FAQs

A Business Improvement District (BID) is a partnership between local government, businesses and land owners to support and enhance public services and spaces and stimulate local economies within a commercial precinct.

A BID is usually a defined area in which a local levy is charged on all commercial properties in addition to their usual property taxes. This levy is used to fund projects and activities which benefit businesses in the area and improve the vitality of the local economy.

The local BID levy would contribute to the maintenance, development and marketing/promotion of their commercial district, including:

• Security
• Cleaning
• Advertising
• Branding and marketing
• Place-making and public realm upgrades
• Advocacy and policy contributions.

While relatively few BIDs have been established in NSW in recent years, they have been used widely in other jurisdictions like England, the United States and New Zealand. Benefits that have been identified from BIDs in these jurisdictions include:

• They help to create places that attract, retain, and enhance human and social capital
• Create liveable, enriching, and desirable places that are commercially viable
• Maximise the vitality and quality of public spaces
• Give businesses an opportunity to become involved in place governance conversations in NSW
• Stimulate local economies.

The answer is they can, and many do. Many centres and high streets have active business chambers who champion the needs of local businesses. These voluntary associations try to coordinate local business activities to improve trading conditions and advocate for local commercial interests. 

However, voluntary BIDs often run into a few common problems which quickly undermine their efforts, make collective action difficult and reducing their effectiveness. The first is the ‘freeloader problem’. Unless every business in a district contributes equally and fairly to the BID, some will receive the benefits the BID creates, without contributing to the costs. This undermines the collective action of the BID and creates ill will, which can cause the BID to quickly fall apart.

Secondly, without compulsory levies it is hard for the BID to have a predictable cashflow and fund employees and/or long-term programs. 

Thirdly, a voluntary association may not have the same level of recognition with a council or the government as a compulsory BID may enjoy.

Internationally, most jurisdictions prevent residential properties from being levied to support a local BID. BIDs, by their very nature, are commercially focused enterprises and the levies are to be dedicated to improving the local business environment.

Residents of a precinct or district may benefit from the work of the BID, but they shouldn’t be expected to pay for them.

Many countries also allow BIDs to be established in industrial areas and it is expected that the NSW regime will as well. Industrial precincts also need the curation and active involvement of local businesses to thrive, and a BID is a good mechanism to achieve this.

This is one of the questions we hope to answer in consultation with stakeholders. 

In most jurisdictions local government is responsible for the administration of BIDs including holding ballots, collecting levies, and overseeing compliance. Councils have oversight of the BIDs in this area, and ensure that funds are being appropriately acquitted. A benefit of this approach is that it draws on the detailed local knowledge held by councils. It also can be a streamlined administration by allowing the BID levy to be bundled with other charges administered by council (eg. rates).

Consideration has been given, however, to whether it may be more appropriate for the state government to undertake this role in NSW rather than councils.

In order for councils to have oversight of BIDs in the manner that occurs in other jurisdictions an amendment to the local government legislation may be required.

Consideration would also need to be given to how to resource councils appropriately to undertake the administration necessary. Consideration also needs to be given to the simplest model to administer BIDs where the BID spans more than one LGA.

Many business districts and high streets straddle council boundaries. In these cases there may be complexities in multiple LGAs being responsible for administration of the BID.

BIDs provide predictable and long-term funding streams to local improvement. This funding is paid by all commercial businesses in the defined district so there are no free riders.

How this funding stream is determined and who pays varies from jurisdiction to jurisdiction is one of the questions we want to answer in consultation with stakeholders. 

In NSW, levying BID levies on the landowner appears to be the simplest approach. Property owners will benefit from the improvements a local BID will bring through increased rents or property values. Likewise, most businesses will benefit from improved trading conditions and in turn will pay more in rent over time.

In NSW levies and charges paid by the owner of a commercial property are usually passed on to the business tenant through rents.

While work is advancing on developing stand-alone legislation to support the creation of BIDs in NSW, this legislation will be high-level and enabling only. There are still several elements of BIDs policy and regulation that need to be designed in consultation with stakeholders. Some of these elements that are open to influence from stakeholders include:

• Whether the BID levy applies to the property owner, the business operator, or both
• Who has a vote in a BID ballot – and what weight is given to each vote
• How often (if at all) a BID proposal needs to return to a vote
• The governance of BIDs, including their required corporate structure and approach
• The process for undertaking a trial of BIDs in NSW at identified pilot locations.