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Spring 1996
   
BIDs Really Work
Heather Mac Donald
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In 1983, the management of Mobil Oil Corporation produced a videotape that would change the face of midtown Manhattan. Mobil's leaders, having resolved to abandon the company's headquarters on East 42nd Street in favor of an office park in Fairfax, Virginia, decided to show the city why the company was leaving. Exhibit A: the videotape. Filmed in and around Grand Central Terminal, directly across from Mobil's headquarters, the short, un-narrated tape reveals a city that has lost control of its public spaces. Cigarette butts decompose in pools of urine outside the terminal; newspaper cyclones swirl wildly down the street; illegal vendors hawk cheap toys from overturned cardboard boxes; crumpled men lie hopelessly on the sidewalk; legions of commuters try unsuccessfully to open terminal doors mysteriously tied shut with twine. The tape then flashes to the pastoral suburban headquarters of Exxon and Bell Labs. Finally, a question appears: "What do we tell our employees?"

The tape got the city's attention. In response, aides to Mayor Koch convened a meeting of midtown business leaders in 1984 to discuss how to clean up the Grand Central area. Improvement was imperative. The terminal and its surroundings provided the first glimpse of New York to thousands of visitors and commuters daily—and what they saw was the largest homeless encampment in the city, hustlers flocking upon tourists and demanding payment for flagging down a taxi, graffiti splattered across stores, filthy sidewalks, and broken streetlights. 

In an implicit admission of governmental defeat, the city implored midtown business leaders to craft a remedy. They responded by organizing a business improvement district, or BID—a special taxing district that would raise additional revenue for cleaning, patrolling, and improving the district's streets and providing services to the homeless. Today the squalor around Grand Central is just a bad memory. The BID—officially called the Grand Central Partnership—put an army of cleaners to work scouring the sidewalks and removing graffiti within 24 hours of its appearance. The BID's security patrol has produced a 60 percent drop in crime. Taxi dispatchers today operate orderly queues outside the station; and new lampposts, planters, and trash receptacles, paid for by the BID, are sprouting up across the district.

BIDs have emerged as one of the most important developments in urban governance over the past two decades. They have created a mechanism for harnessing private-sector creativity to solve public problems, and their success has sharply highlighted the failures of city government. Today some 1, 000 BIDs operate in the U.S.—in big cities like Houston and Philadelphia as well as in small ones, in rich neighborhoods as well as in poor. Increasing in number monthly, BIDs are trailblazers in solving such urban quality-of- life problems as aggressive panhandling, graffiti, and vandalism.

Little wonder that they've also generated controversy. Critics charge that the additional tax burden they impose on business will prove fatal to business's long-term viability; that BIDs represent a dangerous concentration of private power in public spaces; and that they will further balkanize cities into wealthy and poor districts. 

Yet the great advantage of BIDs lies in their private characteristics. Unlike government, BIDs possess finite goals, which they can accomplish free of civil service rules and bureaucratic procedures. More important, they negotiate labor contracts from a clean slate: unbound by decades-old municipal labor deals, they can reward—and fire—employees according to their productivity, not their civil service status. 

Nowhere are these questions debated more violently than in New York City, which boasts the continent's largest concentration of BIDs—34 in operation, with up to 39 more in the wings. Their success and power have threatened a host of existing interests, from community boards and the City Council to the social service industry. The ongoing fight over BIDs, centered on the Grand Central Partnership—the city's most ambitious BID—has brought out every atavistic anti-business instinct in the city and thrown an X ray on those forces that impede an improved quality of life.

New York's BID movement was a response to deteriorating municipal services. In the 1960s and 1970s, the city started devoting an increasing share of its budget to employee salaries and pensions and to social services. The growth of municipal unions meant that it cost more and more to provide less and less service. At the same time, court rulings regarding loitering and police procedure seriously damaged the city's ability to keep order. 

New York's first BID grew out of Con Edison's efforts to clean up the then- troubled 14th Street area in Manhattan in the late 1970s. In a valiant effort to beat back the grime and crime engulfing the area, Con Edison and other major property owners around Union Square started sweeping the streets and sidewalks. The local merchants' association tried to persuade neighboring businesses to contribute to the initiative, costing $10,000 a month, but donations were sporadic and paltry. Finally, a dispirited Con Edison gave up the effort—provoking an uproar from the same merchants who originally wouldn't pitch in. 

