For more information...
Jef Buehler
State Director
609-633-9769
jbuehler@dca.state.nj.us
  • What is an Improvement District?
    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 an ordinance of the local government to collect a special assessment on the commercial properties and/or businesses in that area. That assessment is granted to a District Management Corporation (DMC).
    The DMC, which is typically governed by a board comprised of at least 50%+1 business & property owner stakeholders, 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: private resources from the stakeholders are assessed and used as determined by the businesses to fulfill what they see as the greatest needs of the downtown area.
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  • How many Improvement Districts are in New Jersey?
    Since enactment of the law allowing them in 1984, New Jersey has witnessed the formation of about 90 Improvement Districts. Currently as of (7/12), there are 87 known active Improvement Districts in 65 municipalities over 19 counties.)
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  • Why consider the creation of an Improvement District?
    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 single 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.
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  • How does having an Improvement district relate to our Main Street Program, Chamber or Economic Development Commission?
    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 existence of the ID allows the businesses of a municipality to operate more like the businesses in a mall, managed by a single group (the DMC) rather than by each individual merchant on his or her own, and assessments are one source of funding to support that effort. 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 it may have lack the consistent and sustainable funding base and formal municipal authority to fully achieve some of the above goals. Assigning an already effective Main Street Program as the DMC of an Improvement District (or adding a Main Street Program to an existing Improvement District) is often a very successful approach to ensuring ongoing success in your downtown.
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  • Who controls an Improvement District?
    An Improvement District is managed, per the details or each local ordinance, by a District Management Corporation (DMC). The DMC is a group of principally private sector stakeholders from your community in general and the assessed district in specific, which typically functions as a voluntary Board of Directors that has down-line Committees, Teams, or project-specific groups, also made up of volunteers. In most cases, the DMC organization is a legally distinct entity with its own bylaws, policies and procedures. The DMC usually functions as a private entity for the greater benefit of the private stakeholders within its assigned Improvement District. The municipality assigns (or creates if none exists) an organization to be the Improvement District DMC through ordinance. The Board will usually have 50%+1 (or more) business and property owners in the assessment district and, per State Law, a minimum of 1 (one) municipal government designee. The DMC may 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.
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  • Who determines planning, programs and spending?
    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.
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  • What role do individual businesses have in determining and implementing DMC plans?
    It is the owners and operators of businesses in the defined Improvement District that will typically serve as the majority of the Board of Directors of the DMC. The private sector leads the effort, sets the policies and goals, and ultimately puts in the time, talent and treasure to meet those goals over time. 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.
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  • How is the DMC funded?
    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 to ensure the success and sustainability of the Improvement District:
    1. An assessment on the properties within the ID (as commercial property owners and the businesses who lease from them will derive a direct benefit);
    2. Sponsorships, Memberships (voluntary), and other private sector methods from other stakeholders who care about the district (in effect, a voluntary assessment);
    3. An appropriation from the municipal budget and or in-kind municipal investment (as all residents of the community will see an improvement to their quality of life with a revitalized business district); and
    4. For some projects, State and County funding may be able to supplement the DMC funding.
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  • Does the Improvement District have a termination date?
    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, such as Pennsylvania, require it as well.
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  • Is there a downside to creating an Improvement District?
    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.
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  • Is a District Management Corporation a public or private entity in the eyes of the State?
    The debate regarding the public vs. private status of District Management Corporations assigned by municipal ordinance under (NJSA 40:55-65) has been an ongoing question across New Jersey for many years. Public record of the New Jersey Supreme Court’s opinion stated that Improvement Districts (BIDs, SIDs, DIDs) are an attempt to achieve privately what municipal government has struggled unsuccessfully to do alone as noted in the following cases: Second Roc-Jersey Associates v. Town of Morristown, 158 N.J. 581 (1999). See also Gonzalez v. Borough of Freehold (A-3476-92T2, June 30, 1994).

    NJ DCA’s Division of Local Government Services has assured our office that the State’s Deputy Attorney General’s (DAG’s) office of the State of New Jersey has not rendered an opinion on the question of whether or not all or some District Management Corporations should be considered public or private for several years. As such there is no additional clarity from the State with regard to this issue at this time. Please note that once a DAG decision is rendered, however, our offices will promote that outcome to all interested stakeholders, and update this section accordingly.

    As such, we recommend that the District Management Corporation, even to the extent that it wholly predates it’s assignment by ordinance as the DMC for the Improvement District and that it may have a fully incorporated State and Federal status as its own private non-profit organization, seek to meet the spirit of public entity polices such as the Open Public Records Act (OPRA).
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