How Are Local Governments Affected By Down Economy?

How are local cities responding to the decline in sales and property taxes due to the down economy? We discuss strategies being used to counteract the recession. Which strategies are best to improve the long-term economic health of local communities?

Guests

Scott Lewis, chief executive officer of voiceofsandiego.org

Kent Davy, editor of North County Times

Alisa Joyce Barba, independent editor with NPR member stations

Read Transcript

TOM FUDGE: Well, our focus today is the economy, and its effect we expect on services from government. We'll start at the local level. The City of San Diego is facing a $73 million budget deficit, the city of Chula Vista has had to lioff 20 percent of its staff. Dependent heads [CHECK AUDIO] who had to manage one department are now managing four, according to [CHECK AUDIO]. Meanwhile, as cities lay off their workers, they're trying to figure out ways to get people hired in the private circuit. We'll talk about economic development strategies a little bit later, but first, Scott, as the economy takes its toll on government revenues, we see a loss of sales tax revenues, property tax, capital gains tax, how are local governments being impacted by the down economy?

SCOTT LEWIS: Well, local governments are expected to provide a service, they're expected to provide public safety to take your trash, to provide you water. And you know, depending on the jurisdiction we're talking about, some local governments actually have more demand on their services when the economy goes town. We're seeing in the City of San Diego a chronic budget deficit. The steis simply not set up to take in as much money as it's set up to spend. This is the case with Chula Vista, this is the case in many ways with all kinds of different jurisdictions in town. And the question now then a lot of policy makers are dealing with is whether government is there to provide services for its constituents or whether it's there in many ways to protect the promises and the benefits and other things that it's committed to its employees with. And so we have this tension arising in the city and Chula Vista and other places where employee groups and others don't want to lose any ground on the benefits they've earned over time. On the other hand, citizens expect the same level or more of services than they did before. Of or just not to be completely you know, eviscerated as some of the prognostications about the City of San Diego have said, so we're in a very interesting time.

TOM FUDGE: And we'll talk a little bit about what mayor Jerry Sander system trying to do about that tension between the employees and the citizens who pay the taxes. But Scott, how can residents expect to be affected by the cut backs in services that are going to result from the poor economy?

SCOTT LEWIS: Well, look at what -- look at what's happening in the City of San Diego in particular. And it's not just the poor economy, they were struggling even when times were good. Of but just something as simple as trees. 30000 trees that the City of San Diego maintains, palm trees, need tremendous maintenance compared to other trees, they need their fronds cut, they need their berries taken care of, and yet the city has completely eviscerated its palm tree maintenance team to the point where now it's only gonna be employed when something's in danger, when it's causing a problem for a power line, for example. That's a big deal if you live near one of the thirty thousand palm trees. The swimming pools, all have been said to be on the block, that they might be lost completely in the city. Rec centers, the seventh or eighth worst roads in the country are here. I mean, we're talking about a city that is dissolving underneath our feet, and people are trying to create smaller governments or philanthropies to make up the shack.

TOM FUDGE: And let's get the other'dittors to jump in and talk about this. Kent, what do you want to add to what we heard from Scott?

KENT DAVY: Well, it's not just the City of San Diego. Other North County cities have the same boat. [CHECK AUDIO] $8 million a year, since its revenues fall off 11 million dollars a year. It's dipped into its reserves. And this was an interesting issue in front of its city council just recently, and that is the notion that it uses special assessment districts to keep its street lights on, and proposed that should the property owners in those individual special assessment district business, but their assessments to keep their street lights on. [CHECK AUDIO] portions of the neighborhood street lights off -- [CHECK AUDIO].

TOM FUDGE: What do you want to say about that, Alisa?

ALISA BARBA: Special assessments means tax, which is a popular thing here. One other thing of the litany of ills is that we also have, like every city, every jurisdiction in the country, we have deferred maintenancea basic infrastructure. Like the water pipes. And I'm sure virtually anybody who lives in the City of San Diego has experienced a water main break. It seems to happen all the time,and that's because most of the water pipes are 40, 50, 60 years old. And sometimes the entire infrastructure needs to be redone, and nobody's thinking about -- [CHECK AUDIO].

