Special district governments: examining the questions of control.
Despite rapid growth and an increasingly important role in local service delivery throughout the United States, special district governments face critics who question their impact on other local governments and whether the proliferation of these districts increases or decreases the size of the local public sector.
Record dry weather severely parched the west central Florida area in 1956 and 1957, setting the stage for massive flood damage when, three years later, a disastrous hurricane hit the area. Spurred by numerous requests for assistance from residents and area businesses, the Southwest Florida Water Management District (SWFWMD) was created by a special act of the Florida Legislature to be the local sponsor of the “Four River Basins, Florida Project.”
The flood control project, sponsored by the U.S. Army Corps of Engineers, was dedicated at that time to reducing flooding in the Tampa Bay area through dam building and construction of water retention areas.
The district’s responsibilities expanded in the mid- to late-1960s, when regulatory programs for regional well fields that served the Tampa Bay area were initiated, as they did again in 1972, when the legislature passed the Water Resources Act, which significantly furthered the transition from a flood control focus to a more broad-based policy of water management.
New duties and responsibilities, which increased throughout the ’70s, ’80s and into the ’90s, were primarily the result of continued legislative action and delegation by state agencies.
Today, the district operates 70 water control structures, including basic water management and flood control structures. Over the years, as the state has experienced population growth, changing rainfall patterns and a dramatically increased demand for fresh water, an awareness of the complexity and interrelationship of ecosystems has kept pace.
So has the need for a variety of special district governments.
Florida has long been acquainted with special districts. More than 150 years ago, Escambia and St. Johns counties comprised the area between Pensacola and St. Augustine – the only two cities in the territory at that time.
A lack of roads made access between the two cities possible only by a long, nausea-inducing sea voyage that the territorial legislators had quickly grown tired of making.
At the same time that Tallahassee – a convenient halfway point between Pensacola and St. Augustine – was chosen as the territory’s new capital, the territorial legislature also authorized the creation of the first special districts in Florida under the Road, Highway and Ferry Act of 1822.
The first road districts, created to establish and maintain public roads, had no taxation authority and simply solved manpower needs by conscription. “Men failing to report to work were fined one dollar per day,” states Florida’s (1992) Special District Handbook.
Once Florida achieved statehood in 1845, the legislature created the first special district that was established by special act by empowering five commissioners who were to drain the “Alachua Savannah.”
In order to finance the project, the first special assessments were made on landowners based solely on the number of acres owned and the benefits each derived.
By the 1920s, an increase in the state population led to the creation of many special districts to finance large engineering projects.
Some, like the Florida Inland Navigation District, created in 1927, are still in operation today, covering the same geographical area and serving the same purpose they originally did.
Currently, Florida boasts about 900 special district governments that are dedicated to such services as aviation, beach erosion, downtown development, historic preservation, housing, industrial development, libraries, navigation, transportation, water supply and soil conservation.
Friend or Foe?
The state of Florida is not alone in this growth. Since the 1790s, when special district governments actually originated in Rhode Island and the New England colonies, they have continued to play an increasingly important role in local service delivery throughout the United States. However, despite their rapid growth, there is controversy over their impact on other local governments.
Among the questions being bandied about is one posed in the Fall 1995 issue of “State and Local Government Review:” Does the proliferation of special districts increase or decrease the size of the local public sector and that of other individual local governments?
In the redevelopment policy areas – which include transit, housing, community development and airports – special districts are the dominant service providers in the United States, incurring more than half of all redevelopment expenditures in the local public sector, according to John Harrigan in his book, “Political Change in the Metropolis.”
There has been much debate over the merits of special district governing, and the focus of that debate has touched on a number of themes. Among them, as discussed in “State and Local Government Review,” are.
* the various policy activities of special districts by defining, counting or classifying them (they have been categorized as capital or labor intensive, independent or cooperative and single or multifunctional);
* the reasons for the creation of special districts in the first place (some say the unsuitability of existing general-purpose local governments to provide proposed services to the involved area is the foremost reason, while others state that it is due to policy advocates, desire for independence from established governments); and
* lack of coordination and inequitable distribution of services among different districts (“[Some] argued that efficiency gains, if any exist, do not compensate for the equity problems associated with the proliferation of special districts,” states the “Review.” “… Special districts may be undemocratic because they are not directly controlled either by the public or by the elected officials of the parent government.”).
