The opener for this series closed with the following:
The notion of wealth in a municipal setting is a strange topic. Municipalities readily base their value on tax revenues,the median income of the households within it and the ratings they hold with the banks and bond issuers. That this is a myth is becoming clear nationwide and it has incredible consequences for cities and towns everywhere.The Next Ten Years I
Before tackling the next two parts of the planned series I just couldn’t fight off the feeling the above needed exapansion of its own. I’ve also started to get a weird vibe about the upcoming budget that will hit the floor at our next Annual Town Meeting and really felt I needed to shout this out if only for a moment of my own mental health.
Government is afforded an unrealistic and ultimately unsustainable position when it comes to financial matters. An individual with excellent credit worthiness is a fool to assume this makes him/her wealthy. Government on the other hand is invited to and willfully embraces the notion that the level of debt others are willing to allow you (municipality) to go into is somehow a show of fiscal strength. This is warped!
Government as a rule has a way of counting its assets and liabilities in ways a citizen or private corporation could never. Some of this actually makes sense since municipalities are essentially required to perform services and therefore hold assets/assume liabilities that other forms of corporation are simply allowed to bypass. Oversimplified,yeah this situation kind of sucks;however, for a long time communities found a way to avoid the potential trap nature of this and avoid it. They did it with dedicated funding,savings plans and most importantly incremental and organic growth! Today the trap has become the status quo.
The trap is best viewed as the outcome of Orwellian word smithing. Debt is good,growth is always positive,and liabilities are actually assets being some of the choicest cuts.
Debt is good.
No, it’s not. Debt is bad. It is especially bad when the way you pay off the debt is dependent on the spending of money from other peoples pockets. It doubles down on its badness when whatever the debt was used to pay for doesn’t produce either revenue or more importantly wealth. Debt is sometimes a necessary evil and municipalities are far from immune to having to enter into it. That said indebtedness MUST only be entered into after extensive analysis.
Growth is always positive
Again….NO! There are many variables to explore when we talk about growth in terms of municipalities. The first and simplest is that growth by its very nature presents a laundry list of costs that usually far outpace the new revenue. Municipalities,and Mansfield is very much included here, views the intial intake of permitting fees and projected tax revenue as a big positive. Municipalities never ever look at the 15,20,25 year grind that comes with the initial “oh this is great” growth stuff. This is most insidious in the setting of sprawl or “big thing” projects that are gifted TIFs or other tax exemptions where the simple truth amplifies. If you spend money you don’t really have on something that doesn’t generate constant revenue or more importantly real wealth AND you have to actually spend money in the future to service it… YOU ARE LOOSING THE BET IN THE LONG RUN!
Liabilties are actually assets
This is the grand daddy of the previous. Municipal assets as a rule are not available for sale. Mansfield can’t very well sell one of its schools to raise money,at least not outside of a well thought out school replacement contract.
Another great example is any given roadway in town. Engineers,planners and other policy wonks love to attest to the benefits of road miles. Communities can often get a form of credit towards future road works grants based on total miles of pavement. Smooth and fast roadways and intersections are often fairy dusted with estimates of money made,saved or otherwise conjured by their very existence even if nobody can point to an account anywhere one can withdraw those fantasy dollars from. On the contrary Mansfield line items $3M per year in very real dollars to keep a “B” average quality on its roadways. Spoiler we grade on a curve.
The Town thankfully can’t pimp out our police or firefighters on a “for hire” scheme. We don’t possess the political will to charge for parking throughout town or have the ability to toll our roads. We have tax revenue and grants. On the former we are handcuffed in a number of ways on how we get that money. On the latter there are simply no guarantees.
Whether Mansfield can successfully address its issues over the coming years is a big “to be determined” kind of thing. Since the Trap is not isolated to local government and the locals have been dumped on by the rest of the system I’m personally not an optimist. It would be great if some folks in elected office woke up to the level of bold and harsh decisions needed to get right. Ultimately this is a can communities can only kick down the road so far,eventually:
“We are all Detroit”Charles Marohn/Strong Towns 2016