Judges Opinions, — July 5, 2017 10:00 — 0 Comments

Edward J. Schock vs. City of Lebanon No. 2016-00423

Civil Action-Law-Municipal-Business Improvement District-Neighborhood Improvement District Act-Tax Exempt Property-Affected Property Owners

Plaintiff filed a Complaint for Declaratory Judgment challenging whether forty percent (40%) of affected property owners as required objected to implementation of a business improvement district (“BID”) established pursuant to the Neighborhood Improvement District Act, 73 P.S. § 831 et seq., in the City of Lebanon, which would have the authority to impose assessments against property owners. Plaintiff argues that properties that would be exempt from paying an assessment within the BID, or tax exempt properties, do not constitute “affected property owners” for purposes of determining whether forty percent (40%) of affected property owners objected to the implementation of the BID as required by statute.

1. BIDs were created as a means to generate non-tax dollars to promote urban revitalization.

2. BIDs are funded with assessments paid by property owners of a specific district.

3. BIDs are unique and an exception to the one (1) person-one (1) vote fundamental interest in democratic society and do not run afoul of the Equal Protection clause.

4. BIDs do not violate the Uniformity clause of the Pennsylvania Constitution, as the Uniformity clause applies only to taxes and BIDs do not impose a tax, but one (1) time charges for the cost of public improvements.

5. Objections by forty percent (40%) or more of affected property owners will defeat the creation of a BID.

6. Title 73 P.S. § 833 defines a “benefited property” as those properties located within a Neighborhood Improvement District that profit from district improvements based upon a rational nexus test and provides that properties need not profit equally to be considered to have benefited.

7. The evidence submitted by Defendant revealing that improvements such as upgraded lighting and enhanced security will benefit all property owners regardless of whether a fee is assessed upon those owners establishes that tax exempt property owners constitute “affected property owners” for purposes of determining whether forty percent (40%) of affected property owners objected to the BID.

L.C.C.C.P. No. 2016-00423, Opinion by Bradford H. Charles, Judge, December 19, 2016.

IN THE COURT OF COMMON PLEAS OF LEBANON COUNTY, PENNSYLVANIA

CIVIL ACTION – LAW NO. 2016-00423

EDWARD J. SCHOCK, Plaintiff

v.

CITY OF LEBANON, Defendant

ORDER OF COURT

AND NOW, to wit, this 19th day of December, 2016, upon consideration of the Defendant City of Lebanon’s Motion for Summary Judgment, and in accordance with the attached Opinion, the Motion for Summary Judgment of the City of Lebanon is GRANTED. The Plaintiff’s Complaint seeking declaratory relief is DISMISSED.

BY THE COURT,

BRADFORD H. CHARLES, J.

APPEARANCES:

Edward J. Schock Self-Represented Litigant

Donna Long Brightbill, Esquire For City of Lebanon

Opinion, Charles, J., December 19, 2016

This case implicates the viability of a Business Improvement District (BID) created by the City of Lebanon (“CITY”). Under a statutory scheme created by Pennsylvania’s General Assembly and signed by its Governor, local governments are permitted to propose the creation of BIDs that have authority to impose assessments against property owners. Although confusing, the statutory scheme provides that objections by 40% of “affected property owners” will defeat implementation of a BID. In this case, the parties contest whether this 40% threshold has been exceeded. After reviewing literally thousands of pages of documents submitted by the parties, and for reasons we will articulate in more detail below, we hold today that an insufficient number of affected property owners objected and that the BID created by CITY is therefore viable.

I. FACTUAL AND PROCEDURAL BACKGROUD

At some point in 2010, the City of Lebanon (hereafter “CITY”) began contemplating the creation of a BID for downtown Lebanon. An informational meeting was conducted on March 29, 2010 at the Harrisburg Area Community College Campus. (Exh. 8 to CITY’s submission dated 8/23/2016). A feasibility study was conducted and disseminated to interested residents. (See Exh. 9 to CITY’s submission). That feasibility study recommended the appointment of a formal Lebanon BID steering committee and the hiring of a consultant to develop a BID plan. (Pg. 12 of Feasibility Study).

