Before a municipal service district was implemented in Raleigh, the capitol city’s downtown was desolate. Businesses were fleeing for Cary, other suburbs or the Research Triangle Park, according to Downtown Raleigh Alliance Chairman Rick French.

“If you go back a decade, downtown Raleigh was a ghost town,” French said. “When I opened 13 years ago, we were the contrarians, I guess, we decided downtown was the place we needed to be.”

Since that time, French has watched the tide turn the other way. Vacancy rates are among the lowest in the region and he has seen some familiar faces make a return. He gives some credit to the introduction and implementation of the municipal service district or business improvement district in 2000.

“With the opening of the Fayetteville Street as well as investments in the downtown area, downtown is really the hot area to locate your business for entertainment, as well as living,” French said. “[Our company] put a stake in the ground when others were going the other direction. A majority of them have moved back.”

A new proposal being advocated by Wilmington Downtown Inc. is the creation of a municipal service district, which would tax businesses in the central business district for additional services, such as tour guides and security (“downtown ambassadors”), enhanced cleanliness such as graffiti cleanup and marketing.

“The benefits are big. Having a dedicated source for information and resources for enhanced services will be important,” said John Hinnant, executive director of Wilmington Downtown. “In other markets analyzed, there is evidence of increased retail sales, increased occupancy and higher lease rates because the area becomes more desirable.”

Wilmington Downtown is tentatively proposing a 4.5-cent tax for the downtown municipal service district, which would be about $173,000 per year. The 4.5-cent tax is less than most of the North Carolina municipal service districts. The target implementation date is July 2011. The district would encompass from the base of Taylor and Fourth Street on the north end to the river. The district begins to taper in the northeast corner near the government buildings at 3rd and Chestnut and forms a diagonal to Ann and Second streets.

The proposal has been likened to what shopping areas typically call a Common Area Maintenance fee, or CAM. It’s a pool of money that goes from the leases into security and maintenance, usually decided by the square footage of the building. At Mayfaire Town Center, residents contribute to items like extra security, lawn maintenance, irrigation and pest control.

“That’s what we as a landlord provide to the tenants, because it’s our responsibility to provide for the common areas,” said Sue Rice, the director of operations for Mayfaire.

Wilmington Downtown recently held a meeting with leaders of Downtown Greensboro Inc. and the Downtown Raleigh Alliance about the municipal service concept and introduced their first Downtown Ambassadors the weekend of May 22-23.

The Downtown Raleigh Alliance employs 25 security, safety and clean ambassadors, according to David Diaz, president and CEO of Downtown Raleigh Alliance.

“It’s the biggest part of our budget. We’ve realized that you’ve got to have people on the streets, watching downtown, solving and responding to problems,” Diaz said.

The Raleigh ambassadors are trained to help anyone from tourists to transients. For the tourists, they may provide maps or suggestions on entertainment, and for the transient or panhandler, they call service providers for food or shelter.

“That level of customer service starts to have a ripple effect,” Diaz said. He said that $1.4 million comes from their municipal service district tax (referred to by Raleigh as the business improvement district or BID), but that the group’s overall budget is $2 million. Diaz said that the seed money from their BID encourages other donations and sponsorships.

“I have the money for the personnel and I can go out and fundraise for the events that bring more money to downtown,” Diaz said. “It’s a very neat way to leverage a base of money, whereas other downtown organizations have to compete with other organizations raising money.”

Downtown property owner and real estate agent Todd Toconis said that he does not oppose or support the municipal service district, but does not want to see taxes raised in an individual area.

“I’m not opposed to the programs they’re offering, I’m opposed to paying it with tax dollars extorted from property owners in a specific area,” Toconis said.

He said that the downtown area already contributes a significant amount to the property tax base because of its density. “My attitude is that the CBD is already paying a disproportionate share of the density.” Toconis said that businesses should be expected to pay the tax, not the property owners.

French said he has heard similar complaints before and that he was at first unsure of the district’s impact in downtown Raleigh.

“When it was first proposed, there was certainly some lively discussion and a little apprehension,” French said. French owns property and a public relations firm in downtown Raleigh. “For those of us that are property owners, it is worthwhile to pay the higher level of taxes, because it contributes to our investments and I’ve seen a dramatic increase in the value of the building.”

Diaz said that downtown Raleigh has the highest occupancy rate in the Triangle, at 93 percent.

Some districts employ a year-by-year renewal or have specified contracts. Hinnant said that he is considering a five-year contract to propose.

Wilmington Mayor Bill Saffo has not committed to the district yet and is still listening to the concerns of property owners. “I’m still wanting some additional information in particular, with the added tax that would be put on the property owners down there, who determines how that money would be used,” Saffo said. “I think they need to be part of the process to determine what they want and putting the bill on those services and how it should be used and what type of services they should be.”

French, the chairman of the Downtown Raleigh Alliance, says that the revitalization of downtown Raleigh was due in part to the service district.

“It’s a desirable area to relocate your business,” French said.