Business improvement districts in L.A. County appear to be doing okay – at first glance.

Cumulative budgets for the 50 largest of the organizations here are up a modest 1 percent heading into 2018, when they’re slated to spend a combined $66.9 million, according to the Business Journal’s annual list (see page 10).

But that veneer of stability masks considerable volatility and exploding cost pressures, particularly for the 32 business improvement districts, or BIDs, in the city of Los Angeles that qualified for the list, which ranks the BIDs by their annual budgets.

Rising labor costs brought about by minimum wage hikes, soaring trash collection bills under Los Angeles’ new exclusive franchise waste hauling system, and increased cleanup costs around homeless encampments are straining the budgets of BIDs.

“BIDs are being asked to do more and the costs to do those things are going up sharply,” said Rena Leddy, executive director of the Fashion District BID in downtown Los Angeles, and the new chair of the Los Angeles BID Consortium.

Minimum wage hikes and increased costs for cleanup amid rising homeless populations are impacting almost every BID in the county. That’s exacerbated for BIDs in Los Angeles, by sharply higher trash collection fees brought about by the rollout of the waste hauling franchise system over the past six months.

Trash collection is one of the two basic services that almost all BIDs provide – the other is security patrols – and can account for up to one quarter of BID budgets, according to several BID executives.

Fees soar

Trash collection fees for the Downtown Center BID, which ranks No. 2 on the list with a 2018 budget of $6.6 million, went up more than 80 percent at the end of last year (2017).

“We spent $45,000 on trash collection in 2016,” said Carol Schatz, chief executive of the Downtown Center BID. “For 2018, our trash collection cost will be somewhere between $80,000 and $90,000. That’s a huge hit, especially since we are already coping with annual increases in the minimum wage.”

The vast majority of increased trash collection and minimum wage costs cannot be passed on to an end user by BIDs, since the organizations are funded primarily through assessments of members – typically property owners but sometimes merchants or other business interests. BIDs usually fix their assessment rate for a set term of several years, and most can invoke only lower single-digit increases without getting additional stakeholder approval. Such requests can risk upsetting stakeholders who will eventually vote on the organization’s renewal.

Among the hardest hit by the trash fee hikes are BIDs in downtown Los Angeles, which also must confront a massive and expanding homeless population.

The volume of trash collected in the Fashion District has gone up to seven tons a day from five tons a day just three years ago.

Executive director Leddy said almost all of this increase is coming from the rising number of homeless encampments within the district.

“You combine this increasing volume of trash with the dramatically higher fees to collect the trash and that’s a real problem,” Leddy said.

Making things even worse: until a couple months ago, most BIDs in Los Angeles were unaware that they would be paying sharply higher trash collection fees, meaning they couldn’t budget the increases, Leddy said.

BIDs had a chance to plan for minimum wage increases, which are a major reason for budget jumps at several BIDs, including the Fashion District, which reported a 10 percent hike in its budget to $5 million, enough to move it up one notch to No. 3 on the Business Journal list.

Wage and trash fees aren’t the only cost hikes Los Angeles BIDs are facing. According to Andrew Thomas, executive director of the Westwood Village BID, city permit fees for other services such as tree-trimming are also rising.

“Every year I’m writing more checks to the city than the year before for permits and services,” Thomas said. “For example, we just paid about $20,000 in permit fees related to trimming city trees that the city doesn’t get around to trimming.” Most of that cost was for traffic control around the trimming zones, he said.

Contract ups and downs

Several BIDs outside the City of Los Angeles saw their budgets jolted as they either picked up or lost service contracts with their host cities. The Long Beach Downtown Alliance BID, for example, saw an eight-year $350,000-per-year contract with the city’s now disbanded redevelopment agency come to an end, according to an email from Chief Executive Kraig Kojian. That, combined with the elimination of an annual New Year’s event, resulted in the BID’s budget dropping 13 percent to $4.57 million, which was enough to push that BID down to the No. 4 spot on the list.

The opposite happened at No. 1 Downtown Santa Monica Inc., the BID that runs the Third Street Promenade and other adjacent downtown areas. According to an email response from Chief Executive Kathleen Rawson, the city approached the BID with an offer of a contract to provide “ambassador” services at two city parks. These ambassadors help visitors to the parks with directions and information about various amenities in the downtown area.

That contract, along with an annual 3 percent increase in assessments, resulted in Downtown Santa Monica Inc.’s budget increasing 5 percent to $8.64 million.