Can a New York Business Improvement District spend its assessments on improvements outside the district's boundaries?

Plain-English summary

The Village of Great Neck Plaza had a Business Improvement District (BID) and wanted to chip in toward a gazebo in a public park just outside the BID's mapped boundaries. The village's lawyer reasoned that the gazebo would still help the district's businesses. The AG said the contribution would violate the BID statute (General Municipal Law Article 19-A) unless the village first amended the district plan to authorize spending outside the existing boundary.

The AG's reasoning rested on the design of BIDs themselves. A BID is a special assessment district modeled on the Town Law Article 19 districts for sewer, water, and similar local-benefit services. The whole point is that the property owners inside the boundary are the ones who pay (through a special assessment) and the ones who get the benefit. To preserve that match between who pays and who benefits, the statute boxes spending to the adopted district plan, including its map. Section 980-l(a) puts it bluntly: none of the proceeds collected can be used for any purpose other than what is in the plan. Changing the plan, including changing the geography or purposes of allowed spending, requires another round of the formal process: notice, public hearing, and local-law amendment under §§ 980-f and 980-i.

Currency note

This opinion was issued in 1996. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What is a Business Improvement District (BID)?
A BID is a special-assessment district created by a city, town, or village to fund improvements and services that benefit a defined business area. The statutory framework at the time of the opinion was Article 19-A of the General Municipal Law (chapter 282 of the Laws of 1989). Property owners inside the district pay a special assessment, and the proceeds fund the improvements listed in the district plan.

What is the "district plan"?
The district plan is the foundational document adopted when a BID is formed. Under General Municipal Law § 980-a as it stood at the time, the plan had to include a map of the district, a description of its boundaries, the proposed improvements, the properties benefited, and the source of financing. The local legislative body adopted the plan by local law after notice and hearing.

Why can't a BID spend money outside its boundary if the spending helps district businesses?
Because the statute defines what a BID can do by reference to the plan, not by reference to what might benefit the district in general. Section 980-c authorizes "district improvements," and § 980-l(a) prohibits use of proceeds for any purpose other than those set forth in the plan. If the AG had read those provisions to permit just-outside-the-boundary spending, the statutory definition of "district" would lose its teeth.

Could the village fix this by amending the plan?
Yes. The AG's answer was framed as "in the absence of a legislative modification of its district plan." Section 980-i provides for modifications, and § 980-f(b)(2) requires the same notice-and-hearing process for plan extensions or revisions. The village could expand the geography, add new authorized improvements, or otherwise revise the plan, but it had to go back through the statutory process.

Why does the BID statute care about geography this much?
Because of the assessment design. The Gaynor case the AG cited (Gaynor v Mahron, 268 NY 417 (1935)) and the older Town Law special-district doctrine treat the benefit as having to match the burden. If a BID could spend outside its boundary, owners inside the boundary would be paying a special assessment for a benefit that does not particularly accrue to them. The statute's boundary discipline preserves the rationale for charging a special assessment in the first place.

Background and statutory framework

The relevant law was Chapter 282 of the Laws of 1989, codified as General Municipal Law Article 19-A.

The mechanics of formation, as the opinion describes them:

1. The municipality adopts the BID-enabling provisions by local law (General Municipal Law § 980-b).
2. A district plan is prepared and presented to the local legislative body (§ 980-d). The plan must include the map and boundaries (§ 980-a(b)(1)), the proposed improvements and properties benefited (§§ 980-a(8), 980-a(b)(3)), and the source of financing (§ 980-a(b)(5)).
3. The plan is filed in the office of the municipal clerk (§ 980-e(a)) and a public hearing is held.
4. The local legislative body makes a determination on whether the proposed BID has met all Article 19-A criteria (§ 980-f(a)).
5. The municipality enacts a local law establishing the BID and, in doing so, adopts the plan (§ 980-f(c)).

After formation, the limits on spending are:

Section 980-c(a) describes the authorized powers as providing for "district improvements located on or within municipally or district owned or leased property which will restore or promote business activity in the district." The AG emphasized "in the district."

Section 980-l(a) provides that none of the proceeds collected pursuant to Article 19-A shall be used for any purposes other than those set forth in the district plan.

Section 980-i provides for modifications of the plan, including modifications to boundaries, financing, or purposes, all subject to the notice-and-hearing requirements of § 980-f(b)(2).

The AG cited Pinkus v Incorporated Village of Hempstead, 225 NYS2d 959 (Sup Ct Nassau Co 1962), for the proposition that establishing and modifying a special district is a legislative act rooted in the taxing power, which is part of why the formalities of the plan-amendment process matter.

