Wednesday Apr 07 2010
Out of options: the case for a sustainable revenue source
By: Richard Pearl, Special to The News Messenger
I was pleased to see Stan Nader say in last week’s guest column (April 1, News Messenger, page A5) that he would support a utility users’ tax if it came down to the tax or laying off police officers. Stan, however, wants a “time and motion” study of city operations performed before fully supporting a utility users’ tax. While this sounds rational on the surface, the four departments in the General Fund (police, fire, recreation and library) do not lend themselves to this type of analysis. We could study these four departments forever (at significant cost) and we will still reach the only inescapable conclusion: we’re barely holding on as it is and we’re at risk of falling even further behind without a new infusion of revenue that the state can’t touch. Our police and fire departments are well below national, state and surrounding jurisdictions in terms of professional staff per thousand residents and response times. While our public-safety personnel will of course continue to respond to emergencies, the issue is how long will it take them to arrive on-scene to assist us. If we don’t want further reductions in emergency-services response times or library hours or recreation programs, we must shore up our finances until the economy recovers. Last year, the Lincoln Citizens Financial Task Force (of which I was chairman) interviewed every operation in the city as part of our review of expenses, revenues and reserves. We found no “smoking gun” of untapped resources or, as Stan put it, “fluff.” We did find an undeniable structural deficit, caused primarily by reduced revenue and this deficit will go on until the economy rebounds. The task force identified 13 cost reduction/realignment and new revenue ideas. Only two had the potential to offset a significant structural deficit, one of which was the utility users’ tax. City staff has already been reduced by 20 percent and the remaining staff accepted current salary reductions totaling $1.1 million. This next year’s budget will be balanced through the use of reserves and, I assume, further cost reductions. Once the reserves are gone – the year after next – draconian cuts will be required to balance the budget. The alternative is a temporary tax that stays 100 percent in Lincoln for our police, fire, recreation and library services, and which has a specified and short life. The utility users’ tax is probably the fairest type of tax available and is the easiest and cheapest to administer. While no one at this time can predict how much it will cost each of us, a reasonable “guestimate” - to hold our public safety and leisure-service levels where they are now – is approximately $15 per household per month. The window of opportunity to protect current service levels is this November’s election. Stan noted in his guest column that the utility users’ tax was “removed from the tax rolls in Roseville.” The fact is that Roseville citizens voted to keep their existing utility users’ tax but the Appellate Court found that the ballot measure did not meet certain technical criteria. The court stopped their utility users’ tax, not the citizens! My professional career involved helping local governments better understand their costs and exploring practical revenue opportunities. Certainly, there are always additional expenses that can be trimmed and these should be constantly monitored. Rooftops by themselves, however, cannot support a full-service city. Did you know that only about 15 percent of all property and sales taxes stay with the city – all the rest goes to schools, the state, the county, etc? Our commercial businesses did not have the time to get their operations firmly in place before the economy ground virtually everything to a halt. The result is that our sales tax revenue per resident is 63 percent lower than both the statewide average and the average of cities in our population size. This shortfall is approximately the size of the structural deficit. Bottom line: we need to seriously consider a new Lincoln-only, and temporary source of revenue, to maintain (and only maintain) vital public-safety services and those community services that make Lincoln, Lincoln. I urge you to attend the upcoming budget workshops and judge for yourself. Richard Pearl is the Lincoln Citizens Financial Task Force chairman.