In the Business Improvement Zone

About a dozen business owners, managers and others from the Main Street area gathered last Thursday morning at Conor O’Neill’s to talk about an idea being floated for that district – a self-taxing entity called a business improvement zone, or BIZ. It’s a way to pay for services – things like snow or litter removal, or flowerbeds – to make the district more attractive and bring more shoppers downtown.

This isn’t the first time we’ve encountered the Main Street BIZ. In April, the Downtown Development Authority awarded $83,270 to the group – spearheaded by Ellie Serras and Ed Shaffran – to help get it going. Since then, Main Street BIZ has hired a consultant – Betsy Jackson of The Urban Agenda – and is holding meetings with stakeholders to pitch the idea and get feedback.

That’s what was happening on Thursday. The meeting was one of three planned so far: Earlier in the week, organizers met with property owners of buildings along a three-block stretch of Main Street, where the district is proposed. And on Tuesday, June 30, they’ve scheduled a similar presentation for residents and others who patronize Main Street area businesses. That meeting starts at 6 p.m., also at Conor O’Neill’s.

What’s a BIZ?

Michigan law allows property owners within a specified district to tax themselves, with the funds designated for economic development purposes within that district. The proposed Main Street BIZ would stretch from the south side of Huron to the north side of William, and would include a “wrap” down Washington and Liberty on both sides of Main, running to (but not including) the alleys.

Betsy Jackson, the consultant hired for this project, walked The Chronicle through the process required to set up a BIZ – organizers have already taken initial steps, including setting up a nonprofit and forming a transitional board. Next, they’ll need to get 30% of property owners to sign a petition stating their intent to form a BIZ. (That 30% is based on a formula which gives weight to a vote based on the value of an owner’s property. That is, they could reach the 30% mark without getting 30% of the individual property owners. Additionally, there’s a maximum weight of 25% for any one individual.)

After the petition is filed, the city schedules a public meeting of property owners, who will vote on a detailed business plan for the BIZ. The business plan specifies exactly what the collected funds can be used for. (After the BIZ is approved, it would require another vote to spend the money on services not covered by those categories. For example, if snow removal isn’t initially designated as a category for the BIZ funds, then the district can’t spend the money on snow removal.) The business plan would also give details about a budget, frequency of services, a formula for assessment, governance structure and other information.

At the public meeting, if a majority of property owners approve the business plan, then the city schedules a public hearing within 45 days, and the city council votes on the plan. If council approves it, an election is set. The election is administered by the city via mailed ballots. This time, 60% approval is needed – and again, the votes are weighted based on the value of the property. If 60% or more votes approve the BIZ, then all property owners within the district will be assessed, with the exceptions of  nonprofit property owners (like religious organizations or the university), government properties and owner-occupied housing units. The BIZ requires renewal every seven years.

Why Form a BIZ?

At Thursday’s meeting, Ellie Serras said some of the Main Street property owners decided they needed more control over the district’s future. “We want to make this good thing even better,” said Serras, the long-time executive director of the Main Street Area Association who stepped down from the post last year. Her husband, Dennis Serras, is a partner with Mainstreet Ventures, which owns several restaurants in Ann Arbor, including Palio, Gratzi, Real Seafood Co., The Chop House and La Dolce Vita – all operating on Main Street.

Five property owners got this project off the ground: Ed Shaffran of Shaffran Companies, Rob Spears of Cabrio Properties Amvest Properties, Mike Martin of First Martin Corp., Jeffrey Harshe of MAV Development and Jim Curtis of Curtis Commercial. Each of them contributed $5,000 to the effort, which will be repaid from BIZ funds if the entity is formed. They are also part of a transitional board – other board members are Alan Freedman of Four Directions, and Ron Dankert of Swisher Commercial. Keith Orr of the Downtown Development Authority board (and co-owner of the \aut\BAR and Common Language Bookstore in Kerrytown) is a tentative board member. If the BIZ is formed, property owners in the district would elect a new board at their first annual meeting. The city’s mayor would also be entitled to appoint one board member.

In addition to forming a board, organizers plan to use the DDA grant to set up office space, do website design and cover administrative costs, Serras said.

