Upon debating Shaker Heights Mayor Leiken last week on WCPN’s The Sound of Ideas, I could sense the frustration of his and other mayors’ efforts to cope with the elimination of estate tax revenues, reductions in property tax revenues, and reductions in revenues from the state taken from taxpayers in other localities. The call-in radio show, billed as “Tax Increases or Service Cuts?" describes the conundrum well that exists within the current paradigm of many local governments, and I do not envy the mayors’ positions as they squirm inside that box. That’s why I founded the Shaker Heights Taxpayers Union (SHTU) a few months ago: to get The City of Shaker Heights to think outside the box and balance the budget without raising taxes. The solution we offer is simple: cut costs, control the tax rate and grow the tax base for more city revenues in the future.
How will the City of Shaker Heights do that? It could start with public employee benefits. Mayor Leiken mentioned in the debate that bargained employees had just agreed to a 10% participation rate in their health care premiums, to be phased in over three years. This is still much lower than the average employee participation rate nationwide of 18% for self insurance and 28% for employees and their families. If we’re going to stick together as a community in these hard and uncertain times, then public employees should pay the same for their health care plans as do the taxpayers who fund them.
In the absence of employee benefit cuts, however, prioritized cuts in the general fund will have to be made. This means that, contrary to what Mayor Leiken has threatened, services people need and depend on such as police, fire, road repairs, snow removal, senior transportation and Shaker Family Center support need not be cut significantly. As long as the City isn’t hiding any budget data from the public, we know essential services can remain relatively untouched. Some of these services, such as Fire and EMT, could be consolidated with other cities, and much of The Sound of Ideas show talked about this. Unfortunately, talk was most of what regional mayors could offer on the subject, and the City of Shaker Heights needs to move quickly with other cuts while consolidation is being worked out.
To that end, there are many nonessential or “nice to have” City services and departments that could be cut deeply or eliminated. These include the Health Department and subsidies to school age care, since similar programs exist at other levels of government. The Building and Housing Inspections Department could also go. Not only do they cost taxpayers just to run them, their onerous regulations cost property owners in unnecessary repairs and impede home sales with complicated escrow requirements, further depressing property values. Planning, Economic Development and Neighborhood Revitalization should be cut because they’re not the proper role of government. The City should play only a supportive role for businesses by creating a low cost and safe operating environment – and not risk taxpayer money in trendy, unproven investments such as street cars, “green” upstarts or art galleries.
Shakerites should know, however, that when they see their favorite city service disappear – without a corresponding reduction in their tax burden – it will be because the City managers place their own pay and benefits above the general welfare, and in the past spent all of the estate tax windfalls rather than save some for a rainy day. This violates the public trust and is something that voters should remember in the next city council and mayoral elections scheduled for 2013 and 2015.
In the short run, these cost cuts will help the City balance its budget without raising taxes. In the long run, however, the difficult choice between “Tax Increases or Service Cuts” is not enough to make Shaker Heights competitive in the region and actually grow our tax base. No one wants to pay more to get less; it’s a lose-lose proposition. To grow the tax base, Shaker needs a win-win solution in which taxpayers pay less and get more. City managers need to “rightsize” the structure of government to behave and respond like a business, not only by cutting costs but by improving services at the same time.
Rightsizing Shaker government would include making city departments compete with private firms for the delivery of public services. It would require city departments to do performance-based budgeting that measures success according to outcomes, not inputs. Caps on department budgets would encourage productivity gains rather than budget growth, and duplication of services would be eliminated. For example, the City should eliminate the Mayor’s office or the CAO’s office – either one should have the authority to run the City by itself. Likewise, the City should eliminate either the Law Department or outside legal counsel – not pay for both.
Rightsizing would also force Shaker government to focus on core services, and turn noncore services over to nonprofit or for-profit ventures. For example, the Mayor has threatened to eliminate back yard trash collection, school crossing guards, and Thorton Ice Rink if the tax hike doesn’t pass. If privatized, however, Shaker residents who want to keep back yard trash pickup could pay to do so – or choose whatever cost level of sanitation they want – similar to the way they hire a landscaper or snow plow service. Parents could volunteer as crossing guards to help their children cross the street on their way to school, and the ice rink could be leased out to private managers who might even turn a profit for the city.
So as you can see from the facts presented here, if Issue 1 fails to pass there’s really little to fear as far as service cuts in Shaker Heights – if City managers can rise to the occasion of the fiscal crisis and recognize the solutions that the SHTU offers. The real threat to Shaker Heights is if the tax hike passes.
Take a look at the graph I’ve uploaded as a companion to this blog. It compares recent trends in city property values, property taxes and population. Although the tipping point in population occurred long ago – when the City’s income tax rate increased 200% from 1967 to 1975 – a new tipping point has recently been reached. Since 2004, the accelerating rise in the property tax rate has caused a decrease in average property values, an acceleration in population decline, and a corresponding loss in the tax base. This graph shows that Shaker Heights is becoming a less competitive community, and that blindly voting for more taxes of any kind will not support it. Higher taxes destroy the tax base that produces the tax revenues we need to support our community.
What has the City done to reverse our declining tax base? Instead of implementing further judicious cuts in government spending, and consolidating or privatizing City services, our elected officials have chosen to raise taxes in a costly single-issue midsummer election to avoid more community involvement in November. The City has also unfairly placed the burden of the proposed tax hike on “earned income producing / younger families” who utilize the least amount of City Services, which is divisive to the community. In response to citizen concerns about what will happen if this tax hike doesn’t pass, the City has exaggerated the spending deficits as a means to justify their poor planning, and intimidated Shakerites with a fear campaign to close select services.
Despite this unfortunate behavior by our local elected officials, we at the SHTU are willing to work with Mayor Leiken and City Council after the election – regardless of whether Issue 1 passes – to solve the City’s fiscal emergency. We are all Shaker residents and we all want the same thing: to save our city from further decline and grow it for the future. We are proud of our city and community, and we want to stay Shakerites for many years to come. Controlling taxes, not raising them, is the first step towards Shaker’s future. A vote no on Issue 1 will prove to the region that Shaker Heights may someday be an affordable and competitive place to “live and work”, and that taxing authorities may never have to raise the tax rates here ever again.