Unveiling Hidden Districts: Assessing the Adoption Patterns of Business Improvement Districts in California

Abstract

I use the results of a survey on the adoption patterns of Business Improvement Districts (BIDs) in the state of California to begin filling a gap in our understanding of the role and prominence of the broader class of special assessment districts. A BID is formed when a majority of merchants or property owners in a commercial neighborhood votes in favor of a package of local taxes and expenditures; once passed, assessments are legally binding on all members of the commercial neighborhood. I find that roughly half of all larger cities in California have at least one BID; among the universe of cities in four Southern California counties, that figure falls to about one-fifth. I combine the survey data with demographic, institutional and political data and find that BID adoption modestly increases in residential heterogeneity and more strongly decreases in a city's year of incorporation, which I interpret as a measure of the importance of the collective action problem in older commercial neighborhoods.