Be careful what you bid for

Columnist : Albert Paschall

Technologically savvy guy that I am, I may be the very last person to discover something called eBay. A guy who works down the hall introduced me to it just before Christmas. It seems he and his partners, a bunch of techies, stood out in front of a toy store all night so that each of them could buy some hot new video game machine. They came into the office, posted them on the eBay auction site, and made a fortune overnight as people all over the country bid them up.

For people like me who haven’t read “Internet for Dummies” it was fascinating. The guy showed me how I could check on the progress of his Internet auction and all night I just watched him make money. He warned me, though, that before I tried it myself I’d better get his help, because amateurs like me can get burned in online auctions. This is kind of like what is happening all over Pennsylvania in a lot of small towns with something else called BIDS: Business Improvement Districts.

A BID gives cities, townships and boroughs all over the state the chance to draw lines around their heavier concentrations of shops and offices to assess special taxes. This new revenue must be earmarked for use by the district to do good things. These can be almost anything from street cleaning to additional security. Philadelphia had one of the first of these in the state, and it has had strong success in cleaning up the city’s downtown but it was started with a lot of money.

Not everybody is a fan of these districts. There’s a school of thought, as antiquated as it may be to some city planners, that holds that business owners pay taxes for safe, clean streets and sidewalks that aren’t cracked. They often are paying for schools they don’t use. There’s a risk that if the tax load gets too aggressive and landlords pass it on to tenants, especially stores, they’ll leave town. Some of these districts come with heavily loaded management contracts. A draft of one plan now under review calls for the BID’s management to be paid about 1/3 of the anticipated new revenue.

While urban planners are big fans of these districts, a major recent, awful change in the law of the land can cause a business owner to be seriously burned by a BID. Last June, the U.S. Supreme Court issued a decision that is one of the most atrocious invasions of private property rights in history: Kelo v. New London. In Kelo, the nation’s ultimate justices allowed local governments to condemn homes and businesses in order to sell them to developers. In New London, Connecticut Suzette Kelo and her neighbors are being evicted from the homes they own to make way for a developer to build a hotel with a marina and condominiums. Courtesy of the court, they have no choice but to watch as their homes are torn down.

That’s the real fatal flaw in Pennsylvania’s Business Improvement Districts. Depending on the type of local government, when a BID is imposed on a town’s business district, some entity, the town council, township board of supervisors or the BID’s management is going to have the power of condemnation. Essentially they can pick and choose which businesses stay or go, depending entirely on how high the bidding goes.

Until Pennsylvania takes steps to limit this power of condemnation, business people in downtowns all over this state who are considering forming a BID had better be careful. Someday, they might get a lot more than they are bidding for.

Albert Paschall
Senior Fellow
The Lincoln Institute of Public Opinion Research, Inc.