SCOTT LEWIS: Well, you know, Kent brought up a great point about the special accessment districts. This is when I've tried to label as the dissolving city. They are so burden of proofed by liabilities like pensions and fundamental just structural deficits, that they're feeding territory to these local assessments, these groups like district improvement districts, maintenance assessment districts, the best within in San Diego, I think probability the little Italy association that runs little Italy. And these groups taking over more and more responsibilities. Talmidge has its own security group, which is kind of like a posse of statutes that have gotten together to create and pick up some of the slack where the police leave off.

TOM FUDGE: And I've seen you write about this in the past, Scott, and are we talking about home owners associations? Is that kind of what we're talking about.

SCOTT LEWIS: Basically we're talking about three th1ings, Home Owners' Associations not so much. We're talking about maintenance assessment districts which are groups of property owners that chip into a pile, and that goes into services that they want, trash cans or whatever. Then there's business improvement groups, where accidents actually contribute, in various ways. There's the biggest one, which is the hotel tours and marketing district, where they all chip in to promote the city. Of then the third is the philanthropy angle. The mayor stood in the middle of Balboa park not too long ago and claimed that the city could no longer fund what Balboa park needed. So they created a group of philanthropic [CHECK AUDIO] or just crucial infrastructure improvements to Balboa Park because the city can no longer even steer itself to take care of the park the way it needs to.

TOM FUDGE: One of the questions I was gonna ask, is what are some of the different strategies that cities are taking in this down economy, but I guess we've kind of gotten into this discussion about these special taxes districts. So why don't we continue with this? This Balkanization of financing for infrastructure, Scott, you seem to think that this is the way of the future, this is what's gonna happen. I.

SCOTT LEWIS: I think that it is happening. You talk about San Diego not being a very tax friendly place. On the other hand, we've created dozens of these type of entities, which are tax increases for all these different neighborhoods or places. And I think that if you care about a skate park or about a park or a library or rec center or something in your neighborhood, you are going to get together with your neighbors and form some either philanthropic district like this, or find some other way to take care of it. The La Jolla library is open more than any other library in the city, and there's a reason for that. That's the kind of things that we're seeing in the future. I'm not saying it's right or wrong, it's what we're seeing.

KENT DAVY: There's a reason for that, it's because La Jolla is a very wealthy community.

SCOTT LEWIS: It's a wealthy community that has decided to get together to contribute money to support the library hours in a way that other areas haven't.

TOM FUDGE: Okay. Alisa.

ALISA BARBA: You know, there's nothing new about this. Many, many schools have their local foundations where the parents put together and they put a lot of money, so in addition to their property taxes and whatever else they pay to the state government for education funding, they're also putting extra money into their schools to make their schools better. So I think what you're talking about, can you imagine a time where homeowners get together to keep the roads up? To get the trash picked up?

SCOTT LEWIS: Or in poorer areas without the type of leadership or --

ALISA BARBA: Organization.

SCOTT LEWIS: Capital to do that.

KENT DAVY: Well, a lot of -- you know, a lot of cities take advantage of economic redevelopment districts in order to grab tax increment off of property tax.

SCOTT LEWIS: Right.

KENT DAVY: That's the downtown district.

SCOTT LEWIS: Right. Of.

KENT DAVY: In the city. But it also -- all of the North County cities have got some piece of that, that's why Escondido is busy talking about whether it should build a minor league ballpark for the Padres autopsy there. They want to take that tax increment that is available inside that district and see, will that spur enough development to make it worth while.

TOM FUDGE: And that was Kent Davy who is just saying that, he's editor of the North County Times. Scott Lewis is chief executive officer of Voice of San Diego.org, and Alisa Joyce Barba is an independent editor with NPR member stations. It's the Editors Roundtable, and we're talking about the down economy and its effect on cities and what the cities are trying to do about it. Let's leave behind the special assessment districts also bit and talk about more conventional ways of trying to pay for city services. During the last election, we saw the failure of Prop D, Scott, and now what is mayor Sanders proposing we do? And Prop D, I'm sorry, was the half cent sales tax that the people did in the approve.