Cautiously acknowledging that there is, indeed, a reason and a purpose for the special district government, author Kirk Porter offers this opinion in the National Municipal Review’s November 1993 issue: “Like many other useful institutions, it has been grossly perverted, not only by corruptionists, but also by well-meaning people who have seen in it a safeguard against over-weening power.
“Take, for instance, the need to construct and maintain a drainage project in an agricultural region. … The plan is complicated by the fact that the swampy lands involved and the streams that must be straightened or dealt with in some way extend partially into the jurisdiction of two or three counties, to say nothing of a lot of townships. In a word, the physical, topographical and engineering problem does not conform to the rigid governmental areas established by man.”
Special District Problems
Others lob criticisms at growth management. Largely ignored by the legislature and news media until the early 1970s, special district government problems became the focus of interest in two reports: “Environmental Land Management Study” (ELMS) and the “Commission on Local Government Review.”
About this time, stories abounded about bankrupt special districts, illegal tax levies and misdirected bond proceeds, among others.
In 1979, the Florida Legislature began to address these concerns and enacted the Special Districts Disclosure Act to ensure that independent special districts met minimum requirements in accounting, creation, dissolution, bond issues, registered agents, elections, retirement benefits and other matters.
An in-depth report about special districts was completed in 1987 by the Advisory Council on Intergovernmental Relations (ACIR). The report recommended greater accountability and uniformity in special district structure and operations, including taxation, bond issues, elections, required reports and planning.
“Accountability is the key,” says Gene Schiller, deputy executive director of SWFWMD. “Taxpayers have the right to hold the district to the highest standard.” They can do so in Florida quite easily.
The Southwest Florida
Water Management District
The district contains all or part of 16 counties on the west-central coast of Florida, from Port Charlotte on the south to Levy County on the north, and from the Gulf of Mexico east to Polk and Highlands counties.
SWFWMD contains 98 local governments spread over nearly 10,000 square miles and encompasses a rapidly growing region. The Tampa Bay metropolitan area represents the largest concentration of residents.
The Florida Legislature has given the water districts the authority to develop water policies and to create and implement water management plans. The district also issues permits for underground water well construction, and it regulates activities affecting surface water and the use of water.
SWFWMD has the authority to limit how much water is taken from the aquifer. “Long-range planning and coordination with other agencies have become a primary focus of the district’s efforts to accomplish the mission, which requires the district to manage the resource for current and future users,” Schiller says.
By 1990, there were 3.3 million people living in the district, up from 2.5 million in 1980. Projections for 2010 put 4.6 million people in that area. “All these people need fresh water,” he says. “In 1990, an average of about 1.625 billion gallons was used each day in the district for agriculture, public supply, industry, recreation and other uses.”
That demand, Schiller says, is expected to increase to about 2.4 billion gallons a day by the year 2020, up almost 46 percent.
Eighty percent of the freshwater consumed here in 1990 came from underground water supplies,” he explains. “When more water is withdrawn from an area than is replaced by rainfall, the underground water supply becomes stressed.
“As pumping has increased, a marked trend of lower water levels in wells and nearby surface waters has been documented in various parts of the district. Lakes and wetlands have dried, causing trees and plants to die and putting the water supply and water quality in jeopardy.”
Three such areas in the district are designated “Water Use Caution Areas.” The district has established or is in the process of establishing special rules or management plans for these areas, including using the district’s permitting authority to regulate how much water can be taken.
The SWFWMD is organized into four departments: executive (which oversees the rest), resource regulation, resource management and management services.
“District policy is set by an 11-person governing board, whose members are district residents appointed by the governor and confirmed by the senate to serve four-year staggered terms. They are unpaid, citizen volunteers,” Schiller says. The executive branch also administers the district’s budget.
Currently, the 1996 budget stands at approximately $141 million.
Of that, Schiller explains, 24 percent comes from intergovernmental sources, such as the Save Our Rivers and Preservation 2000 land acquisition and management programs.
There are eight basins, each administered by a Basin Board, which are designated by boundaries that are based upon the natural flow of water and watershed areas, rather than county lines.
“These basin boards provide a local perspective to water management, and they focus on water-related issues and projects within their basins,” Schiller says. “This allows for planning and projects specific for each basin, which is consistent with emerging federal and state efforts.”