Con Edison and other property owners then decided to take advantage of laws that the state and city had passed in 1980 and 1982, authorizing merchants to form self-taxing districts for the provision of services. Under the new laws, local merchants would have to agree to form the BID, but once it was formed, their contributions would be mandatory, collected by the city under its normal taxing powers, like any other levy. Bringing to public spaces the techniques of "common space management" that made malls and office parks so successful, BIDs would maintain security and cleanliness in the area and oversee group marketing and facade improvements. Today, thanks to the 14th Street BID, the area around Union Square is cleaner and safer than it has been in decades.

After the 14th Street BID, the next few BIDs were in even less affluent areas of the city—Washington Heights in Manhattan; North Flatbush Avenue and Grand Street in Brooklyn. All were facing similar problems—government money for business improvement was scarce, city services were declining, and voluntary merchants' associations were strapped for cash. Then, as now, many BIDs began with the homely goal of raising enough money for Christmas lights. 

The small BIDs, such as White Plains Road in the Bronx and Grand Street in East Williamsburg, perform an essential, if modest, role in keeping neighborhoods together. The North Flatbush BID, for example, with the second smallest budget in the city, stretches its $83,700 over a variety of services. Director Richard Russo has organized local teens to paint stores' graffiti-covered roll-down security gates in decorative designs. He has printed up attractive shopping guides and shopping bags for the district. And the North Flatbush BID's solitary sanitation worker is having a real effect: traffic and light poles on the avenue are free of the illegal fliers that one block away, on Seventh Avenue, flap from the poles like papier-mâché. 

Had BIDs remained only small-scale enterprises, they might never have become a flashpoint of controversy. But at the same time that property owners in North Flatbush and Grand Street were organizing BIDs, a far larger BID was taking shape in midtown Manhattan with the explicit aim of restoring social order in a public space. Bryant Park, a large Beaux Arts greensward behind the New York Public Library on 42nd Street, had become a glaring symbol of the city's inability to control its public spaces. The park was a haven for drug dealers and petty criminals; shootouts and assaults were common. Law- abiding workers in the area feared and shunned the park, and surrounding property values had taken a nosedive. 

In 1980, Andrew Heiskell, vice chairman of the New York Public Library and chairman of Time, Inc., proposed, as part of the library's own renovation program, that a nonprofit corporation of adjacent property owners should restore and manage the park—an idea that eventually evolved into a BID. L. Robert Lieb, co-owner of 81 West 40th Street and one of Heiskell's original backers, explains the difficulties the plan faced: "To go into a down area and put additional taxes in was a gamble. Even some of the smartest developers were hesitant to sign on; we had to sell them on the idea that to make money, you have to spend money." The hard reality, however, says Lieb, was that "if we didn't clean up the park ourselves, it wasn't going to happen. " 

City hall welcomed Heiskell's idea, but else where it brought out the city's most virulent anti-gentrification sentiment. Though the park would remain city property, open to all, civic groups such as the Parks Council, as well as academics and the press, accused the project's sponsors of seeking a private enclave for the rich. A proposal to build a restaurant in the park, whose revenues would contribute some $2 million toward park renovation, drew dire warnings of the imminent privatization of all public spaces. Critics conjured up Dickensian scenes of the ragged masses pressing their noses up against the restaurant's large windows, while fat bankers consumed huge quantities of goose liver and Bordeaux inside. Why this scenario should represent more of a taking of the public domain than leaving the park the exclusive province of criminals was never explained.

Nevertheless, the Bryant Park BID won approval, and it finished the restoration in 1995. Overnight, the park became the most successful public square in the city, showered with awards. Round-the-clock security and an exacting standard of maintenance keep the space safe and immaculate—even down to its public toilets. The crowds thronging the park throughout the day and evening have belied the charge that it would become the exclusive province of the rich. "I have yet to see turnstiles," muses Lieb. "No one has ever said: 'You can't go into the park.' They have said: 'You can't urinate on the bushes and attack people.'" Property values around the park have risen; many buildings have waiting lists for tenants. Former critics of the Bryant Park BID are now unabashed supporters. 

This fight was a dress rehearsal for a larger, more bitter battle. As the Bryant Park BID got under way, city and business leaders were discussing the Grand Central problem, whose solution would pit the eventual Grand Central BID against one of the most powerful, and retrograde, forces in the city—the social service industry. 

