Tag Archives: budget

Considering water rates and systems in the suburbs

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American water is pretty cheap but rates can vary quite a bit across suburbs:

Among the primary determinants of cost is the source of the flow. Water drawn from the ground generally costs less — in Warrenville, for example, residents pay just $16.88 per 8,000 gallons for the well water on their utility bills — while those who receive Lake Michigan water, brought in via pipeline and sold by the DuPage Water Commission, are billed at higher rates. Usage of 8,000 gallons in Naperville brings a customer bill of $58.69, according to a rate analysis done by the city. That’s substantially less than the $75.96 average fee paid by all of the communities on the commission’s lake water line…

Elgin residents pay about 25 percent less for their fresh water than people billed in Aurora, where the fee for wastewater treatment is significantly higher as well…

The city plugs its latest numbers into that model to determine water rate increases. The philosophy essentially matches the rates customers pay with the cost of providing the service, said Dave Schumacher, superintendent of Aurora’s water production — not unlike the way other major cities in the region calculate their rates…

The needs of each water system also play a role in setting its rates. Aurora’s 100-year-old pipes are taken into account when the city is projecting its upcoming costs…

A fixed fee also is included on most residential bills. In Aurora, the availability fee comes to $11.65 every other month. Elgin collects $8.54 monthly, and Naperville adds a $5.05 customer charge every month.

So there are a number of variables at work. However:

1. How many of these suburban balance their budgets each year?

2. This reminds me of the mid to late-1800s where many suburbs near major cities wanted to be annexed because infrastructure costs for emerging technologies – like sewers, electricity, natural gas – were prohibitive. Yet, once these prices dropped so did annexations because communities could do it themselves.

3. Does each community need its own system or might it be cheaper to combine some? Why not have a combined Naperville-Aurora water system? This would go against the idea of local control in the suburbs but does it really matter for water and electricity if having more customers in a single system could make things cheaper.

4. I’ve seen several commentators suggest water infrastructure in many municipalities isn’t in that great of shape, particularly in older communities. Will there be a point where significant money will need to be put out at one point to improve such systems? If so, will it be paid for by bonds or other means?

A hard look at Washington, DC’s economic boom

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In light of the recent fiscal cliff showdown, Annie Lowery at the New York Times writes a long profile on “Washington’s Economic Boom, Financed by You“:

Billions in federal spending, largely a result of two foreign wars, were pouring into the local economy by the early 2000s. Then came the housing bubble. But after it burst, a remarkable inversion occurred: as the country withered, Washington bloomed. Since 2007, the regional economy has expanded about three times as much as the overall country’s. By some measures, the Washington area has become the richest region in the country. It is now home to the three highest-income counties in the United States, and seven out of the Top 10.

The growth has arrived in something like concentric circles. Increased government spending has bumped up the region’s human capital, drawing other businesses, from technology to medicine to hospitality. Restaurants and bars and yoga studios have cropped up to feed and clothe and stretch all those workers, and people like [developer] Jim Abdo have been there to provide the population — which grew by 650,000 between 2000 and 2010 — with two-bedrooms with Wolf ranges.

Despite its recent success, however, the article suggests that “Peak Washington” is already here, that there is nowhere to go but down:

And yet there is a sense that the capital is headed for a slowdown. Among the Pentagon’s plans to cut nearly $500 billion over the next decade could be reductions not only in materiel but also to all manner of support staff. The homeland-security budgets look certain to see significant reductions, too. One recent estimate noted that more than two million jobs would be at stake if the sequester comes into effect.

Lowery suggests that a tempering of expectations in metro DC would, on balance, be a good thing:

There’s something unsavory about having a capital city doing outrageously well while the rest of the country is limping along — especially when its economy is premised in part on capturing wealth rather than creating it.

