforts first began as voluntary
membership associations among business and property owners to address the
challenges pressed on urban commercial centers by growing suburbanization.

In the 1950s, families, businesses and commercial activity began migrating
out of urban centers to nearby suburban communities, compelled by mass
construction of new single-family homes following the World War 2 baby
boom, highway expansion, and decreases in the cost of car ownership. In
these suburban communities, new forms and environments of suburban
retail emerged, including the strip mall, while businesses relocated their
downtown operations to office parks surrounded by acres of parking spaces.
Suburbanization and out-migration left urban centers neglected, and
declining tax bases made it difficult to deal with growing crime and poverty
that quickly reshaped public perception of cities as dirty and unsafe. Urban
renewal projects and investments in social services attempted to stem these
effects, but they were unsuccessful in fully restoring urban communities.

During this period, voluntary membership organizations—business owners
associations and downtown councils—used marketing and promotional
activities, such as fairs, window displays, parades, and coupon books, in an
attempt to restore declining commercial activity and maintain property values
in their districts. As these associations matured, organizers recognized that
many property owners within their districts reaped benefits from the collective
effort, but did not contribute to the activities or financing that kindled growth
in retail sales and commercial property values.

In the 1960s in Toronto, Canada, business owners coalesced around a formal
membership organization to eliminate the free rider problem (Morcol, 2008).
Given existing financial contributions made by local businesses to pay for
new services and programming, organizers explored a legal framework to levy
an additional assessment on business owners within the district. In 1969, the
enabling legislation was passed in Toronto. In five years time, the businessbased
assessment district model arrived to the United States in 1974.

The Emergence of BIDs in California and San Francisco

Business based special assessment districts focused on commercial district
revitalization, first emerged in California with the Parking and Business
Improvement District Law of 1989, which allowed cities to establish
parking and business improvement areas as a way to levy assessments on
business owners. These assessments could then be used to finance a limited
range of improvement activities. To counteract the shortfalls of the 1989
law, the Downtown Economic Improvement Coalition lobbied successfully
for a supplemental statue allowing for both property and business-based
assessments, and an expanded list of authorized expenditures necessary to
address the multidimensional challenge of improving urban centers (Olson,
R., J., & Keys, L, 2008). Following the passage of the California Property
and Business Improvement District Law of 1994 (California Streets and
Highways Code 36600 et seq.), property-based special assessment districts
focused on commercial district improvements emerged in California.

In 2004 The City and County of San Francisco, acting under its authority
as a Charter City, augmented the CA Property and Business Improvement
District Law of 1994 with the passage of Article 15 of the San Francisco
Business and Tax Regulations Code. Article 15 lengthened the initial term
that a district could be in place from 5 to 15 years and lowered the weighted
petition threshold required to initiate the legislative approval process and the
special ballot election from 50% to 30%. This legislation, combined with a new
technical assistance program initiated by then Mayor Gavin Newsom through
the Office of Economic and Workforce Development, was instrumental in
easing the process for the formation of new PBID districts in San Francisco.
Prior to 2004, San Francisco had only one PBID district in the Union
Square neighborhood, but in 2005 alone, 5 new districts were established.
Rapid growth of PBIDs in San Francisco, locally referred to as Business
Improvement Districts (BIDs) or Community Benefit Districts (CBDs),
continued through 2008, when a total of 10 districts were in operation. As
of the issuance of this report in 2012, 12 CBD/BID districts have formed in
San Francisco, representing the diversity of the City’s vibrant neighborhood
commercial corridors.

CBDs/BIDs established in San Francisco under The CA PBID Law of 1994,
as augmented by Article 15 are subject to the following requirements:

  • Districts may provide services that include safety, maintenance,
    marketing, capital improvements, economic development, and special
    events. Authorized services may be funded by property and or business
    assessments.
  • A portion of the annual services budget may also be required to come
    from non-assessment revenues based on an analysis of the separation
    and proportionality of general benefits from the special benefits
    conferred onto the parcels and businesses assessed. The formation of
    a district requires petition support from property and business owners
    responsible for contributing at least 30% of the total assessment budget.
  • Following the petition process, a special ballot election occurs for
    45 days. More than 50% of the returned weighted ballots must be
    in support of the district for the Board of Supervisors to vote on its
    authorization.
  • Noticing to all merchants within the proposed district must be provided
    in multiple languages during the ballot phase.
  • Once the district has formed, the Management Corporation Board,
    a body responsible for overseeing the district, must maintain district
    merchant representation—those who do not own property—that is
    equal to 20% of the total board.
  • District meetings and hearing are pursuant to the California Ralph M.
    Brown Act (Government Code sec. 54950 et seq.), as well as public
    records to the California Public Records Act (Government Code sec.
    6250 et seq.).
  • The term of a district may last up to 15 years, however, per a 2012
    amendment to Article 15, those which levy bonds may have a term of
    up to 40 years.

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The information above was taken directly from

Impact Analysis of San Francisco’s
Property & Business Improvement
Districts (CBDs/BIDs)
Fall 2012  by Stanley Ellicott and Lisa Pagan
Pages (9-11)
http://www.oewd.org/media/docs/CBD%20docs/CBD%20BID%20Eval%20Report%20FY%2012-13.pdf

Morcol, G. (2008). Business improvement districts research, theories, and
controversies. Boca Raton, FL: Auerbach.