Lax management and limited oversight of a program created to improve city business corridors has resulted in unreported revenues, payments made multiple times and fees falling through the cracks, according to findings released Thursday from the Long Beach city auditor.

In the first audit of the city’s Business Improvement District (BID) program, City Auditor Laura Doud analyzed financial records and other data exchanged between the city and its 10 BIDs between Oct. 1, 2015 and March 31, 2017, according to the report. The audit focused on city management and oversight; it did not look at individual BID operations or the services they provide.

Among the key findings:

Annual budget and other financial reports were incomplete and non-compliant with California law;

BIDs are required to submit multiple reports throughout the year, but city staff reviews only the annual reports.

Unclear processes allowed incorrect BID fee payments to be made, and $64,000 owed by the city to two BIDs went unpaid;

The city held onto funds that should have been transferred to BIDs, resulting in payments that were weeks or months behind;

Fees were paid to a consultant that manages several of the BIDs without verifying services;

The city does not enforce BID agreements, and the current agreements include terms that are no longer applicable, rendering them “outdated, confusing and cumbersome.”

Doud recommended a number of changes to city processes, including the creation of a handbook and regimented training for BIDs, updates to all existing agreements (many of which are at least a decade old), and a simplification of payment processes.

“BIDs play an important role in the economic vitality of the city, and we want the city to support their work so they can continue to provide key services to the businesses, citizens and visitors of Long Beach,” Doud said in a statement released with the report.

Most of the recommendations will be implemented by year’s end, according to Economic Development Director John Keisler, whose division oversees all city-owned properties in addition to growth in the business sector.

In response to the findings, Keisler said his department agreed with all 28 recommendations, and had already begun to implement a few.

The changes, he said, “will help to improve the operation and oversight of the BIDs.”

What is a BID?

Long Beach has a total of 10 business improvement districts in major commercial corridors across the city, including Belmont Shore, downtown, Bixby Knolls and Fourth Street.

BIDs were formed as an avenue for directing private resources to local needs and priorities that city funds or private entities could not otherwise afford. To manage the operations, the city contracts with nonprofit entities to handle the day-to-day responsibilities.

The first district in Long Beach was founded 45 years ago. Today it is known as the Downtown Long Beach Alliance and it manages the so-called Tourism Business Improvement Area, which is funded by hotels.The most recent district, the Midtown BID, was formed in 2015; it includes Cambodia Town properties in Central Long Beach.

Of the 10, there are three types of districts in the city: the tourism area funded by hotels, Parking and Business Improvement Areas, which are funded by business owners; and Property and Business Improvement Districts, funded by property owners.

Approximately $17 million in payments were made to city BIDs in 2016, and over half of that came from fees assessed on business and property owners. BIDs also generate additional revenue through fundraising, sponsorships, grants and selling tickets to events.

Why do they matter?

Business development is a major tenet in Long Beach’s recently adopted Blueprint for Economic Development. Adopted by the City Council last year, the document establishes a list of priorities to make Long Beach a city of opportunity for workers, investors and entrepreneurs. It identifies BIDs as a key part to building an equitable economic system.

Economic development is also a key component to the Land Use Element update to the General Plan, expected to be taken up by the council in the coming weeks.

Each BID provides services appropriate to the corridor it serves, which can include picking up trash, cleaning sidewalks, security patrol, street lighting, and event planning.

A small business monitor survey conducted by Cal State Long Beach students in 2017 found business owners generally thought their BIDs were doing a “good” to “very good” job in supporting local enterprise. One third of the respondents, however, were uncertain about the services provided by their respective district.

Doud said the hope is for the city to implement these changes to improve operations and maximize economic development.