Private governments coming to an area near you

Imagine you want to create and control a large pool of capital predominantly financed by grants and other people’s money. Simply define a geographic boundary, let’s call it a ‘district,’ and get a few business colleagues to decide what mandatory fee or compulsory assessment you’re going to collect to benefit your private business agendas. Next, petition a state senator and county commissioner; most are eager to curry favor with deep-pocketed business donors. Create a nonprofit to which you will funnel the dollars. Small business owners will be required to collect the fee at the point of sale in your district. You hold the cards because you’ve engineered the framework and set the fee percentage. Sounds a bit Sopranos-like, doesn’t it?

Schemes like this – blandly called Business Improvement Districts or BIDs – are undemocratic but legal ways to levy fees (effectively a sales tax when businesses pass the cost of the fees on to consumers) that benefit the few over the many. BIDs first appeared in the 1970s, but have become a controversial power grab for business interests and developers in recent years to finance tourism destination dreams and pet projects outside of public control or view. BIDs represent a particular risk for unincorporated areas because there are no elected mayors or city councils to hold public meetings or be answerable. 

All citizens and small business owners should be concerned. A few influential businesses or developers can band together and force new recurring costs on an entire community – tacked on at the point of sale. Worse still, the International Journal of Public Administration noted: “BIDs have arisen as a new form of ‘private government.’ As they expand their menus of services, often including land-use planning, and approaching more general-purpose government status, BIDs have begun to raise issues of accountability.”

Private governments with little transparency

Where might you begin such a monetary diversion maneuver in Nevada?  Follow the play book of Nevada Democratic state Sen. Skip Daly, who, at the behest of unelected people – such as Julie Regan, executive director of the Tahoe Regional Planning Agency (TRPA), tourism executive Andy Chapman, now Chair of the Tahoe Transportation District, and TRPA government affairs manager Devin Middlebrook along with legal consulting firm Civitas Advisers – successfully advanced a BID proposal to a panel of his fellow legislators during an interim meeting last year. Put forward by TRPA (a bi-state agency with lots of political sway), their business cronies who will determine BID details — such as where to draw geographic boundaries, how much to levy and where to spend funds — also promoted the bill.

If this is the first time you’ve heard about this fast-moving state legislation, Senate bill 420, that’s by design. Tax-like enabling legislation that will negatively impact constituent wallets is best kept under wraps. 

How is SB420 novel?

SB420 needs state-level approval because there’s no existing legal path to create a BID in unincorporated portions of a Nevada county. Existing Nevada law (like NRS 271A for Tourism Improvement Districts) focuses on cities and municipal projects. As called out in the Lake Tahoe Destination Stewardship plan (p. 38), “legislation would need to be pursued” as “there is currently no statute enabling this sort of improvement district in Nevada.” Hence, testimony from Chapman, President and CEO of Travel North Tahoe Nevada, on April 4: “Senate Bill 420 will create the ability for local businesses within the Nevada portion of the Tahoe Basin to petition the relevant county to create a Business Improvement District (known as a BID), which could only be created with the support of the business community AND approval by the County Commission.”

The goal for this improvement district mechanism is to create a long-term funding solution for issues in Nevada’s Lake Tahoe area. This type of improvement district legislation exists already in California.  As written SB420’s BID model is funded through the levy of assessments on business. However, it’s not clear what businesses this bill will encompass or exempt. Section 6.1 defines “business” as “all types of businesses, including, without limitations financial institutions and professions.” That means if a business license address lies inside the proposed boundary, that business license holder could be assessed. SB420 includes a broad scope of what activities can be undertaken, but residents don’t have a voice. 

If signed into law, SB420 could create a template in Nevada for future quasi-governmental taxation in counties, virtually unregulated by the legislature or department of taxation. 

If other broadly written BIDs elsewhere are any indication, more surprises lie ahead. Residents of Rochester, New York, characterized a proposed BID there “as a shadow government.”  While told that businesses would pay for the BID, reporters learned, as residents suspected, it would be mostly taxpayers who would fund the BID managed by 17 “movers and shakers in business and political circles” — members of a nonprofit established to control the Rochester BID. 

BIDs are hard to undo. When formed BIDs become legal special districts, in Nevada’s case, under state law. Dissolving a BID, governed by a management plan written by consultants like Civitas who obtain multi-year contracts, usually requires approval from the same body that created it. Who likes to relinquish money and power? Businesses – particularly tourism outfits with multiple locations or headquartered elsewhere – can get away with charging added fees because of high-turnover visitors. BID members can even use money generated by the fees to market themselves.  Self-dealing at its worst. 

Residents who shop, dine or recreate within a ‘district’ always pay the fee. Communities effectively subsidize private agendas. Residents in San Diego revealed how Civitas’ founder has a history of creating legal loopholes (p. 14). Civitas Advisors as of March 2013 had pocketed $546,016 and counting from San Diego alone; lawsuits followed.

The Sacramento-based firm has expanded overseas but now wants to make Nevada its newest client.

‘I think it’s taxation’

SB420 took shape August 16 at the interim Legislative Committee for the Review and Oversight of the Tahoe Regional Planning Agency and the Marlette Lake Water System. None of Northern Nevadans’ public concerns about public safety and the environment are mentioned or considered in the recommendations for legislation. Instead Daly, at the sixth and final meeting along with other legislators, agreed to advance TRPA’s wish list, including the BID legislation. In the meeting (1:51:24 on the recording), Civitas – the legal firm that stands to profit handsomely to administer BIDs – testified, not surprisingly, in support of it. 

Senator Robin Titus (minutes, p.16), however, saw the scheme for what it is: “I am going to be a ‘no’ on this when it comes to a vote. I truly cannot accept—I think [it’s] a taxation.”

Assemblymember Ken Gray shared the concerns: “I want to echo Senator Titus’ comments as well.”

Citizens (not business owners) who participated in the April 4 Senate working session opposed the BID legislation and its lack of specificity. BID activities in SB420 include promotion of events, marketing and economic development, transportation and other services that confer “benefit upon assessed businesses in the district.”  

If this isn’t a tax why does the state legislature need to have a bill that involves the Department of Taxation to facilitate what businesses should be managing or funding on their own. Is SB420 really in the best interests of Nevada residents? This should be a red flag for other state legislatures who’ve been lobbied to create similar legislation.

Transportation alone is a heavy lift. Even the U.S. Department of Transportation Federal Highway Administration agrees. Among BID disadvantages it lists:

• “BIDs are not public agencies and cannot be directed to accomplish transportation goals, services or facilities desired by elected officials and agencies. 
• “BIDs, as private entities, will not fund public goods or services that provide benefits outside the BID boundaries. Also due to sunset provisions, they are not typically structured to facilitate the development of large infrastructure facilities that require financing.”

Many residents first read the SB420 language amendments only after the bill was advanced out of committee as one of 48 bills reviewed by the Senate Government Affairs Committee April 11. No matter; public comment was reserved for the end of the meeting after voting had ended.

Two senators, Lisa Rogich and Lisa Krasner, went on record to say they reserved the right to change their vote later. Rogich went further, “I’m hoping the parties can continue to have conversations with the community and get the residents on board.”