Another BID Bites the Dust

Under the terms of state law establishing improvement districts-be they for neighborhoods, business areas, a combination of both, etc.-it is incumbent on those against the plan, which normally involves levying an extra tax or fee on top of existing taxes to supplement and, frankly, improve, a targeted area. In Pittsburgh, Downtown and Oakland have had improvement districts for some time, but in areas outside those the concept has not gained traction.

That’s not to say that residents of Pittsburgh won’t vote to levy higher taxes on themselves, as they did it last year to fund the Carnegie libraries. But proposals for the West End, South Side, East Liberty, and now, Lawrenceville, have been defeated or not gotten to the drawing board. We wrote about the Lawrenceville proposal last fall. If the City verifies the vote as reported, the Lawrenceville proposal had close to 60% against it, well above the standard set by Act 130, which says an improvement district fails if 40% object.

The most recent count of improvement districts statewide (from 2010) is 32, with about a third of them in Philadelphia.

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.

Does East Liberty Need a NID?

One of the agenda items that City Council had this past month was a petition from residents of East Liberty to establish a Neighborhood Improvement District (NID) in that section of the City. Under the NID law, a petition is not binding and it is ultimately the decision of the governing body to create a NID. If 40% of the affected property owners submit written opposition about the district then the NID is nullified. We last wrote about the mechanics of the NID in two pieces in 2002.

The purpose of the NID is to levy additional special assessments on the property owners within the district in order to promote economic growth and development.

So how many NIDs are out there? According to data from the PA Downtown Center in Harrisburg, there are 32 including districts in Downtown Pittsburgh and Oakland. A third of them are located in Philadelphia. All but two are active and assessing their particular levy according to the Center. The Center did not count a few tax increment financing projects (Victory Center, Pittsburgh Mills) that utilized the NID legislation to provide additional financing, even though their use was a complete perversion of what was intended by the legislation. The proposed WEHAV program for the West End of Pittsburgh underwent similar scrutiny in 2002 for its aim and focus.

What City Council and East Liberty need to decide is this: will higher fees and more government intervention promote the type of future the community desires?