At the urging of the Koch administration, Peter Malkin, a lawyer and eventual chairman of the Grand Central BID, began organizing local property owners in 1985. Malkin hired Dan Biederman, the Bryant Park BID's young director and president, to serve the same roles in the Grand Central BID. The plan Malkin and Biederman devised was the most ambitious yet: a sweeping renovation of the streetscape, including specially designed streetlights and signage throughout the district, new trees in pits that allow deep watering during droughts, ornamental planters, trash receptacles, redesigned food carts and newspaper kiosks, restoration of the Pershing Square Viaduct that leads traffic from the elevated roadway around Grand Central Terminal back to Park Avenue, floodlighting the terminal, and replacement of all sidewalk wheelchair ramps. 

In late 1988 the Grand Central Partnership—a 50-block district extending roughly from 39th Street to 48th Street and from Second Avenue to Fifth Avenue—began operations. Only one of the 181

property owners had filed an objection in accordance with the law. With some 51 million square feet of commercial real estate, the district comprised 14 percent of Manhattan's total office space, valued at approximately $7.8 billion in 1994. 

The partnership, today with a $10 million annual budget, has transformed the district with a fanatical sense of mission. Biederman is a perfectionist and has assumed an unmistakably proprietary attitude toward the district. Pointing to an elegant new lamp pole crowned by a clutter of parking signs, he sighs: "The city has been putting things on our poles that we don't like." Characteristically, the partnership has offered to provide alternative poles.

In a city where official indifference to the broadest assaults on human dignity had until recently been the norm, such devotion to detail should be welcome. But for many New Yorkers, such an attitude signals a sinister intention to usurp the public domain. The partnership's imperialistic designs on mid town Manhattan seemed confirmed when Malkin and Biederman announced plans in 1990 to establish another BID on 34th Street. No matter that city hall backed the plan, recognizing that it was incapable of cleaning up the area around Madison Square Garden in time for the Democratic National Convention in 1992.

Then the Grand Central Partnership and the 34th Street BID announced their intention to issue some $55 million in bonds to finance their capital improvements program, with interest and principal to be paid with the BID assessments. Since the bonds are not backed by the full faith and credit of the city, the city would not be liable in the case of a default. Yet all resulting capital improvements would become city property—a gift to the city. Even so, State Senator Manfred Ohrenstein introduced anti-BID legislation, with a specific anti-Biederman clause. "You've got one man 

running a private government for public purposes in the center of Manhattan," Ohrenstein told Crain's New York Business in 1992. "It's just too much power with no control, no accountability, no review." The legislation ultimately went nowhere, for even the Democratic Assembly realized the value of BIDs to the city. In 1992 and 1993 the partnership and the 34th Street BID issued $32 million and $24 million in bonds, respectively, receiving a credit rating of A1—far higher than the city's.

The Grand Central Partnership's greatest infraction lay in its attempt to offer an alternative to existing services for the homeless. From its inception, the partnership had acknowledged a duty to help the homeless who congregated in and around Grand Central. Then-Manhattan Borough President David Dinkins had made his support for the BID conditional on its involvement in homeless services. Robert Hayes, founder of the Coalition for the Homeless, the city's most powerful homeless advocacy and litigation machine, had urged the partnership's involvement in social services. 

In 1985—the same year that the partnership was starting to organize—the Coalition for the Homeless had begun a feeding line outside Grand Central on Vanderbilt Avenue. Unruly and dangerous, the line brought hundreds of men each night to the area; fights—one of them fatal—often broke out. Businesses and restaurants complained that the men were defecating in their doorways. Several other charitable organizations in the neighborhood also offered food, with the result that men were racing around the district to collect three dinners in one evening. The food line invited the public to dislike the homeless; advocates predictably complained of "backlash." 

To improve the district, the partnership needed to get the food line off the streets. "I realized that if you attack Robert Hayes, he only grows bigger," explains Jeff Grunberg, director of the partnership's social service programs. "Instead, we decided to compete by providing the homeless what they want indoors." In 1989 the partnership opened a 24-hour, multi-service drop- in center on East 44th Street. It is the only drop-in center in the city that turns no one away except those who show up drunk or threaten violence, and one of the few programs willing to cater predominantly to young black men, many of whom have psychiatric disorders, criminal records, and addictions. Yet it is also among the city's safest.

