Urban
Collective Governance Organizations: The
Effect of Institutional Arrangements on Organizational Behavior
Susan E. Baer
and
Vincent L. Marando
The authors analyze how the institutional
arrangements, considered rules and forms of public policy in this context, of
four community benefits districts (CBDs) impact organizational behavior in
these organizations. A community
benefits district is a quasi-governmental city subdistrict organization that
assesses an additional property tax to both residential and commercial property
owners within its boundaries. In
exchange for paying this additional tax, subdistrict property owners receive
supplemental services such as safety, sanitation (garbage collection), and
economic development. The authors
examine these institutional arrangements in four subdistrict organizations in
Baltimore, Maryland; New York, New York; Louisville, Kentucky; and Cincinnati,
Ohio. Specifically, the authors find the
following broad similarities in the organizations’ institutional
arrangements: legislation at the state
and local level is required before the organizations can form; a necessary
amount of favorable political will at the grassroots level is required before
the organizations can form; organizational governance by an elected or
appointed board is required; and a professional and non-professional staff that
manages the organizations’ daily operation is required. In addition, the authors find and discuss the
importance of more nuanced differences in these institutional arrangements on
organizational behavior. In the article,
the authors show that how the organizations are institutionally structured
affects the way in which they behave.
At least twelve U. S. cities have
recently established community benefits district (CBD) organizations within
their boundaries (Baer and Marando 2001).1 The institutional arrangements of these city
subdistrict organizations have been outlined but not thoroughly analyzed. In this article, we examine their
institutional arrangements, defined here as rules and public policies, and show
that how the organizations are institutionally structured affects the way in
which they behave. To accomplish this
analysis, we examine and compare the institutional arrangements in four CBDs
including Baltimore’s Charles Village Community Benefits District (CVCBD), New
York’s 14th Street – Union Square Business Improvement District,
Louisville Downtown Management District (LDMD), and Downtown Cincinnati
Improvement District (DCID). Interviews
with CBD organizations’ executive directors and others knowledgeable about the
districts provide data concerning institutional arrangements in each one. The availability of data helped to determine
the four organizations examined, although the authors hope to extend the
analysis to CBD organizations in additional cities in the future.
CBDs in different cities share common broad institutional
arrangements, but their specific arrangements may vary from city to city. Using Baltimore’s Charles Village CBD as a
model, the following serve as common institutional arrangements in these
subdistrict organizations (Baer and Marando 2001):
1.
CBDs have the authority
from a state legislature and city government to mandate an additional tax
assessment levy above city-wide rates, which the city administers on all
property owners, commercial and residential, within the subdistrict.2
2.
CBDs are created only
after the service preferences of subdistrict property owners (and sometimes
residential tenants who do not own property) are identified and taken into
account. A referendum is required to
assess property owner and residential tenant support in Baltimore. In other cities, a specified number of
signatures meeting a public petition requirement or attendance and
participation at city-community sponsored public hearings may be used to assess
support for creating CBDs.
3.
CBDs are governed by an
elected or appointed board whose qualifications are
specified
by city charter ordinance and in some cases state statute.
4.
CBDs have full- and/or
part-time professional and non-professional staff to manage the day-to-day
operations of the subdistrict. Commonly,
CBDs are created to provide primarily “traditional” municipal services such as
security and trash removal but might also provide neighborhood organizing and
economic revitalization
services.
Examples of city subdistrict organizations that levy
an additional property tax in return for supplemental public services include Business
Improvement Districts (BIDs) and the newer Community Benefits Districts
(CBDs). CBDs share a common legal
heritage with the BID, a structure that normally taxes and provides services
exclusively to commercial property owners.
CBDs are the focus of this inquiry.