Another public meeting was conducted nearly three years later on March 26, 2013. At the March 2013 meeting, local leaders and “leaders of other successful downtowns” shared their insight regarding the possibility of a BID for CITY. A glossy brochure was even created and disseminated. (Exh. 13 to CITY’s submission).

Civitas Consultants was hired to assist in the study of a BID. Civitas concluded that “downtown Lebanon is a relatively quiet, pleasant but unexciting place…It is not sliding rapidly into decay, but neither is it becoming more competitive with a number of similar-sized cities in Pennsylvania and Maryland.” Based upon interviews with dozens of residents and business owners, Civitas recommended that a BID be pursued. Notably, Civitas stated “A BID could be supported by enough property and business owners if it is organized in an inclusive and transparent fashion . . .” (Pg. 7 to Exh. 16 of CITY’s submission.)

At an unknown date believed to be in 2014, CITY published a comprehensive 69-page economic development action plan designed to promote growth through 2020. (Exh. 18 to CITY’s submission.) The plan outlined the current status of Lebanon, its workforce, and its businesses. The plan also outlined challenges for CITY and set forth numerous proposals with respect to how to meet those challenges. At the same time, the BID steering committee continued to meet to develop plans for a BID. (Exh. 19 of CITY’s submission.)

On September 18, 2015, CITY sent a letter to all property owners and lessees located in the proposed BID district. Included with the letter was a copy of the BID preliminary plan designed to “revitalize our downtown.” All recipients of the letter were invited to a public meeting on November 4, 2015 at the Lebanon Valley Family YMCA. (Exh. 20 to CITY’s submission.)

A public meeting was conducted on November 4, 2015. A court reporter was present and transcribed events at the hearing. (Exh. 21 to CITY’s submission.) After introductory comments by Lebanon City Council Chairman Wiley Parker, Mayor Sherry Cappello addressed the crowd, as did BID consultant David Feehan. Thereafter, many residents provided comments, both for and against the proposed BID. At the end of the public meeting, Chairman Parker stated:

I think I have heard a lot of people here think that the prospect of the City of Lebanon improving is impossible. Well, it’s not. Listen to Mr. Lebo, give it a try, Lebanon can be the place to grow.

(Public Meeting Transcript at pgs. 139-140).

Following the November 4, 2015 public meeting, another letter was sent to all BID residents on November 20, 2015. That letter announced the acceptance by Lebanon’s City Council of the preliminary BID plan and stated: “The plan is now considered the downtown Lebanon BID final plan.” (Exh. 22 of CITY’s submission.) The letter moved forward to communicate how residents could vote upon the establishment of a BID. The letter communicated that nothing needed to be done to register a “yes” vote. However, those opposing the creation of the BID would have to submit written objections to the Lebanon City Clerk within 45 days. The letter outlined that all objections would have to include the property address, Lebanon County Tax Assessment Identification Number and a notarized signature of all owners listed on the deed to the property. The letter also emphasized that a negative vote of 40% of property owners would be needed to defeat the BID. (See Exh. 22 to CITY’s submission.)

To follow up on this letter, Mayor Capello sent another letter on February 10, 2016 imploring residents to support the BID: “Please give it a chance. No other alternatives have been suggested. Doing nothing is not an option.” (Exh. 24 to CITY’s submission.) Together with Mayor Capello’s letter was a brochure outlining responses to “frequently asked questions.” Among those questions were ones about the process to be employed in order to create the BID. The brochure published by CITY emphasized that “this process is not a vote. It is an objection to the establishment of a BID.” The brochure also emphasized that CITY was following state law governing BIDs and that CITY itself did not create the process that some residents obviously found distasteful.

Appendix B of the BID plan contained a list of 358 properties located within the BID district. Seventy-eight of these properties were deemed exempt from any BID assessment. Although we did not count the actual objections, the parties have both indicated in their submissions that 146 objections were received to the BID from property owners who would be assessed under the plan. CITY rejected 13 of these objections and counted 132. Only one objection from the 78 properties exempt from assessment was received.

In evaluating whether BID objections exceeded the 40% threshold, CITY considered not just the 280 properties subject to assessment, but also the 78 so-called “exempt properties.” CITY determined that 132 out of the 358 total “affected” properties objected. This represented 36.8 percent of “affected property owners” as that term was interpreted by CITY.