Three months after the partnership opened its Social Service Center, Hayes, to his credit, moved the coalition's feeding line to the center. But the agreement between the coalition and the partnership was extremely fragile. Hayes soon left the directorship, replaced by Mary Brosnahan, a far more confrontational advocate with a deep disdain for "muckety-muck business people," as she calls them. Periodically, the coalition's food line would reappear on Vanderbilt Avenue—in protest over the partnership's policy of metal detection for weapons, or the partnership's allowing the "coalition's homeless" into the building early (the coalition preferred that they wait on the street), or over the air-conditioning, crowding, or alleged lack of safety in the center. When the line returned to Vanderbilt, the partnership would try to lure the "coalition's homeless" back inside by passing out menus for the center's meals on the food line—a bourgeois tactic viewed with Olympian disgust by coalition officials. The partnership had encroached upon the advocates' universe by opening a competing shop: its center offered not only hot meals and a place to stay overnight but also job training and a program to prepare people for, and place them in, housing. The partnership's record in hiring the formerly homeless is unparalleled among service providers. Given these incursions into the advocates' territory, the chances of peaceful coexistence between the coalition and the partnership—in the same building, no less!—were slim. 

Writing in New York Newsday upon the occasion of the food line's reappearance in 1994, columnist Murray Kempton spoke for the city's entire left wing in his contempt for the partnership's efforts. The partnership, he said, ran a human "waste disposal program" whose main goal was "to find a place to hide" the homeless. The center's purpose, he claimed, was "obscuring the homeless with cosmetology"—never mind that its "cosmetology" included giving the homeless drug treatment, mental health counseling, housing, and jobs, as well as food and shelter.

It began to seem that for the advocates and their allies in the press, the only place the homeless belonged was on the streets. Several months before the Democratic National Convention, the partnership had begun an innovative program to persuade people living in homeless encampments to seek help. The partnership's outreach workers would give the encampments' occupants a coupon for $5 and a hot breakfast, redeemable at a social service "network fair," where the homeless would meet an array of service providers and learn about their programs. If a person actually hooked up with a provider, the partnership offered to reimburse the provider at the city rate and pay the homeless person's first month's rent if the organization found him housing. The coalition would have none of it. A "passive sweep!" cried Mary Brosnahan. The advocates charged that the network fair program—like the Social Service Center—was intended simply to get the homeless out of sight for the convention. The Coalition for the Homeless, by contrast, planned to create a homeless encampment on the periphery of the convention, a sort of Potemkin Village in reverse.

What was at stake in the battle between the Grand Central Partnership and the city's traditional service providers was not just ideology, but money—lots of it. The partnership supplemented its own assessments with government grants—in 1995 the Social Service Center received $1.7 million from the city's Department of Homeless Services and $300,000 from the Federal Emergency Management Agency for nutrition. When Peter Malkin and Dan Biederman announced their intention to form a BID on 34th Street, the advocates and their allies on local community boards decided that this was the moment to get their hands on that money. Peter Smith, then president of the Partnership for the Homeless, began an all-out campaign in the press and the community boards to tar the Grand Central Partnership. Smith warned that if the 34th Street BID was approved, New Yorkers "will lose a huge chunk of Manhattan." The Social Service Center was one of the "worst in the city," he falsely charged. Smith demanded that the 34th Street BID sponsors give him the money they had set aside for social services. He found an ally in the local community boards, often populated by representatives of social service agencies. During board meetings about the 34th Street BID, people screamed at Jeff Grunberg, director of social services for the Grand Central Partnership, that he was "causing homelessness."

After the advocates' political attacks came the legal ones. In February 1995 the Urban Justice Center sued the Grand Central Partnership for violating minimum wage laws in its homeless job-training program. "I've never seen exploitation as bad as at the partnership," deadpanned Doug Lasdon, executive director of the Urban Justice Center, to a sympathetic City Council. The advocates charged that the partnership was trying to get rich off its homeless, paying highly capable workers slave wages to perform needed tasks. A ludicrous charge: the partnership's trainees are initially incapable of holding down a job—no more than a third show up for their kitchen and maintenance jobs on any given day. The program gives the trainees needed discipline and confidence: a tall, thin man working in the center's kitchen drew himself up and told me emphatically, "This is not a homeless shelter; this is a self-help center." The partnership has a highly credible record in moving people into full-time jobs: 400 former clients are working to date, 200 of those doing menial or administrative jobs for the partnership itself. 