The success of BIDs in meeting the service needs of city merchants
stimulated their widespread adoption, and there are now 15,000 BIDs estimated
to be in existence in North American cities (International Downtown Association
1996). The existing literature tends not
to recognize that new BID-type arrangements such as CBDs have extended to mixed
residential and commercial communities (Oakerson 1999).3 A CBD is defined as a mixed-use city
subdistrict organization whose area property owners, both residential and
commercial, pay property taxes in addition to what the city levies in order to
receive supplemental public services such as security, sanitation (garbage
collection), and economic development.
In this article, we define organizational behavior as
“the study and application of knowledge about how people, individuals, and
groups act in organizations. It does
this by taking a system approach.
That is, it interprets people-organization relationships in terms of the
whole person, whole group, whole organization, and whole social system” (Clark
1997). In other words, when we speak of
organizational behavior, we are referring to the actions of the entire
organization. We recognize the strong
importance and influence of the actions of specific individuals within an
organization, but for the purposes of this paper, we examine organizational
actions in a broader sense. However, we
indirectly address the behavior of individuals, because organizational actions
reflect the decisions of individuals within each organization.
Substantial variation in
the level of public services delivered to different neighborhoods within any
particular city may occur (Lineberry 1977).
This fact contrasts with the way cities are often outlined in the literature
as offering the same services throughout their territory. In addition, large cities increasingly rely
on subdistrict organizations as structural mechanisms to provide tax and
service differentiation among residents and businesses that is qualitatively
different from informal approaches.
Hawkins, Percy, and
Montreal offer findings that support the assumption that decentralized,
specialized, and nested governance organizations are part of the
“intergovernmental” system of sharing authority and delivering services (1996,
1997). Clearly city property owners and
possibly residential tenants and merchants who do not own property in a city
cannot create a subunit by themselves. A
“higher” level local government is necessary for creating subdistrict government. In other
words, subcity interests for creating subdistricts need to be “negotiated” with
officials representing city interests (Thomas and Hawes 1999). And the creation of a city subdistrict such
as a CBD is the result of a “compact” or officially sanctioned intergovernmental
agreement involving state government as well (Briffault 1996, 1997, 1998). Thus, CBD creation reflects the results of a
negotiated intergovernmental process between property owners (and residential or commercial tenants
in certain cases) on the one hand and city and state officials on the other.
The
Charles Village Community Benefits District:
In this section, we examine how
the institutional arrangements in four CBD organizations affect organizational
behavior. We begin with the Charles
Village Community Benefits District (CVCBD) in Baltimore, Maryland. This CBD provides sanitation and safety
services. The first institutional
arrangement involved the necessity to pass state enabling legislation and a
Baltimore city ordinance in order to create the CVCBD. This process of creating the CVCBD involved
considerable conflict that ultimately affected the organization’s behavior.
Although the proposed
benefits district was located in a lower-income area, the Mayor, the city
delegation to the General Assembly, and several Baltimore City Council-persons
expressed concern that by creating subdistricts the city would become
balkanized with white middle-income neighborhoods engaged in an elitist
movement to obtain services that exclude lower-income neighborhoods. Several legislators were further concerned
that such balkanized subdistricts aimed to promote lifestyle homogeneity
through subtle forms of “gating” by placing an additional tax levy on property
owners.4
Perhaps officials were concerned, because they believed that subdistrict
creation in more affluent areas might also begin to occur. Their concerns motivated city officials to
demand that an ordinance establishing subdistricts require that they be both
larger in geographic scope and more diverse economically and racially than
originally proposed. As a result, the
CVCBD’s boundaries were enlarged from a 30-block area to a 100-block area
before the 1994 Maryland legislative session (Baer and Marando 2001). Therefore, this institutional arrangement or
public policy affected organizational behavior by creating a larger, more
diverse district for the organization to manage.