Further, he says, the boards are essential partners with the district in the New Water Source Initiative, one of the most important programs the district sponsors. “The Basin Boards work with local governments to complete projects that have direct and measurable impact in local communities,” he says. Together, the district and boards provide 50 percent of the funds needed for these programs.
Most of the budget – 57.7 percent – comes from ad valorem taxes on real estate.
That taxing ability was set by the legislature, which established a limit of one dollar for each thousand dollars of assessed value.
Fifty cents of each dollar can be used by the district to fund regulatory activities as well as various projects of regional significance. The remaining 50 cents can be used by the Basin Boards to support projects that directly benefit the particular basin where the money was collected.
Historically, the actual tax rates levied have been far less than the maximum permitted. And, says Schiller, “We have not raised the tax millage in four years.”
While special district governments have existed for more than 200 years, a relatively know breed of animal is making itself known in the form of business improvement districts.
“Downtowns and community town centers are successfully meeting the challenges of the economy and evolving into new forms with new functions,” says Richard Bradley, president of the International Downtown Association (IDA), Washington, D.C.
“While in the recent past they were developing into the central business and commerce districts, today they are reemerging as dynamic and vibrant centers not only for business and retail, but also for education, arts, entertainment, tourism, government – and for living,” he says.
The IDA, which was founded more than 40 years ago, has served as the primary network for sharing information about ways to face new challenges. In this role, the association “works to tell the positive downtown story to gain local and national media exposure and represents the values and successes of downtowns to government leaders at national and local levels,” Bradley says.
Known by several names (business improvement zones, special improvement districts or special assessment districts), business improvement districts are only about 20 years old.
Basically, a BID is a self-help program undertaken by downtown businesses to supplement public services provided by the city.
Currently, there are more than 1,000 BIDs in North America.
All of them have some common elements, according to the Pittsburgh Downtown Partnership.
* The initiative comes from businesses who want more services than the city can provide;
* The city agrees to maintain the current level of public services;
* Additional services often provided over and above the city’s basic services include advocacy for property and business owners, marketing to raise awareness of downtown and attract shoppers and visitors, sidewalk cleaning to remove litter and debris and ambassadors to provide a friendly, visible presence to complement city police;
* Property and business owners shape the annual budget and oversee the expenditure of funds;
* The city council establishes the BID; and
* Costs are shared by downtown stakeholders – businesses, property owners, family foundations, government and other tax-exempt entities who make up downtown.
BIDs “take advantage of state and provincial enabling legislation allowing for property owner assessments, which will be used for both capital and operating improvements in a commercial district,” IDA’s Bradley says. “They are excellent mechanisms for supporting community and economic development.”
Because of this, the city of Pittsburgh is in the process of creating a BID structure that will fund services provided by the Pittsburgh Downtown Partnership (PDP) in the city’s Golden Triangle.
“The health of Downtown Pittsburgh is critical to the financial health of the city and the economic success of the region,” according to the “Business Improvement District Feasibility Study,” prepared by the Pennsylvania Economy League (PEL).
Other reasons Pittsburgh is pursuing a BID include:
* changing the perception that downtown is an unsafe, difficult and confusing place to shop and visit;
* continuing the programs of the Pittsburgh Downtown Partnership such as The Core Investment Strategy that the Allegheny Conference on Community Development has committed to implement;
* increasing the awareness of downtown as a business center; and
* providing intensive sidewalk cleaning so downtown Pittsburgh will become an attractive place for shoppers and visitors.
It used to be that communities tried raising money through voluntary contributions and assessments to pay for the projects and administrative costs.
However, “given the changing economic conditions for different kinds of businesses or property owners, this strategy never provided a sufficient or reliable stream of funding,” according to Bradley.
Instead, the use of districts for achieving financing assurances has become popular. Generally, he explains, revenues came from an assessment on existing property tax, “ranging from five cents to 15 cents extra per square foot.
“A delightful paradox,” Bradley says, “is that most BIDs require that property and business owners agree voluntarily to be assessed mandatorily.
Recently, BIDs have begun launching economic development and business enhancement initiatives in an effort to retain and attract retail businesses. Modeled somewhat after shopping center management, which provides services such as helping to organize retailers, providing marketing and promotional activities and putting on special events, BIDs focus on programs aimed at helping to improve business management or enhance business opportunities.
