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Business Improvement Districts

by Mike Muller, Oct 19, 2006
 

Merchants, landlords and owners of co-ops in Fort Greene and Clinton Hill recently filled a small church in Brooklyn to hear how their community could change for the better if they would agree to a small new tax. The Pratt Area Community Council was holding the first of two public hearings about its efforts at forming a new Business Improvement District, or BID.

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There are 55 such districts in neighborhoods throughout New York City, the most of any municipality in the world. What they promise merchants and property owners, in exchange for a small tax, is a revitalized area, by providing such supplemental services as increased maintenance and security, as well as marketing and promotion.

The Pratt people were beginning the long process of getting a new business improvement district along a 21-block stretch of Fulton Street, one of a dozen such districts bidding to be new BIDs. The chances are good that they will be accepted. Since the inception of New York’s business improvement districts in 1982, there has been only one unsuccessful attempt.

Indeed, the crowd in the Brooklyn church listened to a panel of community activists and public officials describe the benefits that come from BIDs. None mentioned any possible negative consequences, and if any of the interested parties were to visit the Web site of the Department of Small Business Services, the city agency that deals with BIDs, they would only be able to read about success stories.

Still, members of the audience were skeptical. Although their opinions were gut reactions, experts and past officials have indeed painted a more nuanced picture of BIDs than the official story. Indeed, at least one expert argues that they do more harm overall than good.

What is a BID?

BIDs are public-private partnerships that vary greatly depending on the neighborhood. The 180th St. BID in Queens has a budget of $53,000 a year while the Lower Manhattan Alliance, which encompasses the Wall St. area, runs on an annual budget of over $11 million.

Many fund capital improvements such as landscaping and signage. Some go full-throttle into business development: The Lower East Side BID created a business incubator called Forward that attempted to further cement the neighborhood's reputation as a fashion center by offering a retail space for selected up-and -coming designers. Each BID develops its own plan according to the needs of the district. Some BIDs have been recognized for their effectiveness and creativity. The Village Alliance widened the sidewalks on Eighth Street to make it more accommodating to pedestrians. The Pitkin Avenue BID , in the Brownsville area of Brooklyn, has been noted for its successful efforts to thwart crime.

Starting a BID is a complicated process that takes at least a year and a half, which involves not just public hearings but a slew of approvals, all the way to the mayor and the state comptroller. If any party feels that their interests will be damaged by the formation of the BID, they can seek judicial review, but must reimburse the city for legal costs if the court rules in the BID's favor. At any point, a BID can be dissolved by the City Council or by petitions from a majority of property owners.

THE DEBATE OVER BIDS:

Why Supporters Like Them

Supporters hail business improvement districts as an effective way to clean up a neighborhood, reduce crime and vacancy rates, and generally improve the community, all at no cost to the city. The Pratt Area Community Council points out that the average total monthly assessment for the Fulton BID would be less than the monthly average in fines alone that are imposed on property owners and merchants in the area for failing to clean the sidewalks for which they are responsible. Indeed, the sidewalks in business improvement districts city-wide score nearly perfect ratings in the mayor’s management report on cleanliness.

The Department of Small Business Services cites a battery of statistics and anecdotes that show other such improvements as the result of BIDs, as well as an impressive reduction in vacancy raters in some of them. Further, it points out that BIDs have brought in additional funds for the area by fulfilling this role.

Why Detractors Criticize BIDS

Detractors have called BIDs a burden on the city, unfair to workers, and even anti-democratic. Among the accusations:

1. Undemocratic: Residents in a district vote for the BID’s board of directors, but there are specific slots for local public officials, as well as representatives of property owners, business owners, and tenants, and public officials. But the system is weighted towards property owners, a fact that has inspired lawsuits. One such case occurred when residents in the Grand Central Partnership BID argued that the board violated the one person, one vote clause of the Constitution. A court ruled that such consideration does not apply to the limited function of a business improvement district – restoring and promoting business activity. Residents have recourse through their elected officials, who oversee the BID.

But the dismissal was not unanimous: District Judge Jack B. Weinstein issued a dissenting opinion , announcing that "Granting a more powerful vote to some because they own real property constitutes such a derogation from constitutional principles, such a denigration of equality of political rights, such a diminution in the practical political power of citizens, that I must respectfully dissent."

2. Unfair Treatment of Workers: Moshe Adler, a frequent critic of BIDs and senior economist at the Fiscal Policy Institute, has argued in testimony to the City Council that BIDs have contributed to a deterioration in wages and benefits for workers. He contrasts workers employed by BIDs who get paid minimum wage and no benefits with city employees who perform similar work for wages starting at $13 an hour with full health and pension benefits.

In one instance, the Grand Central Partnership was one of two BIDs embroiled in a scandal over its hiring practices. In 2000, they paid $816,000 in back wages to settle a lawsuit that alleged that they violated minimum wage laws.

Robert Walsh, the Commissioner of Small Business Services, disagrees, and points out that the BIDs directly employ over a thousand people. "These jobs provide opportunities to many workers who otherwise may not have found employment, and almost all of these jobs pay a decent wage with benefits." Walsh says.

3.Too Much Debt, Too Little Oversight: A 2002 report by Cornell University's Department of City and Regional Planning catalogs the debate surrounding BIDs and their potential pitfalls. It notes that a BID's debt counts toward the city's debt ceiling, and that BIDs' borrowing has the potential to crowd out investment in other parts of the city. It also points out that government oversight "decreases dramatically once the district is established." The formation process mandates numerous public hearings and approval by a series of public officials, but once it is approved, oversight is limited. And halting the formation of a BID requires that a majority oppose it, rather than a majority show support, and as a result, the report posits that many of them are created due to a lack of knowledge, rather than by active support.

4. Unclear Support While it has always been required that a BID take a survey to show that adequate support exists within a proposed district, the creation of the Madison Avenue BID is an example where this process failed, according to the City Council. When significant opposition to the BID's creation surfaced after the approval process, the Council conducted its own survey to see how the the BID's survey did not account for it. After using methods similar to that of the Madison Ave BID survey, and only being able to contact about 5 percent of commercial property owners in the district, they concluded that the inability to account for support "places the entire BID approval process in question." Of the small number actually contacted, half had heard about the BID only after its approval. Only one proposal for a BID has ever been denied, the Manhattan Ave. BID, in Brooklyn, where a majority of property owners opposed it.

So what is the record for BIDs as a whole? The only comprehensive analysis of the city's BIDs was published in 1995 by the City Council's Finance Committee. It concluded in its executive summary that while "overall, BIDs have had a positive impact on many New York neighborhoods, BIDs nevertheless require additional oversight and in some cases serious operational restructuring." Two years later, it issued a supplemental report detailing legislative proposals to begin addressing the concerns that surfaced in the two reports.

In response to that report, the Department of Business Services - the agency that dealt with the BIDs at the time - instituted some reforms. It required, for example, that renewal of a BID's contract be based on a performance evaluation and be accompanied by a survey of constituents that shows continued support. There have been 15 BIDs since then, and 12 more on the way. BIDs seem here to stay.

 


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