Tuesday, November 17, 2009

Dishonesty in Budgeting

Three aldermen voted “no” on the city budget motion this evening: Sandy Weidner, Jeff Coe and Mike Shields. All I can say is, “Good for them.”

I don’t think any of them voted that way for the same reason I objected to the budget: dishonesty. But they didn’t like the budget for philosophical reasons and at least had the gumption to vote that way also.

Once again we will find a new fee on our tax statements while Mayor John Dickert and the aldermen tout a “no tax increase” budget.

It isn’t a “no tax increase” if you treat the budget honestly:
1. The new fee, the recycling fee, is a tax. It can legally be called a fee because the tax is going into a separate fund controlled by the Department of Public Works. It doesn’t go into the general fund first. But other than that little short cut, it is the same as a tax.
2. Recycling is a function of garbage disposal. As such it is a function of DPW and all expenses thereof should be part of the DPW budget and the tax levy.

That is my paramount objection to this budget and it should not be passed in this misleading and dishonest form.

It should be not passed with the misleading and dishonest Sewer Lateral fee attached to it. Sewer laterals have been the jurisdiction of DPW for a long time…probably since they were installed.

Why now a fee to deal with them?

That fee should also be repealed and sewer lateral maintenance put back into the general fund.

Until both those fees are eliminated, we do not have an honest budget and it should not be passed.

There are other reasons to not pass this budget, but this is one of the fundamental reasons: dishonesty in budgeting.

No Courage Here

Except for a well paid bureaucracy and a few elected officials who revel in wielding power over others, this budget will not increase happiness in the city of Racine.

The city council continues to assess fees in a cowardly attempt to hide tax increases. Fees such as the sewer lateral fees, recycling fees and fire department inspection fees, are fees that cover activities that are part and parcel to conventional government operations. Such fees are not voluntarily paid and are essentially a tax.

They are fees that are meant to hide aldermanic inability to make politically difficult choices as to what is and what is not an essential government expenditure.

More importantly, this budget reflects aldermen’s lack of courage in dealing with crafty bureaucrats and unions that demand luxurious health care plans, generous pension plans, and less than demanding work schedules for themselves and their underlings.

And if a bureaucrat can show he will cover the costs of his salary and benefits with fees and/or fines, that gets an almost automatic pass from the council.

And how much of the $1.5 million in sewer lateral “fees” actually went to homeowners. Not a single alderman asked that question during the budget process. As I recall, about a half dozen such requests would come up in a year. That is about $75,000 of the $1.5 million assessed fees, or as little as 5%, that actually goes to homeowners. The rest went to the Department of Public Works for salaries, benefits and other expenditures that should rightfully have been included in its budget and on the tax roles, subject to all the rules and regulations of levy limits.

But the council chose to take the role of a sort of tax dodger and assess constituents with fees instead. (And they complain about constituents that don’t obey the rules.)

With the alternate side parking they have intensified the “regulation and punishment” system of control over people, a proven failure in government relations with the public.

With recycling they are considering more regulations and fines. The garbage police seem to be on the horizon of this city’s future.

Never have I heard a single alderman consider the more benign system of “communication and reason,” the system used in private sector companies, by the way, with its customers, in a medium called “advertising.”

The Mayor is actually using communication and reason in his radio message regarding drug abuse. And I can assure you that he is accomplishing much more in that approach to abating drug abuse than all 200 Racine police officers with their Armadillo, Swat Teams, guns and jails ever will.

Communication is the universal solvent; it invites cooperation. The use of punishment as a means of attaining compliance does little more than build up resentment.

This budget leaves much room for improvement. The only defense of this budget lies in comparison with the budgets of other communities — whose budgets — universally — consist of similar deficiencies and abuses.

What's on Third?

I made a statement to the city council that was a bit of an exaggeration that I must correct. I stated that businessmen “want to know what is the expense of doing business in that community and that is solely determined by taxes and regulations.”

That simply is not true. There are other factors. Taxes and regulations are the main determining factor in the field of moving businesses. And those communities and states that have the highest taxes and most restrictive regulation will draw the fewest businesses and jobs. Those communities and states with the lowest taxes and lenient regulations will draw the most businesses and jobs.