On March 22, 2016, Plaintiff filed a Complaint for Declaratory Judgment seeking to declare CITY’s BID “dead.” Plaintiff argued that CITY should not have counted “exempt properties” in accessing the percentage of objections to the proposed plan. In Plaintiff’s view, the term “affected property owners” should be limited to only the 280 properties against which an assessment would actually be lodged. In Plaintiff’s view, 47 percent of “affected property owners” opposed creation of the BID and this should have been enough to derail the plan.

Following the filing of Plaintiff’s declaratory judgment action, CITY filed Preliminary Objections. We conducted oral argument in June. Following oral argument, we denied the preliminary objections primarily because we did not believe that the issue was truly ripe for disposition at that early stage of the proceedings. We allowed the parties to conduct discovery and we instructed that affidavits and documents be submitted to us via a Motion for Summary Judgment. Such a motion was filed by CITY on September 15, 2016. Thereafter, both parties submitted voluminous documentation that included records generated during the study of the BID, records documenting the process leading to the approval of the BID and affidavits from numerous people.

II. THE HISTORY AND PURPOSE OF BIDS

BIDs were created as a means to generate non-tax dollars to promote urban revitalization. Conceptually, BIDs are funded with assessments paid by property owners of a specific district. In return, the residents are promised that all funds they expend will be used to improve the district where they reside.

According to information submitted by the parties, the concept of BIDs was born in Toronto, Canada in the late 1960s. From there, BIDs proliferated into 8 different countries, including the United States. By 2007, over 400 BIDs existed in the United States, including several within the Commonwealth of Pennsylvania. These BIDs were widely credited with improving the urban business districts to which they pertained. (The foregoing information was derived from the Lebanon BID Preliminary Plan (Exh. 22 to CITY’s submission) and from an article written by Professors at the Massachusetts Institute of Technology entitled “The Business Improvement District Model: A Balanced Review of Contemporary Debates” (2007), which will hereafter be referenced to as the MIT article.)

The MIT article chronicled the many benefits experienced by cities which adopt BIDs. The authors of the article concluded that “large or small, the fact remains that in the domain of urban revitalization, the BID model has been at the forefront and has managed to make a position contribution that is being emulated at an astonishing rate worldwide.” (MIT article at conclusion.) Notwithstanding this observation, the MIT professors also noted frequent and vociferous complaints about BIDs, the most notable of which was chronicled in a chapter entitled “Are BIDs Democratic?” The professors at MIT expressed no opinion on this topic.

Courts and legal scholars across the country have begun to evaluate the constitutionality of BIDs. Perhaps the most comprehensive treatise on the topic was published in the Law Review of the University of California Hastings College of Law. See Business Improvement Districts and the Constitution, 38 Hastings Constitutional Law Quarterly 91 (Fall 2010). The Hastings article began with the following summary of BIDs:

Quasi-governmental Business Improvement Districts (“BIDs”) have proliferated in cities across the country. By compensating for the service deficiencies of under-performing city governments, BIDs have been a notably bright-spot in what has otherwise been a grim half-century for America’s cities. BIDs have been hailed as a remarkable practical success in the struggle to revitalize urban centers and neighborhoods throughout America. However, their constitutional roots have yet to be explored in significant depth by law and politics scholars.

Recognizing that BIDs “represent a radical shift in urban development strategy,” the authors of the Hastings’ article proceeded to outline constitutional issues about their governance and formation. Foremost among the constitutional challenges against BIDs is one founded upon the Equal Protection Clause of the United States Constitution. This challenge relies upon the United States Supreme Court decision in Reynolds v. Sims, 377 U.S. 533 (1964), which confirmed that the principle of one person, one vote remains a “fundamental interest” in our democratic society. By definition, BIDs are created outside this paradigm and are governed by unelected officials. Hence, some question the constitutionality of BIDs and their ability to assess fees.