Jackson said that BIZ districts are typically set up in response to dwindling public sector resources. Business districts have special needs that aren’t necessarily covered by the city’s general fund – standard “common denominator” services aren’t sufficient, she said. Downtown shops and restaurants can’t compete on price with big box stores and malls, Jackson added, but what they can offer is a distinctive, positive experience and ambiance – that’s their competitive edge.

Organizers have identified three potential categories for which BIZ funds could be earmarked, Jackson said, though these could change based on feedback. All of them are aimed at improving people’s perception of the Main Street business district – they are the first things people encounter, she said. The potential categories are 1) snow removal from sidewalks and curb cuts, 2) sidewalk cleaning and litter removal, and 3) landscaping/maintenance.

Questions and Concerns

After a presentation by Serras and Jackson, they opened the floor for questions – and there were many. Several people expressed concern that Ann Arbor city council would not provide basic services if they knew that Main Street BIZ had the money to pay for them instead. Jim Beuche, an attorney with Hooper Hathaway who’s doing work for the BIZ, said that while city council is hard to predict, they “can’t foist off more on us than they will on everyone else.” That said, the reality is that the council defines what services are provided in the city, Beuche said, and those can change at any time.

This prompted Newcombe Clark, president of the Main Street Area Association board, to say: “If you pay more for a cabin on the Titanic, you’ll still sink like everyone else.”

Serras responded by saying that the city can – and has – been pulling back services for the past decade. When the city decided to stop taking care of flowerbeds downtown, the Main Street Area Association stepped in to pay for that, she said. A few years ago, the South State Street merchants paid for security because the city removed its beat cops, she said – a scenario that’s playing out again. Having the BIZ in place would make it possible to respond when the city changes its service levels. (Clark later reminded the group that Ann Arbor’s beat cops would no longer be patrolling, as of this week.)

Derek Davis, marketing manager for The Melting Pot restaurant on South Main, wondered how expensive this would be for his business. The Melting Pot pays rent, he said – would the BIZ mean that their rent will be raised?

At this point it’s unclear how much the property owners will be assessed, Jackson said. The business plan would have to specify the formula used to calculate an assessment, likely based on a property’s value and perhaps its streetfront footage. But the BIZ has no authority to prevent landlords from passing along the costs to their tenants, she added.

Davis noted that some landlords do take care of services like sidewalk snow-shoveling and flowerbeds. But for the building his restaurant rents, he said they have to pay for that kind of thing themselves. It sounded to him like within the organization of the BIZ, tenants had little power.

The issue of tenant power came up again in a discussion of the BIZ board, which would be elected by property owners and include one mayoral appointee. Several people suggested that the board include at least one business owner/tenant, to give that group a voice.

Parking was another issue raised during the discussion. Caroline Kaganov, general manager of Conor O’Neill’s and a Main Street Area Association board member, joked that she feels she’s been working for the city – she’d spent the past four days helping people figure out how to use the new parking meters installed downtown. She said the perception is that parking is scarce. Davis said there was plenty of parking, but there needed to be ways to lower the price. Perhaps the BIZ could subsidize customer parking for businesses that can’t afford to comp it on their own, he suggested.

Some people were concerned because alleys aren’t going to be included within the BIZ district – that’s where a lot of the problems are, they said, citing litter and snow removal.

Angela Pierro of Zero Gravity Designs said aesthetics were important, like putting in flowerbeds and cleaning up cigarette butts. She also said sidewalks need to be in better shape – uneven sidewalks, which cause little kids to trip or which make it difficult to push strollers – deter families from wanting to come downtown.

Davis said that in general he felt the city was very safe, but the biggest security complaint he heard from customers related to panhandling. Being approached by panhandlers affects the perception of whether Ann Arbor is a family friendly place, he said.

Next Steps

The goal would be to have a BIZ assessment on the July 2010 tax bills, Jackson said. That means they’d need to have a draft of the BIZ plan adopted by the board and start circulating petitions in September, she said. They hoped to have enough signed petitions to submit to the city clerk in October.

Meanwhile, they’ll be gathering information about similar zones in other cities. More outreach efforts are planned, too, including a website (to be designed by Angela Pierro of Zero Gravity Designs) and online survey to get more feedback about what services the district needs. They’re also working with the city attorney’s office and city clerk to ensure that all the proper steps are taken, since the city hasn’t done anything like this before. “We want to make sure there are no hold-ups related to process,” Jackson said.