To the extent that DC’s economy is indeed “premised in part on capturing wealth rather than creating it,” I agree.  Nevertheless, Lowery cites plenty of evidence that “creative” (as opposed to “capturing”) work is being done in metro DC (“Google has opened an outpost….LivingSocial owns a huge, hiply decorated space….Audi, Intelsat, Hilton Worldwide and dozens of other firms have opened up offices or moved their headquarters to the region”).  Presumably, every urban area “captures” some of its wealth and “creates” some.  How much “capture” is too much, thus making a whole region “unsavory”?

Along these lines, I’m also intrigued by the quote from Virginia Congressman Jim Moran (D), who observes that “Maryland got the life sciences [centered around the National Institutes of Health in Bethesda, MD], and Virginia got the death sciences [centered around the Pentagon in Arlington, VA]….Of course, NoVa [Northern Virginia], given the two wars, it’s done even better than suburban Maryland.”  Does this suggest that DC’s Maryland suburbs are less “unsavory” than DC’s Virginia suburbs?  Or does it only matter that the National Institutes of Health and the Pentagon both spend tax revenue, making them equally offending because they “capture” the country’s wealth?

How suburbs deal with the loss of a major big box retailer

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Big box stores can provide a lot of tax revenue so when a big box store leaves a suburban community, it can be a big blow:

The unexpected closure — it was announced in April and the store shuttered in May — forced village officials to approve a series of last-minute budget cuts totaling $216,000.The largest savings came by cutting hours for part-time firefighters, a move that limited response times out of one of the village’s two stations. West Dundee also moved its 54 employees to a cheaper health insurance carrier, reduced hours for part-time and seasonal employees, eliminated a community service position in the police department, canceled a National Night Out event and decided to hold fewer board meetings…

But Rolling Meadows officials found themselves scrambling in January 2010 when Sam’s Club abruptly closed after eight years in business, City Manager Barry Krumftok said.

The closure meant the loss of about $600,000 in various annual revenues from the retailer — nearly an 8 percent loss to the general fund…

The city responded by eliminating two part-time jobs and four full-time positions among the police department’s civilian staff, delaying the hire of a finance director, eliminating holiday decorations and glow necklaces for kids at the tree-lighting ceremony, ending a program reserved to commemorate employee and volunteer milestones, and holding off on painting its historical museum, digitizing city records and parkway tree replacement, removal and trimming.

In many cases, big-box stores leave one town to build a bigger, better store just out of the taxman’s reach.

To paraphrase a common saying, if you live by the big box store, you can also die by the big box store. I can see why communities would want big box stores since they generate tremendous tax revenues but at the same time, communities would prefer to have a diversified economy where a single employer or firm doesn’t control a sizable portion of the municipal budget. This hasn’t just happened to suburbs reliant on big box stores; it has happened to communities reliant on single factories or industrial firms that might be prosperous for years or even decades but when business dries up, the community doesn’t have much recourse. It doesn’t sound like the big box stores are as big of a loss as some factories to some towns but a 5-10% revenue loss can be huge, particularly in a down economy.

Once the initial budget adjustments are made, then the loss of the big box store becomes perhaps even more problematic for smaller communities: can they find someone else to lease or buy the property? Should the community continue to pursue big box retailers or does it pursue different directions? In an economy that in recent years has been built on a consumer economy, many suburbs will probably redouble efforts and continue to pursue more white-collar, high-tech jobs but there are not enough of these to go around at the moment.

Claim: those new municipal fees are here to stay

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More communities are charging residents more fees and they probably won’t be rescinded anytime soon:

As the nation’s cities attract an ever-growing share of the U.S. population, their capacity to honor service commitments, build and maintain necessary infrastructure, and meet their financial obligations will have a profound effect on local and regional economies, public safety, education, and overall quality of life for hundreds of millions of Americans. But U.S. cities are in a bind. Faced with a requirement that they balance their budgets every year, they have borrowed a page from the airline industry: increase fares (i.e., taxes) just a little if at all, and start charging big time for the “extras” that passengers (i.e., taxpayers) want. In the airlines’ case, it’s bag fees and the like that are going up. For cities, it’s charges for little things like, say, putting out fires…

In an annual survey [PDF] administered by the National League of Cities, more than four out of ten cities (41 percent) reported last year that they were increasing service fees in an effort to stanch the bleeding in city budgets. For the last two decades, when asked to identify a revenue action that their city had adopted in the previous year, city finance officers overwhelmingly selected “increase the level/rate of user fees or charges” and “impose new user fees or charges.”

