Tuesday, April 15th, 2008

Bureaucracy-2, Democracy and the Rule of Law-0

Democracy continued to take a beating in Indiana this week. Close on the heels of vetoing a school building project in Greenwood, the Department of Local Government Finance decided to deny a Westfield-Washington Library bond issue to build a new library. As in the previous case, there had been a publicly contested petition drive between the for and against sides, which the for side won handily, 55% to 45%. In a presidential election, that would have been a landslide. Nevertheless, the DLGF decided that they knew better than the residents of the city what to do.

There are four distinct problems with this trend in DLGF activism, which I’ll restate and highlight here:

  1. It is anti-democratic
  2. It subverts the rule of law
  3. It confuses two separate questions about a project under one measure of tax efficiency
  4. It damages Indiana’s ability to compete in the new globalized knowledge economy.

The first is very straightforward. I always thought the dueling petitions approach to publicly contesting a bond issue was hokey. A proper referendum, for certain types of capital projects at least, would be more desirable. Nevertheless, it is a reasonable proxy for the will of the people. Both sides had ample time to state their case and sign up voters. The No side lost, fair and square, plain and simple. For bureaucrats to overrule a democratically determined outcome like this absent a clear and compelling violation of some rule or law seems like overstretch to me. On matters of spending particularly, I think a high degree of deference should be paid to what the voters want. Clearly that was not the case here.

The second involves the rule of law. This is a more subtle but but in many ways more important point. I’ll quote from my previous “Why I Hate Historic Districts” posting.

What I consider perhaps the most important part of our political system, moreso than free speech or even democracy, is the idea of the rule of law. Now because of legal positivism and many other theories, this has become a rather meaningless term. So let me explain what it means to me. Fundamentally, the rule of law means that the power of government is executed only in accordance with general rules, that are published in advance, provide a sure guide to compliance, and apply to everyone equally. Contrast this with the rule of the commissar, where a government official has the arbitrary right to apply the standards he sees fit to a situation, leading to a situation where you don’t know if you are in compliance with the law or not until the commissar makes his ruling.

A great example of the rule of law is zoning. Whether you agree with zoning or not is another matter entirely, but at least it meets the test. If you own a parcel of land, it is easy to look up the zoning, where a set of clear rules exist which specify what uses are allowed on the land, what types of buildings, setbacks, etc. For uses that are compliant with the zoning of the parcel, going through the approval process is a purely administrative matter. The city can’t stop you from building something just because they don’t like it, and if they do, you can go to court and get an order to allow you to proceed. It is only when you want to do something outside of the zoning of the parcel, that is, when you are seeking a rezoning or a variance, that acceptance or denial becomes a more arbitrary matter, and that’s ok because what we are talking about is changing the law to accommodate the new use.

I strikes me that the DLGF is acting very much like a commissariat in this instance. The Star article doesn’t cite any rule that the bond issue broke, merely that the DLGF decided it was too expensive. That’s a completely arbitrary judgment. No citizen, corporation, or local government entity should be subject to that type of arbitrary second guessing by a bureaucracy. The DLGF should restrict itself very much to ensuring that the law is followed, not acting as a “daddy knows best” review board.

Beyond that, it is not clear to me that the DLGF’s rationale holds water. They cite the fact that cost of the bond was 148% above the average for a library construction project. Ok, maybe it is. But again, clearly the people supported this. What’s more, it isn’t clear that the increased cost is even indicative of inefficiency. There are two completely unrelated questions that need to be asked when determining the appropriateness of a public service. Namely, what service level is desired? and how can that service level be delivered most efficiently? If a city or town elects to freely decide they want a high caliber of services, such a nice library instead of a bare bones one, then it is likely to cost more, even though from an efficiency standpoint it might be one of the cheapest nice libraries around. There’s no indication from the article that the DLGF took this into account whatsoever.

Lastly, it shows what I highlighted in the Greenwood case as a dangerous case of the state imposing a least common denominator, el-cheapo, race to the bottom, one size fits all model on the state’s communities, hobbling their ability to compete in the new global knowledge economy. Again, I’ll quote myself, this time from my “The Importance of Aesthetic Design in Transportation Projects” posting.

Previously, Midwestern states could rely on participating in a sort of commodity market for manufacturing jobs. That is, the most important determinants of factory location were access to labor and the cost of doing business. This leads to a strategy of focusing purely on functional efficiency and minimizing cost. The problem is, in a commodity market, the low cost producer wins, and in a global economy with third world labor at pennies per hour, the Midwest will never be a low cost producer again, no matter how much cost cutting they do on highway design. This means a more differentiated strategy needs to be pursued.

The Midwest also has a particular problem: attracting talent. That is, its young and educated citizens are all too frequently electing to move elsewhere, and there isn’t enough inflow from elsewhere to make up the difference. This is a result of yet another trend: the mobility of people in our modern society. And while there is a circular effect, in today’s world it is more true that jobs follow people, people don’t follow jobs. One reason you see comparatively few life sciences and high technology jobs in the Midwest is the lack of a skilled labor force. The answer is not just to try to lure jobs, but also to try to lure the people.

Midwestern cities need to make people want to live in them. As I’ve argued before, no one who is bright, ambitious, and has big plans for themselves will want to live in a place where good enough is good enough. The new economy labor force is going to migrate to places where the civic ambition matches their personal ambition.

Indiana says it wants to have a strong life sciences sector for the future. But to have that you’ve got to have life scientists. Given that practically every city and state has said they likewise want to focus on life science, the competition is fierce. Is a top scientist or marketer or technologist or or other employee of these types of company going to want to live in a state where their kids have to attend school in a trailer and the community only has a bare bones library?

