A Business Improvement District for Middlesbrough

MIDDLESBROUGH COUNCIL

EXECUTIVE REPORT

A Business Improvement District for Middlesbrough

Executive Member for Regeneration & Economic Development: Councillor C Rooney

Executive Director for Regeneration: Kevin Parkes

27 July 2010

PURPOSE OF THE REPORT

To seek Executive approval for the Town Centre Management Team to work with town centre businesses to progress the development of a Business Improvement District (BID) for Middlesbrough as outlined in this report.

SUMMARY OF RECOMMENDATIONS

That the Executive supports the proposals for developing a Middlesbrough Business Improvement District and approves the approach as outlined in the report.

That the Executive receives further reports as the BID proposal develops and prior to any BID ballot.

IF THIS IS A KEY DECISION WHICH KEY DECISION TEST APPLIES?

/ It is over the financial threshold (£75,000)
It has a significant impact on 2 or more wards
Non Key / x
DECISION IMPLEMENTATION DEADLINE

For the purposes of the scrutiny call in procedure this report is

Non-urgent / x
Urgent report

If urgent please give full reasons

BACKGROUND AND EXTERNAL CONSULTATION

What is a Business Improvement District?

A Business Improvement District (BID) is a public / private partnership in which business elects to boost their vitality by making a collective financial contribution to improving their commercial district.

BIDs are designed to enable businesses within small geographical areas to enhance existing services provided by the local Council, the Police and others. Businesses in the BID area have to agree to its setting up, its management and its programme of additional services to address identified priorities. These additional services are funded through a “levy” based on the rateable value of properties within the BID area. This is often in turn used to lever additional funding.

How is a Business Improvement District established?

BIDs can only start after a successful ballot of affected businesses within the proposed BID area and are subject to a re-ballot after 5 years. The ballot is open to those who pay business rates and for a BID proposal to be approved requires acceptance by a majority by both number and rateable value (i.e. a majority of voters voting yes, and those voters representing more than 50% of the rateable value of all properties in the ballot). Once voted for, the levy becomes mandatory on all defined ratepayers and is treated as a statutory debt.

Are Business Improvement Districts successful?

The first BID in the UK was in Kingston upon Thames following a vote in November 2004. Since then the number of approved BIDs has been increasing and BIDS are currently helping to transform around 90 towns, cities and even industrial estates in the UK. In the North East, Newcastle voted in November 2008 for a city BID (called Newcastle NE1) raising almost £1.5m in levy per annum. The focus of the programme is operations, marketing, enhancing links (railway station to the city) and developing the retail and leisure offer.

Elsewhere, BIDs are operating successfully in towns and cities across the country including Skipton, Hitchin, Edinburgh, Nottingham, Oldham, Hull and Bedford. Many of these areas have similar issues to those faced by Middlesbrough and are using a BID as a means of addressing them.

A number of towns and cities are reaching the stage of re-ballot following the first 5 years. In all cases so far this vote has been successful and BIDs are continuing in Lincoln, Plymouth, Kingston, Reading, Bristol, Paddington, Liverpool, Coventry, London (West End and Heart of London).

Is a Business Improvement District for Middlesbrough feasible?

Initial consultations have engaged around 40 key town centre businesses to ascertain the appetite for a Business Improvement District to deliver enhanced town centre management.

Despite carrying out this work against a backdrop of economic uncertainty and decline this work has identified that there is an interest in the idea amongst the businesses consulted. However, whilst there is currently a broad outline, there is not yet a detailed BID proposition to present and development of this is the important next stage in the process.

What are the priorities for a Middlesbrough Business Improvement District?

The priorities for a Middlesbrough BID identified through the feasibility work have a strong correlation with the key actions in the Town Centre Strategy. The three priority themes suggested are:

Promoting Middlesbrough – raising the profile of the town centre and encouraging more and higher-spending visitors by initiatives such as advertising, events, Christmas lights;

Protecting Middlesbrough – working with the Council and Police to ensure that the town centre is cleaner, safer and greener by initiatives such as street washing, improved management of the night-time economy and planting schemes; and,

Progressing Middlesbrough – improving and diversifying the offer of the town centre by initiatives such as further pedestrianisation, attracting more cafes and restaurants, and improving the signage and environment at major gateways.

