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Volunteering To Be Taxed: Business Improvement Districts And The Extra-Governmental Provision Of Public Safety

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  • Leah Brooks

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Abstract

When the median voter's preference sets the level of local public goods, some voters are left unsatisfied. Is there an institution by which subsets of voters can resolve the collective action problem and increase the local provision of public goods? If so, what are the consequences? In response to problems such as crime and vandalism, neighborhood property owners have established Business Improvement Districts (BIDs) to provide local public goods. When a BID is approved by a majority of property owners in a neighborhood, state law makes contributions to the BID budget mandatory. This resolution of the neighborhood's collective action problem reduces crime - BIDs in the city of Los Angeles are robustly associated with crime declines of 5 to 9 percent. Indeed, crime falls regardless of estimation technique: fixed effects; comparing BIDs to neighborhoods that considered, but did not adopt, BIDs; using propensity score matching; and comparing BIDs to their neighbors. Strikingly, these declines are purchased cheaply. Attributing all BID expenditure to violent crime reduction, and thus ignoring the impact of BID expenditure on many quality-of-life crimes, BIDs spend $21,000 to avert one violent crime. This higher bound estimate is substantially lower than the $57,000 social cost of a violent crime.

Suggested Citation

  • Leah Brooks, 2006. "Volunteering To Be Taxed: Business Improvement Districts And The Extra-Governmental Provision Of Public Safety," Departmental Working Papers 2006-04, McGill University, Department of Economics.
  • Handle: RePEc:mcl:mclwop:2006-04
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    File URL: http://www.mcgill.ca/files/economics/Leah2.pdf
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    References listed on IDEAS

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    1. Lorlene Hoyt, 2004. "Collecting private funds for safer public spaces: an empirical examination of the business improvement district concept," Environment and Planning B: Planning and Design, Pion Ltd, London, vol. 31(3), pages 367-380, May.
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    Cited by:

    1. Paul Heaton & Priscillia Hunt & John MacDonald & Jessica Saunders, 2016. "The Short- and Long-Run Effects of Private Law Enforcement: Evidence from University Police," Journal of Law and Economics, University of Chicago Press, vol. 59(4), pages 889-912.
    2. Catalina Gómez Toro & Hermilson Velásquez & Joaquín Andrés Urrego & Juan David Valderrama, 2014. "Efecto de los Ingresos Permanentes sobre el Delito: Un Enfoque Espacial y un Caso de Aplicación," DOCUMENTOS DE TRABAJO CIEF 010900, UNIVERSIDAD EAFIT.
    3. Xiangping Liu & Lori Lynch, 2011. "Do Agricultural Land Preservation Programs Reduce Farmland Loss? Evidence from a Propensity Score Matching Estimator," Land Economics, University of Wisconsin Press, vol. 87(2), pages 183-201.
    4. James Mak, 2016. "Creating Tourism Improvement Districts to Raise Stable Funding for Destination Marketing and Promotion," Working Papers 2016-2, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    5. Brooks, Leah, 2007. "Unveiling Hidden Districts: Assessing the Adoption Patterns of Business Improvement Districts in California," National Tax Journal, National Tax Association, vol. 60(1), pages 5-24, March.
    6. Heléne Lundqvist, 2015. "Granting public or private consumption? Effects of grants on local public spending and income taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(1), pages 41-72, February.
    7. Meltzer, Rachel, 2011. "“Clean and Safe” for All? The Interaction Betweeen Business Improvement Districts and Local Government in the Provision of Public Goods," National Tax Journal, National Tax Association, vol. 64(3), pages 863-889, September.
    8. Philip J. Cook & John MacDonald, 2010. "The Role of Private Action in Controlling Crime," NBER Chapters,in: Controlling Crime: Strategies and Tradeoffs, pages 331-363 National Bureau of Economic Research, Inc.
    9. Edward L. Glaeser, 2012. "Urban Public Finance," NBER Working Papers 18244, National Bureau of Economic Research, Inc.
    10. Philip J. Cook & John MacDonald, 2010. "Public Safety through Private Action: An economic assessment of BIDs, locks, and citizen cooperation," NBER Working Papers 15877, National Bureau of Economic Research, Inc.
    11. Miller, Mark V., 2013. "Valuing local collective goods: the case of business improvement districts," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150635, Agricultural and Applied Economics Association.

    More about this item

    JEL classification:

    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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