How Improvement Districts Help Drive Needed Revenue for Municipal and County Governments in New York

Woodbury Commons

Municipal governments in New York looking for ways to generate revenue can consider improvement districts, such as business improvement districts, to fund needed services in high-demand areas without imposing an undue burden on other taxpayers.

New York State enacted legislation allowing for the creation of business improvement districts (“BIDs”) in 1981. In general, improvement districts are created to provide services to a specified area, while having the property owners within that area who would benefit from those services pay for them.

BIDs are formed and governed by municipal officials and community members and funded through an added tax on commercial property owners within the borders. In exchange for those taxes, these BIDs offer services including street and sidewalk clean-up and maintenance, with the aid of volunteers; marketing of the district, and special events that draw in potential customers and contribute to the life of the district and surrounding community.

BIDs may also drive revitalization efforts with the municipality, bringing to fruition improvements to sidewalks, roadways, lighting, and other downtown design elements.

In practice, business improvement districts can be narrowly tailored for a specific service, or a broader entity that oversees security, sanitation, land- and streetscaping and marketing for business.

Examples of expansive business improvement districts are found in the City of Middletown, where the Downtown Middletown Business Improvement District encompasses the heart of the commercial district near City Hall; and in the Town of Poughkeepsie, where the Arlington Business Improvement District centers on Raymond Avenue and borders on Vassar College.

An example of a more focused BID is one created by the Town of Woodbury for the Woodbury Common Premium Outlets, the 250-plus-store shopping center that draws 13 million visitors annually from around the globe. The Woodbury BID was created specifically to fund police services required by the outlets.

The Town of Woodbury, with an estimated 2019 population of 11,370, employs 21 full-time and two part-time police officers, and four full-time civilian dispatchers.  Although the town has little other crime of any significance, according to statistics from the town and from the state Division of Criminal Justice Services, the department handles hundreds of larceny cases and more than 1,500 motor vehicle accidents annually.

Creating a business improvement district requires a public hearing. The district must be clearly defined, and its enhanced services will be funded via a special assessment on each property within its boundaries. Because the districts have higher demands for the services, the tax is essentially a premium

Although the BID will be incorporated as a non-profit, the assessment will be levied by the municipality along with property taxes, and the taxing district remains under the control of the local government. According to the Government Finance Officers Association, this has the added benefit of maintaining accountability to the public for the improvement district’s spending.

Some BIDs, including Middletown and Arlington were formed in part to revive urban downtowns that suffered in previous decades when malls and chain stores drew customers out of traditional shopping districts.

In areas where there may be separate special districts for water, sewer, lighting etc., a BID can also consolidate these other entities and simplify the structure of government. In cases of municipal mergers, BIDs can also play a role. For example, when towns and villages discuss mergers, concerns by village residents about reductions in services often present a stumbling block. In such a case, the solution could be a business improvement district that follows the village outline. That would allow a special assessment for dedicated police coverage for the former village, and the town could take over water and sewer as special districts.

Local governments need revenues to provide enhanced services to support the economic health and stability of commercial areas. Business improvement districts present a way to do that by charging a special assessment to the commercial properties that will directly benefit from those services, without unfairly burdening other taxpayers.