What should be the geographic focus of a Middlesbrough BID?

Using 2005 rateable value information provided by the Council in June 2009, the optimum target area for a Middlesbrough BID has been reviewed. For the purposes of analysis the town was divided into 6 proposed zones. (A map of the zones is shown in Appendix 1).

Having considered the feasibility of each of these zones, it is clear that any BID in Middlesbrough should be focused on zone 1, which forms the town’s retail core and contains over 62% of both town centre properties and over 65% of the total rateable value. However, Centre Square and the surrounding buildings (Town Hall, mima, Central Library) are also critical in terms of the wider Town Centre and in respect of their role in promoting the town and potentially should also be included within the BID area. Whilst this means that a levy would be payable on these premises, the area already provides a focus for a number of cultural activities and attracts significant footfall to the town. The inclusion of this area would be likely to result in enhanced resources to develop its role as the cultural hub for the town centre.

However, these zones are not fixed and during further development of the BID concept stakeholders may wish to consider adding zones or parts of zones to form a larger proposition area.

Which businesses would participate in a Middlesbrough BID?

As part of the feasibility work, consideration has also been given to establishing a levy ‘threshold’. This excludes properties with a rateable value below a certain level from both the BID ballot and subsequently from paying the BID levy. The main reasons for doing this is that the costs of both campaigning to and collecting a levy from a large number of smaller businesses can be disproportionate to the actual amount gathered, as well as minimising impacts on very small businesses.

The initial recommended threshold for a Middlesbrough BID is £10,000 (the effect of introducing alternative thresholds is shown in Appendix 2). This would mean that smaller businesses would feel no impact, an important factor given the current climate and fragility of small enterprises.

All businesses with rateable values in excess of this would be liable to pay a levy and therefore eligible to vote on the proposition presented in a BID ballot.

How much would be raised by a Middlesbrough BID?

Utilising these recommendations a number of potential rates of levy have been considered to provide indicative information about the funding that could be raised. This analysis suggests that resources of around £290,000 could be raised with a 1% BID levy and £435,000 with a 1.5% levy,based on 2005 valuationlevels. This is obviously a significant additional contribution from the business community to the BID to support the eventual priorities and in turn boost the delivery of the Town Centre Strategy. These figures are indicative only, and are likely to be higher as a result of the 2010 ratings list.

What is the relationship between the BID and the Middlesbrough Town Centre Partnership?

BIDs need to be business led and to bring a number of stakeholders, private and public, together to be successful/effective. The current Town Centre Partnership already brings stakeholders together and incorporates a range of business interests. It is envisaged that the current Partnership will provide the basis of a BID Partnership, or at least the starting point for the development of the latter.

EQUALITY IMPACT ASSESSMENT

There are no specific equality impact assessment implications to consider at this stage. However, during the further development of the Business Improvement District proposition this will need to be considered ensuring that all businesses that will be able to vote are given equal opportunity to participate in the process.

OPTION APPRAISAL/RISK ASSESSMENT

The town centre has seen considerable improvements in recent years in its development, management and promotion. It remains a key economic driver and continued improvement and development is vital to the town.

In this context it will be important to try to maintain momentum over future years particularly as funding sources such as Working Neighbourhoods Funds, which has been used to enhance town centre activity (by funding promotional, marketing, and event activity, and environmental improvements), comes to an end.

A Business Improvement District provides an opportunity to further engage with the town centre business community to identify key issues and enhance partnership arrangements by working together to address these, whilst facilitating private sector investment over the medium-term to help take the town forward.

