Opening BID

If the legislation passed this week by City Council becomes law, the business improvement district for Downtown Pittsburgh will be extended for another four years through 2016. It has been in place since 1996 (amended six times since then) with a special assessment levied on the land value of commercial properties within the district for "administrative services and improvements". If approved, the BID will have existed two decades when the next term is completed.

The Pittsburgh Downtown Partnership (PDP) acts as the agent for the BID and carries out services related to the District. The renewal of the BID comes one week after the PDP announced its new CEO.

A 1996 study by the Allegheny Institute showed that the initial expenses were slanted more toward marketing/advocacy than cleaning/security, the exact opposite of the situation in other improvement districts around the country at the time. The study asked "if the primary purpose of the BID is to make the downtown cleaner and safer, then why is such a disproportionate share given to marketing, advocacy, and administration as contrasted with the other successful BIDs?" That year $558k of the $1.270 million budget (44%) went toward "security and cleaning".

Has that situation changed? In the PDP’s 2011 business plan the BID expenditure total stands at $1.476m, about 16% higher than 1996. This year, "clean and safe" expenses are $959k, or 64% of total spending. So it is accurate to say that a higher percentage of resources are being devoted to what could be termed the core functions of the BID. "Marketing" was $240k, or 16% of total expenditures.

But comparing the growth rates of these two functions from the PDP budget shows that while "clean and safe" grew 9% from 2007 through 2011 (audited compared to budgeted) "marketing" grew 43% from $167k to $240k. Total BID expense (clean and safe, marketing, housing, planning and economic development, transportation, and administration) grew 13% over the same time frame, from $1.305 million to the aforementioned $1.476 million. All categories were dwarfed by the growth in administration, which nearly doubled from $93k in 2007 to $183k in 2011.

Could an Alternative Bid Method Be Used?

City Council will now have the $452 million offer from JP Morgan/LAZ Parking in front of them and have to consider the short-term and long-term impacts and the foreseeable and the unforeseeable consequences of the lease proposal. They have to think of what the proposed rate increases will do to the City’s business community in particular.

They, like the Mayor and other City officials, are probably surprised at how high the final bid came in and that it was well above the $300 million the Mayor said was needed to retire the Parking Authority’s debt and get the pension funds to 50% funded under the terms of Act 44 of 2009. Much of the debate will be centered around what to do with the overage.

Realizing the balancing act that had to be made to satisfy parkers, pensioners, City residents, City businesses, etc. perhaps the City should have employed a different bidding method: set the price to lease the parking system for the $300 million amount, but have the firms specify what would happen to parking rates under their proposal. Then the City could have selected the firm with the lowest impact on rates would have won the bid. The City’s debt and pension issues would have been satisfied and the impact on parking rates would have been less severe.

The discussion on how to soften the blow of rates and how to resist the numerous demands on how to spend the "extra" money will be quite interesting.