Though a decision by the Pennsylvania Supreme Court in May invalidated Lebanon’s Business Improvement District, its supporters are vowing to move forward.
As LebTown reported earlier this year, a Pennsylvania Supreme Court decision voided the 2016 enactment of the Downtown Lebanon Business Improvement District, commonly known as “the BID.”
As a result of the state Supreme Court’s decision, the Lebanon County Common Pleas Court, where the lawsuit challenging the BID began, is expected to issue an order formally declaring the BID dead at an October 8 hearing before Judge Bradford H. Charles.
If there is support on City Council, Mayor Sherry Capello intends to form another steering committee to put forward a new BID plan, which Council could finalize through an ordinance. Property owners inside the BID would then once again vote thumbs up or down.
The BID was intended to fund Downtown improvements, and would have been managed by the Lebanon Foundation, a non-profit arm of the Community of Lebanon Association. Those plans were derailed when a property owner convinced the state’s highest court that the BID was created improperly, sending its proponents back to square one.
What is a BID? What does it do?
A Pennsylvania law known as the Neighborhood Improvement District Act (“NIDA”) allows municipalities to create “neighborhood improvement districts.” These are geographically defined areas that need public improvements, such as new sidewalks, streetlights, or building facades. A “business improvement district” (“BID”) is a type of neighborhood improvement district.
BIDs can raise money to fund public improvements through fees, known as assessments, charged to property owners inside the BID’s boundaries. However, some properties inside a BID, depending on how they are used, can be exempt from paying fees.
The first attempt to create a BID
The City of Lebanon started looking at a BID in 2010. It formed the Lebanon BID Steering Committee, which worked with a paid consultant to study Downtown’s needs. The result was a proposed district that contained 358 properties, 78 of which were considered non-fee-paying.
That left 280 properties that could be charged fees, a number that turned out to be critical.
The City finalized the BID plan in 2015, and the Steering Committee mailed documents to property owners inside the boundaries, notifying them that “benefited property owners” could object to the establishment of the BID.
The letter to property owners said “objections from at least 40% of the benefited property owners within the district boundaries are required to defeat the establishment of the BID.” (Italics added by LebTown)
In 2016, 132 property owners voted “no” to the BID.
That’s less than 40% “no” votes out of all 358 BID properties, fee-paying plus non-fee-paying. But, it’s more than 40% “no” votes out of just the 280 fee-paying properties.
The City and the BID backers considered 40% of 358, not 40% of 280, to be the magic number to defeat the BID, and declared in 2016 that the BID had been properly created under the law.
At least one property owner inside the BID disagreed.
Lawsuit filed: 40% of what? Pa. Supreme Court says BID not properly created.
Edward Schock, an attorney and the owner of an assessed property in the BID, filed a lawsuit in Lebanon County Common Pleas Court, asking the court to rule that the BID had never been properly created, and therefore could not assess fees against property owners.
Schock contended that under NIDA only the 280 fee-paying property owners in the BID were “benefited property owners” who could vote for or against the BID, not all 358, fee-paying plus non-fee-paying.
He argued that 40% of 280 was 112, so the 132 “no” votes that had been cast were enough to kill the BID. The City countered that all 385 property owners inside the BID were “benefited property owners,” so 154 votes were necessary to keep the BID from being created.
The Lebanon County Common Pleas Court agreed with the City and dismissed Schock’s lawsuit. He appealed to the Pennsylvania Commonwealth Court and lost again.
Schock appealed further, this time successfully, to the Pennsylvania Supreme Court, the Commonwealth’s top tribunal. It reversed both lower courts, agreeing with Schock that the “benefited properties” in the BID were only the 280 fee-paying properties.
In other words, the Pennsylvania Supreme Court ruled that enough “no” votes had been cast to keep the BID from being created. It sent the case back to the Lebanon County court with instructions to enter an order declaring the BID officially dead.
While it voided the BID, the state Supreme Court criticized NIDA as poorly written and confusing. “Needless to say,” the Court wrote, “we agree with both [Schock and the City] that the NIDA could have been drafted in a more precise fashion.”
Will there be another try for a Downtown BID?
In an interview last month, Mayor Capello made it clear she will not give up on a BID. She is convinced that it will benefit Downtown Lebanon.
If there is support on City Council, Capello intends to form another steering committee to put together a new BID plan, which Council could finalize through an ordinance. Property owners in the BID would once again vote, thumbs up or down.
Even without support from a BID, Capello says the Downtown Lebanon Main Street program is still operating and doing good work. The “Main Street” designation is conferred by the state on downtowns and central business districts throughout Pennsylvania, and allows certain community based revitalization efforts.
“A lot of positive things came out of this,” she said, referring to the many events the organization has conducted in Downtown. “Some of the businesses have reported to us that with Main Street promotions they had had their highest sales ever.”
Amy Kopecky, Downtown Lebanon Main Street’s director, would love to have funding from a BID, but, with or without, the Main Street program will continue to operate in Downtown, relying on sponsorships, donations, and grants.
Kopecky pointed to successful 2019 events, including Prom in the City, where salons and hair stylists worked with high school students, and Burger Week. Events on tap for the rest of the year include a Fall Cleanup on September 14th and a Multi-Cultural Festival on October 12th.
Capello also confirmed in an email to LebTown that the “Downtown Lebanon – A Main Street Community” brand will continue running after the declaratory judgement hearing. Both the Main Street program and the BID are associated with the Lebanon Foundation.
The Lebanon Foundation’s Mike Kuhn, while stressing that he can’t officially speak for the organization, also supports another BID formation.
“We want to work with the mayor to continue the progress we started,” he said. “I still think the BID is a good idea. We have positive momentum, and the court decision can’t change that.”
A few loose ends remain.
The 2016 BID entered into two contracts. One is with Kopecky, who does double duty as director of both the BID and the Downtown Main Street Program. The other is with a company hired to clean sidewalks.
And, the BID collected, and still holds, some fees from property owners for 2016, 2017, and 2018.
“Each year varies based on the total current assessed value, but [the amount assessed] was approximately $104,000+/-/year,” Capello explained in an email. “So [the BID] should have received slightly over $300,000, but not everyone paid (which is standard and was similar to the real estate tax collection rate). Receipts are closer to $265,000 give or take.”
“Expenses have basically been for the Manager’s salary and benefits, advertising, cell phone, internet, contracted service of sidewalk cleaning, parking expenses, liability insurance, office supplies, postage, training, required conferences and associated expenses. The current balance as of 6/30/19 was $105,023.91,” she said.
No money had been collected by the BID at the time Schock filed suit, and all collection efforts were put on hold until the Lebanon County court made its initial ruling in favor of the BID, Capello said.
Schock’s lawsuit does not make a demand for return of fees that have been paid to the BID, and Capello was not aware of any repayment demands. She plans to contact those who have paid, and is considering a number of ways to resolve the situation.
Schock did not respond to a recent request for comment. When reached by telephone in early summer, he had no comment other than to say that his lawsuit was not claiming money.