A second institutional arrangement was a referendum
in the proposed area that was a requirement for subdistrict adoption. Unlike the other three subdistrict
organizations that petitioned property owners only, the CVCBD allowed both
property owners and renters to vote in the referendum. One might explain the CVCBD’s use of a
referendum that allowed both residential tenants and property owners to vote by
the fact that this subdistrict contained a much higher percentage of residents,
including renters, than did the other three subdistricts. In such a broad residential community, a
referendum might be the most appropriate way to assess support. Also, because residential tenants may be more
mobile than owner occupants and may have
the ability
to easily move out of the CVCBD by “voting with their feet”, those designing the subdistrict
organization’s institutional structure wisely gave this important group an
opportunity to vote in the referendum.
Thus, the subdistrict’s substantial group of renters received a voice in
deciding whether and under what conditions to create the subdistrict and
hopefully will not choose to exit the district.
The effect on organizational behavior of this policy to include renters
is that this group is considered when the organization makes decisions, and
renters are also allowed to be members of the organization’s Board of Directors
in addition to property owners.
A thirteen to twenty-five member elected and
appointed Board of Directors governs the CVCBD, and the Board serves as the
third institutional arrangement. The
Board originates from the community-at-large with members representing
neighborhoods within the CVCBD and is responsive to the community, acting as
its agent in determining policy and procedures.
The Board is composed of residents, businesses, appointees of the Mayor
and City Council, and non-profit organizations.
Up to one-third of the Board members could potentially be residential
tenants. This analysis shows that
residential tenants are allowed to serve only on the CVCBD and 14th Street
– Union Square Business Improvement District Boards, while only property owners
are allowed to serve on the LDMD and DCID Boards. This attests to the added political power
that renters have in the former two subdistricts where their numbers are much
higher than in the latter two. As a
result, this institutional arrangement or policy affects the former two
organizations’ behavior by giving this potentially mobile group of residential
tenants added political power and a voice in the direction of the
district.
This
district has 75 percent commercial properties and 25 percent residential
properties. Thus, although it has a
higher percentage of commercial properties than the CVCBD that is no more than
50 percent commercial, it is still a mixed-use CBD structure. In fact, it has a higher percentage of
residential property owners than do the two remaining districts in this
study. As a result, calling itself a
Business Improvement District is a misnomer, because this name implies that
only commercial property owners pay additional taxes for supplemental
services. In the 14th Street
district, however, both residential and commercial property owners pay for
these extra services.
Like the CVCBD, this
subdistrict’s first institutional arrangement was the necessity to pass state enabling legislation and a local
city ordinance. However, unlike the case
of the Baltimore CVCBD, the legislative process to form this New York
subdistrict was not filled with conflict.
The state of New York passed enabling legislation that allowed the local
city council to create the CBD and allow tax assessment in the area. The district was created in 1984, the first
of its kind to form in New York City.
The effect of this first institutional arrangement on organizational
behavior was that this CBD did not have to tailor its management style to deal
with the conflictual issues faced by the Baltimore CBD such as district
boundary expansion and the related concern over residential balkanization by
ethnicity and income.
Then,
the second institutional arrangement or policy involved the requirement that
property owners sign a petition favoring the creation of the improvement
district. The petition was
successful. If fifty percent or more of
affected property owners had objected to improvement district creation, it
would have been unable to form. Tenants
were not involved in the petition, because state laws and local ordinances say
that property owners are the only ones who may form BIDs. Thus, compared to the Baltimore CVCBD, the 14th
Street district is less inclusive in its creation process since it does not
involve tenants. As a result, one might
expect the organization to behave in a manner that does not take account of
tenants to the same degree as the CVCBD.
The third institutional
arrangement, a twenty-five voting member Board of Directors, currently governs
the district. All Board members except
four government officials are elected at the annual meeting. The four government officials are eligible to
be on the Board through statute/legislation.
Fifty-one percent of Board members must be property owners. And at least one member must be a residential
tenant, although up to forty-nine percent of Board members could technically be
residential tenants. Thus, tenants do
have representation on the Board, although this representation might be very
small. As previously stated, allowing
tenants on the Board affects the organization’s behavior, because it means that
tenants as well as property owners will have a voice and influence in managing
the district. As a result, the
organization needs to take the preferences of tenants into account.
