Official Site of The State of New Jersey

An improvement district is a defined area, generally in the central business district of a downtown or a mixed-use corridor in a larger city, that is authorized by state law and created by the local government to collect a special assessment on the commercial properties and/or businesses in that area. That assessment, along with other monies from the municipal government is granted to a designated non-profit Downtown Management Corporation (DMC).

The DMC, which is governed by a board comprised primarily of business & property owners, sets the agenda, priority, and initiatives of the organization, in addition to hiring and supervising staff, and determining the annual budget and assessment amount. In a sense, the business community becomes self-governing: assessments are determined by the businesses to fulfill what they see as the greatest needs of the downtown area.

Since enactment of the law allowing them in 1984, New Jersey has witnessed the formation of about 90 Improvement Districts.  Currently as of 7/11, there are 84 known active Improvement Districts in 64 municipalities over 18 counties.)

Downtown Management is a tool that enables private and public stakeholders to meet the needs, goals and vision of the district, its properties, businesses and communities.  In enables a collective, organized response to problems as well as opportunities, leveraging the district s assets to mitigate its issues.  Having an Improvement District as a municipally-mandated funding structure enables Downtown Management to be more focused on meeting the needs of its district stakeholders and less focused on seeking revenue for projects and operations.

A downtown commercial district is similar to an outdoor mall, with a variety of commercial businesses and property owners.  Additionally the downtown includes local government, other publically-owned property (including streets, etc.) and various non-commercial uses. In the mall setting there is one property owner of all of the commercial real estate and that one owner sets the hours, events, leases, cleaning, business retention and recruitment activities, etc.  All businesses leasing in the mall comply with the rules and pay a Common Area Maintenance Fee to underwrite the above activities or else they will default on their lease. For downtowns and neighborhood commercial corridors, an Improvement District creates a commonly-derived pool of resources that is leveraged collectively by the DMC to increase the economic, physical and social values of the district.

The best way to illustrate this distinction is coming back to the example of the shopping mall: every mall is a collection of stores and eateries that were selected by plan based on their appeal to the local marketplace, and placed in their respective locations within the mall by careful design. They operate under common hours of business, they all contribute to an annual marketing program for which they all benefit, and they share in the costs of special events, improvements, provision of on premises security (that supplements local police support), and even the maintenance of common areas.  They can do this because the entire mall is owned by a single owner; the commercial buildings in a village, town or city are all owned by various owners. The ID allows the businesses of a municipality to operate more like the businesses in a mall, managed by a single group rather than by each individual merchant on his or her own. The DMC operates with a funded budget, and pursues a strategy to grow business by managing the appearance, the marketing, the business mix and the events for the commercial corridor in ways that the municipality or the Chamber of Commerce or municipal Commission typically is not designed to do.  A local Main Street Program that has been serving as the de facto DMC for the downtown district typically does many of the above functions, however may lack the consistent funding base and formal municipal authority to fully achieve some of the above goals.  Adding an Improvement District to an existing Main Street Program (or a Main Street Program to a successful Improvement District) is often an effective catalyst to reinvestment.

An Improvement District is managed by a District Management Corporation (DMC), a group of stakeholders from your community in general and the assessed district in specific, who function as a voluntary Board of Directors and have down-line Committees or Teams, also made up of volunteers.  The municipality assigns (or creates if none exists) an organization to be the ID DMC through ordinance.  The Board must have 50%+1 (or more) business and property owners in the assessment district and a minimum of 1 (one) municipal government designee.  The DMC would have an Executive Director and potentially other staff to implement its programs.  The Executive Director would be accountable to the DMC Board.  Note:  While the functional operations of the Improvement District are led by the DMC, each year the municipal body approves (or denies) the DMC (Improvement District) assessment budget.  Therefore, maintaining a collaborative public-private partnership is essential.

The District Management Corporation sets policy for the ID, and directs all planning, programs, and spending. They would craft a budget each year for this purpose, and that budget would be submitted to the municipal government for approval.

It is the owners and operators of businesses in the defined Improvement District that will serve as the majority of the Board of Directors of the DMC. Also, the DMC operates in the open, with meetings that are open to private and public stakeholders to attend and participate. The DMC needs to earn the cooperation of property owners, local business owners and operators, and will naturally want to operate with their consensus where possible.

A DMC can be funded in a variety of ways.  One method provided by State law is through assessment on commercial properties within the district.  Other communities create their Improvement District assessments with business licensing fees.  Some communities fund their improvement district through an appropriation from the municipal budget, without creating a separate assessment.  The State law broadly allows for local self-determination regarding the funding mechanisms, provided the those who are assessed receive direct benefits for those assessments. Typically we recommended a multi-tiered combination of funds:

1. An assessment on the properties within the ID (as commercial property owners and the merchants who lease from them will derive a direct benefit)
2. An appropriation from the municipal budget (as all residents of the community will see an improvement to their quality of life with a revitalized business district), and
3. Sponsorships, Memberships (voluntary), and other private sector methods from other stakeholders who care about the district (in effect a voluntary assessment.)
4. For some projects, State and County funding may be able to supplement the DMC funding.

No, a ID is created by ordinance, which is local law, and that ordinance is not required by the State to have a termination date. However, it is also true that if the municipality finds that the ID is not meeting its expectations, then the municipality always has the option to modify or even refuse to fund the ID s annual budget. Moreover, the municipality could terminate the ID by subsequent changes to the ordinance creating it.   It may be in the interest of those creating and Improvement District to include a 5 year sunset provision in the enabling ordinance.  This will assure concerned stakeholders that every 5 years there will be a significant review of progress in addition to the annual budget review.  Montclair has this clause in their ordinance and many states other than NJ require it as well.

Like any other mechanism for working collectively, whether private business or non-profit or a government entity, the downsides to creating an Improvement District (and assigning or creating a DMC to manage it) can come from a variety of sources:  poor management of projects or finances, politics, poor communication within the organization or with stakeholders, lack of effective leadership.  That said, if the ID is not meeting expectations or doing illegal activities, for example, the municipality may simply shut down the assessment or re-assign the ID assessment to another DMC entity.

Whenever a suggestion is made to make a new appropriation of money for a new expenditure, it s reasonable to question whether that expenditure is really necessary.  People who feel that business district management is not necessary would probably consider the allocation of money for an ID to be a waste. We believe that your business district needs to be managed in order to become more effective.  It needs to pro-actively recruit new businesses; it needs to plan for a specific mix of retailers and restaurants rather than sit by and wait to see what comes along; and it needs to market itself based on its economic and other assets as well as its vision.  Municipalities can use an ID to make all of that happen at a higher level and to ensure its sustainability into the future, one in which every downtown/community is competing for customers, investment, and tax ratables.