In December 1995 the Urban Justice Center sued again, charging the partnership with violating the Constitution by not giving residents in the district equal representation on the BID's board of directors. BIDs revive America's "tradition of non-democracy," Lasdon told me. "For hundreds of years, we haven't had democracy but landowners voting." Of course, the partnership's bylaws merely follow the state and city BID legislation in requiring that over half the board consist of property owners, and the U.S. Supreme Court has upheld property qualifications for voting in special assessment districts.

But these suits, for all their cost and negative publicity, cannot compare in destructive force with the brilliant public relations coup launched on April 14, 1995—the day the New York Times published its by now infamous " goon squad" article on page one. Noting that the partnership trains its own homeless clients to do homeless outreach, in the belief that the formerly homeless can best persuade those still on the street to seek services, the Times charged that the partnership encourages these trainees to beat up the homeless and drive them off private and public property. Four former partnership outreach workers—brought to the Times by the Coalition for the Homeless and the Urban Justice Center—claimed to have kicked and bludgeoned the homeless who resisted services as part of their expected duties. The partnership vehemently denied the charges, pointing out that two of the self- confessed "goons" had been fired for stealing partnership vans, and all had axes to grind. Three of the accusers are parties to the Urban Justice Center's minimum wage suit. 

The Times's article resembles nothing so much as the Salem witch trials, with no charge too fantastical to print. A former secretary of the partnership who had been fired for being in the office after hours says that the director of homeless outreach dispatched his workers in the morning with the cry: "OK, goon squad! Go get 'em!" The partnership, charges the Times, referred to its outreach workers not only as "goon squads," but also as " wrecking crews" and "vigilantes." 

With the publication of the Times article, a glad cry went out across the city. The allegations immediately entered city lore as the gospel truth. The City Council Committee on General Welfare, chaired by Councilman Stephen DiBrienza, the social service industry's mouthpiece, held a circus-like hearing on the partnership's "goon squads," and the Finance Committee declared a moratorium on new BID approvals and ordered a review of BIDs, targeted undisguisedly at the Grand Central Partnership. The federal Department of Housing and Urban Development, working closely with the City Council Welfare Committee, yanked a half-million-dollar grant to the partnership. "There's no doubt that these things happened," announced Andrew Cuomo, assistant secretary of HUD and a former New York homeless advocate. 

The question is: what "things" happened? In one of the incidents alleged by the Coalition for the Homeless a fight between an outreach worker and a homeless person in front of the Philip Morris building on 42nd Street and Park Avenue—the partnership outreach worker filed a police report and a criminal complaint for assault. The alleged "victim" filed a cross-complaint; neither party pursued the matter further. The partnership made no effort to cover up the incident. In another—an alleged assault on a man under a box in the snow—although the partnership had no record of the event, it now believes its outreach worker feared the man was dead and sought to rouse him. Out of 70,000 contacts between partnership outreach workers and the homeless, these are the only charges for which any evidence has been found. They do not support the fundamental indictment against the partnership: that it sanctioned a policy of aggression toward the homeless. Homeless advocates have been videotaping alleged abuse of the homeless on the streets for years; they recorded none of the beatings allegedly routine among the partnership's outreach workers. Likewise, hundreds of hours of videotape by banks inside their ATM vestibules, the most frequent site of partnership outreach services, yield no record of the goon squad activity. The partnership has asked the Manhattan district attorney to investigate the charges; that report has yet to issue. No one has denied that the partnership encouraged abuse more adamantly than the partnership's own homeless outreach workers.

The episode has further damaged the partnership's reputation and isolated it within the BID community. Some of the big competing BID managers have taken to delivering gratuitous and sanctimonious potshots at the partnership. Ultimately, however, the partnership will ride out the storm—it is too effective to be destroyed.

The greatest damage from the smear campaign is not to the partnership but to the city itself, which will lose a highly promising alternative approach to homeless services. The partnership's outreach effort had succeeded in striking a unique balance between the needs of the homeless and the interests of property owners and public order. But now such balance is forbidden, thanks to a report by Robert Hayes, whom the partnership, in a striking show of good faith, had asked to evaluate its outreach and social service programs in the wake of the goon squad charges. Though Hayes's report unequivocally supports the Social Service Center and dismisses the goon squad allegations as "demagoguery," it reasserts the prevailing, destructive social service orthodoxy that homeless outreach must concern itself solely with the interests of the homeless, without reference to the public interest.

As the Hayes report details, when an outreach worker found a homeless person on private property, such as a bank ATM vestibule, he would try to persuade the homeless person to accompany him to the partnership's Social Service Center. So far, so good. But if the homeless person refused to move, the outreach worker would counter: "You're on private property; I am therefore obligated to notify the bank security officer, who will evict you. So you might as well come with me now where you may get shelter and food."

