Thursday, June 27th, 2013
Occasional Urbanophile contributor Robert Munson has talked about how Chicago Mayor Richard M. Daley was among the first to recognize that there was a “taxpayer strike” in America. That is, given the breakdown in the social contract in our cities, taxpayers were increasingly unwilling to pour money down a rat hole.
Localities have also been in a fiscal vice as their tax receipts have collapsed thanks to the Great Recession and especially the decline in housing values, while at the same time the chickens are coming home to roost from the accumulated unfunded liabilities that had been racked up from sweetheart pension deals and the like.
And state and federal retrenchment have cut into municipal budgets. Aid to municipalities is easy to cut. Also, it’s easy for states to make municipalities bear the brunt of tax caps and other disempowerment items since living with them is Somebody Else’s Problem for state office holders. And most states radically under-empowered local governments to begin with.
Combine these and there’s little room to maneuver for many cities and mayors. They are hemmed in on all sides. So what do they do? Unsurprisingly, they’ve increasingly turned to gimmicks, especially in bigger cities that have the talent firepower to dream them up.
Exhibit A is parking meter lease in Chicago. It generated $1.2 billion in “free money” for Mayor Daley to use to paper over deficits, but at a huge long term cost. We’ve seen all sorts of other “public-private partnership” type deals that accomplish similar things. Many of these are not per se problematic – I’m a fan of privatization done right, for example – but the details can be troublesome when you examine them.
One common complaint I hear in places like Chicago and Indy is the abuse of Tax Increment Financing (TIF). Without a doubt TIF has been abused in a number of cases. But what critics fail to take into account is that TIF is one of the few tools left in the civic toolbox that can actually raise real money.
Let’s say we are all opposed to gimmicky privatization deals and TIF to raise money. Now let’s ask the question: how are our cities supposed to pay to rebuild their obsolete infrastructure like pothole-ridden streets that, even if they were already pristine, don’t meet modern 21st century demands? This is a real liability of the city, accrued over the years as previous generations failed to keep up with maintenance and such. Absent gimmicks, how is this supposed to be funded? And if the answer is don’t fund it, then how is a completely run down, dilapidated city with creaky services supposed to retain choice consumers who can easily pull up stakes and move to a new suburb or other part of the country that doesn’t have these problems? It’s easy to criticize, but solutions are needed.
Munson thinks that we need to have accountability reforms so that the public will be convinced to open their wallets and invest. I agree this is critical. I personally have no desire to pour any more of my money into the local treasury until I can see that I’m going to get some return on it. And there’s evidence that the public will spend if you can demonstrate that. Capital bonds and actual tax increases for things like schools, transit systems, stadiums, and even cultural facilities have frequently passed across America when there’s assurance that the money is ring-fenced. When people know that they can vote for a tax and get something tangible for it, even something as dubious as a stadium, they can be convinced to vote for it. But more money for fewer and worse services is a loser every time.
The problem is that the state controls the fiscal levers. Therefore there’s no guarantee that even if a city got its house in order, it would even be permitted to ask its residents for more money. Also, too many local leaders are beholden to special interests and so are unlikely candidates to deliver reform anyway. Paddy Bauler eloquently summed up this mindset when he famously said, “Chicago ain’t ready for reform.” Sadly, this remains true in all too many places.
So while the use of gimmicks may be distasteful (and even destructive in the long term at times), we should expect more of it since the incentives are all aligned to produce this outcome. Those cities that do manage to reform, and get state support for the type of legal framework the need to operate (as called for in The Metropolitan Revolution) will be the ones that end up with long term success.