Community Improvement Districts and CRE: Beautification and Other Benefits

November 15, 2021 | By: Owen Kavanagh

Community Improvement Districts, or CIDs, are a way for commercial entities like businesses, buildings, and other groups to improve their areas without waiting on government action. CIDs go by many names: Business Improvement Districts, Neighborhood Improvement Districts, and Self-Help Business Improvement Districts to name a few. CIDs are each unique in their purpose, governance, and makeup but they all share a common goal; to improve their areas of influence and encourage others to do the same.

What is a CID?

Community Improvement Districts (CID) are a self-taxing group of commercial properties in a defined boundary who tax themselves for specific purposes and goals. These goals are dependent upon the location and business owners who make up the CID, and the rules for the formation and function of these districts vary state by state.

A few requirements remain constant between jurisdictions. These are boundaries, purpose, and consent of the affected. A CID’s boundaries must be clearly defined at its establishment. These boundaries can change, and often do if a CID is successful, but only with approval from members of the CID and the local governing body (such as a city council or county government). A CID must clearly state a purpose in their establishment, such as enhancing public safety, improving infrastructure, or beautification.

Finally, a CID requires the consent of the majority of the commercial entities inside it. These votes occur under different systems state-by-state. CID voting can be based on the total value of the land, in which case votes are based on value per square foot rather than one-member-one-vote. They may also be dependent on square footage, where the more land a business owner owns in the CID, the more votes they haves.

What do CIDs do?

CIDs exist to improve the district they reside in. This can be done in many ways, but the main goals of most community improvement districts are public safety, beautification, infrastructure improvement, facilitating discussion between members and governing bodies, and other supplements to local governments as defined by the CID. This is a wide range of topics, but CIDs serve an incredibly wide range of people.

“Each Community improvement district has a unique purpose that is defined by its members.” Regional Vice President of Asset Management, Natalie Tyler-Martin, RPA, with Duke Realty stated. “A CID made up of industrial owners would likely focus on infrastructure and transportation projects, while a CID made up of hotels would likely prioritize public safety and beautification.”

Community improvement districts are quasi-governmental bodies, but they do not replace the local government. They work hand in hand with local governments and groups to attain the goals they formed for. The cohesion of CIDs helps to facilitate communication between jurisdictions, though only for districts that continue. Many CIDs are formed for a specific project and dissolve afterwards.

Community Improvement Districts by State

CIDs can vary drastically from state-to-state. CIDs are formed for different reasons, but most states have laws regarding their formation and upkeep. Kansas, California, and Georgia, each have different regulations on CIDs, but the basics remain the same.

The rules governing Kansas’ CIDs were established in 2009 with the Community Improvement District Act. This act requires signatures of owners with over 55-percent of land area and 55-percent of land value in the assessed area to begin a CID. This also requires a specific project for the formation, which can still be denied by the governing body after acquiring the necessary signatures for formation.

The petition to form CID in Kansas must include the general nature of the project, a cost estimate, the method of payment, method of assessment, map, and a legal description of the proposed district. Maps of the district must be made available, and further hearings on the formation and continuation of the district must be public. Like many CIDs, improvement districts in Kansas can issue bonds and debt to pay for projects.

California’s CIDs are close to Kansas in scope. They require the consent of over 50-percent of the value of the proposed district to form, but members of the district who own over 40-percent of the value cannot be counted for this. California’s rules governing CIDs stem from the Property and Business Improvement District Law of 1994, with some amended language from 2014.

Californian CIDs differ from Kansas in that they look only at value rather than land area. California also assesses who will pay the land taxes and how much when considering a CID establishment. CIDs in California start with a five-year lifespan, and they can be renewed for up to ten years after the initial five.

Georgia’s CIDs are enshrined in the state constitution, and the formation of a CID assess the value and number of owners for establishment. 75-percent of the value within the boundary must be represented in the CID, and over 50-percent of the owners must sign on. These stringent requirements make it more difficult for CIDs to form, but they carry enormous benefits for their members.

Getting Involved

Forming a CID requires careful consideration, of both the potential members and the local laws the CID would coalesce under. Community improvement districts are an opportunity to expedite and supplement government improvement projects, and they are an excellent option for commercial entities to get involved in their community. Find a CID in your area or form a coalition to start one, join in, ask questions, and get involved in the governing process.

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