SCOTT LEWIS: It was the sales tack that was combined with a series of reforms where the tax wouldn't be initiated unless those reforms were done, well, mayor Sanders has announced that basically he's going to continue to pursue reforms, and then on the side, as what I would argue size a distraction, he argued that the city needed to completely get rid of its defined benefit pension plan which was a guaranteed pension when people retire. But not for current employees, for future employees. And although this won't safe any money for virtually decades, it was a big stand for him to take. And in that -- is a competing proposal with Carl DeMaio who's laid out a plan which, basically, its fulcrum is on not just getting rid of the pensions for future employees, but actually lowering the pensionable wages that city employees have, for instance, if they get paid for being bilingual or something like that, an extra bonus, that that would -- they would still get paid that, but it wouldn't count toward their pension, and that would lower the burden that the city faces. So there's these discussions going on. The thing that's interesting about it is for the first time there's competing proposals about a structural deficit fix as opposed to debates about whether the structural deficit even exists.

TOM FUDGE: All right. What do we think of these plans? Alisa? Kent? Kent, what do you think?

KENT DAVY: Let me push back a little bit on Scott, and his notion or what he said about pension reform not having a monetary effect for decades to come. Actually, I think if you think about the normal turn over of organizations and whatever that turn over rate is, by some percentage point, whether it's 5 or 15 or even 20 percent, with each year then, you automatically fold in whatever benefit you have by having gone to a new system. So it is not really decades away, it starts immediately. And then starts to compound.

SCOTT LEWIS: The -- there is actual aerial graphs that show -- not only eight the city -- the city -- [CHECK AUDIO] just two years ago, so add into the fact that the city will probably have to pay more because it doesn't offer Social Security, it will have to contribute toward that.

PLAINTIFF: That's true.

SCOTT LEWIS: I'm saying that the long-term, that the graphs show is not a big deal at all compared to the situation we're facing.

TOM FUDGE: But I guess the question, my question is is this a first step toward solving this problem with structural budget deficit? Alisa.

ALISA BARBA: It's a teeny step in a direction that we haven't gone before as Scott is saying. We have had to kind of fight so many battles to get to that teeny step. Of so I think it is a teeny step. And I think it's interesting when we're talking about citizens taking on more and more and more of the expenses of their local communities, you can envision something which is really, actually, could never happen, is impossible. Where people are paying for their own services but your taxes are going to basically just support government salaries, and government pensions which is pretty crazy.

SCOTT LEWIS: Well, government salaries for people who are supposedly providing services to you.

ALISA BARBA: At the same time, but we're talking about you're providing services forriers because the government can no longer afford to do that.

TOM FUDGE: Well, you know, I referred to this process as a Balkanization for a payment of city services and it's gonna be something that would help La Jolla, where they got a lot of money, maybe not something that would help Barrio Logan, so much. So this is a way we want to go? Scott?

SCOTT LEWIS: I think again with government burden, and the kind of burdens and long-term liabilities that it is, it's not necessarily a choice, it's just a continuing evolution. If you care with Mission Bay, for example, mission bay and the park around it, in this last election select and in '08, there was measure that sort lockboxed away revenue from Mission Bay so that it could be kept there. Again, this is the devolving city, the decentralization of pots money in town, so if you care about something, grab it right now. And the hoteliers did that, they created their own hotel government accident basically, they raised their own tax, and it goes to the things that they care about. And so you know, it's just what's happening because people still care about things and they have enough political power to put them in lockboxes right now.

TOM FUDGE: Well, we do need to take a break, so we'll do that right now. We'll continue our discussion for a little bit about local government when we return, but then we're going to talk about the disaster with the state budget. So it's all going to be very cheerful this day after Thanksgiving. So stay tuned, I'm Tom Fudge, it's the Editors Roundtable. And we'll be right back. .