City should allow self managed SSDs

Featured, Policy — By on February 23, 2013 11:00 am

When it snows, the sidewalks throughout many business districts in Minneapolis are cleared of snow. Those trash cans on the sidewalks in Uptown are dumped out regularly. The trees get adorned with holiday lights and sometimes there may be baskets with flowers hanging from the light poles.

Who do you have to thank for that? In Uptown, the Lowry Hill District, and Lyn-Lake, you can thank their respective Special Service Districts (SSDs).

These districts (similar but different to Business Improvement Districts) are geographic areas that requested that the City add additional tax assessments on the commercial properties within the district to pay for extra quasi-public services, like snow clearance and removal, trash receptacle pick up, holiday decorations, streetscape improvements, sidewalk scrubbing, extra security, or other “clean and safe” services.

Currently, there is an advisory board that recommends a budget to the City, the City adopts the budget and collects the funds, and procures and manages contracts to provide the services. The only exception to this is the Downtown Improvement District (DID), which self manages the procurement and management of the services (the City holds a contract with the DID).

The Problem
Minneapolis business districts struggle to provide cost-effective, responsive district services, like snow removal from sidewalks, holiday lighting, graffiti removal, and more.

The Solution
The City should allow business districts to have the option to self-manage the services provided to the City for three primary reasons: (1) local management can be more responsive than the current city managed system, (2) local management can be more cost effective, and (3) local management can provide better financial transparency and budgeting.

The Background
Until a little over a year ago, over 20 special service districts in Minneapolis were managed by a bridge engineer in the City’s Public Works division. With what amounted to a part-time staff person managing a large amount of districts, some districts felt that they were not receiving the level of service that they would have liked. This frustration along with other factors combined to have a new full-time staff person come in and manage all of the districts.

But still, with multiple districts varying in geographic and financial size, some require more attention than others. In some cases, there are districts that just want the local control and don’t want the City to manage it because the City is a billion dollar enterprise and managing a district with a budget of $100,000 give or take (0.01% of the City’s budget!) is not going to be as nimble as the locals would like.

Others see the opportunity of self-management as a way to find more cost effective ways to deliver the services. Currently, the City requires all contractors completing the work to pay prevailing wage. That is a high cost in the eyes of many district members. They’d like to be able to hire a college student to scrub the graffiti off of the traffic light. Some businesses would like the opportunity to hire other local businesses and not businesses from other cities or from outside of the district.

One complaint about the current city managed system is that it isn’t easy to know when the actual costs are exceeding the budget and that variance often isn’t absorbed for two years due to the city’s financial reporting system. An example:

August 2011: Uptown SSD sets 2012 budget
2012: Actual expenses incurred
August 2012: Uptown SSD sets 2013 budget
March 2013: Uptown SSD receives 2012 accounting data
August 2013: Uptown SSD sets 2014 budget and includes any overages that need to be paid back to City from 2012 overages.

This means not only is the budget bases its assumptions on incredibly old data, but that the City is cash flowing the overages unnecessarily long. It also means that poor management wouldn’t get caught until well after the fact. We should strive for transparency and a local management group would be closer to the expenses, managing a smaller budget than the City’s accounting department, and be in a direct position to take action to adapt to changing conditions.

Of course, this would require a very transparent management organization with safe guards to protect the City and the tax payer.

The Self-Managed Solution
The good news is that the City’s Public Works department has proposed a policy outlining what the City should allow and require for any self-managed special service district. This policy came out yesterday and addressed a variety of issues ranging from organizational governance, procurement, transparency, etc.

Public Works held a meeting on January 31, 2013 to gather input from business district leaders on these issues. As someone who attended the meeting, I heard attendees state that they wanted transparency with these management organizations, that prevailing wage would hurt their district but Living Wage was acceptable, that there needs to be nimbleness for the management team on procurement, amongst other things.

Maintenance issues

Electrical conduit breaks as Uptown’s infrastructure ages. Could a local management organization better keep tabs, fund, and advocate for infrastructure in Uptown versus the City managing it?

Self-Managed Special Service Districts would likely take place like this, though some of the details may be slightly different in reality:

1. A majority of property owners in an area would ask the City to establish a SSD for enhancement public services delivered through a third party who would manage the district.

2. A business plan would be developed with a budget.

3. The city would deliberate and potentially approve the establishment of the district and authorize a contract with the proposed non-profit.

4. The city would ensure that special assessments were collected with the property taxes for the year and then provide a monthly payment to the non-profit to manage the service delivery.

5. The non-profit would procure services from a variety of sub-contractors. They may even perform other tasks and collect other income from related but different services, such as promotions or events.

6. The non-profit would likely have to provide an annual report and financial documentation to the City and make it public for the property owners. The City would play a role in financial transparency but it is unclear what, if any district, would be required to have annual automatic audits.

The Conclusion
Self-managed districts is nothing new. While the Downtown Improvement District is almost 5 years old in Minneapolis, other districts across the country have been operating similar to what is outlined above since the 1970s.

We don’t need to reinvent the wheel in Minneapolis and self-management can provide substantial benefits to the economic vitality of our business districts. We should expect transparency, accountability, and professionalism of any self-managed district and the City should clearly articulate its expectations in this new policy. But let’s open the door to local management!

Thatcher Imboden

How cities work and change, how they are the product of their inhabitants and outside forces, and the resulting livability keep me thinking and dreaming about the future. I work in transit oriented development and have a background in urban real estate development. I am Past President of an Uptown business organization, grew up in Uptown, was on an Uptown neighborhood association Board, and am an Uptown and Lyn-Lake historian.

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