San Diego, California, a relatively young city with post-World-War-II-built infrastructure, is a good case in point. On August 9, 2006, The New York Times carried an article describing San Diego’s financial problems …

“Independent experts brought in to help San Diego dig its way out of a deepening financial hole said yesterday that city officials broke federal securities laws and other statues as they tried to conceal their failure to put enough money in the city’s pension fund for police, firefighters and other public employees”…Arthur Levitt Jr., a former Security and Exchange Commission Chairman was brought in to lead the investigative team. “Mr. Levitt said, ‘San Diego officials fell pretty to the same type of corruption of financial management and reporting that afflicted municipalities such as Orange County and such private sector companies as Enron, HeathSouth and any number of public corporations’…”.The City has not been able to issue audited financial statements since 2003 because of legal questions about its pension fund and it is barred from raising money by selling its bonds on the public markets”.

The result: an FBI investigation of the City Council, resignation of the Mayor in 2005, an SEC investigation, the inability to issue bonds, and a brewing battle over the pension issues between the current Mayor and City Attorney.

So, if financial and political calamity can affect a relatively young and growing city like San Diego, what does it mean for cities such as Buffalo, Newark, Baltimore, Miami, Houston, Seattle, Chicago and New York City? The combination of pension and health care obligations, coupled with the infrastructure deficits of these cities will place a tremendous demand on existing city revenues.

So how will small and large cities react to this demand? In all probability, local politicians will default to funding public safety services and allow services such as tree trimming, park maintenance, library operations, sidewalk repair, street maintenance, economic development and recreational activities to be sacrificed for public safety. Therefore, the amenities that make our cities livable will increasingly decline due to new demands on limited funding.

The de-funding of popular “Main Street” programs will be a likely casualty of this brewing fiscal crisis.

New ways to look at revenues

There must be new ways to generate revenues, without increasing general taxes. New ways to operate cities, to figure out what services cities should and should not be doing, need to be explored.

First, the nearly 80-year-old model of how city governments are organized should be seriously reviewed. The “progressive era”, and its prioritization of professional city managers, civil service and professional planners, has run its course. Just as the corruption of the old patronage system of running local government gave way to the progressive era system, the institutional and accountability problems of the progressive era must give way to a new way of operating our cities. With fourth or fifth generations of civil service retirees, tax-payers cannot financially support them, as well as their replacements, on a limited tax base. This financial issue, at a local level, is unresolvable.

Second, “geographically-based revenue” systems that are managed at the community or industry level should be explored. Examples of these systems might include a) property assessment districts/community benefit districts that fund specialized enhanced services in geographically defined areas, b) parking meter revenues that are split between city governments and those business districts from which they are generated; c) sales tax increment districts in which business communities are given the option of increasing sales taxes by a fraction of a percent in those districts and the revenues are kept in the district to fund special services; d) leveraging all these sustainable revenues with public monies to maintain public rights of way and maintain order. Also, statewide fees or surcharges to fund specific activities have demonstrated great results in many industry-wide sectors such as agriculture and tourism promotion.

In the post-progressive era environment, cities will need to be operated with the same number of public safety employees; however, will inevitably have to give up services they have traditionally provided. Examples of city underwritten, but non-profit operated libraries, parks and recreational programs abound throughout the US today n these are the models for the fiscal stability in our new cities.

Third, the methods of using non-profit organizations, funded with these geographically-based revenue sources, are the future models of how to run our business districts, Downtowns, neighborhoods and communities

— MARCO LI MANDRI

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