Examining the Logic Behind the Self-Help, Self-Taxing Movement: Business Improvement District Formation

An institution that has shown great promise in addressing the revitalization of declining central cities is Business Improvement Districts (BIDs). These private governments provide supplemental municipal services such as sanitation, security, and marketing to independent businesses in underserved commercial areas. By 1999, 44 U.S. states had legislation that enables and dictates the formation process and structure of BIDs. The surprising element of this legislation is the wide variation in approval needed to form a BID over a proposed geographical area. Some states require as little as 20 percent approval of proposed members and others as much as 75 percent approval to allow formation of a BID. This variation in state statutes likely influences the use of BIDs. Results highlight that relatively easier state enabled collective action positively impacts the creation of BIDs, the limited effects of tax expenditure limitations on the formation of BIDs and the positive impacts that new development has on the number of BIDs per state.