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/I_96-9_pw.pdf

Original opinion text

OPINIONS OF THE ATTORNEY GENERAL

Opn. No. 96-9
GENERAL MUNICIPAL LAW ART 19-A, §§ 980, 980-a, 980-b, 980-c, 980-d, 980-e, 980-f, 980-i, 980-l; TOWN LAW § 190, et seq.; L 1989 CH 282.

In the absence of a legislative modification of its district plan, a business improvement district may not use funds for any purpose other than those set forth in the district plan.

March 4, 1996

Richard Gabriele, Esq.
Village Attorney
Village of Great Neck Plaza
The Chancery
190 Willis Avenue
Mineola, New York 11501

Informal Opinion No. 96-9

Dear Mr. Gabriele:

You ask whether the Village of Great Neck Plaza Business Improvement District (BID) may make a monetary contribution toward the purchase of a gazebo to be located in a public park just outside the BID's geographic boundaries. You state that although the gazebo would not be located inside the BID's boundaries it would nonetheless provide a direct benefit to the district and further the goal of restoring business activity to the area.

We find that such a contribution would be in violation of the State law regulating the establishment and operation of BIDs, if it is done without prior legislative modification of the district plan.

Chapter 282 of the Laws of 1989, codified at Article 19-A of the General Municipal Law, governs the establishment, operation and financing of BIDs by cities, towns and villages. See, L 1989 Ch 282; General Municipal Law § 980 et seq. The concept and process for the establishment and maintenance of a BID is analogous to the procedure provided in the Town Law for the creation of an improvement or special district for various services such as sewer, water and solid waste disposal. See, Bill Jacket, L 1989 Ch 282; see also, Town Law § 190 et seq. Historically, such districts have been employed because the benefits they produce are totally or almost wholly local in nature, making it inappropriate for the general populace to be taxed for their entire cost. See, Gaynor v Mahron, 268 NY 417 (1935). By authorizing the creation of a BID, the local legislature is attempting to enhance the business community and business environment within the geographic area established by the district plan. See, Bill Jacket, L 1989 Ch 282.

The act of establishing and modifying such a district is legislative in character and has its origins in the taxing power of the State. See, Pinkus v Incorporated Village of Hempstead, 225 NYS2d 959 (Sup Ct Nassau Co 1962). After a municipality adopts by local law the provisions of Article 19-A (General Municipal Law § 980-b), a district plan is prepared and presented to the local legislative body. See, General Municipal Law § 980-d. Among other elements, the plan must contain a map of the proposed district and a description of its boundaries (General Municipal Law § 980-a[a], [b][1]), a list of the proposed improvements and the properties to be benefited (General Municipal Law § 980-a[8]), [b][3]), and the proposed source of financing (General Municipal Law § 980-a[b][5]).

After the plan is filed in the office of the municipal clerk (General Municipal Law § 980-e[a]), the local legislative body must schedule a public hearing on the plan's contents. Id. The local legislative body may then make a determination as to whether the proposed BID has met all of the criteria of Article 19-A. General Municipal Law § 980-f(a). If so, the municipality may enact a local law establishing the BID, and in doing so adopts the district plan. General Municipal Law § 980-f(c). Once this occurs, a BID is formally established.

General Municipal Law Article 19-A defines the powers of the legislative body with respect to the district as providing "for district improvements located on or within municipally or district owned or leased property which will restore or promote business activity in the district". General Municipal Law § 980-c(a). Emphasis added. Thus, the improvements authorized are "district" improvements, a clear reference to the district whose boundaries have been defined. This is the central concept underlying a BID, whereby all benefited property is included within the district. See, Bill Jacket, L 1989 Ch 282. Only district property is improved and charged for the costs of those improvements. See, General Municipal Law §§ 980(c), 980-f(3). Once established, any modification or extension of a BID's boundaries, financing or purposes must be predicated upon legislative amendment of the district plan. See, General Municipal Law § 980-i; see also, General Municipal Law § 980-f(b)(2) (in the event that an extension or revision of the plan has been proposed, Article 19-A's notice and hearing requirements must again be adhered to).

In the absence of a legislative modification of its district plan, Great Neck Plaza BID revenues cannot be used for purposes outside district boundaries. See, General Municipal Law § 980-l(a) ("[n]one of the proceeds collected pursuant to this article shall be used for any purposes other than those set forth in the district plan"). Thus, it would be inappropriate for a BID to make a monetary contribution to a municipality for the purpose of making improvements to areas outside the BID's borders.

The Attorney General renders formal opinions only to officers and departments of State government. This perforce is an informal and unofficial expression of the views of this office.

Sincerely,
JOSEPH CONWAY
Assistant Attorney General