Ready for the Smart(er) City: How Community Improvement Districts are Building the Future

Commercial real estate owners and developers use Community Improvement Districts (CIDs) to build safe, accessible and welcoming places. But with evermore complex infrastructure needed, how can they adapt, future-proof and find opportunities for more effective - and innovative - partnerships?

CIDs build the roads we drive on, the trails we walk on and the beautification we enjoy when we visit our favorite places. And yet, other than spotlighting individual CID accomplishments, there’s been little effort to study the characteristics of the CIDs that are most successful in building value for property owners and their communities — or to look at how they can best be used in the future.

That’s why I partnered with Georgia Tech’s Smart Cities & Inclusive Innovation and the Center for Quality Growth and Regional Development to research that very topic. As someone who has formed, led and pioneered this unique model of infrastructure development, I’ve seen first-hand the power of these unique public-private partnerships to accelerate growth and create prosperous communities.

What We Learned

Basically, a CID is a tool that commercial property owners use to create value for their real estate assets. It is a designated geographic area where commercial property owners collectively initiate an ongoing, additional property tax to help fund important, area improvements. So far, CID funds have been used for mobility, beautification and public safety. In other words, CIDs are private enterprise helping governments literally lay the groundwork for prosperous communities.

In metro areas without CIDs, they can be used as a competitive advantage as they are incredibly successful in attracting ongoing, public investment. In areas like metro Atlanta where CIDs are commonly used in commercial submarkets, CIDs have become a competitive necessity in order to effectively compete for these funds. To that end, we found:

• Those commercial areas with CIDs have successfully attracted billions of dollars in funding and investment. On average, every $1 spent by a CID attracts an additional $5 in outside funding.
• Where CIDs were initially slow to catch on in metro Atlanta (only six formed in the first 15 years), there has been an acceleration as the value proposition is more widely understood. Now 30 commercial areas in metro Atlanta use CIDs to compete for limited public resources to grow their communities.
• Local governments understand the benefits of CIDs, too, as they bring private dollars to the table to help fund wider, community needs. Nearly 60% of CIDs formed in the last 10 years due to their influence and participation.

CIDs are Impactful

CIDs have played significant roles in contributing to infrastructure improvements. More than three-quarters of a billion dollars in commercial real estate value have leveraged more than $6 billion in public funds over the past three decades. For every dollar spent by a CID they leverage five dollars in outside funding. This helps manage commercial centers in need of urban development strategies. CIDs quickly channel those funds into infrastructure projects and community services, and attract often scarce public money to support projects that build their communities.

And — perhaps no surprise here — CIDs’ structure and resources mean they’re often more efficient than governments. Their projects can get fast-tracked because the CID can offer management and oversight to a project that might otherwise get sidelined by overworked local governments. Meanwhile, commercial property owners have a seat at the table for infrastructure development decisions.

CIDs can deliver on major projects that neither commercial property owners nor local government on their own would have been able to do by themselves.

CIDs Provide Sustainable Ecosystems for Public-Private Partnerships

CIDs are also well equipped to handle long-term trends in real estate and community infrastructure needs. The public-private partnership organizational model means CIDs can provide the management continuity required for long-term infrastructure projects against changing political administrations and priorities.

Their boards can take long-term, collective views against individual, commercial considerations. The diversity of funding sources and relative fiscal flexibility allow CIDs to withstand economic fluctuations and other crises (like, say, a global pandemic). CIDs are the best way for commercial real estate owners, developers and investors to build different types of infrastructure that meets their long-term needs.

From the 1980s to 1990s, CIDs helped fund the “drivable suburban” real estate model’s roads and bridges. In the 2000s, they financed “live, work, play” infrastructure investments. By the 2010s they transitioned to infrastructure in the “dense, walkable urban” model.

So what's next?

As we move into the next phases of real estate, CIDs can continue to be out in front, shaping the built environment.

CIDs can become leaders in the application of technology solutions, piloting projects in mobility and other arenas that benefit local enterprise and their governmental jurisdictions. But CIDs don't need to stop there. Commercial centers increasingly need physical infrastructure that supports digital communications (ie - broadband and fiber). CIDs could be considered useful tools to help fund and develop these needs. In other words, just as CIDs helped pave roads that led to economic prosperity, CIDs could be used to advance digital communication infrastructure.

CIDs are an incredibly flexible mechanism well equipped to handle shifts and utilize influence. CIDs bring private and public partners to the table and make scarce dollars go further. They are a tool that easily evolves to meet local, community needs. They can continue to lead and support the development of the next generation of public infrastructure and stronger communities for years to come.

Visit CIDreport.com to download the full version of the Georgia Tech/Lexicon Strategies research report 'Ready for the Smart(er) City.'

About the Author: Malaika Rivers specializes in building commercial real estate portfolios and communities through strategic public-private partnerships between CRE owners, developers, and governments. She is a leading expert in Community Improvement Districts (CIDs) and advises on their best use as powerful tools for real estate and economic development.