Much like Newton’s Third Law, as cities raise fees, they decrease their reliance on taxes to support general municipal services. Back at the start of World War II, city taxes on sales, income, and property amounted to some 89 percent of all revenues cities raised (excluding aid from state and federal governments and borrowing or debt), with property tax generating 78 percent of “own-source” revenues. Fees amounted to some 11 percent. Today, nearly 40 percent of “own-source” revenues are derived from fees on services, and 60 percent from all other taxes (and less than 30 percent from the property tax). In other words, we have seen a sea shift over the last three generations from a city fiscal system that collected taxes—almost all of which were property taxes—to pay for the bulk of municipal services to one that identifies individual beneficiaries or users of services who can then be assessed a fee (e.g., fire suppression in Mondovi).

I wonder about several pieces of this:

1. What about the declining federal and state support for communities? If the federal government and individual states have less money themselves, there is less to pass along to communities as well as other taxing bodies.

2. The share of revenue from property taxes has decreased over time and I wonder how much of this is tied to an increasing number of taxpayers arguing against paying more property taxes. This has been gaining steam since the 1970s (see more about Prop 13 in California) and limits what communities can collect. It sounds like more communities see fees as a solution but is this because their other options are limited? Of course, municipalities aren’t the only ones who get money from property taxes as there are others who take more of this pie.

3. It would be interesting to see these numbers alongside figures about the size of municipal budgets and what the money is spent on. As fees increase, where is the money going and how much is it contributing to or paying for larger budgets? Some of this increase could be hard to stop; communities do age, infrastructure needs replacing, and the costs of services tend to go up.

Lakoff on Obama: a progressive moral vision plus systems thinking

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George Lakoff has an interesting take on President Obama’s April 13th speech. While the speech was ostensibly about the budget, Lakoff argues that Obama was making two larger points:

1. President Obama was laying out a progressive vision of democracy. Here is how Lakoff sums it up:

The basic idea is this: Democracy is based on empathy, that is, on citizens caring about each other and acting on that care, taking responsibility not just for themselves but for their families, communities, and their nation. The role of government is to carry out this principle in two ways: protection and empowerment.

Obama quotes Lincoln: “to do together what we cannot do as well for ourselves.” That is what he calls patriotism. He spotlights “the American belief… that each one of us deserves some basic measure of security… that no matter how responsibly we live our lives, hard time or bad luck, crippling illness or a layoff, may strike any one of us.” He cites the religious version of this moral vision: “There but for the grace of God go I.” The greatness of America comes from carrying out such moral commitments as Medicare, Social Security, and Medicaid.

It would be an interesting public discussion to have over whether these three programs are a moral commitment. I suspect that a good number of Americans would see it this way but this is not the typical angle taken in public discourse.

2. President Obama highlighted the role of systems and how a budget cannot be isolated from other important needs and goals in society:

President Obama, in the same speech, laid the groundwork for another crucial national discussion: systems thinking, which has shown up in public discourse mainly in the form of “systemic risk” of the sort that led to the global economic meltdown. The president brought up systems thinking implicitly, at the center of his budget proposal. He observed repeatedly that budget deficits and “spending” do not occur in isolation. The choice of what to cut and what to keep is a matter of factors external to the budget per se.