That argument, said Hayes, violates the most fundamental tenet of homeless outreach: the out reach worker may not "mix outreach and security." Telling the homeless person he is trespassing would jeopardize the precious bond of trust that the outreach worker hopes to establish with him. In fact, states Hayes, quoting several social service "professionals," the fondest wish of the outreach worker is that the homeless person will still be trespassing in the same spot the next day, so that he can re-administer his services (thus, one might note, filling up his quota of requisite homeless "contacts" for the month).

The absurdity of this argument is overwhelming. Nothing could be less conducive to re-integrating the homeless into society than exempting them from the rules that others have to live by. To treat the homeless as sensitive plants that may be damaged by learning that they are breaking the law is profoundly "infantilizing," to borrow a word from Hayes. Equally nonsensical is the implicit assumption that the homeless person is better off either left in a bank vestibule or evicted by a security officer, rather than being persuaded by the invocation of the law into shelter. Before the partnership persuaded bankers to try its more compassionate approach, banks used dogs to evict the homeless.

Hayes's report subtly reaffirms a basic tenet of the left: business will always oppress the powerless, even when it claims to be working for the common good. He cites with concern the statutory purposes of BIDs: to " restore and promote business activity" and to enhance the "enjoyment and protection of the public"—purposes that, he says, may put the BIDs in conflict with the mission of helping the homeless. Thus, he concludes, BIDs should not deliver social services on their own; any such efforts must be directed by "experts" and "professionals," Unsurprisingly, those "experts" acclaimed the report as the definitive statement on homeless outreach. 

In response, the partnership meekly capitulated: its outreach workers have stopped telling homeless people that they are on private property. As a consequence, Chase Bank canceled its contract with the partnership for outreach services, now relying solely on its security officers—hardly a victory for the homeless. The partnership has also reconstituted the board of directors of its Social Service Corporation with a large majority of " seasoned social service experts," including a director who once headed the radical

Mobilization for Youth the original failed War on Poverty program—and it is considering Hayes's recommendation to find a "sophisticated outreach agency" to replace its own former homeless clients. 

Game, set, and match to the advocates: the Hayes report preserves a huge pot of money for social services and reestablishes the social service industry's hegemony over it, as HUD awarded the grant money it had stripped from the Grand Central Partnership to the Partnership for the Homeless. And a move is afoot in the City Council to prohibit BIDs from direct involvement in social services, thus locking up the advocates' monopoly over government money. This proposal, still in its early stages, would be a heartbreaking loss to the city. The partnership, which started delivering services because it couldn't persuade existing organizations to take on the challenge of its universal drop-in center, has provided some of the most creative solutions to homelessness in recent years. Requiring all BIDs to contract out with existing service providers, as Councilman DiBrienza would like to do, would limit new ideas in a field desperately in need of them.

By now, about the only people willing to support the partnership publicly are BID managers in other cities—many of whom also see dealing with the homeless as central to their mission. Nationally, the reaction to the uproar in New York is one of utter incomprehension. "West of the Mississippi, we think: 'You guys are nuts!"' exclaims Margaret Mullen, executive director of the Phoenix BID and chairman of the International Downtown Association. "Tell them in New York to grow up and call our social service people—and leave Dan Biederman alone!" If such a smear campaign were ever waged against the Phoenix BID, Mullen says, "the business community would be so offended that it would stop giving money to social services." 

Indeed, what the Hayes report finds so objectionable in the partnership's operations—allegedly combining "outreach" and "security" is far more innocuous than what BIDs in other cities do, without protest. The BID in Portland, Oregon, a bastion of liberalism, sends out its security guards to give morning "wake-up calls" to the homeless—in other words, to roust them

from the doorways of businesses. Phoenix's downtown guides—like roving ambassadors—evict the homeless from private property and call the police if a homeless person is panhandling or urinating in public. Baltimore's downtown guides ask panhandlers standing in front of businesses to move along. If a panhandler refuses, the guides station themselves on either side of him and discourage pedestrians from giving money. In 1993 the ACLU sued the Baltimore BID over its practice of asking panhandlers to move along; the BID board refused to settle out of court. "Our board felt it was a battle worth fighting—the community had to find out what its rights are," explains Frank Russo, the Baltimore BID's head of security. The BID won.