But there are other factors. But what are they? What’s third?

Size of the community is a factor. More people equals more customers and a better shot at qualified workers.

Natural resources will be a factor. It might be hard to open up a bait shop in the desert. Furriers will sell more coats in the Snow Belt than in the Sun Belt.

Distance from the I-System makes a difference as more good are shipped by truck.

The aldermen are right. There are other factors. I stand corrected. But how do these thing compare to taxes and regulations? On all businesses across the board?

As a major force affecting the ebb and flow of businesses in and out of a community or State, nothing comes close to affecting it as much as do taxes and regulations.

People follow jobs. The City of Racine has the advantage over surrounding communities with its low rents and housing costs. So there will be people who stay in Racine while working outside of the City. That means the city of Racine can lose more jobs than the surrounding communities and not have as many people move.

So when the City is the only community in the County of Racine to actually lose population, it must be losing one heluva lot of jobs.

After talking to many of the aldermen about this subject of taxes and regulations versus jobs versus population shifts, I get the impression that none of them understand this concept. Let’s put it like this: I haven’t talked to one yet that does.

I think I know why: If tax/regulation/job postulate is true, that makes them largely responsible for controlling the ebb and flow of jobs in and out of the City.

And considering it has mostly been and ebb in and a flow out, well, I guess if I was an alderman I wouldn’t want to agree with that postulate either.

Slick Rick

As 2007 wended its way through history, Department of Public Works Head, Richard Jones faced a serious problem with a city full of deteriorating sewer lines and a packed DPW budget with nowhere to get the money to cover the ever increasing costs to repair them.

He faced a City Council that can’t prioritize spending to save their collective souls or the City of Racine.

What was he to do?

But there was another problem that caught his eye that was causing pain and agony out in the private sector. And got his thinking wheels going: Homeowners were getting hit $12,000 a pop to fix their collapsing sewer laterals (the section of the lateral from the house to the main line that runs down the middle of the street).

Rick thought about his problem. And he thought about their problem. He put them together and, wha-la, came up with a solution: A Fee.

Sell it as a Homeowner’s “Insurance” Fee (the BAIT) for homeowner’s sewer lines, then use it to get the money he needs for his sewer lines (the SWITCH).

(Admit it: Slick Rick is Brilliant. That’s why he plays the City Council like a piano.)

The aldermen took it, hook, line and sinker. They didn’t have to raise taxes. It got those wailing homeowner off their backs crying about the 12G hit. And the sewer laterals got fixed.

The aldermen even got the promise that the fee would not be raised.

It passed. Slick as a Rick.

Thursday, November 5, 2009

Bait and Switch

As I mentioned Tuesday at the (Nov. 3) Council meeting, assessed fees (as opposed to voluntarily paid fees) are in reality just tax increases used to either

1. Bypass a property tax levy limit, and/or
2. Hide an actual property tax increase.

The sewer lateral fee takes it a step further using the “bait and switch” technique to sell the public on the idea.

The bait (the homeowner) is used as described in the handout I gave to the aldermen. (See the 2d page, 3d paragraph for the pertinent reference.) That is what was sold to the public. This fee would be a sort of a collective "insurance policy" for homeowners. That is why only homeowners were assessed during the first year of its existence. Each homeowner would chip in $50.00 to a fund that would be used to cover the homeowners that got hit with the sewer lateral problem.

Rick Jones still used the homeowners as “bait” at his portion of the budget hearing last week. He touted how happy the homeowners were that were protected from the $12,000 hit by this fund. Then, although only a small portion actually goes to the bait, he proposed raising the fee from $50 to $52.

I thought it was a good idea when Aron Wisneski told me about it two years ago. When I talked to Rick Jones about it that evening, he gave me the added information that an engineer that had been costing the city something like $45K a year would be given a $35K (approximate) salary increase to monitor the lateral and that the entire salary would be put into the “insurance fund.” That was all he told me.

I objected to that right away to that salary shift, as money that had been spent from the general fund was now being put into the “insurance fund.”

