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Business Improvement Districts


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.

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.

 

Using City Tax Policy To Help The Working Poor


When Mayor Michael Bloomberg’s commission on poverty issued its report in September, it made many broad recommendations, but it was only during the press conference surrounding the release of the report that the mayor suggested two specific plans he would be pursuing. One is to seek $24 million in private funds to be used, as the New York Times put it, as “cash rewards to encourage poor people to stay in school and receive preventive medical care.”

The other plan is to use $42 million of city budget funds as a refundable child care tax credit to low-income families. This means, these families would get credit against income tax due the city, or cash from the city if they don’t owe any tax.

The $42 million tax credit is the only sign thus far of any new public funding for anti-poverty programs.

But it could be just a start. There are other ways in which City Hall could change tax policy to enhance opportunities for working New Yorkers.

MORE POOR, AND POORER

Both the report by the mayor’s poverty commission, and the most recent annual report on poverty by the Community Service Society, reveal the difficulties facing the working poor – some 340,000 individuals who have jobs but do not earn enough to rise above the poverty level. (For a discussion on how poverty is assessed in New York City, see The Poverty Commission: Measuring Up?)

A “massive expansion” of the service sector has meant more jobs, but with low wages and a lack of health benefits. The effect is particularly harsh on families; almost one third of all children in the city live in poverty.

The Community Service Society’s report describes a growing crisis, with “a sharp decline in annual earnings and a resultant rise in working poverty for families with children.” It also finds “a recent decline in employment and increase in poverty among single mother families.”

CHANGING TAX POLICY

1. Child Care Tax Credit

Reaction to the mayor’s proposed child care tax credit was largely enthusiastic, such as in an editorial in the Daily News: “The mayor would give parents earning $25,000 to $30,000 annually up to $1,000 per year per child to cover certified day care for kids up to age 3. An estimated 50,000 families would benefit. That’s a ‘hand up, not a ‘hand out.’…Get it done.”

This is not a new idea. The City Council was quick to point out that it proposed something similar in four separate years, going back to the year 2000. In fact, in 2002 Mayor Bloomberg joined with the council in backing a child care proposal, but it didn’t pass the state legislature, which must approve such tax changes.

Still, Mayor Bloomberg’s initial attempt to use the city’s complex tax system to help at least a few of the working poor and other low-income workers could lead to a much more comprehensive and fairer tax plan.

Such a plan could consider three more tax changes that would help the working poor and near-poor:

2. Earned Income Tax Credit

More than 700,000 New Yorkers (most of whom live in households that earn less than $20,000 per year) receive Earned Income Tax Credits (EITC), which is a kind of tax refund for poor families.

The Earned Income Tax Credit is funded by the federal, state and city governments, though City Hall’s share is only five percent. Many believe that an expansion of the city’s share of this tax refund would have a much more substantial impact on working families in or near poverty than the child care tax credit. The city council proposed increasing the city’s share to ten percent. This was estimated to cost the city $62 million and would increase the benefit for individual families by as much as $430.

3. Revamping City’s Personal Income Tax

Expanding the Earned Income Tax Credit helps New Yorkers of low income at relatively low cost. It is in sharp contrast to the actual city tax breaks currently on the city books, which help high-income New Yorkers. Indeed, putting them all together, the tax relief for higher income New Yorkers adds up to over $1.5 billion a year – nearly 40 times the $42 million the mayor is proposing for a child care tax credit.

About a third of that $1.5 billion comes from a reduction in the city’s personal income tax for the wealthiest New Yorkers. In fiscal year 2006, the top rate of personal income tax for New Yorkers with the highest incomes was reduced from about 4.5 percent to 3.65 percent. This cost the city government some $550 million in lost revenue. Yet, at the low end, heads of households with net incomes of as little as $14,400 pay 2.9 percent.

The Independent Budget Office has suggested a more progressive personal income tax by reducing tax rates for lower-income households and restoring the top rates for higher-income New Yorkers.

4. Expanding Property Tax Relief To Renters

A lot of money each year is forfeited in city tax revenue in order to fund the mayor’s $400 property tax rebate to homeowners, and a property tax abatement for coop and condo owners.

The city’s Tax Expenditure Report for Fiscal Year 2005, for instance, shows the scope of property tax cuts that primarily benefit middle- and upper-income New Yorkers:

  • The $400 rebate benefited 645,436 house, condo, and co-op owners, and cost the city $256.6 million in lost revenues.
  • The co-op and condo abatement, benefited 329,322 condo and co-op owners, an average of $783 per owner, and cost the city $257.8 million.

 

The $400 rebate, now in its third year -- and promised for the next three years (although it needs new state approval) -- softens the 18.5 percent property tax rate increase imposed on all property taxpayers in November 2002 in order to help solve the huge budget deficit at the time.

But neither rental landlords nor renters – who pay a significant share of their landlord ’s property tax through their rent -- receive a rebate.