All these cities, like New York, have extensive systems of help for the homeless, but they also recognize what many in New York are still oblivious to: "If you emphasize individual rights," Baltimore's Russo argues, "the city goes bankrupt. You have to do what needs to be done to see that the city survives."

While the Grand Central Partnership's social service program should have been a non-issue, BIDs do pose genuinely serious questions for cities. Critics within the business community charge that BIDs impose a second tax on businesses for services they are already paying the city to provide. In the long run, these critics say, the double taxation, rather than the enhancement of services, will determine whether firms stay or leave.

But the BID assessments are tiny compared with the city's own tax burden. Real estate taxes in midtown Manhattan run between $6 to $14 a square foot compared with the Grand Central Partnership's assessment of 14 cents a square foot. BID assessments range from a few hundred dollars a year for small buildings to $500,000 for the Empire State Building. A sensible proposal floated in 1994 by Deputy Mayor John Dyson to allow at least part of BID assessments to be tax deductible would further defang the double-taxation argument. 

The evidence at least partly confutes the economic argument against BIDs. Buildings are starting to advertise membership in the most successful BIDs: the law firms of Simpson, Thacher & Bartlett and Davis, Polk & Wardwell say the existence of the Grand Central Partnership figured in their decisions to relocate to midtown. Property owners in some areas, such as the perimeter of Bryant Park, point to the existence of the BID to explain the zero vacancy rates of many buildings. Even small-property owners view the additional expense as a worthwhile investment: "I have no problem paying more if it upgrades the area," says Howard Somers, owner of Grand Book Center, a 40-year- old business in the Grand Street BID. "The more the area is worth, the more my property is worth." 

And BID revenues don't only duplicate what city taxes are supposed to provide. Even the best-run city is unlikely to provide, as many of the larger BIDs do, continual sidewalk cleaning and graffiti removal for over 12 hours a day, peripatetic visitor guides, special events, and help with store upgrading. Many BIDs aim at a standard set not by the ideal city but by Disney World or a premier shopping mall. And if midtown merchants want, say, floodlighting at Grand Central Terminal, they'd be politically naive to expect taxpayers in Jamaica, Queens, to pay for it.

lt's true that many BID activities are things the city should be doing. But what is the alternative? If all BIDs were to cease operations tomorrow, it is fanciful to think that New York would revamp its work rules, civil service policies, and spending priorities fast or fully enough to prevent further business decline. Forcing businesses to die a slow death in order to highlight the city's failings is unlikely to make the city refocus its priorities. 

Yet BIDs make the situation worse, respond critics, by taking pressure off New York to reform its ways. By providing basic services themselves, critics argue, BIDs "enable" the city to continue pouring money into salaries, pensions, and a massive welfare apparatus while ignoring the essentials of municipal government. Furthermore, opponents say, BIDs "co-opt" out of the political process the most powerful citizens. The large real estate interests, the argument goes, which otherwise would be screaming at city hall about the filth in the streets, fall suddenly silent once in a BID, because their neighborhood is clean. Meanwhile the rest of the city continues its long decline.

The first argument—that BIDs enable dysfunctional spending priorities has some bite. BIDs conceivably allow the city to shift resources even further from basic services in the knowledge that others will pick up the slack. Some people have argued, analogously, that the Central Park Conservancy, a private philanthropic organization that contributes millions to the maintenance of Central Park, has allowed the city to slash further its entire parks budget, though proving the claim is virtually impossible. But again, the response has to be pragmatic: not picking up the slack is unlikely to produce a positive result. And conceivably, BIDs could force reform of city priorities by creating a higher standard for neighborhood cleanliness and safety. New Yorkers have grown accustomed to a barbaric level of litter and filth; the best BIDs show what a city should look like. With any luck, residents will start demanding that the entire city look as clean.

As for the argument that BIDs co-opt people out of the political process, the opposite has proved true. BIDs involve business as never before in the day-to-day operations of cities. The BID becomes a watchdog for service delivery because it is so close to the ground. When New York cut trash pickups in midtown, the Times Square BID fought—with some success—to get them back. Rather than fostering just a parochial commitment to turf, the New York BIDs are working together on citywide solutions to citywide problems, such as illegal street vending. 

