BIDS as a Superior Innovation Tool

Cities, which were previously facing population decreases due to urban sprawl, are now facing an urban resurgence or revitalization. Millennials and retirees have found a home in many of the urban centers of America. In 2010, 83.7% of people in the United States and Puerto Rico lived in metropolitan area and a 10.8% growth in metropolitan areas from 2000-2010.[1] However, with a large number of people living in the suburbs in previous decades, cities have not updated their neighborhoods to fit the needs and desires of its new residents. One of the tools to meet this need is a Business Improvement District (BID)

Business Improvement Districts are areas inside a municipality created for the purpose of developing, redeveloping, or maintaining a business area.[2] New Orleans was the first city in the United States to implement a BID, and it saw great success. [3] There are now more than 1,200 BIDs nationally. In 1984, Wisconsin created its BID statute. [4] There currently 34 active BIDs within the city of Milwaukee. [5]

One of the unique aspects of a BID is that it requires that one business owner in this area to come forward with a petition for the BID.[6] The planning commission designs its special assessment method and the implementation of the collected funds. If the owners of at least 40% of land value inside the BID raise an objection, it is vetoed. If the landowners do not veto the plan, then it then goes through the city legislative process and the mayor can approve it. The BID members have to renew the BID on an annual basis, unless there is an outstanding debt.

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The Securities Act: Does It Permit Companies To Cheat Investors?

New_York_Stock_Exchange_EntranceAuthor’s Note: This post is taking an economic and investor approach to The Securities Act of 1933. This is not to ignore the time and monetary cost of information. It is merely a critique of one portion of a larger regulatory scheme and its effects.

The purpose of the 1933 Securities Act was to protect investors by providing them with information in order to make a sound investment decision. Albeit not articulated at the time of The Securities Act’s inception, the modern application of the Securities Act reflects the Capital Asset Pricing Model and the Efficient Capital Market Hypothesis. Roughly, the efficient capital market hypothesis assumes that the market and the stock prices are a reflection of information available about that security.(1)  As the original standards for reporting requirements and disclosure requirements of the Securities Act have loosened in recent years, have we cheated investors? Are investors not being fairly compensated or informed for the risks they have assumed?

When a security becomes available to the public for the first time, the SEC requires certain disclosures through its registration statement. The registration statement provides basic information about the company and basic financial information. During this process, there are underwriters who analyze and then provide the first price for the security. They will consider the projections of the company, the segment in which it operates, as well as general global and national market conditions. Their ultimate goal, however, is to sell the securities. The underwriters receive a percentage of the final sales price, which incentivizes them to have a higher price than potential fair market value. The SEC helps to regulate this process and civil liabilities and administrative action can provide a disincentive to be overly optimistic about the security’s prospects.

Since 2005, there has been a movement towards reducing the information required from issuers prior to offering securities to the public.

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