To date, the equal protection challenge to BIDs has not yet made its way to our nation’s highest court. However, Courts across the country that have addressed the issue have held with near unanimity that BIDs are unique and do not run afoul of the Equal Protection Clause. Foremost among the opinions on this topic is the case of Kessler v. Grand Central District Management, 158 F.3d 92 (2nd Cir. 1998). In Kessler, the Second Circuit Court of Appeals rejected a one-person, one-vote argument proffered by property owners against whom an assessment was imposed. The Court concluded that the Grand Central BID was “a special-purpose district that affects property owners disproportionately.” As such, the Court approved the “weighted voting system” created by the Grand Central BID. The Court ended its Opinion by stating:

We conclude that the Grand Central BID is a district that exists for a special limited purpose, that [the BID’s governing body’s] activities have a disproportionate effect on property owners, and that [the governing body] has no primary responsibilities or general powers typical of a governmental entity. Accordingly, we conclude that the Grand Central BID falls within the exception to the one-person – one-vote requirement. Since the Act’s guaranty of majority board representation to property owners has a reasonable relationship to the purpose of the BID, we conclude that the weighted voting system for electing [the governing body] does not violate the equal protection clause.

Id. at 108. See also, White Plains Business Improvement District v. Spano, 2007 N.Y. Misc. Lexis 769 (N.Y.Sup.Ct. 2007).

Also pertinent is the case of Zimmerman v. City of Memphis, 67 S.W.3d 798 (Tenn.S.Ct. 2001). In Zimmerman, a group of assessed property owners sought to declare the BID assessment to be an unconstitutional tax. The Tennessee Supreme Court stated: “The overall purpose and tenor of the Central Business Improvement District Act of 1990 is to improve local business climates. The Act itself grants broad discretion to municipalities to establish programs most consistent with their local needs.” Id. at 804. The Court therefore deemed that the BID law should be liberally construed in order to effectuate its stated purpose of “elimination of urban blight and decay and the modernization and general improvement of such central business districts . . . .” Id. at 802. The Court specifically rejected a due process challenge lodged by the property owners based upon the premise that BID assessments were not created with the same procedural pathway that is necessary for the imposition of taxes. The Court stated:

Appellants also contend that they were deprived of due process of law under the Fourteenth Amendment to the United States Constitution. Appellants posit that they never had the opportunity to be heard regarding the assessment and the benefits conferred upon the properties. We disagree. Before the assessment was implemented, the Memphis City Council sent notice to all property owners in the district and a hearing was held regarding the proposed assessment. The property owners within the district could have appeared and protested anything regarding the proposed district or assessment . . . However, none of the appellants appeared at the hearing to protest the proposed district or the proposed assessment. As a result, we find that appellant’s due process rights were not violated.

Id. at 804.

In Pennsylvania, the concept of BIDs was born with the enactment of the Business Improvement District Act of 1967. (See former 53 P.S. § 1551 et seq. (now repealed.) Pennsylvania’s Commonwealth Court described the 1967 Act as follows:

The Business Improvement District Act of 1967 empowers municipalities to establish Business Improvement Districts, and to expend monies for needed improvements within such districts including but not limited to sidewalks, trees, shrubbery, pedestrian walks, water lines and similar amenities. The municipalities are empowered to assess the costs of the improvements upon properties benefited by several methods . . .

S.O.L. Club, Inc. v. City of Williamsport, 443 A.2d 410, 410 Pa.Cmwlth. (1982). In the S.O.L. Club case, Pennsylvania’s Commonwealth Court rejected a constitutional challenge to the 1967 Act in a case involving a BID created by the City of Williamsport. The Commonwealth Court stated:

The appellant next argues that the method of assessing the properties used by Williamsport violates the uniformity clause of the Pennsylvania Constitution. However, the uniformity clause applies only to taxes and we are not here concerned with a tax to pay the ongoing expenses of government but a one-time charge for the cost of a public improvement.

Id. at 411.

In the year 2000, Pennsylvania’s General Assembly enacted the “Neighborhood Improvement District Act” (NIDA) that incorporated the BID concept. See 73 P.S. § 831 et seq. The Act authorizes creation of a “Neighborhood Improvement District” which is defined by the Act as:

A limited geographic area within a municipality, in which a special assessment is levied on all designated property, other than tax-exempt property, for the purpose of promoting the economic and general welfare of the district and the municipality, hereafter referred to as N.I.D. Such district shall be referred to generally as Neighborhood Improvement District (N.I.D.) and specifically as Business Improvement District (BID) . . .

