Long Beach City Auditor Laura Doud released today a Business Improvement District (BID) Oversight Audit which found the city could make some improvements regarding its management of the BID Program.

Created by local businesses and property owners, BIDs help improve business corridors by facilitating the pooling of private resources (through assessment fees) to collectively pay for activities that are beyond the services the city provides and that business and property owners cannot afford to do on their own, according to the release.

Once BIDs are established, the city contracts with nonprofit entities to run operations and provide services such as security, cleaning, community events and marketing.

“The audit found the City needs to improve oversight of the BID Program, in which ten BIDs received $17 million in 2016, to ensure that BIDs follow agreements, comply with State Law, and receive the resources to which they are entitled,” the release stated. “With better oversight, the City can help BIDs maximize the impact on business corridors.”

While BIDs reported that they were well supported by city staff—who act as a general liaison, attend meetings and field questions—the audit found the city needs to direct more focus toward the more technical aspects of the BID Program.

The audit’s three primary findings were:
1. Agreements – The agreements between the City and BID operators contain requirements such as reporting content and deadlines, and the City’s payment schedule. These agreements perpetuate annually based on Council’s approval of their annual reports. BIDs were not aware that agreements existed or were not knowledgeable of their contents because the City does not emphasize or enforce the terms.
2. Reporting – State law requires BIDs to submit to Council an Annual Report that describes BID operations, including the BIDs’ plans on how they will use the assessment revenue received. The Council’s vote signifies their approval of the BID budget and activities. However, Annual Reports submitted by the BIDs are not all consistent with State Law, do not provide a full picture of the BID operations, and do not include performance metrics. For example, one BID report did not include an excess of $2 million in reserves. In addition, not all reports were reviewed by City staff.
3. Management and Transfer of Fees – Approximately $9 million was generated in 2016 for BIDs through assessment fees paid by businesses or property owners. Almost all assessment fee revenue is eventually handled by the City; the City passes all of it on to the BIDs. However, as a property owner within several BIDs, the City did not pay all its $630,000 property assessment fees in 2016. The City owes $64,000 in assessment funds to two of the BIDs. In addition, mistakes made in the charging of business assessment fees caused BIDs to not receive the correct amount of revenue.

The City and BIDs agreed with all detailed recommendations in the audit report, including:

• Updating agreements to reflect processes surrounding required reports and payments.
• Creating templates for all required reporting and instituting a City review process for BID reports.
• Tracking payments, including those made on behalf of the City, and simplifying payment processes.

Other audit recommendations included that the city create handbooks and conduct trainings to improve communication and understanding of the BID program for all parties, in an effort to clarify roles and responsibilities, outline agreement terms and reporting requirements among other key topics. The recommendations can ultimately help the city find ways for BIDS to maximize their impact on economic development, according to the release.

“We are pleased that the City and BIDs have been receptive to all our recommendations which have the potential to improve the impact of the BID Program and the multiple areas of Long Beach where people shop, eat and work,” Doud said in a statement. “BIDs play an important role in the economic vitality of the City, and we want the City to support their work so they can continue to provide key services to the businesses, citizens and visitors of Long Beach.”

You can check out the complete Business Improvement District (BID) Oversight Audit here  and the Report Highlights Sheet here.