The abatement was, in 1997 when introduced, supposed to be a temporary tax break for co-op and condo owners, who pay a higher effective property tax rate than house owners, until a more comprehensive reform of the city’s inequitable property tax system could be devised. Ten years later, the abatement continues and neither the mayor nor council talk of a reformed property tax system.

The relevance of these large property tax benefits to the mayor’s anti-poverty plans is that they do little for lower-income New Yorkers, who are twice as likely to be renters rather than owners. According to the 2005 NYC Housing and Vacancy Survey, median income for the two million renter households in the city in 2005 was $32,000; for the one million homeowners, it was $65,000.

It would make sense to create some tax relief in the property tax system for renters as well.

OUTREACH

It would not be enough just to institute these benefits. As it is, there are existing public benefit programs that are not reaching all the people who are eligible. Over one million New Yorkers receive federally-funded food stampsm, but that represents only 72 percent of those eligible. The more than 700,000 who receive Earned Income Tax Credits are only about 80 percent of those eligible. Public health insurance goes to 2.6 million New Yorkers, but 11 percent of those eligible don’t have it. This is why the report of the mayor’s poverty commission had another suggestion – sign up more of the poor for these programs. The mayor has promised to do so.

Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001. 

New Council Bills -- Nightlife Safety and Property Tax Breaks


At each of the City Council's stated meetings, council members introduce bills, most of which will never become laws (for the process by which bills become laws, click here). As a regular feature, Gotham Gazette discusses some of the legislation proposed at each meeting.

At its most recent stated meeting on September 27, the City Council introduced 12 bills, most addressing nightlife safety, property taxes, street vendors, and health.

 

NIGHTLIFE SAFETY

 

City Council Speaker Christine Quinn introduced four new bills to continue the Council’s campaign on nightlife safety

Intro 440 calls for independent monitoring of clubs with multiple or serious violations of the cabaret licensing law. Violations include hiring unlicensed security guards or allowing underage drinking. Offending club owners would be required to pay for the monitors, which must be approved or selected by the police department. The monitors would also advise club owners and report to city agencies on a regular basis.

Intro 441 would address the problem of underage drinking by requiring identification scanners at club entrances. This idea has raised privacy concerns. In response, the bill calls for scanners that are able to read and display information from licenses, but not retain this information.

Intro 442 would require clubs to install surveillance cameras at club entrances and exits. To ensure privacy, the bill calls for careful regulation of access to the recordings, which would be made available to authorities if an investigation is warranted.

Intro 443 would require increased training for nightclub employees to help them spot underage drinkers, know when to stop serving overly intoxicated patrons, and handle emergency situations. The law would require all new cabaret employees to complete their city-approved training course within 60 days of starting.

Quinn’s nightlife safety package is part of a broader campaign to improve security after several deaths this year near bars and clubs. In August, the Council passed a law that called for tighter enforcement on unlicensed security guards. One day after she introduced the new bills, Quinn led a nightlife summit at which city officials, club owners, and community leaders met to address these issues.

 

PROPERTY TAXES

 

Several measures were proposed to give property tax breaks to various members of the community.

Quinn proposed two bills that would ease the burden on disabled and senior citizen property owners who are on fixed incomes. Currently, the maximum income a disabled homeowner can have to qualify for a 50 percent exemption is $24,000. Intro 444-A would gradually raise this limit to $29,000 by 2009. Intro 445 would do the same for senior citizen homeowners.

Councilmember Diana Reyna proposed Resolution 529, which asks the state to pass legislation that would provide tax credits to those who own and improve city-designated historic landmarks. Resolution 531, by Councilmember David Weprin, asks the state for legislation that would make it easier for not-for-profit organizations to get tax exemptions on newly acquired property.

 

STREET VENDORS

 

Councilmember Tony Avella introduced two bills related to food vendors.

A 1995 law sets a limit of one food-vending permit per individual, corporation, business partnership, or other entity. It was originally aimed at stopping the illegal and overpriced leasing of multiple permits. Avella says that this limit hurts small business owners who obtain and distribute these licenses and who manufacture pushcarts.

Intro 446 would restore multiple vending permits to small distributors and manufacturers who were in business prior to Dec. 31, 1995. The law would also regulate against illegal leasing of permits for exorbitant prices.

The second bill addresses a restriction on the number of disabled veterans who wish to operate food carts. Intro 447 would remove the city-mandated limit. Avella points to a state law that allows those harmed while in service to vend in certain areas that are otherwise closed by law or regulation.

 

HEALTH

 

Councilmember James Oddo continued his long-running campaign to equip public places with devices that deliver an electric shock to counter irregular heartbeats, or automated external defibrillators. Intro 451 would require the city’s Department of Health and Mental Hygiene to make these devices available to primary, intermediate, and high schools that don’t already have them.

 



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