The feasibility work to date gives an indication that the business community recognise the issues in the town centre and want to try to deliver solutions, however, there remain uncertainties about the level of support for a Middlesbrough Business Improvement District in this current economic climate. This is the biggest risk at the current time and therefore it is important to engage with businesses at the earliest opportunity to discuss their views and opinions about a BID, and work with those supportive individuals and businesses to ensure there is strong leadership and support in place to develop a successful proposal.

Whilst an indicative forward timetable has been produced (Appendix 3) this will need to be driven by the willingness of town centre businesses to participate in a BID. It is proposed to adopt a staged approach to developing this to ensure that sufficient support is in place before moving to the next phase. The key stages, through to completion, are:

Stage 1 – Expanding the Business Consultation

Stage 2 – Developing a Detailed BID Proposition

Stage 3 – The BID Vote Campaign

Stage 4 – Implementing the BID

Stage 5 – Running the BID

FINANCIAL, LEGAL AND WARD IMPLICATIONS

The introduction of a new levy on town centre businesses in the current recession is clearly going to be challenging. However, without sourcing additional resources, the loss of WNF funding at the end of this financial year will mean that the current programme of town centre promotions and activities will need to be significantly curtailed.

There are a number of potential direct and indirect costs to the Council from the development and implementation of a BID. These are indicative and will need to be the subject of negotiations between the Council and the BID partnership. There is no set format and different BIDs have adopted different models in relation to many of the costs identified below:

Development Costs (engaging, consulting and developing the proposition) – in progressing the BID development there are a number of potential costs for which provision of £5,000 has been made from the Town Centre Management Team 2010/11 budget. This will potentially include marketing and promotion brochures, leaflets and website. Input by the Town Centre Management Team required to engage individual and groups of stakeholders, etc, is funded from existing budgets. Inevitably work on the BID will impact a capacity to support other activities, but is seen as being a key priority for the Team.

Development Costs (Yes Campaign) – once the proposition is developed funding (c£20,000) will be needed to support a yes campaign and conduct the ballot. The Council may need to assist with support funding for this although it would also be anticipated that all key stakeholders on the BID steering group would contribute.
Implementation Costs (BID Set-up) – assuming a positive vote for a BID there are then likely to be set-up costs in advance of the levy being drawn down. This includes potential costs, such as software amendments to allow levy collection, perhaps even additional staff costs. This could be considered as either an agreed Council contribution to the BID or a recoverable cost to be reclaimed by the Council when the BID is established and the levy being collected.

Delivering the BID (Running Costs) – there are a number of potential costs for the Council during the delivery of the BID. First and foremost there is potentially a direct cost related to Council buildings located within the BID area. Based upon the approach set out in paragraph 16 for those properties at June 2009 for which either the Council or Mouchel were paying the NNDR,using 2010 rateablevalues, the total cost per annum would be £12,803 at 1.0% and £19,204 at 1.5% (see Appendix 4 for details).

Additionally there will be associated running costs incurred by the Council from the collection of the levy. As these are directly attributable costs in many other BIDs there is a fee paid by the BID organisation for this service, or they can be considered an in-kind contribution.

There will be an expectancy from town centre businesses that the Council maintains an ongoing contribution to the BID/Town Centre programme throughout its five year life-cycle. It is envisaged that the Town Centre Management Team will continue to provide support to the Town Centre Partnership/BID Partnership, and to the co-ordination of the BID and delivery of BID activities. This contribution can also be treated as a contribution to the BID and offset against the Council’s additional levy.

The Council may of course derive income streams from the BID, particularly to support promotional activities, but also to maintain high standards of environmental management etc, in the town centre. Whilst priorities need to be determined by the BID partnership it is envisaged that these will be in line with the Council’s own aspirations for its services in the town centre. In some areas this may mean that standards of service supported by WNF will be able to be maintained/restored that would otherwise revert to what the Council can fund through its own resources alone.