The Board of Directors
then selects an executive director to run the organization. The executive director in turn selects
district staff. The organization
provides sanitation and safety services.
Under this fourth institutional arrangement of staffing, five persons
including the executive director hold full-time professional administrative
positions in both the improvement district and the 14th Street – Union
Square Local Development Corporation (LDC).
The LDC is a downtown organization that focuses on stimulating
development, improving Union Square Park, and enhancing the quality of life in
the neighborhood through efforts to make the neighborhood cleaner and
safer. The 14th Street
district’s policy of being connected to a downtown organization reflects the
fact that this CBD has a more commercial composition than does the CVCBD. Because the 14th Street CBD’s
executive director works for both the LDC and the CBD, the latter’s
organizational behavior should take into account the needs of businesses more
than the CVCBD that is not connected to a downtown organization.
The
Louisville Downtown Management District:
The final policy
involves the organization’s hiring of professional and non-professional
staff. The LDMD provides both sanitation
and safety services. In selecting an
executive director, a search committee first gives its recommendation to the
LDMD Board. If the Board approves the
candidate for the position, the person is hired. Related to this fourth institutional
arrangement is the LDMD’s management by the Louisville Central Area, Inc.
(LCA), a major research agency for downtown organizations and city government
and a downtown development organization with the task of enhancing business
life. The LCA manages the LDMD
separately from the LDMD Board of Directors and covers the entire downtown
consisting of 102 blocks. LCA’s fiscal
responsibilities include developing an annual LDMD budget, monitoring property
assessment collections by the City’s Department of Finance and Budget,
preparing and providing monthly cash flow statements to the LDMD Board of
Directors, maintaining and storing LDMD financial records, and coordinating an annual audit. The involvement of a downtown business
organization is most likely linked to the highly commercial nature of the LDMD.
This downtown agency’s involvement that includes management of the CBD affects the LDMD’s organizational behavior, because such
control makes the CBD more likely to favor policies that will enhance
commercial rather than residential interests.
Downtown
Cincinnati Improvement District:
The Downtown Cincinnati
Improvement District (DCID) began operation in 1998 and consists of 330
property owners. It is a revitalization
district, providing mainly business development services, although it also
provides sanitation and security services.
Similar to the LDMD, its properties are approximately ninety percent
commercial and ten percent residential.
Thus, both of these districts are more BID-like than the CVCBD or the 14th
Street district, but they are still classified as CBDs since they assess an
additional property tax to both commercial and residential property owners
within their boundaries.
Its creation was also not conflict ridden like the CVCBD creation. In this organization, the first and second institutional arrangements are interconnected. State enabling legislation to form subdistricts had been passed in the Ohio legislature in the early 1990s, and Dayton was the first city in Ohio to form one. Thus, the path was clear to form the DCID in terms of state legislation. The next step involved getting downtown property owners to sign a petition in favor of creating the subdistrict. In November 1996, downtown property owners were asked to sign a petition for the adoption of DCID’s Downtown Services Plan listing the services to be offered and how much to spend on these services as well as a budget. At least sixty percent of front footage property owners were required to sign the petition, and the petition was a success with sixty-two percent actually signing. Tenants were excluded from signing the petition. City Council then approved the DCID and its services plan in December 1996.
The process to create the DCID differs from the other three subdistrict organizations, because property owners in the DCID first signed a petition before city council approved the district’s creation. In the other subdistricts, a city council ordinance favoring subdistrict creation was required before either a petition or referendum could occur. As a result, organizational behavior is affected, because those initiating the creation of the organization first had to lobby property owners within district boundaries before lobbying the city. In addition, because the institutional structure did not allow tenants to sign the petition, the organizational behavior of those managing the district is most likely affected as these managers do not need to be as accountable to tenants to the degree they would need to be if tenants served as a powerful political force in forming the district.
