A Crucial Open Question in Anti-BID Theory: Where Does the City Clerk Get the Authority to Sign Pro-BID Petitions Before the BID is Approved? Arts District BID Episode From 2013 Highlights City’s Hypocrisy On This Issue and Collusion With Carol Schatz

Holly Wolcott, Clerk of the City of Los Angeles, in June 2015.
Holly Wolcott, Clerk of the City of Los Angeles, in June 2015.
UPDATE: This problem is now solved. Let’s work on fixing things!

Roughly, the process for creating a new BID goes like this: Some property owners hire a consultant who collects petitions in favor of the BID. When petitions adding up to more than 50% of the total assessments in the proposed district are on hand, they’re submitted to the City Clerk, who then takes the matter to City Council.1 One interesting aspect of this is that City-owned parcels in the proposed district are voted in exactly the same way that privately owned parcels are. That the City always votes in favor of BIDs is well-known, although see below for an episode where the City actually opposed a BID proposal.2 In fact, part of the consultant’s job seems to be to gerrymander as much City-owned property into the BID as possible so as to minimize the requisite number of agreeable private owners. The City Clerk, currently Holly Wolcott, is somehow authorized to sign petitions on the City’s behalf for City-owned parcels.

But the petitions must be signed before City Council can pass an ordinance of intention to form the BID. For instance, in the case of the proposed Venice Beach BID, consultant Tara Devine submitted the signed petitions to the Clerk before June 24, 2016. City Council passed the Ordinance of Intention on July 1, 2016. But see these pro-BID petitions for City parcels, signed by Holly Wolcott on June 15, more than a week before Council voted to authorize the BID process. Of course the City always favors BID formation, but where does the Clerk derive the authority to sign these? It can’t be from the Council vote, which happens afterwards. There must be a law or a rule or something authorizing this. I haven’t been able to find it yet, although I’m sure it exists.

The problem is, though, that if it’s preordained by ordinance or rule or whatever that the Clerk can sign pro-BID petitions, then the 50% rule seems like a complete sham, as does the requirement that the City Council approve the BID formation process. In the case of the Venice Beach BID, the City owns parcels representing more than 25% of the assessments, which means that by pre-authorizing City approval, the City has set things up so that property owners representing less than 25% of the assessments, which is less than 33% of the non-City assessments, can impose mandatory fees on the other 67% of their fellow non-City property owners.3

Even worse, the fact that the City can essentially guarantee the approval of a BID before the Council votes on it is strikingly anti-democratic. Also, by signing the petitions without any public debate, the City is committing to paying huge amounts of tax money into the BID without the citizens of Los Angeles having a chance to protest.4 In the case of the Venice Beach BID, City payments will amount to more than $450,000 per year. Surely this is tax money paid not by the business owners but by all the people of Los Angeles, who have absolutely no say in whether the City forms this BID or not.

It would be much more fair if the City position weren’t predetermined. One of the persistent criticisms of BIDs is that people who live in the districts but don’t own commercial property have no say in their formation or operation. Perhaps one relatively easy5 way to allow such residents some input would be to let them decide how to vote the City’s parcels. Ballots approving BID formation could be distributed to e.g. everyone who’s eligible to vote in Neighborhood Council elections in the area, and City petitions could be voted proportionally to the outcome of that election. This proposal isn’t perfect, obviously. A major drawback is that it’s somewhat random how much of a proposed BID is owned by the City, which means that different neighborhoods would have different amounts of control over BID formation. But it is at least simple.

Finally, a little-known episode from 2013 illuminates the hypocrisy of the City and the City’s pro-BID establishment, exemplified by Carol Schatz, with respect to the democratic nature of BID elections. It also shows that the City is not in favor of every BID formation effort, and in fact will sometimes work to undermine BID formation drives if they don’t suit its needs. This highlights the importance of the question of how and why the City gives its support in the form of signed pro-BID petitions.

It’s well-known that in 2013 a successful lawsuit forced the Arts District BID to dissolve. Naturally the City and the usual suspects immediately set about reforming a new BID, essentially the same as the old BID. Successful plaintiff Yuval Bar-Zemer and some other property owners tried to set up a new BID that wasn’t associated with the same people who’d run the previous BID.

The City of LA at that time had6 an ordinance, the Alpha BID Ordinance, that allowed BIDs to be formed under certain circumstances with the agreement of property owners representing only 30% of the assessed value. For reasons I haven’t been able to uncover, Bar-Zemer and his compatriots tried to form their new BID using this law.7 In August of 2013 they met with Mike Feuer to discuss the matter. On September 12, 2015, Miranda Paster emailed Carol Schatz telling her about this:

From: Miranda Paster

Hello,

did you know that one of the consultants, on our list, is pushing the City Atty (Feuer) to allow BIDs/Community Benefit Districts using the City’s Alpha Ordinance?