38.BIDs are intended to add value to the work of the existing public sector services rather than displace existing funding. One of the key processes during the development of the BID is therefore to agree the public service baseline for the period of the BID. This ensures that the BID resource is being used to enhance services but will also mean that the Council is financially committed to this agreed baseline. Inevitably, this will be a challenge during a time of severe financial pressures, but will be a sign of the significance of the town centre, and the Council’s significant commitment to support the on-going success of the town centre.

Ward Implications – The BID area is likely to be within the Middlehaven ward, however the town centre is of interest to the whole town.

Legal Implications – at this stage there are no legal implications or obligations upon the Council, although as the BID development progresses legal advice and input will be an increasingly important part of the process, ensuring that all the necessary agreements are in place and the arrangements meet the requirements of the BIDs legislation.

RECOMMENDATIONS

It is recommended that the Executive Member supports the proposals for developing a Middlesbrough Business Improvement District and approves the approach as outlined in this report.

That a BID area based on Zone 1 plus Centre Square and the surrounding buildings (Town Hall, MIMA, Central Library) be supported in principle.

That the Executive receives further reports as the BID proposal develops and prior to any BID ballot. This will include full details of the baseline financial position the Council will commit to the programme.

REASONS

Feasibility work indicates that there is the potential for a Middlesbrough Business Improvement District even despite the current economic climate.

A Middlesbrough BID provides an opportunity to build upon existing town centre management arrangements and ensure that the town continues to grow and expand and play a pivotal role at the heart of the city-region.

It is important to engage further with businesses within the proposed BID area to ascertain their views and opinions, identify BID champions and progress towards developing a successful BID proposition.

BACKGROUND PAPERS

The following background papers were used in the preparation of this report:

Middlesbrough Business Improvement District Feasibility Report 2010

AUTHOR:Alan Weston, Town Centre Manager

TEL NO: (01642) 226622

Appendix 1

Appendix 2

The Case for Introducing a Threshold

Impact upon number of properties and rateable value of introducing a threshold
/ Rateable value threshold of:
/ £0 / £10,000 / £15,000 / £20,000

Area

/ Total no. of properties / Total rateable value / Total no. of properties / Total rateable value / Total no. of properties / Total rateable value / Total no. of properties / Total rateable value
Zone 1 / 739 / £31,115,775 / 428 / £29,539,100 / 340 / £28,445,150 / 284 / £27,486,400
Zone 2 / 228 / £8,798,570 / 89 / £8,135,450 / 69 / £7,890,000 / 55 / £7,648,350
Zone 3 / 33 / £406,675 / 8 / £301,750 / 5 / £266,500 / 4 / £250,000
Zone 4 / 63 / £1,682,950 / 41 / £1,552,000 / 23 / £1,321,750 / 19 / £1,253,000
Zone 5 / 86 / £3,786,935 / 28 / £3,544,500 / 18 / £3,428,250 / 17 / £3,412,000
Zone 6 / 37 / £2,679,075 / 17 / £2,585,250 / 11 / £2,510,500 / 8 / £2,458,750
All Zones / 1,186 / £48,469,980 / 611 / £45,658,050 / 466 / £43,862,150 / 387 / £42,508,500
/ £0 / £10,000 / £15,000 / £20,000

Area

/ Levy payable by % of properties / Levy payable by % of rateable value / Levy payable by % of properties / Levy payable by % of rateable value / Levy payable by % of properties / Levy payable by % of rateable value / Levy payable by % of properties / Levy payable by % of rateable value
Zone 1 / 100% / 100% / 58% / 95% / 46% / 91% / 38% / 88%
Zone 2 / 100% / 100% / 39% / 92% / 30% / 90% / 24% / 87%
Zone 3 / 100% / 100% / 24% / 74% / 15% / 66% / 12% / 61%
Zone 4 / 100% / 100% / 65% / 92% / 37% / 79% / 30% / 74%
Zone 5 / 100% / 100% / 33% / 94% / 21% / 91% / 20% / 90%
Zone 6 / 100% / 100% / 46% / 96% / 30% / 94% / 22% / 92%
All Zones / 100% / 100% / 52% / 94% / 39% / 90% / 33% / 88%