The third institutional
component is the DCID’s Board of Trustees that consists of nine members, four
appointed and five elected. The four
appointed members include the city manager, a city council appointee, a
Hamilton County representative, and a representative from the Building Owner
and Management Association (BOMA). Thus,
local government officials have a substantial role on the Board and influence
in managing the district. As a result,
the CBD must consider the desires of these officials when making its daily
operational decisions. At least one of
the five elected Board members must be a residential property owner, so residential
property owners receive at least a small share of power on the Board. However, the district excludes tenants from
serving on the Board of Directors.
Therefore, tenants lack a voice in governing the organization, and the
CBD Board and staff do not need to
devote much consideration to the preferences of tenants as a result.
The final institutional
arrangement to be considered is staffing.
Since DCID itself hires no staff and instead has only volunteers, the
Board’s relationship to DCID’s employees flows through Downtown Cincinnati,
Inc. (DCI), a downtown advocacy organization established in 1994 as a result of
the city’s loss of retail tenants.
Donations from major corporations in the city and tri-state area fund
DCI’s operation. To acquire employees,
the CBD Board hires or contracts with DCI.
The president of DCI then runs the CBD organization and hires its
employees. The staff includes ten
professional, full-time employees and nine non-professional clean team and
safety team employees. Because the
president of DCI, a downtown business organization, directly hires CBD
employees, it is likely that these employees will focus more on commercial or
business interests than on residential ones.
Table 1 illustrates the major institutional
arrangements in each of the four CBD organizations under examination.
Overall, the current inquiry shows that CBDs share
four similar broad institutional arrangements outlined earlier in the paper,
and that these arrangements or policies affect organizational behavior. However, several key differences exist in the
institutional arrangements of the four CBDs under analysis, and these
differences affect policy implementation.
First, the CVCBD is the only organization to
require a referendum for subdistrict creation.
The other three CBD organizations instead use a petition. Second, residential tenants as well as
property owners are able to vote in the CVCBD’s referendum, while the former
group is not allowed to sign petitions in the other three subdistricts. Third, up to one third of the CVCBD’s Board
of Directors may be renters, and up to forty-nine percent of the 14th
Street – Union Square Business Improvement District’s Board members may be
renters. In contrast, both the LDMD and
DCID allow only property owners to be Board members.
1 A telephone survey with
officials of 36 large cities concerning the existence of Community Benefits
Districts (CBDs) was conducted. The
National League of Cities also conducted a survey of subdistrict
organizations. The assessment from both
sources was that subdistrict organizations similar to CBDs exist in at least
twelve U. S. cities including Baltimore, Chicago, Cincinnati, Detroit, Great
Falls, Houston, Louisville, New York, Philadelphia, San Jose, Santa Cruz, and
Seattle. The subdistricts may be
categorized as CBDs, because both residential and commercial property owners
paid an additional property tax in order to receive supplemental services.
2 This taxing authority
distinguishes CBDs from more traditional neighborhood associations and
residential community associations (RCAs).
3 There is no official
national count of city subdistricts. The
Census of Government documents does not tally or report dependent districts of
general purpose local governments. The
Census of Government documents published every five years ending in “2” or “7”
(i.e. 1992, 1997) report independent districts, not administrative units of
cities. Estimates of some types of
subdistricts do exist.
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D. C.
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Civic
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Louisville, KY.
Susan E. Baer
School of Public Administration and Urban Studies
San Diego State University
5500 Campanile Drive
San Diego, CA 92182-4505
Office Phone: (619) 594-4934
Fax: (619) 594-1165
E-mail: sbaer@mail.sdsu.edu
Susan E. Baer is an
Assistant Professor in the School of Public Administration and Urban Studies at
San Diego State University. She has
published in Urban Affairs Review and has forthcoming articles in
International Journal of Public Administration and Public Administration
Quarterly.
Vin