And Carol Schatz didn’t like that at all:

From: Carol Schatz (DCBID)

Let me guess who that is—I will be sure to discuss that with Feuer.

It seems wildly inappropriate for Miranda Paster, who’s theoretically supposed to accept and process BID formation proposals as they come in without playing favorites, to organize Carol Schatz’s opposition to a competing proposal. And it worked. At some point in the next couple of weeks, the fix got put in. On September 25, 2013 the Alpha BID proponents discovered that Miranda Paster was dragging her feet on their application and emailed Mike Feuer asking about the following obstructionist email from Paster:

From: Miranda Paster

Hello,

We are in receipt of the Management District Plan and Engineer’s Report. We have not started the review of either of the documents. I am waiting for the City Attorney instructions. The standing instruction is that the Ordinance, by which the documents were prepared, is not legal and preempts State Law, nor should it be used in light of the lack of cohesion of the Arts District.

Naturally this perturbed the BID proponents, specifically because it appeared that the City was playing favorites among the people trying to form the new Arts District BID:

From Leonard Hill:

From the e-mail exchange below, it is clear that Miranda Paster has been instructed to follow a protocol that effectively insures that the community will not have a choice in choosing a plan that they feel best suits the interest of our neighborhood.

The Arts District deserves the chance to choose the BID that they determine best suits the needs of our community. We need to the
[sic] help of your office to insure that Ms. Paster will review and certify our plan as fast as possible.

Somehow this was still in play in November of 2013, when Steven Shapiro wrote to Mike Feuer and also Carol Schatz wrote to Mike Feuer opposing the use of the Alpha Ordinance to form a new Arts District BID. Carol Schatz attached a letter from her lawyers stating, among other things, that

Alpha BIDs formed under the City-created BID law can be created and impose assessments with the buy-in of only 30% of the assessed parties (by assessed value), which appears undemocratic. All BIDs are required to comply with the Constitution, and BIDs are frequently attacked on Constitutional grounds. In the event that an Alpha BID is challenged, a reviewing court’s judgement might be influenced by the lack of democratic legitimacy in the formation of such Alpha BID and rule that it is unconstitutional.

These two letters almost certainly are more performance art than an attempt to influence Feuer’s position. We’ve already seen that between September 12 and September 25 Schatz almost surely got Feuer to instruct Paster to reject the Alpha BID project. And the argument made is certainly an argument of convenience meant to support Carol Schatz and the CCALA in their goal of preventing outsiders from forming and controlling BIDs.

But it’s interesting to see what happens if we take it seriously. In combination with the fact that City-owned parcels can reduce the number of private owners required to form a BID to significantly below the 30% which Schatz’s lawyers claim is undemocratic and might lead a judge to rule that a BID was unconstitutional, doesn’t this argument suggest that the Venice Beach BID, and indeed any BID the formation of which relied heavily on City-owned parcels for approval, is unconstitutional? Or at least that it might be seen so by a judge?

The City not only bought this argument in the case of the Arts District, but effectively solicited it from Carol Schatz via Miranda Paster’s September 12 email to her notifying her of the Alpha BID formation effort, because it suited the City’s needs at the time. Doesn’t this suggest that the City is being supremely hypocritical by ignoring the argument in the case of Venice Beach, again because it suits their needs? It’s interesting albeit not surprising that the City and the BID establishment are instrumentally concerned with the appearance of democracy when the lack of it might get in the way of their schemes. Perhaps this false concern has, ironically, provided a means by which some real democracy might get injected into the BID formation process. We shall certainly see in the future.


Image of Holly Wolcott is a crop of a public record which I obtained from here.

  1. This leaves out a ton of details relating to the boundaries of the BID and other related matters, but they’re not important for what I’m discussing here.
  2. For reasons that are too complicated to summarize in this lead paragrah.
  3. I am ignoring the fact that the LAUSD owns parcels in this proposed BID and that they also signed pro-BID petitions. The same issues apply, but I don’t yet understand LAUSD participation at all, and they don’t affect the analysis.
  4. The property owners get a chance to protest after the petitions are collected, but they’re not protesting qua citizens, only qua property owners.
  5. Easy in the sense that it could be handled internally in the City of LA without involving or trying to modify State BID laws.
  6. And may still have for all I know.
  7. If I had to guess, I’d say that they tried this method because the City was opposed to these mavericks forming a renegade BID, so that they would probably not sign petitions for City-owned parcels, making it pretty difficult to get more than 50% agreement. This is only speculation, but it’s pretty plausible.
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