What Is a Neighborhood Improvement District?

With the Greater Easton Development Partnership (GEDP) proposing the creation of a (NID) comprised of the entire historic to fund the Easton Main Street and Ambassador programs, we thought we'd take the opportunity to summarize the law as it stands in Pennsylvania.

City council is expected to hold a hearing on the issue on June 8.

 A brief history of NIDs

 Originally invented in the late 1960s in Canada, the NID model has since spread to at least eight other countries including Australia, New Zealand, Japan, South Africa and the United States, where there are currently hundreds of such districts.

The basic model provides for an autonomous, privately managed agency with the power to impose additional property taxes on those within the created district for the purpose of furthering the goals of the NID plan, usually extended public services or capital improvements or both.

In Pennsylvania, the establishment of a NID is governed by the “Neighborhood Improvement District Act, Act of Dec. 20, 2000, P.L. 949, No. 130”.

(For the full text of the act, please view or download the pdf attached to this article.)

In the “Legislative Findings” section of the 15-page law, we read that since existing tax rates in many places are at or near their legally allowed limits and many times the revenue derived from these taxes is insufficient to provide the desired level of public service, the law was created to allow those municipalities to create neighborhood improvement districts to provide desired services and capital improvements despite tax caps, particularly in downtown commercial areas.

How it works

Property owners in the NID are assessed an additional annual fee, usually based on a millage rate and similarly collected as property tax, that is used to provide additional services and/or capital improvements that the municipality can otherwise not afford or has deemed to be benefiting one area or group only, and therefore judges it unfair to provide these extra services from general funds.

In conjunction with the NID, the municipality can set aside public funds, acquire or lease property, have preliminary planning and feasibility studies done, advance funds to the designated NID management association (NIDMA), and “issue bonds, notes or guarantees...in the amounts and for the periods necessary to finance needed improvements within any NID."

The establishment of a NID also allows the municipality “To collect special property assessments on behalf of the NIDMA...and to employ any legal methods to insure collection of the assessments.”

Once established, the NID's sunset provision may not be less than five years from the date the NID was approved.

If it chooses, the municipality may also assess a fee on property owners in the NID when “needed to finance additional supplemental programs, services and improvements to be provided or made by the NIDMA.”

When a municipality desires to create a NID, all property owners and lessees of property owners located in the proposed NID must be notified at least 30 days prior to a required public hearing on the matter.

At least one public hearing must be held before the establishment of the NID.

The NID will be considered approved by the affected property owners unless enough of them -- 40 percent -- object to its creation in writing. In this case, those objections would go to the city clerk.

If not disapproved by the required 40 percent of within 45 days of the last public hearing on the matter, the NID is considered approved by those property owners, and the municipality is free to pass an ordinance providing for the NID to take effect.

The NID management association

Once the municipality establishes a NID, it must designate a management association to oversee it and the NID plan. The association can be an existing non-profit agency, or one set up by the municipality.

The law says NIDMA must have an administrative board of five, seven or nine members, who are property/business owners in the NID, but not necessarily residents.

Powers granted to the NIDMA

Act 130 grants NIDMAs the power to:

• Sue or be sued, implead or be impleaded, complain and defend in all courts.

• Solicit in-kind services or financial contributions from tax-exempt property owners within the NID in lieu of property assessment fees. This may include entering into voluntary multi-year agreements between the NIDMA and tax-exempt property owners located within an NID...

• Impose liens on property for the nonpayment of property assessments. NIDs administered by nonprofit corporations would have any such liens filed by the municipal corporation.

• Hire additional off-duty police officers or private security officers whose patrol area responsibilities would be limited to the geographical area incorporated within the designated NID service area and whose responsibility would be to support existing municipal and volunteer efforts aimed at reducing crime and improving security in the NID.

 The NIDMA is annually required to:

• Submit an audit of all income and expenditures to the Department of Community and Economic Development and the governing body of the municipality in which the NID is located within 120 days after the end of each fiscal year and

• Submit a report, including financial and programmatic information, including a summary of audit findings, to the governing body of the municipality in which the NID is located and to all assessed property owners located in the NID.

The NIDMA is generally an autonomous body, however, it must seek approval from the municipality if it seeks to make any of the following changes to the final plan:

• Substantially changed or added programs, improvements and/or services to be provided in the NID.

• Increased expenditures affecting more than 25 percent of the total NIDMA budget for the fiscal year.

• Incurring increased indebtedness.

• Changing the assessment fee structure levied on property owners in the NID.

• Changing the legal entity (NIDMA) which provides programs, improvements and services within the NID.

With regard to these changes and amendments to the NID plan and provisions, the law states: “Prior to the governing body of the municipality approving any of the changes in this paragraph, the governing body shall hold at least one public hearing to determine that such changes are in the public interest as it relates to affected property owners within the NID...The governing body of the municipality may within 30 days following the public hearing and at its sole discretion approve or disapprove of any amendments to the plan. If approved, such amendments shall be effective upon the date of such approval.”

All information regarding the “Neighborhood Improvement District Act, Act of Dec. 20, 2000, P.L. 949, No. 130” was taken directly from the text of the law, a full copy of which is included in pdf format.

“The Business Improvement District Model: A Balanced Review of Contemporary Debates,” by Lorlene Hoyt and Devika Gopal-Agge. Massachusetts Institute of Technology, 2007, was also used as a reference.