Somehow we came up with a figure that the entire fund would come to about $1M as I recall.

I remember walking down the stairs with him after the meeting asking more about it stating that if there were not a lot of requests from homeowners for sewer lateral repairs, then the tax could drop to the level that we only needed to replenish the fund back to the million, right?

He said that would probably not happen. The entire fund would probably be spent.

I questioned whether there would always be that many homeowner sewer laterals go every year.

He repeated without further explanation that the fund would probably be all spent.

It made no sense to me. Why would that be? The truth was soon to follow.

Later I found out the that the wye fitting repairs that I had often seen come through the finance committee and the Council minutes were also thrown into this fund.

Then there were more sewer repairs put into the fund, and now sewer inspections.

The trick here is that the basis of the establishment of this fund was to rescue homeowners that were getting sacked for $12,000 in repairs when a sewer lateral failed. That is the bait: the homeowner. That was the way the bill was introduced—an insurance program for the homeowner. Witout the bait, the aldermen would have been hard pressed to add a fee to perform services that had always come out of the general fund.

And that was the switch. The fund was really a way to funnel more money into DPW for sewer repairs.

If the aldermen were entirely honest with the people of this community they would increase taxes, if necessary, to cover the costs of the repairs that had and should come out of the general fund.

What I want to know, and I am really surprised that no alderman has requested it, and that is a complete accounting of every penny that comes out of that fund.

—How much of it actually goes to the “bait,” the homeowners.
—How much goes to that bureaucracy.
—How much goes to which kind of sewer repair.

I think taxpayers should accept the part that goes to homeowners as a one-of-a-kind fee, an “insurance fee.” I, personally, like that idea.

But the rest of the expenditures is nothing more than the plain old ordinary fee that gets used to

1. Circumvent a levy limit, and/or
2. Hide a tax increase.

Honest and Effective Budgeting

The balance of my comments at the (Nov. 5) public portion of the budget hearing were of a general nature.

The real proof of the efficacy of this budget is how does it affect the citizens of this community.

Since 1970, with every census, we find more people leaving the city.

In 1970 we were the third largest community in the state with about 95,000 people. Only Milwaukee and Madison could claim larger populations and economies. Behind us were Green Bay and Kenosha with about 79,000.

Now we have switched places the the latter two. Green Bay and Kenosha both are up to around 95,000 and we have lost 16,000 residents and are down to about 79,000, now the 5th largest community in the state.

We are the only community in Racine County that is declining in population. So I don‘t think we can blame international trade and China.

Other communities in the county have grown since 1970 and so can we.

It is taxes and regulations that businesses survey before they set up shop in a community. Potential entrepreneurs don’t drive through the alleys looking for cleanliness, check out the paint conditions on the houses, or even research the schools (otherwise no one would set up shop in Chicago). They want to know what is the expense of doing business in that community and that is determined by taxes and regulations.

And people follow jobs.

Our miserable business environment (and we had a little demonstration of that a couple of nights ago when three aldermen attempted to stop another business from starting up in Racine) has kept business at bay and people leaving the City for lack of jobs.

It is time this council

1. Get straight and honest with its constituency regarding taxes.
2. Tax and regulate so that Racine can grow economically.

Wednesday, November 4, 2009

Tilting at Windmills

Julius Servantez & Family want to open an automobile sales and repair establishment at 1407 South Memorial Drive. For those of you who may not recognize this forgotten area of Racine, 1407 SMD is the old Racine Library. Several businesses have tried to succeed in the pursuit of happiness at this location, but have failed. The building sits vacant for a year.

Servantez came to the Council meeting November 3d well equipped with several impressive family members, particularly his daughter Jessica, with a degree in business and a well prepared statement on economic consequences.

They came as a family to bring a family business to Racine—in a district that cries for someone to succeed.

Undaunted by the show of aptitude, Alderman Greg Helding came to the forefront brandishing his usual halberd of obstruction. The Bulldozer went to work on the prevention of this family business. Here were his three objections:

1. There is only one bay in the old Library Building. Greg feels there should be more.
2. The driveway opens directly onto Memorial Drive. (I guess this adds to the problem caused by all the other driveways along all the streets in the City that open directly onto the street.)
3. This is an historic building (though not on the National Registry of Historic Buildings) and it used to be a library and this is a real come-down to become a “used car lot.”