73 P.S. § 833 (definition of Neighborhood Improvement District). The stated purpose of the NIDA was articulated by the General Assembly as follows:

(1) Existing tax rates in many municipalities are at or near their statutory cap.

(2) The general fund revenue derived from these taxes many times is not sufficient to provide adequate municipal services or additional services needed in specific geographic areas within the municipality, including, but not limited to, downtown commercial districts.

(3) As a result, municipalities should be encouraged to create, where feasible and desired, assessment-based neighborhood improvement districts . . .

(4) Municipalities should be given the broadest possible discretion in establishing by local ordinance the type of assessment-based programs most consistent with neighborhood needs, goals and objectives as determined and expressed by property owners in the designated district.

73 P.S. § 832.

Section 835 of the NIDA establishes the process by which BIDs can be established. Clearly outlined in Section 835 were the following:

Notice of the proposed BID must be provided to all property owners in the affected district.

The contents of the preliminary BID plan must include the list of properties to be assessed, the amount of the assessment and a list of proposed improvements to be paid with the assessments.

A public meeting must be conducted regarding the proposed BID plan.

Following the public meeting, the final BID plan must be submitted to all property owners together with notice as to how property owners could vote upon the plan.

Unfortunately, Section 835 of the NIDA was poorly drafted as it relates to the voting process. Section 835(B)(3) addresses BID proposals and states:

Any objections by property owners within the proposed NID must be made in writing by persons representing the ownership of 40%, in numbers, of the benefited properties within the NID. Objections must be signed by the property owner and filed in the office of the clerk for the governing body of the municipality in which the NID is proposed.

While Section 835(B)(3) references 40% of properties “benefited” by the proposed BID, it does not specifically outline what happens if or when that 40% number is exceeded. Even more confusing is Section 835(F)(2), which outlines how the final plan can be vetoed. That section reads:

If 40% or more of the affected property owners within the proposed NID fail to register their disapproval of the final plan or amendment to the final plan in writing with the clerk of the governing body of the municipality in which the NID is proposed, the governing body of the municipality may, following the 45-day period, enact a municipal ordinance establishing an NID under this Act . . .

This section permits a municipality to establish a BID if 40% of “affected property owners” “fail to register their disapproval.” By using a double negative, this section appears to allow the creation of a BID unless 60% of property owners object. Further confusing the issue is Section 835(C)(3)(vii). This section requires a municipality to publicize that “a negative vote of at least 40% of the property owners within the NID proposed in the final plan shall be required to defeat the establishment of the proposed NID . . .”

Before embarking upon an analysis of the issue crafted by the parties, we first wish to declare as a matter of law that in spite of the language contained in Section 835(F)(2) of the NIDA, objections by 40% or more of “affected property owners” will defeat the creation of a BID. We conclude this for the following reasons, inter alia:

All provisions of the statute must be examined together in order to discern the intent of the General Assembly. See, 1 Pa.C.S. § 1921(a), 1 Pa.C.S. § 1922. Despite internal inconsistencies, it is clear to this Court that the General Assembly intended that negative votes by 40% or more of affected property owners would defeat the final BID plan.

When CITY communicated the BID proposal to property owners, it notified everyone that objections by 40% of property owners within the district boundary lines would defeat implementation of the BID. (Exh. 22 to CITY’s submission.) By communicating the “40% to defeat” standard to members of the public, CITY is effectively estopped from imposing any different standard. See, e.g, Chester Extended Care Center v. Com., Dept. of Public Welfare, 586 A.2d 379 (Pa. 1991), Commonwealth, Department of Public Welfare v. Town Court Nursing Centers, Inc., 509 A.2d 950 (Pa. Cmwlth. 1986), allocatur denied, 528 A.2d 603 (1987). Commonwealth, Department of Public Welfare v. UEC, Inc., 397 A.2d 779 (Pa. 1979).

In their Briefs, both parties have adopted the same 40% standard. In fact, in its summary of argument, CITY acknowledges “the Neighborhood Improvement District Act requires 40% or more of the affected property owners to register their disapproval for a plan to fail.” (CITY’s Brief at pg. 4.)

