If It's Broke, We Ain't Fixin' It

Before we delve into the broken budget and its broken appendage of an economic development engine, I wanted to put a fact on the table: the population of the City of Amsterdam grew. Not by a lot, but for the first time in a long while, the trend was not down but ever so slightly upward.

So what does have to do with budgets and economic development? Quite a bit.

We’re constantly bombarded with statements like “people are leaving in droves”, “people will leave in droves”,”the city is collapsing”,”no one is left”, and on and on.

And no where does this irrefutably, unquestionably wrong statements get challenged especially when it comes to taxes but only when it is city taxes. If city tax rates even climb marginally– as they will this year– the proclamations of imminent demise for the city erupt.

Again, the numbers disprove this unquestionably: if this was so, then why has population slightly increased? Most importantly, as a matter of economic reality, why would not marginal county or school district tax increases well above those levied by the city not create a similar exodus? Again, it is beyond dispute that as a proportion of total tax levy the county and school district exceed those of the city therefore a marginal tax rate increase of 1% for the school district is equivalent to a 2.1% tax increase for the city. In other words, if the economics to the argument were sound, the exodus and outcry to tax rates should be more than twice for the GASD versus the city.

So why not?

I think fundamentally it is a failure to address the real fundamental problems facing  the city– we’re exerting great energy and time trying to fix the wrong problems while leaving the real problems unsolved and unanswered. I’m not really sure why or how this has manifested itself, although my many prior posts posit some ideas as to why, and it’s really more important to focus on undoing and unwinding this broken approach.

As a useful illustration of broken approaches, I refer you to this Letter to the Editor in the MVI. It’s no secret that Diane and I agree on very little but I do agree with one of her statements:

It is unfortunate, but the current administration does not care what is said on the local blogs, websites and radio talk shows.

I’m not sure this blog is included in the roundup but I’ll flatter myself and outline why folks should follow the advice on this blog:

1) The Council needs to initiate a revision to the Charter restoring budget authority to mayor and making Controller an elected position. Let’s remind ourselves that the current Controller, even with his decades of accounting experience, barely won against a candidate with zero experience. In other words, the public cares little for experience and skills, so matters , at the voter’s own hands, could have been far worse on the current budget. Let’s not do this again.

2) The County IDA and City IDA have no record of bringing economic development to the city. Indeed, the County IDA rescinded its marketing help to the City IDA yet somehow, we have to rest our development efforts on a collaborative effort which simply does not exist and which to date has garnered no development in the city. And all this is viewed as “saving money” when we fail to drive growth and revenue to the city.

3) The CED position falls far short of the required approach to drive economic development to the city. The Budget Committe, even at $45K, is underfunding economic development. Yes, underfunding.

4) The Council and Mayor need to create an economic development engine similar to what I outlined here– a joint public/private entity to drive growth. This requires more funding, not less, and certainly not spearheaded by existing IDAs.

5) The city’s budget problems are a function of years of negative and no growth. No amount of line-by-line expense review will fix the financial challenges of the city without enhancing growth. Indeed, way too many resources are spent on the expense side and not enough on the revenue side.

6) In spite of efforts to downsize and plan for everlasting decline, the city manages to be treading water somewhat. By focusing on expenses relentlessly and scorning revenue side efforts, that effectively takes off the frayed life jacket the city now wears. Why not step back and say,”Wow, the city actually might be stable, how can we build from that?”

7) Remember how taxes were going up 55% and I claimed it was basically rubbish inspired by the local demand for political theater than actual analysis? As of today, it looks like the tax rate falls far short of 55% or the doubling and tripling of water fees promulgated elsewhere.

8) If you’re going to make parallels from municipal to private business, you should perform it properly. I know a few things about business and the funny thing is, I spend a lot of time fretting and focusing on customers and revenues. Maybe I don;t get business but all the successful business people I know focus on customers and revenues relentlessly. Sure, they worry about costs and expenses but financial management requires managing revenues and expenses. But no matter how fundamental revenues are to public and private sector, the local debate or policy hardly ever focuses on revenues. As the kids like to say , “epic fail”.

Of the things that make apoplectic, it is the utter disregard for revenue through attainable growth– yes, the city does have attainable growth opportunities–  while championing “running it like a business” when prescribing actions no business person would embrace.

That does it for me on budget 2012 so I’ll see you next year when we can repeat the process one more time.


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