Category Archives: Fiscal health

Don’t blame the Koch Brothers (for low gas taxes)

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After a variety of conservative groups (including some funded by the Koch brothers) sent a letter to Congress opposing gas tax increases, the liberal and urbanist blogospheres were chock full of stories like this one, complaining that Congress can’t reach a transportation deal because (in the words of grist.org)  “of the right-wing and Koch network’s coordinated national attack on transit.”  There is certainly an element of truth in these stories; indeed, conservatives don’t like tax increases and are often not particularly supportive of public transit.

But this narrative misses a huge fact: It’s not just the far Right (or even the not-so-far Right) that hates tax increases, especially gasoline tax increases. For example, a 2013 Gallup poll asked respondents if they “would support a state law that would increase the gas tax by up to 20 cents a gallon, with the new gas money going to improve roads and bridges and build more mass transportation in your state.” Only 29 percent of respondents would support the new tax. It wasn’t just conservatives or residents of conservative areas who were against the tax either; only 40 percent of Democrats, and only 32 percent of northeasterners, supported the tax hike.  Even in Massachusetts, voters recently voted to eliminate a law indexing the gas tax for inflation.

In sum, if you think we need to spend more money on transportation, don’t blame a cabal of conservatives, blame the American people, who believe (rightly or wrongly)  they can have good roads and good transit without paying more money for them.  We have met the enemy and he (or she) is us.

(Cross-posted from cnu.org)

Is Mismanagement the Cause of Legacy Cities’ Decline?

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When I was arguing with someone about sprawl in declining “legacy cities,” I ran into the following argument (loosely paraphrased): “The reason places like Detroit are declining isn’t because of sprawl but because of municipal corruption and mismanagement. Fix that instead of worrying about suburbia.”

At first glance, this argument seems appealing: after all, one former mayor of Detroit is in prison, and Detroit’s low level of public services is certainly highly suspicious.

Nevertheless, I am not sure the argument is provable, because there is no easy way to quantify mismanagement; thus, there is no objective way to verify that Detroit is any more mismanaged than more prosperous cities.

There appears to be little evidence that Detroit is unusually corrupt: more affluent cities and suburbs have had equally scandalous governments. For example, Atlanta has gained population for two decades in a row, despite having a mayor who served prison time for tax evasion and a major scandal in its public schools (involving over 100 teachers and principals who rewrote students’ incorrect answers on standardized tests).

Fast-growing suburbs have also had questionable leadership: Orange County, California declared bankruptcy in 1994 because of some foolish investment decisions and has a former sheriff who in 2009 collected over $200,000 in pension payments despite a felony conviction.

Detroit’s decline also should not be blamed on fiscal liberalism: although Detroit’s spending level in 2011 ($5,437 per capita in direct expenditures) exceeded the national urban average, it spent about the same amount as Atlanta ($5,408) and less than Nashville (just over $6,200) or San Francisco (which spent over $11,000 per resident) (NOTE: more details are available in this database). Continue reading →

The Second Life Cycle

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This is part of the ongoing conversation happening right now at the Memphis Boot Camp. 

by Charles Marohn

If a city like Memphis fails to make wise investments, it doesn’t go out of business. It simply stops doing the things it needs to do to support its people and it businesses. As a result, people suffer.

For cities, a public investment that builds wealth within the community can’t be evaluated over the short term. We must consider the multi-generational impact of the assets AND the obligations with everything we do.

(Cross posted from Strong Towns.)

Should Local Government Make a Profit?

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by Charles Marohn

The very notion is abhorrent to think about. Of course government does not make a profit. Government is about serving people. It is about maintaining streets and parks. It is about job creation and economic development. Local governments should not be in the business of making a profit.

Profit is for companies like Wal-Mart. A company like Wal-Mart has revenues and expenses. Their revenues must exceed their expenses, an accounting term that is called “profit”. We are comfortable with this.

What about an orphanage? Should an organization that cares for abandoned children – the most vulnerable among us – be concerned with making a profit? They have revenues. They have expenses. For the orphanage to stay in business, their revenues need to exceed their expenses. The orphanage, in short, needs to make a profit.

Cities have revenues. Cities have expenses. If a city’s revenues do not exceed their expenses, a city doesn’t go out of business. No. What happens is that things go bad. And people get hurt. Continue reading →