For all of the above reasons, we will adopt the 40% threshold as the one needed to defeat Lebanon’s BID.

III. ISSUE BEFORE THE COURT

While the above information is necessary to provide context, and while the constitutional implications of BIDs are interesting, Plaintiff in this case has not challenged the constitutionality of the NIDA. Rather, the specific issue before this Court is relatively simple: what constitutes an “affected property owner” for purposes of the NIDA?

In his Declaratory Judgment Complaint, Plaintiff alleges that the 132 “no” votes submitted by property owners should be compared against the 280 property owners who would be assessed under the BID and that this percentage of “no” votes exceeds 40% of assessed property owners. In response, CITY alleges that the 132 “no” votes must be compared to the total of both assessed and exempt properties in the district and that 132 out of 358 represents less than 40% of all property owners.

Given the positions of the parties, our role today is to focus on the phrase “affected property owners.” Does this term include exempt properties? If it does, the number of objections falls under the 40% threshold and Lebanon’s BID can be implemented. If “affected property owners” does not include exempt properties, then the BID cannot be implemented because more than 40% of assessed property owners objected to its creation. The salient question, therefore, is whether exempt property should be included within the phrase “affected property owners.”

IV. ANALYSIS

The NIDA does not define the term “affected property owners.” However, the Act does define “benefited property” as “those properties located within a Neighborhood Improvement District which profit from district improvements based on a rational nexus test. Properties need not profit equally to be considered to have benefited.” 73 P.S. § 833.

Plaintiff points out that Section 835(B)(3) of the NIDA references “ownership of 40%, in numbers, of the benefited properties.” Plaintiff argues that both Section 835(B) and Section 835(F) “refer to the same objection process,” so they should be read in pari materia. Accordingly, Plaintiff suggests that the terms “affected property owners” and “benefited properties” are “equivalent” and “the owners of the benefited properties are the affected property owners.”

In response, CITY asks us to interpret the term “affected” in accord with its ordinary English language meaning. CITY provided numerous dictionary definitions for the term “affected.” Synonyms suggested by CITY for “affected” included the words “influenced,” “Impacted” and “touched.” Both parties point out that the General Assembly could have drafted the NIDA to specifically define how the 40% should be calculated. Plaintiff points out that the General Assembly could have used the word “all” if it had intended to include assessment-exempt properties, while CITY points out that the law could have specifically used the word “assessed” if it wanted to limit voting consideration to only those who would be subject to an assessment. Needless to say, we agree with both parties that the NIDA could have been drafted in a more precise fashion.

The Random House Dictionary of the English Language (Unabridged Edition), is over 2000 pages long and contains perhaps the most comprehensive compilation of definitions that this Court has to date encountered. That dictionary defines “affected” as “acted upon; influenced.” The root of the word “affected” is “affect,” which the Random House Dictionary defines as “to act on; produce an effect or change in.” Synonyms identified by the Random House Dictionary include “influence, sway, modify, alter, touch, stir.”

From the outset of this litigation, we viewed the meaning of “affected property owners” as a mixed question of law and fact. That is the reason why we refused to decide this case based upon preliminary objections. It is also the reason why we invited the parties to submit affidavits and documentation as to whether or how the BID would “affect” property owners within the district.

In response to our invitation, we received thousands of pages of documentation. Among the documentation were affidavits from numerous individuals, including the following:

Cliff Olson is the owner of three assessed properties and one exempt property. His affidavit does not address the question of how his properties would be impacted by the BID. However, he simply expresses an opinion that “exempt properties are not affected by the BID plan in that they are not required to contribute to nor benefit from the BID. “

CITY’s Mayor, Sherry Capello, submitted an eight-page affidavit outlining her vision and support for the BID. Mayor Capello stated in her affidavit:

The question regarding this case involves whether or not properties exempt from assessment are affected. As one of the most active campaigners for the downtown Lebanon BID, I have come across this issue several times in determining what properties will be assessed and what the benefits will be in the district. Not once in my research, or in any of the events I attended, or consult received, was there a notion that any property within the boundaries of the BID would not be affected.

