(Joey Kyber on Unsplash)

In many American downtown areas and commercial centers, improvement districts are used as tools for revitalization, placemaking, and economic development. They improve the street presence and provide important marketing services for local businesses. But what if they could tackle larger infrastructure needs? Better yet, what if commercial real estate owners and investors could attract billions of public dollars and, in the process, create a new way to build roads, interchanges, and other important projects? 

Commercial Real Estate Gets in the Game

Commercial real estate owners and developers play a major role in shaping urban landscapes. Many owners and developers—especially in cities and active commercial centers—consider their investments extending beyond their property lines. The public realm adjacent to their buildings significantly affects their bottom line. It was that activity that led to the creation of the first improvement districts in the United States in the 1970s.

Over the following decades, improvement districts were adopted and adapted in urban areas and commercial submarkets throughout the country. They had different names like business improvement district (BID), community improvement district (CID), and special services area (SSA), each with distinct abilities. However, they shared similarities in that districts consisted of concentrated commercial submarkets; they were enabled through legislative action; and they functioned as mechanisms for property owners to raise money through self-taxation.

The pooled funds raised through self-taxation were spent on projects and services important to the property owners in their respective submarkets. The funds enabled businesses to improve street conditions, provide security, market the district, and support other efforts important to the value and health of the properties. In many cases, the money raised through the improvement district leveraged municipal and other government funds. This stretched local dollars further, enabling public/private partnerships to fund capital improvements like sidewalks and streetscapes. With this, commercial real estate had gotten into the game of attracting and influencing public investment.

Doing It Differently

The idea of commercial real estate owners pooling funds to change the community took hold in Atlanta in the mid-1980s when a prominent real estate developer learned of the concept on a trip to Northern Virginia. Soon, legislation was passed in the Georgia General Assembly enabling CIDs statewide and the launch of the first one in northwest metro Atlanta.

From the start, this CID was different. The commercial submarket it served was not a downtown with public safety and redevelopment needs. It was a suburban submarket still young and growing into its own as it attracted real estate development trends typical for that period. Its needs were proactive, not reactive. The car was king and the submarket needed roads—lots of them—to make sure it was accessible to the greater region.

The CID was the mechanism to assemble the people, money, and political will needed to do just that.

Creating a New Model

A master transportation plan identified approximately $200 million worth of capital improvements that the district needed, including major commuting corridors and intradistrict roadways. The needs were big, and the CID’s commercial ownership knew they needed to act big in order to get things done.

From the start, the CID saw itself as the means to expedite necessary projects. CID funds paid for preconstruction activities such as preparing engineering and environmental documents. This emphasis on “first-in” funding to jump-start projects that did not yet have money for right-of-way acquisition or construction was a gamble that the commercial real estate owners took on. Preparing the projects and getting them “shovel ready” before that term even existed proved to be the secret sauce. It gave public agencies charged with administering local, state, and federal funds a valuable partner who brought financial, technical, and political resources to the table. Together, they got things built. Over time, real estate values grew and with that the CID’s revenues. The district was deploying millions, which attracted 10 times that in public sources, putting the commercial market at an advantage due to its organized approach.

The Paces Ferry Interchange in Atlanta’s northwest submarket was a $26 million project built to handle the relocation and expansion of the Home Depot’s headquarters, the Store Support Center. (Cumberland CID/Flip Chalfant)

 

Imitation Is the Sincerest Form of Flattery

It was not long before other submarkets around Atlanta took note. Over time, commercial owners in other locations created their own CIDs to solve their mobility challenges. Although the projects they focused on were particular to their needs, the approach was the same—advance infrastructure projects by funding engineering and permitting in order to attract and leverage public money to build the projects.

These efforts paid off handsomely. Commercial real estate owners in other parts of metro Atlanta’s burgeoning suburban submarkets leveraged CID revenues to build interchanges, expand major commuter corridors, and effectively position their infrastructure plans for public funding. Intown commercial markets also launched CIDs to address more urbanized needs such as capital-intensive streetscapes and parks. Those areas with organized CIDs experienced great success as they found eager public partners to help position, maneuver, and fund projects through these effective public/private partnerships.

The Ashford Dunwoody Diverging Diamond Interchange was a $5.6 million infrastructure project advanced through a $400,000 investment from the Perimeter CIDs. (Perimeter CIDs)

 

Changing the Paradigm of Public Investment

Metro Atlanta’s commercial real estate owners’ ambitious early CID projects set the stage for what is possible today. They tackled projects with big regional impacts and in doing so positioned themselves as valuable partners in infrastructure development.

In the early days, commercial submarkets with CIDs were at the forefront of attracting public investments. They brought local, commercial real estate dollars to the table willing to spend their money as well as their time and efforts to advance designs, marshal the politics, and assemble funding sources. These commitments proved attractive to public funders with limited resources and, in many cases, these mutually beneficial relationships advanced the CIDs’ projects to the front of the line.

This successful formula—created and amplified over the years in other commercial centers around Atlanta—changed the paradigm of infrastructure development. These public/private partnerships became part of the fabric, with CIDs claiming an important role in the infrastructure development funding structure and pipeline.

The financial impact on these commercial submarkets is evident. The Council for Quality Growth estimates that since the late 1980s, $1.5 billion in commercial CID assessments have leveraged $5 billion in public infrastructure funding throughout metro Atlanta. The benefits of these successes are not limited to the private side, the commercial real estate owners. It is just as important to the public sector since it also defers costs through these partnerships.

Twenty or 30 years ago, those submarkets with CIDs had a competitive advantage, but with 31 now operating in the region, that opportunity has given way to necessity. Now, emerging commercial centers in metro Atlanta effectively need CIDs in order to be competitive for limited public-sector investments.

What’s Next?

Like the real estate submarkets they serve, CIDs evolve their projects around their local communities’ needs. Throughout the 1980s–2000s, those needs were focused on vehicular mobility. To be sure, there also were efforts such as sidewalks, trails, and signage during that time, but many big projects were roadway related.

Since then, however, metro Atlanta’s CIDs have evolved their project investments to emphasize more multimodal and placemaking projects. Pedestrians, cyclists, transit riders, and others deservedly receive just as much attention as those who drive cars. Along with broader project types, their organizational structures have evolved as well. These welcome trends (to be explored in a future article), demonstrate the flexibility of these improvement districts as powerful commercial real estate tools.

What started as a means to help build a singular submarket in metro Atlanta effectively changed more than that as metro Atlanta’s commercial real estate owners and investors have found a tool to help them build big.

MALAIKA RIVERS is a partner with Lexicon Strategies, a public affairs and strategic communications firm based in Atlanta, Georgia. Her expertise spans 25-plus years helping commercial real estate owners and investors build critical capital-intensive infrastructure projects with a specialty in community improvement district development and management. Connect with Malaika on LinkedIn .