“On another level,” Bradley says, “these activities have been directed toward growth of other commercial enterprises through other, similar retention and recruitment activities.”
He offers Millburn, N.J., as an example of how districts assign staff to contact a variety of businesses throughout the area to ascertain needs for expansion and development.
Special improvement district leaders “helped establish a bank CDC to provide loans for businesses after learning that access to capital was a major need,” he says.
Voting with their feet
Nevertheless, special district governments have their detractors. “A large number of local jurisdictions in metropolitan areas has a negative impact on central city expenditures because central cities decrease expenditures in response to possible migration of their tax base to more competitive places,” states David Sjoquist in his article “The Effect of the Number of Local Governments on Central City Expenditures,” published in 1982 in the National Tax Journal.
The “State And Local Government Review” examines a variety of competition theories that further this idea. One theory offered up states that “a large number of municipalities creates a competitive environment in the provision of public services because residents can vote with their feet and move to another municipality if it provides better service/tax packages.”
Survey of Business
There is no question that providing such enticing service and tax packages is possible only with a strong financial commitment that can translate “into direct personal involvement and interest,” IDA’s Bradley says. “This private sector involvement increases the potential for success.”
Pittsburgh’s financial commitment includes a first-year budget set at $1,278,250. That budget would be supported by more than $1 million in additional tax assessments on downtown properties and by $265,000 in revenues from memberships, voluntary payments from tax-exempt properties, sponsorships and grants from foundations as well as appropriations from city, county and state governments.
The PEL compared the proposed property assessments of similar BID cities and found that Pittsburgh’s are lower per block (see chart, p. 63).
The tax assessment revenues would come from an additional 11.5 mill tax on land values of properties within district boundaries.
“This represents a 4.25 percent increase in the total city, county and school district taxes on land, but an average of only 1.45 percent in total land and building taxes,” the PEL feasibility study says.
Additionally, the land tax would ensure that retail stores would pay proportionately more for services than large office buildings.
“Most tenants would pay an additional two cents to six cents per square foot in pass-throughs for the tax assessment,” according to the study.
Some service categories that BID funds are generally directed toward include physical improvements (streetscapes, signage, banners, lighting); supplementing local government services (security, additional security officers); maintenance (additional workers, removing snow, increasing frequency of trash pickups); improvement of the marketplace (organizing retailers, undertaking market analysis, providing leasing funds_; and addressing social needs (homelessness, daycare, employment assistance).
Who controls the BID?
Pittsburgh’s feasibility study notes that “the district would be established by a city ordinance and would go out of existence in five years unless it was re-established.
“Although it would be established by the city and taxes would be collected by the city, all expenditure decisions would be made by a board dominated by private property owners,” the study says.
In June 1995 the PDP conducted a survey of 28 BIDs in operation throughout the United States. Twenty-three BID responses were recorded. Among the findings are:
* The average total budget for a business improvement district was $2 million, of which approximately 84 percent was obtained through assessing property owners;
* Ten of the largest properties account for an average of 42 percent of the assessed valuation of most cities;
* Approximately 43 percent of the survey respondents used a straight assessment method to determine assessment charges for services in the downtown area. Rarely were retailers assessed a special fee to cover services;
* Basic services provided by downtown organizations include cleaning, marketing and supplemental security programs. Business services, transportation and shuttle services were other activities provided by downtown organizations; and
* Eleven of the downtown organizations ranked city services as the same after a BID was established. Five organizations cited city services as better, while six downtown organizations cited city services as worse. One BID did not respond to this question.
The fate of special district governments
The BID survey brings to the forefront a number of issues in which both supporters and critics can find validation.
“A major reason for BID’s success is that, while the districts live and work in partnership with the local government, they usually are led and governed by representatives of the businesses upon which the assessment has been placed,” says IDA’s Bradley. “This feature ensures a high level of accountability and entrepreneurship.”
And yet, others, such as Kirk Porter, lament the fate of special districts. “On the whole,” he writes, “county governing boards and city councils stand to acquire greatly increased power as a result of doing away with special districts – and certainly they would gain greatly in power by abolition of many special taxes.”
There is little doubt that divergent opinions, ongoing for as long as special districts have been around, will continue to further the debate. Regardless, as Richard Bradley says, “They will play increasingly important roles.”