Sunday, October 16th, 2011
State and local governments from coast to coast are making major budget cuts as they grapple with plunging revenues and years of deferred investment and maintenance. One refrain of some has been that just like with household budgets, government simply cannot spend more than it takes in. Thus painful cuts are the only option.
There’s no doubt this is true in the short term. Clearly, we have to make adult decisions about priorities and can’t spend money on everything, no matter how much shrieking about the end of the world every single special interest group on the planet makes when they are asked to step up to the plate and do their fair share to balance the budget.
But let’s take this household analogy further. Let’s say a family is forced to make major cuts, to the point where they have to start cutting back on maintaining their car. They can’t afford oil changes, tires, brakes, etc. when the old ones wear out. All they have money for is food and shelter. In a sense it would be true to say that they don’t have money to spend on oil changes. But if you can’t afford to pay to maintain your car, what you’re really saying is that you can’t afford the car, period.
Similarly for cities, if they can’t afford to maintain their infrastructure, run decent schools, or provide any services other than basic public safety (and often even having to make cuts in that), what they are really saying is that they can’t afford to be a city.
That’s the situation too many places find themselves in. They can’t afford to be cities, and so are really in the process of an extended civic going out of business sale. As with a company that has been issued a going concern warning by its auditor and is about to be delisted from the stock exchange, people smell the whiff of death about it, so it doesn’t attract many customers or investors. Which is to say that people aren’t moving there – they are moving out if anything – and businesses are staying away. Who wants to stake their personal or financial future on a place that might not have a future of its own?
This is something merely balancing this year’s budget isn’t going to fix. What’s really needed is to restore investor confidence. That’s going to take more than balanced budgets. Just as most companies don’t fail because their costs are too high, but rather because of the forces of creative destruction, excess leverage, poor product positioning, quality and customer service issues, a bad strategic concept, etc., most cities don’t fail because their budget’s too big, but because they are no longer relevant to the marketplace. They are selling an inferior version of a product that customers no longer want to buy.
For too many struggling cities, especially former industrial towns, even if their current service levels could be delivered for a budget of zero that wouldn’t save them.
The real issue with many cities is that their leaders spend too much time grappling with short term issues, particularly budgets in the present day, and not nearly enough time thinking about where the trend line is taking them and what they need to do to drive a materially better outcome in the future.
That’s the challenge – and a hard one. Cities with long standing enlightened leadership and populations – like Columbus, Indiana, for example – have been able to stay strong by staying ahead of the curve. For those where the rot has already taken hold, it’s a far greater struggle. This applies not just to regions, but also struggling suburbs and inner city neighborhoods even within thriving metro areas.
By all means budgets have to be balanced and spending bloat can kill you. Fiscal and operational matters must be attended to. But until these places take a hard, spare no illusions look in the mirror and develop a compelling reason for a person or business to hitch their fortunes to these places instead of thriving ones elsewhere, too many older cities will continue on the slow road to oblivion.
This post originally ran on September 30, 2010.
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