Legal Foundations for Tourism District Formation
The first step in forming a tourism improvement district is creating a legal foundation. Eleven states – California, Montana, South Dakota, Kansas, Louisiana, Texas, Oregon, Colorado, New Jersey, Tennessee and Washington – have enabling laws in place. Other states, are in the early stages of adopting enabling legislation.
While most tourism districts are confined to a city or county, there are also two large-scale districts – one covering the state of California, and one covering the United States.
California’s 1989 Act is the first known tourism improvement district enabling law. Under the 1989 Act, a municipality can initiate proceedings to form a district on its own initiative, and must then undertake a hearing and protest procedure to form the district. Every year, the district must be renewed by the municipality in order to continue operating. To manage the district, the municipality appoints an advisory board, which operates the district in accordance with requirements set in Ordinances adopted by the municipality. read more
California’s second law enabling tourism districts gives lodging business owners greater flexibility. Businesses often choose to form tourism improvement districts under this law because it allows an initial term up to five years and a renewed term up to ten years. Initiating formation procedures requires submission of petitions from businesses which will pay at least 50% of the assessment, followed by three city council hearings and an opportunity for protests. This law also allows designation of a non-profit corporation to act as the owners' association and manage the district funds, with oversight by the municipality. read more
In Montana, upon a petition by owners of 60% of the businesses in the district, a municipality may begin the district formation process by adopting a resolution of intention. There is a 15-day period in which owners may protest formation of the district, and the municipality must hold public hearings on the proposed district. A 5-to-7 member board of trustees is appointed to manage the district. read more
The Improvement District (whether business, or special, or downtown or some other name) is a model for management of the municipality s commercial corridor. It is authorized by state law (the Pedestrian Mall and Special Improvement District Act, N.J.S.A. 40:56-65, et seq.) to be formed by ordinance in any municipality in New Jersey. The Improvement District provides a mechanism for the businesses and property owners of a community to organize as a single entity, to raise funds for activities that enhance or expand upon municipal services, and through a District Management Corporation, to manage themselves to become a more effective destination for commerce
In the State of New Jersey, municipalities are empowered to create Improvement Districts and to assign District Management Corporations (DMC s) to manage the resulting assessments and to provide enhanced services to those commercial businesses and properties in the defined District. The State provides ad hoc technical assistance and support to communities already having created Improvement Districts that are being managed by DMC s, as well as assistance to communities seeking to explore the implementation of an Improvement District. As resources allow, the State also manages the Downtown Business Improvement Zone Loan Fund and two Improvement District Challenge Grant programs. read more
In September of 1991, the city of Portland, Oregon put into effect Ordinance No. 164665. The Ordinance regulates Economic Improvement Districts within the city of Portland. There are two types of Economic Improvement Districts, one in which the assessment is mandatory and applied to all properties except exempt properties, the second type in which the property owner can decided whether to be assessed, a voluntary assessment, as authorized by state law. It is up to the owners to determine if they want wither a mandatory or voluntary assessment. If mandatory, the assessment will be considered a tax under the Oregon Constitution, Article XI section 11(b). An assessable property is any real property within a District except for exempt property. Hotels and motels can be assessed.
The City is responsible for administering and operating any Economic Improvement District, but the administration and operation may be carried out by a third party under contract with the City. All costs associated with running the District will be paid from assessments and fees generated by the District and the City is not financially responsible for the District nor will the City loan the District funds to run the District. Some services allowed under the Ordinance include landscaping, maintenance, and security measures for the District, the promotion of commercial activity or public events, activities in support of business recruitment and development parking improvements, and any other economic improvement activity that specially benefits property. read more
The South Dakota Legislature during their 1986 session enacted what is now SDCL Chapter 9-55. This chapter allows municipalities to create and administer business improvement districts. This law was based upon similar statutes from other state, including Nebraska and Kansas. Amended in 1990, 2003, 2004, 2005, 2006, and 2007, chapter 9-55 gives business districts and municipalities the tool that they need to create a special purpose district to overcome some of the problems of development and promotion of business areas.
A Business Improvement District (BID) can be created “within the boundaries of an established business area of the municipality zoned for business, public, or commercial purposes.” An established business area may also include noncontiguous property within the incorporated municipality that has a common zoning designation. (SDCL 9-55-4.) This means that a BID can be created in any business area of the community, not just in central business districts. The district can also include similarly zoned property within the municipality, but which is not physically joined to other property in the district. read more
Public Improvement Districts (PIDs) offer cities and counties a means for improving their infrastructure to promote economic growth in an area. The Public Improvement District Assessment Act allows cities and counties to levy and collect special assessments on properties that are within the city or its extraterritorial jurisdiction. Additional financing options are available to certain large counties.
PIDs may be formed to develop, rehabilitate or expand affordable housing; create water, wastewater, health and sanitation, or drainage improvements; street and sidewalk improvements; mass transit improvements; parking improvements; library improvements; park, recreation and cultural improvements; landscaping and other aesthetic improvements; art installation; creation of pedestrian malls or similar improvements; supplemental safety services for the improvement of the district, including public safety and security services; or supplemental business-related services for the improvement of the district, including advertising and business recruitment and development. read more
Washington’s Tourism Promotion Areas Law requires submission of petitions from business owners who will pay 60% or more of the proposed assessment. Only lodging businesses with forty or more units can be included in the tourism promotion area. Upon receipt of petitions, the municipality must adopt a resolution of intention and hold public hearings on the proposed promotion area. An advisory board or commission may be appointed, or a destination marketing organization may be designated to manage the district funds. read more
Travel Promotion Act
The Travel Promotion Act establishes a non-profit corporation to promote US tourism and increase international travel to the United States. The Act provides for the corporation to be funded primarily through the collection of a $10 fee from visitors entering the United States from foreign countries that do not require a visa. Once paid, visitors from these countries are not required to pay the fee again for two years. Entrants to the US from countries requiring a visa are exempt from the $10 charge. The Act creates a public-private marketing enterprise, directed by an 11-member board of tourism industry representatives and is expected to raise $320 million annually and create 40,000 additional jobs in the tourism and hospitality industries.
California Tourism Marketing Act
The California Tourism Marketing Act was enacted in 1995 to promote tourism in California. The legislation authorized the levy of an assessment on all tourism and travel related businesses. It also provided for the establishment of a non-profit, public benefit corporation to manage the funds. The statute became operative in 1997 and it is estimated that the assessments raises over $50 million annually.
“It's a win-win... owners get local control of the funds... and the city gets a stable new revenue stream. ”