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Smart Growth / Smart Energy Toolkit Modules - Business Improvement Districts (BID)

Learn about the Smart Growth/Smart Energy Business Improvement Districts (BID) module.


Business Improvement Districts (BIDs) are special districts in which property owners vote to initiate, manage and finance supplemental services above and beyond the baseline of services already provided by their local city or town governments. To finance these services a special assessment, or common area fee, is levied only on property within the district. The goal of a BID is to restore or promote business activity in targeted commercial areas. The assessments are collected and expended within the district for a range of management, marketing and economic development services and programs including:

  • District Management Services
  • Maintenance and Security
  • Promotion and Marketing Services
  • Business Services
  • Physical Improvements and Property Management


Business Improvement Districts seek fund services that are needed to make downtowns economically viable. BIDs provide for a professional management entity that can implement identified activities that are needed to make the area more economically viable. They also provide for a funding source to ensure that the management and services are sustained.

Communities are authorized to establish BIDs under M.G.L. Chapter 40O. A BID must be a contiguous geographic area in which at least 75% of the land is zoned or used for commercial, retail, industrial, or mixed uses. A BID is established through a local petition and public hearing process. The petition:

  • must be signed by the owners of at least 60% of the real property.
  • must be signed by at least 51% of the assessed valuation of the real property within the proposed BID.
  • must include delineation of the BID boundaries, a proposed improvement plan, a budget and an assessment/fee structure.
BIDs create inviting, walkable environments
BIDs create inviting, walkable environments

Powers and Rights of a BID

BIDs are established for a variety of reasons, such as to provide additional maintenance and security, replace volunteer efforts to raise funds for community improvement, or to provide management of parking facilities to improve customer access. Once initiated, under MGL Chapter 40O, the BID will have a pre-determined set of rights and powers, including:

  • retaining or recruiting business
  • promoting economic development
  • managing parking
  • leasing, owning, acquiring, or optioning real property


All property owners within the BID are assessed a fee in addition to their real property taxes to fund the supplemental services and programs. The collector-treasurer of the municipality collects the fee and distributes it to the management entity designated by the BID.

Although the fee amount is established for each BID individually, it cannot exceed an annual one-half of one percent (.005) of the total participating members' assessed property value. For example, for every $5 million in assessed valuation of participating property owners within the district, the BID can generate a maximum of $25,000. However, through its improvement plan, the BID does have the option to limit or cap this maximum annual fee derived from individual properties or the total annual revenue generated by the BID.

The basis of the fee is determined by a formula using any one or a combination of the following:

  • different levels for varying classifications of real property
  • benefit zones
  • assessed valuations
  • square footage
  • street frontage
  • any other formula which meets the objectives of the BID

The three established BIDs in Massachusetts (Springfield, Hyannis and Westfield) have all used assessed valuation.

Owner-occupied residential property, agricultural land, or tax-exempt property owners may be exempt from BID fees by a municipality. In addition, some property owners who can show that paying the fees would result in an economic hardship may be exempt from fees.


A BID is managed by a Board of Directors who may act as the "management entity" or who may designate a separate management entity to receive the funds and implement the district improvement plan. Some existing downtown organizations or Community Development Corporations act as management entities for BIDs. The designated Board of Directors for a BID is established by a majority vote of the electors or their designees (i.e., those who own real property and are participating in the BID). Many BIDs include municipal officials or their appointees as voting or ex-officio members in order to strengthen communication and cooperation between the municipality and the BID and to promote a private-public partnership.

Approval Process and Timeline under MGL 40O

The Massachusetts municipal approval process can be broken down into the following five main steps:

  1. Filing of a petition by property owners within the proposed BID in the office of the municipal clerk
  2. Filing of a copy of the petition with the Department of Housing & Community Development (DHCD) by the municipal clerk within 30 days of petition receipt at the municipality
  3. Public notification and public hearing held by the municipal governing body within 60 days of petition receipt at the municipality
  4. Declaration of a BID and recognition of the management entity by the municipal governing body within 45 days of the public hearing and commencement of BID activities
  5. An "opt-out" period of 30 days following the declaration of the district. A property owner has thirty 30 days after the declaration to elect not to participate in the BID and not be subject to the BID fee.

The original petition should contain:

  • the signatures of at least 60% of the property owners representing at least 51% of the assessed value of all properties within the proposed BID
  • a description and site map delineating the BID properties
  • a proposed improvement plan identifying the additional services, revitalization strategy, budget and fee structures
  •  the identity and location of the management entity designated to implement and oversee the improvement plan

The process typically takes from 1 to 2 years to implement. One step that is not included in the legislation, but is recommended for a community considering undertaking the process, is a planning phase. During the planning phase, the community develops methods for communicating with property owners, agrees on the borders of the district, designs the improvement plan (services to be provided) and develops a strategy for pursuing the BID implementation process.

Rights and Powers of a BID

Sustainability - Stability. The improvement plans are not contingent on public officials being re-elected, and the funding source is stable. The structure is based on professional staff and not solely on volunteers and fundraising.

Measured accomplishments and accountability. Having a BID improvement plan in place with clear objectives and a defined budget provides a benchmark against which implementation and performance can be measured.

Additional services. The BID is able to provide for services and programs that can not be covered by municipalities. This allows the district to provide the services that are needed to ensure the economic vitality of the district. Because the range of possible services is so broad, BIDs can tailor their program to address the unique needs of the district.

Common objectives. In regular business districts with many different property owners, too many conflicting interests and apathy can inhibit overall improvements to the area. A BID provides the leadership, funding, and a stable vehicle to discuss and achieve common objectives for the business district.

Secure and predictable funding source. BID member fees are set ahead of time usually based on property valuation and are paid on a regular basis (e.g., quarterly or annually) by property owners. This creates a secure and predictable source of funding allowing services to be provided as planned. A BID also has the ability to borrow money, for which a secure funding source is key to obtaining lower interest rates and therefore, lower costs.

Financial Considerations

Some of the financial investments associated with BIDs may include legal advice and consultants to support and shepherd the planning and implementation processes. In general, start-up costs, including legal fees, for a BID can range from $20,000 to $60,000. The host city or town should also contribute to the BID program, providing support for things like festivals and other events that benefit the community as a whole.