Aaron Wisneski came up with some support for The Bulldozer’s obstructionism with this jewel:

4 Although an auto repair shop is not forbidden by the district rules, it is not recommended.

I guess if these guys couldn’t come up with a real reason to prevent a business from starting up, they felt they should at least give it a try with some ridiculous reasons.

Helding is the chairman of the City Plan Commission. He takes that job seriously. So if you don’t have perfect, guaranteed plan to succeed, if everybody isn’t going to just love you, be prepared to face The Bulldozer. He probably won’t want you to even try.

Wisneski, sitting along side of Helding, gets some of the obstructionism rubbed off on to him. He generally votes with Helding on the issues.

Is it any mystery why businesses have a hard time coming to Racine?

But this time cooler heads prevailed.

A strong voice from the First District, Alderman Jeff Coe, pointed out that when it was a library, they had a problem then backing out onto Memorial Drive. But they made it and Servantez can too. And besides, the Uptown District needs a business in there.

Coe also stated there are other similar businesses with one bay. If Servantez thinks he can succeed, he must be given the chance to do it.

Jim Kaplan felt the building had been vacant too long. And as most of the vehicles Servantez will be dealing with are waranteed, they will be repaired at dealerships.

QA Shakoor spoke strongly for the Servantez business, emphasizing the family nature of the business.

Common Sense prevailed on this one; while Helding and Wisneski were left tilting at their windmills.

And the City of Racine took one small step for a better future.

Tuesday, November 3, 2009

The Cutting Edge of Fee Oppression

A fee in its purest sense is a payment in exchange for a service. And, as opposed to a tax, it is a voluntary involvement. Some good examples here in the city is the fee charged to play on a softball team in the city leagues, or to close off a street for a block party.

I have no objection to such fees. It follows the rule: If you want to play, you’ve got to pay. The choice is yours.

Government units have expanded the definition of “fee” to include so-called “dedicated funds.” Examples of that here in the city are the fire department fees and water run off fees. Such a “fee” is not voluntary. It is assed like—and essentially is—a tax.

This involuntarily assessed government fee is use for two purposes: to hide a tax increase and/or to circumvent a tax levy limit.

This involuntary fee is not a direct exchange for a service rendered. It pretends to be, but is not. For instance, it does not cost the fire department 150.00 to inspect smoke detectors of a store or apartment building. It doesn’t cost the fire department anything extra except for a little gas money to run the fire engine around town. We are already paying for the vehicle and personnel in our property taxes. These fire department fees were used to increase the fire department budget without using property taxes…for the reasons stated above.

Then we have the UNIT “fees.” Our City Council has developed a “fee” which by anyone’s comprehension, is not really a fee at all, but a fine. It represents the cutting edge of fee oppression.

The reasons for assessment in this manner is to bypass the burden of allowing constituents their right to due process and appeal.

My alderman, Jim Kaplan, has suggest to me that the way to eliminate UNIT is for everyone to just obey the “law of the land” (as he put it) and do what UNIT wants. I use Jim as an example, but I have total certainty that the rest of the City Council is in total lockstep agreement with that concept.

There is a new fine procedure of which most Council members must surely be aware: the traffic signal cameras, used in many cities around the United States and the Western World, wherein a motorist who runs a stop light, is fined by the camera and its associated computers…through the mail.

Great fund raisers are these cameras. And despite proponents of the cameras using the same argument Jim uses—just obey the law and we will get rid of them—California courts, and a few other cities, are ruling the use of these cameras illegal…for lack of due process. Not one of these judges is saying it is OK to run a red light. What is senior in importance to monitoring this reckless practice of motorists, the courts are saying, is constitutional rights to due process.

No one I know of is recommending getting rid of UNIT, as Jim suggests. I am only saying put UNIT back on the constitutional basis on which UNIT operated before they were given this fee power.