Wednesday, May 6, 2009

What is Local Government's Role?

Below is the OpEd that I wrote on the current financial situation the city faces. The underling question I am trying to answer is—What is local government’s role?

I cannot understand those who justify raising taxes because our tax rate is lower than other localities or those who opposes tax increases on the basis that taxes are too high. The issue for me is not the level of taxes but rather the level of service residents expects, and as a community, we can afford. When that question is answered then we take on the issue of how we raise the revenue to provide that level of service.

Obviously there are those services—public safety, public works, and education that are a governmental responsibility. I also believe, and I know some would question, that as a community we do have an obligation to help those who are not in a position to help themselves. I have also justified support for the use of tax dollars when there is going to be a financial return on the investment or will save tax dollars in the future. And again there are those who would question government’s role in these types of endeavors.

So what is the legitimate role of local government? Are we to focus strictly on core services? What about human services or the investment of tax dollars for positive outcomes? Then there is the question of whether there is a governmental role in providing quality of life investments-- in the arts, museums and recreational opportunities?

I have to admit that I am a bit perplexed by today’s societies reliance, or maybe a better term being expectation, that government should take care of all these things. The question I would ask is where has the role of community support gone? Wouldn’t it be easier to write a check to those groups and organizations that you strongly support instead of giving the money to local government who is dealing with competing needs and wants? I don’t have answers to these questions but look forward to hearing from those who think they do.

How will Fredericksburg pay its bills?
May 6, 2009 12:35 am

CITY COUNCIL'S responsibility is to ensure a safe environment and provide public services while not becoming a financial burden on those we serve. Living this responsibility in the current economic climate is a challenge. To meet it we must understand the financial realities we face and be prepared to make some tough choices.

For the second year in a row the city budget has gone down. Even with additional cuts and reductions in work force, a 3-cent increase in the real estate tax rate and the use of $1 million in fund balance is recommended to balance the budget. The use of fund balance for operating expenses means we must increase revenue or reduce spending next year. And there are other challenges on the horizon.

The outlook on Fredericksburg's 'AA' bond rating was changed from stable to negative in part because of the "city's reduced financial flexibility due to substantial declines in general fund reserve levels." This could impact the cost of future capital projects like the new court facility. If we maintain the current timeline for the court project, it too becomes an issue because we will have to begin paying debt service on it within three years.

Like our neighbors, we are faced with declining personal-property revenue and must set a rate to maintain the revenue stream as well as recover lost revenue from the end of this year--the new rate would not go into effect until January. We cannot disregard the impact on this and future city budgets.

Nor can we forget that residents and businesses are also under financial strain during this economic downturn. Property values have dropped, with one result being foreclosures. Our retail base continues to shrink, affecting both employment and revenue. Residents have seen their financial investments drop, and many businesses are just trying to keep the doors open. For these reasons, Council must focus on core services, prioritize needs, and avoid expanding the budget and putting additional financial strain on those we serve.

Council members have expressed three concerns regarding core services in the current budget: 1) the cut to the school budget; 2) reduction in employee salaries; and 3) outside agency funding cuts. To address these concerns while minimizing the impact on the budget and the tax burden on residents, I proposed adding $300,000 to the school budget from two designated reserves, for schools and the regional jail, and a half-percent increase in the meals tax in an effort to restore employee salaries.

I proposed the meals tax increase because it hits disposable income and it doesn't put the entire burden on residents. I also suggested that we be conservative with the revenue projections. Should revenue come in higher than what is needed to restore salaries it could be used to cover potential shortfalls or reduce the need to use reserves.

In regard to outside agencies I proposed that we focus on community needs rather than wants. The staff identified organizations that provide important human services, such as the Senior Visitor Program, Boys and Girls Club, the Disability Resource Center, Legal Services, and the Council on Domestic Violence. Such organizations should be considered for full funding.
Savings within the budget have been identified and more funds from within the outside agency budget could be moved to fully fund human services programs. Sister-city programs, festivals, and museums add to the community but don't rise to the level of need. For those who feel taxes should be raised, here is an opportunity to provide more community support for these worthy causes.

A majority on Council are considering a different approach. Instead of increasing the meals tax they would prefer to increase the real estate tax rate an additional 1 cent, for a total increase of 4 cents. The rationale for this position is the possible negative impact of an increase in the meals tax on restaurants and a guaranteed revenue stream with the real estate tax rate.
Residents should be aware that the real estate tax rate will change with the new assessments to ensure projected revenues. The approach Council is considering puts an additional tax burden on home and property owners.

In regard to outside agencies the consensus is not to prioritize based on community needs but rather to add funding to all organizations. Because the added funds do not restore level funding, all organizations--including human services--will still be cut.

In addition, instead of just restoring 1 percent of the employee salary cut and meeting the needs of human services, discussions have begun on how to spend the remaining surplus revenues gleaned from the budget and the additional increase in the real estate tax rate.

I do not question the justification of some of the expenditures proposed by my colleagues. But in looking at the budget constraints that we face now and in the near future, current economic uncertainties, and the financial challenges faces by residents, the reality is we can't afford them right now.

What should your tax dollars be funding?


Larry G said...

Not sure if you are playing off of Don M's comments in the previous blog subject:

"I want to see the city provide only the core services (education, public safety, public works) out of the general budget.
Everything else is, IMHO, "optional" and should only be funded via public funds when the residents agree to and can afford it."

But at any rate.. you've asked the question which I'm quite sure is on the minds of most local governments when we have tough times and there aint no mo fat to cut....

Within each one of these core categories themselves we can also talk about what is "core" or not.

Are taxpayer-funded deputies a "need" at high school games that could charge for security?

Is the Governors School a legitimate taxpayer-funded "core" service or should it be a fee for service ( with the subsidized lunch folks attending on the taxpayer dime)?

Should Parks and Rec charge people so that the maintenance and operations are not taxpayer burdens?

All the above and much more are arguable points - and that's an understatement but safe to say that for every "free" service that has advocates .. that if nothing else it proves there is a demand for it as opposed to parents being poor on purpose so their kids can get free lunches or the like.

Some of this comes down to some folks like myself - to questions like:

How much does law enforcement in a locality cost - per capita?

And.. how does that compare to other places?

It does not mean that a particular locality should not fund the level of service that it wants but what it does do is tell you if you are at the top or bottom ..or in the middle.

If you are at the top or bottom.. questions about what is being provided (or not) "extra" compared to other localities or vice versa would if nothing else give one a better idea of what folks are paying for or not.

And that's the challenge for an elected leader.

If you don't know the answer and thus cannot respond to folks who say we spend too much or not enough..then you're basically reduced to counting heads at the next election (which I'm sorry to hear that you're apparently opting out of).

But I think an elected leader who can say for instance in response to a constituents challenge that say law enforcement spends too much and/or wastes money.. to be able to respond and say ... we spend less per capita on Law Enforcement than 60% of other localities ...if nothing else puts to bed claims along the lines of "we waste too much"... without anything more to the assertion than lips flapping.

I assume you're familiar with and have seen this:

"Comparative Report of Local Government Revenues and Expenditures"

I found it interesting....

Larry G said...

errata: I don't know where the date stamp comes from but I submitted my comments at 6:45 pm and it got time stamped at 3:46