(¶ 26 of Capello Affidavit). Mayor Capello referenced upgraded lighting and location of security cameras as examples of benefits that will flow to all property owners within the BID, even those who are not assessed. Mayor Capello theorized that improvements created by the BID would increase all property values within the BID, even those who are exempt from assessment.

Kimberly Kreider-Umble is the C.E.O. of Lebanon Family Health Services, which is an exempt agency located within the BID zone. Ms. Umble indicates in her affidavit that her agency has already benefited from the BID. She states: “Although we are not an assessed property, we have already been affected positively.”

Laurie Bowersox is the Executive Director of the Harrisburg Area Community College – Lebanon Campus. The HAAC center in downtown Lebanon is probably the largest exempt property within the BID. Ms. Bowersox states in her affidavit that “although the BID has not been fully implemented yet, we have been affected by the recent cleanliness of the street and alley’s [sic] surrounding the building.” She indicates that the goals of the BID are designed to facilitate a downtown Lebanon that is “more foot traffic friendly.” She also cites improved lighting and security as beneficial to the students who attend classes at her facility.

Malcolm Johnstone is the Executive Director of the West Chester, Pennsylvania BID. Mr. Johnstone indicates in his affidavit that West Chester considers all property owners to be “affected” by its BID, “even if they are exempt from paying an assessment.” (¶ 6 of Johnstone Affidavit.) He further states that even non-profit property owners and businesses are beneficiaries of the programs created by the West Chester BID.

Kim-Marie Coon is the business manager of the First Presbyterian Church in Reading, Pennsylvania. Ms. Coon’s church is located in the Reading Downtown Improvement District. Even though her church is exempt from assessment, Ms. Coon outlined the security and cleanliness benefits derived by exempt property owners within Reading’s DID.

David Feehan is the President of Civitas Consultants. Mr. Feehan indicates in his affidavit that he has worked with over 250 BIDs in countries across the globe. He states:

It is clear to me that tax exempt properties are affected by and benefit from the creation of a BID, because in virtually all cases, the services provided, such as additional security and maintenance, marketing and communication, an image improvements benefit all entities within the boundaries of the BID.

(¶ 4 of Feehan Affidavit.)

William Fontana is the Executive Director of the Pennsylvania Downtown Center and has been involved in the planning and implementation of BIDs in Erie, Jenkintown and Harrisburg. Mr. Fontana acknowledges “imprecision in the language” of the NIDA, but he concludes that tax exempt entities located within the BID zone are both “benefited” and “affected” by the activities of the BID. He states:

Any improvement in the overall business and/or quality of life environment of the NID has both a positive effect on the value of the real estate within the district, and may result in a direct financial benefit by reducing the cost of services that the property [owner would] [sic] normally incur individually if the NID as not in place. The law clearly indicates that there will be different levels of benefit within the district. Some of these benefits may be tangible and some may be intangible.

(Fontana Affidavit at ¶ 3.) It is somewhat interesting to note that Mr. Fontana also identifies a potentially negative impact of the BID upon exempt properties. Mr. Fontana points out that the existence of a BID assessment could affect the marketability of exempt property. (Fontana Affidavit at ¶ 4.)

Sifting through the above, no material issue of fact exists on the issue of whether the BID actually would “affect” exempt properties. Clearly, the evidence and affidavits submitted by CITY reveal that improvements such as upgraded lighting and enhanced security will benefit all property owners regardless of whether those owners are assessed a fee or not. While Plaintiff has attempted to convince us that only those with a financial stake should have a voice, next to nothing has been presented by Plaintiff to refute that the BID has and will continue to “touch,” “impact” and “influence” non-assessed BID property owners. As to the question of whether exempt property owners would be “affected” by the BID, the answer is clearly “yes.”

Having concluded that all property owners within the designated district will be “affected” by the BID, logic dictates that all such property owners must be included within the census used to evaluate whether the 40% objection threshold has been met. In this case, both parties agree that 132 objections is not enough to defeat the BID if the total number of properties within the physical confines of the BID are counted. Because we hold today that all such properties are “affected” by the BID, we must also therefore conclude that the 132 objections lodged to the BID are insufficient to defeat it. Hence, we are constrained to grant CITY’s Motion for Summary Judgment and dismiss Plaintiff’s declaratory judgment action.

