Diversity of revenue income does not insulate any jurisdiction from problems of a recession.
If fewer people have jobs, fewer people are paying income taxes. Those same people are also spending less, so sales tax revenue goes down. Just as sure as these unemployed people are up against a wall, they will also stop paying their property taxes, particularly if they are in the process of foreclosure and no longer paying their mortgage.
For example: Hawaii has a sales tax, an income tax and property tax, yet their two-year budget was in the red to the tune of a few billion dollars. That trickles down to the city level where fewer dollars make their way.
As I was leafing through the New York Times this weekend I came across an article that, in essence, detailed how cities were losing state and federal aid just when they need it the most.
From New York to Minneapolis, Philadelphia to Los Angeles, cities are suddenly coming up short when they need to perform essential maintenance services such as filling potholes, supporting police officers and keeping libraries open.
The answer? The United States Conference of Mayors is calling for a speedy end to wars in Iraq and Afghanistan. The basis for this request: if the U.S. is burning through Benjamins building bridges in the Middle East, perhaps it would be more sensible to put that money to work here, in this sprawling nation.
They have a point, at least on principle. But I can’t help but feel that these budgets are not one and the same.
The budgetary picture that cities rely on to run operations is a complicated tangle of various income streams. I don’t want to ignore that fact, but looking at the issue from 30,000 ft., it seems to me that a city should be policing its streets and keeping its libraries open on its own dime.
Here’s a quote from the Times article, by Lansing, Mich. mayor Virg Bernero:
Our cities — and it ain’t just Lansing — our cities are stumbling, many of them, on the edge of receivership. We rely on property taxes. The silent scream that is happening out there is this continued foreclosure crisis. The unemployment rate is unacceptably high. But the foreclosure rate is outlandish. We rely on those property taxes, and they are in steep decline.
No one denies that an economic downturn spells trouble for anyone trying to balance a budget. But when did cities fail so spectacularly at diversifying their revenue streams?
What’s even more concern is a lack of flexibility (and transparency, for that matter) among these cities with regard to prioritization of services. Bernero added in the Times report: “I’m providing 2011 services with a 2001 budget.”
An unnerving statement, because the underlying assumption in it is that modern services require a bigger budget. In 2010, Lansing had just over 114,000 residents; 10 years prior, the city had 4 percent more residents. (The city has been on a decline since the 1970s, from a high of 131,000 residents; in fact, its greatest population drop happened in 2000.)
I’m no mathematician, but it seems to me that the city is spending much more per capita than it used to. And while I have little doubt that Lansing is a safer, better place to live in 2011 than in 1970, you’ve got to wonder where the wiggle room in the budget has been all these years — and moreover, why cities are increasingly reliant upon the state or federal government to survive, when they generally count most of their state’s taxpayers as residents anyway.
Simply: why are we trying to provide 2011 services? Why not provide efficient 2012 services? Many of the topics we write about on SmartPlanet apply technology to solve problems. Sounds expensive, but whether for solar panels or transit fare systems, many of the business models for these infrastructure remedies are being structured in revenue sharing agreements, in which the city pays little to no upfront cost.
I’m a firm believer in spending money to make money, but it’s clear to me that cities need to stop building their budgets around federal and state handouts — or a single revenue stream, for that matter — and treat that money as a temporary windfall, not a right.
When it comes to building bridges or other essential infrastructure, state and federal governments should certainly offer financial support. That’s part of what they exist for. But the city government that waits expectedly for a gift is one that risks burning their constituents when one isn’t delivered.
Illustration: Joe Lertola for TIME