Long-term prosperity, economic recovery, and job creation, he argued, depend up maintaining “investments” — investments in infrastructure (roads, bridges, long-distance rail), education, scientific research, renewable energy, and so on. The maintenance of American values, he argued, is outside of the budget in itself, but is at the heart of the argument about what to cut. The fact is that the rich have gotten rich because of the government — direct corporate subsidies, access to publicly-owned resources, access to government research, favorable trade agreements, roads and other means of transportation, education that provides educated workers, tax loopholes, and innumerable government resources taken advantage of by the rich, but paid for by all of us. What is called a “tax break” for the rich is actually a redistribution of wealth from the poor and middle class whose incomes have gone down to those who have considerably more money than they need, money they have made because of tax investments by the rest of America…

Progressives tend to think more readily in terms of systems than conservatives. We see this in the answers to a question like, “What causes crime?” Progressives tend to give answers like economic hardship, or lack of education, or crime-ridden neighborhoods. Conservatives tend more to give an answer like “bad people — lock ’em up, punish ’em.” This is a consequence of a lifetime of thinking in terms of social connection (for progressives) and individual responsibility (for conservatives). Thus conservatives did not see the president’s plan, which relied on systemic causation, as a plan at all for directly addressing the deficit.

This sort of systems thinking sounds like sociological approaches to the world: the complex social realm can be difficult to understand and predict but settling on simple (often individualistic) explanations leaves much to desired.

I can imagine that conservatives might find holes with Lakoff’s argument, not the least that all of this explanation still doesn’t say much about how the United States could deal with its budget issues. But Lakoff highlights the cultural ideas and values surrounding political debate: speeches and political activities may be about budgets and practical matters but there are underlying values that guide such actions.

Millennium Park: an example of how growth machines work

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Within a story about whether Chicago will be able to move forward with large development projects in the next few years, a historian describes how Millennium Park, a significant undertaking, came about:

Indeed, as Chicago ponders its future, it may be useful to view Millennium Park not as a triumph to be repeated, but as a shining exception, one that occurred only because the stars aligned and Daley had created order in Chicago’s turbulent political universe.

After years of fruitless talk, the story goes, the park got its start in 1997, when the mayor peered down from his dentist’s office along Michigan Avenue and decided to turn that dusty railroad yard in Grant Park’s northwest corner into an urban showcase.

By then, Daley had been mayor for eight years and had consolidated his grip on power. Key figures in the park’s creation, including major donors like the Pritzker and Crown families, were “in many ways indebted to, dependent upon and allied with the mayor,” Gilfoyle said. They wanted to please Daley, he explained, partly because their real estate and other holdings might benefit from future city action.

All roads, in other words, led to Daley. And the economic winds were at his back. The late 1990s dot-com boom gave the park’s chief fundraiser, former Sara Lee Corp. CEO John Bryan, enormous wealth to tap. Without it, Gilfoyle said, the 6-year-old park might never have happened.

Today, with such favorable conditions a distant memory, Chicago’s builders are scrambling to find new paths to get things done. One is to push projects ahead step by step rather than in a single, expensive rush, as at Millennium Park.

This sounds like a classic description of growth machine development: the mayor wants something to get done, major donors and partners are sought and found, and a large and impressive park is able to be built on a spot that had been an industrial location/blighted site for years.

This is an interesting example considering the context of the rest of the story: Chicago will have a new mayor (with less consolidated power) and also is facing significant budget issues. Growth machine politics may not be possible at least with the new mayor for a while though other power brokers could emerge. Growth machines are also more limited when money from businesses and local governments is scarce.

Another question one could ask after reading this story: how unusual was it for both Mayor Daleys to undertake so many significant projects? Around Chicago, they are known for having significant building legacies. Are there mayors in other major cities with similar records or are they truly unusual?

A conundrum: Americans see entititlement programs as growing problem but don’t support available solutions

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Gallup reports that a majority of Americans see entitlement programs, such as Social Security and Medicare, creating large financial problems for the country in 25 years. Yet, a poll from several months ago showed that Americans did not support some of the main options for helping the finances of Social Security developed by the Congressional Budget Office.

I always find this to be an interesting situation: people agree something should be done but the available options do not appeal to a majority. Looking for and then applying patterns from situations where  solutions are developed would seem to be worthwhile. Are there sociological studies that address this?

Whoever can find a way through this will be deserving of lots of credit. Complicating the issue is the generation gap: issues like Social Security and Medicare tend to fire up older voters, who vote in larger proportions already.