Cost Accounting in Local Government

We’re All In This Together

Let’s jump into the “wayback machine” and travel back to 1975 when I was a 23 year old Administrative Analyst (i.e. “punk”) with a fresh new BPA working at my first government job, a well established city in the eastern San Gabriel Valley. With my C.E.T.A. tattoo firmly imprinted on my forehead and my “Whip Inflation Now” button on my shirt, I was clearly living large on my $833 a month (not to exceed a maximum of $10,000 for the year). Simply said, I had “made it.”

One day, the very wise City Manager called me in to inform me that I would be going with the Mayor to the State Capitol to take part in the annual League of California Cities (LOCC) one-day invasion of Sacramento. I thought his choice was brilliant, even though I was secretly surprised that he even knew my name. But it kind of made up for the time he had me drive into the Los Angeles produce market to pick up the three watermelons that the Salinas Mayor has sent our Mayor. But wow, a coordinated march on Sacramento. This League thing is COOL! I imagined the some 3,000 council members (and dutiful staff) ascending upon the many assembly and senator offices like some well-tuned army, requesting, (Nay I say!), demanding that the State Legislature FULLY address the fiscal needs of the 540 UNIFIED cities! I knew that we would show them our might, and they would quake at our strength and unification.

Now fast forward to Reality 101. I was basically sent to keep the Mayor on schedule, pick up the bar tabs, give him his talking points, carry his bags, listen to his many lawyer/golf stories, and get him back. I also realized that the elected state officials knew something that we didn’t. The LOCC represents some 540+ cities, each with different demographics, financing, and service needs. It’s like representing all the animals on the Ark; sure animals all, but bears just aren’t like giraffes. We weren’t a unified army at all, but instead were just a bunch of individual cities with individual tin cups in hand that could be simply taken care of by a grant (usually a partial grant) for a traffic signal or a community center (always with the local assembly or senator’s name on it). We were bought off cheaply.

And this is my point (because Rick and Eric suggest there should be one). The time-honored process of divide and conquer works; always has and always will. There are roughly 540 cities in California, each with little in common with any other city. Pretty much the only thing that all cities have in common is providing (and maintaining) circulation and storm drainage infrastructure systems. After that, public safety services can be provided in a myriad of ways, whether it is contract, in-house, special districts, etc. Some cities have water, sewer, electric, or refuse utilities. Recreation, library and beach services can cross inter-agency lines. Then, some have enterprises such as golf courses, sports stadiums and airports. As extreme examples, what does the City of Industry have in common with, say, the City of Malibu, Anaheim with Oroville, or San Francisco with Pomona? It’s hard to find more than a few alike.

Stated more precisely, your city is not so much in league with the other 539 cities as you are in competition with them. Most dues paying cities are members of the League of California Cities pretty much in name only, sort of like catastrophe health insurance. Cities will take advantage of whatever they can over any city they share boundaries with. Admit it; there is some sense of satisfaction when your strategy wrestles that Chrysler dealership away from that contiguous city. So what if you spent a million or two in Redevelopment increment money to construct that freeway-contiguous giant Chrysler electronic sign to do it (2009 Honda Accord just $17,500 in bright eight foot letters!).

So we end up with this. Glendale takes advantage of the fact that Los Angeles has a high business license tax based on gross receipts and steals L.A.’s auto dealers and the sales tax dollars that come with them. Los Angeles is then forced to consider dropping that business license tax revenue, probably with poor net revenue results. Then again Villa Park, a residential community in the hills of northeast Orange County, collects less than five figures in sales tax revenues and probably couldn’t care less about that revenue source. But sales tax collection is still a major component to most cities (and State) and thus Redevelopment Agency monies have tended to slide towards getting that big box retail or hardware store or car dealership to move into their City.

The unintended consequence of Redevelopment Agency efforts, as currently constituted, appear to create more low-paying than high-paying jobs. Frankly, we have gotten to where there are enough places to shop and enough places to spend money. We do have a shortage of places to make a viable income. But given a choice between a big box hardware store and a research facility creating over 90 jobs with an average salary of $75,000, both competing for an eight acre parcel owned by your Redevelopment Agency, which would you pursue? It happened, and you can guess the outcome. Is there any wonder that there was no hue and cry from the public when Governor Brown started eyeing the increment-rich Redevelopment Agencies.

California’s cities, for all to survive, need to find a revenue policy stream that works for most of the 540 cities, if not all. Dependence upon sales taxes may no longer be the answer. We have enough consumption-based retail jobs. Redevelopment receipts need to be used to entice career-based light/clean manufacturing and more design/research career jobs back to California. It can happen but not under the current revenue structure. It’s simply bad policy and the existing tax structure is the ultimate statement of policy. I’m not saying that competition isn’t good. I always enjoy and respect seeing a great staff work hard for better services for the residents and businesses in their City, but there appears to be too much zero-sum gaming going on to make things better in the aggregate.

The League of California Cities needs to be part of it to make it happen. Cities will need to compromise. Legislators need to think about the State and not their re-election. California is a great State and that’s why we have all chosen to live here. It’s time to work together, to be an actual League.

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