Budgets, Taxes, and Other Fun TopicsPosted: May 30, 2012
Anyone who knows me, knows I have a lot of opinions. I’ve established this as a matter of record, by public commentary at meetings, comments on online publications, and most of all, by publishing a blog since 2009 with observations and opinions about Ann Arbor’s civic life.
A wise political adviser would probably not have recommended this behavior as a basis for running a political campaign. In fact, one person advised me to lock the whole thing (the blog) under a password. But since I’m on record with Local in Ann Arbor on a number of subjects, here is where I step up and take responsibility on some difficult subjects that I’ve written on in the past. I’ll also set out my positions on those subjects.
Budgets are boring. Budgets are essential. The budget process that every elected body undergoes each year is often frustrating, usually incomprehensible to almost everyone but those obligated to dive into it, and is the major job of government. The budget is the actual embodiment of the policies that will direct what our government does for us. In the budget, important programs come to birth, live, and die. As a veteran of many budget cycles (as a county commissioner), I’ve gotten to have an understanding of a few of the “tricks” and a philosophy of how it should be done.
Note: This year’s City of Ann Arbor budget deliberations fit the description. Congratulations to the Ann Arbor Chronicle for doing a heroic job of summarizing the discussion. (I’ll read it in detail later, honest.)
Here are the essentials of my budget philosophy:
- Take care of business first: make sure that there is enough money to conduct the ordinary and expected business of government. This includes services and functions mandated by law and also “basic” services, which in a city include road maintenance, trash removal, fire and police protection, and water utilities. This is my first priority.
- Keep the cost of government itself within bounds: administrative and technical departments should have adequate funding to operate properly, but watch the natural tendency to spread out, buy the latest equipment, hire consultants or more staff than necessary. The amount spent on these departments should not be disproportionate to the rest of the city’s operations. Council should not waste money on its own activities, either.
- Keep promises made to voters: Dedicated millages and fees should be used in a responsible way to fulfill the purposes for which this money was collected, not carved out to support different programs.
- Don’t spend money based on the most optimistic future scenario: I wrote about this concern in a blog post in which I related some of my frustrations with financial decisions made by Washtenaw County (which did, ultimately, turn out badly). Here is part of what I said:
Second, decisions have been made that seem to depend on wishful, or worse, magical thinking. This is what I also refer to as linear or “what could go wrong?” thinking. For example, during the housing boom, the county budget director repeatedly and yearly came out with budget forecasts prefaced with the statement (in writing!) that “the best predictor of the future is the past”.
On the one hand, we must not be paralyzed with fear and must plan for the future. But those plans should evaluate risk and should not depend on assumptions that, for example, Federal funding will be obtained to pay for most of the cost, or that the economy will expand in a continuous upward trend.
- Avoid creating a “debt mountain”: Many communities around the country (and a couple in our own county) have found themselves in dire trouble through incurring debt for what seemed a good idea at the time. May I just mention the City of Ypsilanti? And Sylvan Township is another example of disastrous misadventure (a story I hope to tell one of these days). Ann Arbor has so far avoided outright disaster, but the trend is bad. The figure to the right was prepared in 2010 and needs to be updated. (The curve did not continue upward after that year.) I consider taking on debt for large projects to be one approached with a good dose of caution, and only through necessity. I’ll be very skeptical of any scheme which requires bonding for large capital projects, of public-private partnerships that commit the city to expenditures, and of spending general fund money for studies leading to such projects. I’m looking at you, Fuller Road Station.
- Money is fungible: We hear a lot about “buckets”. But except for restricted funds that are dedicated, for example, to a ballot measure-approved activity, or are grant funds awarded for a particular purpose, money can be moved around from fund to fund, and should, when the circumstances require it. It all depends on the priorities you have set. I’ll be open to re-examining the current organizational structure, including some enterprise funds, for budgetary purposes, especially when that structure does not serve our priorities.
Last year, upon hearing of some draconian cuts proposed by the former (and unlamented) city administrator, Roger Fraser, I wrote three posts proposing that Ann Arbor should adopt a city income tax. (Post I Post II Post III) These are still worth reading if you would like to dig really deep into taxation as a subject, and I stand behind my statement. But if you’ve read Local in Ann Arbor regularly, you’d have noticed that I went silent on this subject. That is because I no longer support a city income tax at this time.
One reason is, simply, that the city’s finances appear to have improved slightly. The dire consequences being proposed have mostly not come to pass (except for severe cuts in police and fire protection).
Other reasons for my change of heart are the changes in Michigan tax law.
- The credit for income taxes paid to cities has been removed.
- Most retirement income is now taxable by the state.
Both of those changes mean that a city income tax would have a much broader impact on our citizens. Previously, any taxpayer could recoup part of the city tax through the state tax return, and persons living primarily on retirement income would actually see a lower tax bill (because property taxes would be lower). If we were to entertain the idea of an income tax now, there would need to be a new study that measured impacts on different classes of taxpayers.
But finally, my revised position is partly guided by concerns about the judgment of the current city council majority. To be fair, several of those who pushed a new expensive (and ugly) city hall addition onto the city are no longer on council. But I’m uneasy about some future possibilities.
- They seem to be leaning toward supporting a project to build a new train station on Fuller Park.
- They appear to support the proposed transit plan that includes a highly capital-intensive connector system.
- They stubbornly continue to insist on the Percent for Art program.
- There are other straws in the wind, too poorly defined to go into right now.
In other words, I’m not sure that the current council should be given a new pot of money to spend.
UPDATE: An issue looming ahead is the possible repeal of the personal property tax by the state legislature. This is a significant point of policy as Ann Arbor attempts to attract new business and high-tech industry. The PPT is a major source of income from those new businesses. (It is a tax on equipment used by businesses; the name of the tax is misleading.) We should evaluate actual revenue balances when issuing tax incentives to attract them, for example.
Percent for Art
As I stated at (great) length in those and earlier posts, I believe that this is a bad program on almost every level. Although the City Attorney has reportedly assured the council that it is legal, I am not convinced of this. It is certainly improper. (See the first post linked above for an extensive discussion of legality.) It takes money that was levied (either by fees or taxes) specifically for basic utility or infrastructure programs.
The Percent for Art program has so many flaws that it would be comic, if public money were not involved. For an excellent update on the current status of the program, see this article by the Ann Arbor Chronicle. AAPAC commissioners are now complaining about the work load and suggesting that a full-time staff be assigned – at a time when our public safety staffing is at historical lows. And this fund takes money (illegally, in my opinion) from the water utilities funds, which are paid for by user fees, at a time when those fees are being raised (see discussion by the Chronicle).
One of the disturbing aspects is that much of the product of this program seems pointless. Though it is always risky to make aesthetic evaluations of art objects, some of their notable achievements have been a much-derided sculpture with a water feature that doesn’t appear to work, metal trees in a park where natural features are more welcome (and where the stormwater installation that helped to pay for the art didn’t work), a decision to put a chandelier where the public is restricted in access, and now they are discussing an artwork in a roadway roundabout, where surely driver distraction is not a good thing.
If elected, I will work to return those monies to the programs from which they were diverted. I’ll also happily vote for a ballot measure whereby Ann Arbor voters can choose to support the arts through a millage. Perhaps that could be written so as to support programs like FestiFools and even small festivals like Water Hill MusicFest. Those are true expressions of a community artistic spirit. I’m happy to support public art, and even public funding of art, but the current program is just wrong.