Another argument against BIDs is that they are elitist, allowing wealthy areas of the city to help themselves at the expense of less wealthy areas. BIDs do not simply add to the total pot of city services, charge critics such as Robert Solomon, a law professor at Yale who is bringing the suit against the Grand Central Partnership over its board representation; they are a zero- sum transaction: the BID's gain is someone else's loss. Solomon's reasoning: when a city proposes to raise taxes, members of a BID—who are already paying an additional tax will fight against the increase all the more strenuously. "If the city currently has a revenue pie of 100 pennies," complains Solomon, "and the BIDs self tax, raising the pie to 110 pennies, they get to keep all those additional pennies and will pressure the city against the tax increase."

So much the better! one hastens to reply. The more pressure against tax increases, the better for the city. And surely Solomon is naive to think that without BIDs, property owners would be any more amenable to tax increases. More important, Solomon's zero-sum analysis of BIDs is utterly wrong. BIDs are a net gain to urban well-being, because they operate in the public realm, adding benefits available to all city residents, not just BID members. We are all free riders on BID expenditures. Solomon also ignores BIDs' potential effect on a city's tax base. If they increase the value of commercial property, they will contribute additional revenue to city coffers and allow continued funding of those (often counterproductive) welfare programs that Solomon cherishes. 

Anti-elitists also argue that BIDs exacerbate existing disparities in the city, because some BIDs have big budgets, others small ones, and some areas can't afford BIDs at all. Accordingly, Doug Lasdon, executive director of the Urban Justice Center and professional scourge of the Grand Central Partnership, recommends raising taxes citywide 1 percent, so that every neighborhood can be given a $10 million budget like the Grand Central Partnership. This proposal illustrates that at bottom, BIDs offend left wing sensibilities because they violate the redistributionist principle of ordinary taxation. BID taxes are virtually the only taxes in the city that are spent locally: those who pay more, get more. The absence of redistribution is a strong argument in BIDs' favor. Certain areas of the city are economically more important than others, and increased spending on them is in the entire city's self-interest. The big Manhattan BIDs target resources where they can stimulate the most economic activity to the benefit of the whole city.

Leaders of the smaller BIDs are the first to recognize this. Stan Bonilla, manager of the East Brooklyn Industrial Park BID, says he "absolutely does not agree with Lasdon's redistribution argument . The Grand Central Partnership is at the doorstep of the world. If they can afford to spend $500 million, go ahead—it's not affecting East Brooklyn." Leonard Battle of the Grand Street BID agrees: "It's unfair to redistribute; that's taxation without representation. My needs are different from those of the Grand Central Partnership or Metrotech the largest BID in Brooklyn and sixth largest in the city."

The City Council's Finance Committee added one last set of criticisms, in a November 1995 report on BID operations. Based on a telephone survey of some 6 percent of property owners and BID managers, the report purported to find widespread ignorance and less than overwhelming support of BID operations. In addition, the report charged some BIDs with such improprieties as paying excessive salaries to BID managers (a swipe at Biederman), employing illegal aliens, conflicts of interest, excessive spending on administration, and lax management. The report recommends that a vote be taken on the continuation of a BID every five years, and threatens regulation if BIDs don't improve their accountability to their members and the public at large.

But property owners say the report is based on a sloppily conducted survey, and one looks in vain in it for evidence of systemic problems that might require government intervention. The improprieties alleged in some of the outlying BIDs remain hotly disputed; the complaints about the midtown BIDs center on a rehash of the "goon squad" lie. And the council's report holds BIDs to a standard of accountability and efficiency that city government can only dream of achieving. Unless more persuasive evidence of member dissatisfaction surfaces, the current procedures for operating a BID—which already provide for extensive public and governmental oversight, including political appointees on their boards—should remain in place. Above all, it would be a gross mistake to let the City Council get its hands on the BIDs, so it can do for BIDs what it and other branches of city government have doe for New York. 

BIDs have channeled an enormous amount of private-sector energy toward the solution of public problems. They have disproved the notion that the public interest and private interests necessarily conflict. And in a city that has often been swayed by anti-business sentiment, BIDs have given business a needed voice in the provision of city services. BIDs may also offer some lessons for the future. They suggest the advantages of giving smaller areas of the city more control over the raising and spending of revenues. And they point further in the direction of privatizing city services. 

Perhaps one day BIDs will not be necessary. But for now, as Dan Biederman says, they "provide the West Berlin to the city's East Berlin."

 

 

 
Business improvement districts have used private-sector initiative to restore cleanliness and order to public spaces in cities across the nation. Success has earned them bitter enemies--especially in New York.
City Journal Spring 1996.
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