Skimping on these types of things is penny wise, pound foolish. In the sort term residential taxpayers might have lower bills. In the longer term, there won’t be a strong business tax base, and the residential taxpayers will suffer. Particularly when their kids skip town as soon as they can.

A Westfield official was quoted in the paper last year as saying, “We want nice stuff.” Westfield knows it has to elevate its game while it still on the leading edge of the growth wave. It knows it in a fierce national and international competition to lure talent and businesses, and has to supply the amenities they want. The state is unfortunately taking a more narrow view, one that ultimately compromises Indiana’s ability to be competitive.

Topics: Economic Development, Public Policy, Talent Attraction
Cities: Indianapolis

4 Responses to “Bureaucracy-2, Democracy and the Rule of Law-0”

  1. SpeedBlue47 says:

    While I agree that this Department of Local Government Financing works in a queer manner, I think you are wrong about several things.

    Your first and second points are actually intertwined, and I am surprised you didn’t realize it. Merrian-Webster’s Dictionary of Law states that the relevant sense of the phrase rule of law means: “government by law: adherence to due process of law.” State law is based on the State constitution which is superseded by the Constitution of the United States of America. Therefore, the issue you state about the rule of law not being follow is true — to a point. It does NOT seem to be following the current codified legislation, but if you look more closely, the culprit that is breaking the rule of law is not the DLGF, but Indiana legislation.

    Now I don’t know Indiana constitutional law like the back of my hand, but I happen to know the US Constitution pretty well. In that document, we establish that the country is in fact not a democracy, which is a form of government that the founders found distasteful and as vulnerable to tyranny as monarchy.(Quoting Jefferson: “A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine. “) We actually established a Constitutional federal presidential republic that has a democratic form of representation. Therefore, a law that was based on true “democracy” would be truly operating under the rule of men, which given the nature of democracy is apropros.

    I think the purpose of this agency is a good one. But I think it could be done better. Either a constitutional amendment(state) or a state law mandating that local budgets be balanced, that tax raises require a 2/3 super-majority , and that non-essential local spending be shown to on net balance the revenue spent to capitalize them over the course of the bond issue. Also, requiring at least 90 days before public hearing for projects over a set dollar amount would help with local governments out-of-control with taxpayers money.

    As far as competitiveness goes, the state of Indiana is not as competitive as it should be because of high burdens of taxation assessed at not only the state level, but also the local level. New Hampshire consistently ranks as a desirable place for high-tech companies and their employees despite the climate, remoteness of most of the towns, lack of amenities, big marketing money, etc. This is because it has no income tax, inventory tax, state sales tax, and the municipalities are extremely tight-fisted with taxpayer funds and therefore have low property tax rates(the Town Hall structure work well in most of New Hampshire due to the small town nature of most of the state).

    I agree with your Pecha Kucha presentation that cities should attempt to get the best with their dollar. But I think they should look for a way to get a better product, or at least more iconic product, with the same funds – not necessarily the best with the more. Good design doesn’t have to be expensive, but given the structure of how infrastructure is paid for, few officials have incentives to look for the well-design, budget conscious solution. Cities also rarely haggle to get the best prices from suppliers beyond the bidding process, which is obviously flawed. With the library project being discussed, I don’t know the specifics of Indiana law regarding expenditures on non-essential government services. Maybe we should instead look to find new ways to fund these sorts of projects.

    An example is the library. Maybe instead of government largesse, allow the people to support the library themselves. Charge $10 a year to check out books. Allow a coffee shop or cafe to lease part of the space to offer the wares to the library patrons. Offer special memberships for extended internet usage for a monthly fee. Take endowments from surrounding businesses and the developer, selling it as a way to increase foot traffic in the area. There are so many way to build a library and fund its operation, that this should not be an issue. I always say that you vote with every dollar you spend.

  2. Connie says:

    Had the same thing happen recently with the Elkhart Public Library bond to replace the two oldest branch library buildings. No remonstrances, tons of local support, definite need, and Commissioner Musgrave of the DLGF denied it last month because the Pres of the County Council did not support. (“We don’t know enough yet about how these kinds of things will impact other unit revenue under the new reform package.”) She also cited that percent average over on that one, but when you looked at the numbers carefully she was looking at total bond debt per capita, and that percentage is how much the proposed bond is above the median of that figure. Frustrating time to be a public service administrator.

  3. David says:

    Speedblue, you wrote an absurdly large number of words, and said very little. We don’t need to hear the middle school civics lesson that the US is a republic, not a democracy. What The Urbanophile was referring to was the fact that we have a strong democratic tradition. That is, the will of the people is to be the foundation of our government. A distant executive-branch bureaucracy is subverting the will of the people.

    Railing against “government largess” is pointless when the people who pay taxes to the government in question clearly want to spend the money to have nice things. If the rabid tax-cutters had their way, I can imagine every city in Indiana looking like Muncie. If you’ve ever been there, you know that’s a sad prospect (and I hope for your car’s sake you avoided the potholes).

  4. Lord Peter says:

    I want to echo David’s point, and additionally note:

    (1) Jefferson never said the quote that you (and many others) attribute to him.

    (2) “Democracy” is not the same thing as “pure democracy,” and it’s always annoying when people (always libertarians, IME) use someone’s use of the term “democracy” to provide a lecture on republicanism *as if* the person were somehow under the mistake belief that we lived in a pure democracy. Here is a definition of “democracy” from Merriamwebster.com:

    “a government in which the supreme power is vested in the people and exercised by them directly or indirectly through a system of representation usually involving periodically held free elections 2: a political unit that has a democratic government”.

    When people say that we live in a “democracy” or that something is or is not “democratic,” this is what they are getting at.

    (3) I had some trouble following the rest of your post concerning the federal constitution and the state constitution – specifically, I’m not sure what Indiana legislation you believe is unconstitutional.

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