V. CONCLUSION

Through this litigation, we learned a great deal about BIDs. We confess that we are left with a sense of uneasiness about how BIDs are created. By establishing a process where “yes” is the default vote and “no” requires adherence to an inconvenient process, Pennsylvania has stacked the proverbial deck in favor of BIDs. In so doing, the General Assembly has declared as a matter of public policy that generating funds for urban revitalization is more important than the need to comply with the normative political process. Frankly, this is a philosophy that could and perhaps should be questioned in the political arena. However, it is not the role of courts to create laws or determine public policy. In a democratic republic such as ours, it is the role of the legislature to create laws designed to address matters of public concern . . . and those laws are entitled to respect and a presumption of constitutionality when they are presented to courts. See, e.g. Dranzo v. Winterhalter, 577 A.2d 1349, 1354 (Pa. Super. 1990).

While we are uneasy about the BID process established in the NIDA, we must accept it as the will of the people. Moreover, our review of thousands of pages of documents has led us to respect the transparency with which the City of Lebanon has approached the establishment of the BID. Time and again, CITY created and disseminated written information that outlined precisely what was being proposed and why. CITY even self-adopted a “40% to defeat” standard when it could have legitimately argued that a 60% negative vote was needed. Whether citizens agree or disagree with the outcome of the process, no one could credibly argue that subterfuge was used to create the Lebanon BID.

With the above having been noted, the decision we are asked to reach today is relatively simple. We are asked whether improvements to a neighborhood will “affect” all of the properties in that neighborhood. Having answered this question with a resounding “yes,” we are left with only one logical conclusion – that not enough property owners opposed the BID to defeat its implementation. An Order reflecting this conclusion will be entered today’s date.

1) In response to a Right to Know request submitted by Plaintiff on February 26, 2016, CITY provided its list of property owners and tenants that it deemed to be impacted by the BID. (Exh. 7 to document submitted by Plaintiff on 10/14/2016.)

2) According to all of the promotional literature published by the City of Lebanon, the BID revenue is to be used to supplement and not supplant tax dollars. This is in keeping with the stated goal of every BID – to improve the affected district beyond its preexisting status.

3) The MIT article was attached to documents provided by Plaintiff as part of his submission.

4) Another commentator actually extolled the democratic accountability of BIDS in a commentary published by the New York University Law Review entitled “BIDs Farewell: The Democratic Accountability of Business Improvement Districts.” 78 N.Y.U.L.Re.V. 374 (April 2003). In the New York University Law Review article, the author conducts an expansive analysis of whether BIDs adhere to traditional democratic norms. The author concluded that “the BID model provides a way of governing sub-local commercial districts in downtown areas that is more fair and accountable to those actually governed than any obvious alternative.” The author also stated: “BIDs exist because they keep the streets cleaner, but over the long term, the success of BIDs will depend as much on BID accountability as on anything else. Clean streets are dirty, BIDs must continue to be responsive to the varied stakeholders of America’s shopping districts, commercial areas, and downtowns.”

5) It is this section that is implicated by this case, because the parties’ dispute involves a vote to veto a “final plan” and not a BID “proposal.”

6) What Plaintiff overlooks about Section 835(B)(3) is that it refers to the BID proposal process and not the final vote to “veto” a final plan that is contested in this case.

7) While inconvenient, the process did at least afford affected property owners with 45 days to submit their objections. On the other hand, the “notarize” requirement imposed by the CITY is found nowhere in the NIDA.

8) Here, no one has ever challenged the constitutionality of the NIDA. Even if someone had, our general philosophical belief is that constitutionality of laws is a question best left to appellate courts whose members are selected by statewide election.

9) By “will of the people,” we are referring to the fact that the NIDA was passed by legislators elected by the people and it was signed by a Governor elected by the people. This being said, we must also remind Plaintiff that even under his view of events, less than one-half of assessed property owners objected to the BID. A fortiori, it is apparent that many – perhaps even a majority – residents of the BID support its implementation and the benefits it is designed to create.

 

 

About the author

Ben has written 980 articles for Lebanon County Legal Journal

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