Sunday, January 14, 2007

Rationalizing Taxes Outranks Consolidating Governments

Police Director Godwin says “functional consolidation doesn’t work” and blows up the Metro DUI Unit, a joint operation of MPD and the Shelby County Sheriff’s Department.

While some suggest deep political motivations for his decision, the police director is nonetheless right. Functional consolidation – frequently a stand-in for full city-county government consolidation – generally muddies the water more than purifying it.

Functional consolidation is a regular feature of local political campaigns. Some candidates use it to neutralize a broader urge to merge while others use it to occupy a safe middle ground where they can support consolidation between city and county functions without the governments themselves.

Targeting Functions

No one ever opposes functional consolidation, so it is dependably trotted out during almost every election cycle. A favorite target for it is the merger of the city and county engineering offices - an idea first advanced in 1981 as the way to streamline the building process and eliminate duplication, and yet, the offices still remain separate today. So do the county trustee’s office and the city treasurer’s office, another merger option mentioned intermittently over the past 25 years.

Various experiments have been tried over the years – including several in law enforcement – but by and large, the promise of functional consolidation has never matched its reality. That’s because in the end, complete governmental consolidation puts in place clear lines of responsibility and accountability, Functional consolidation, on the other hand, generally does just the opposite, as departments serve two masters – both city and county government administrations. This produces conflicting priorities, warring political agendas and an operational tug of war that tend to erode decisiveness and effectiveness.

Over the years, MPD and the Sheriff’s Department have tried several consolidated programs – Metro Narcotics and Metro Aviation – and more recently, Metro Gang Unit and the Interstate Drug Interdiction Squad. The pitfalls of the programs are command and control issues and the inability to deploy manpower to priority problems. This is not meant to diminish the political considerations in which city law enforcement officials suggest that their county counterparts have little expertise and experience to offer and that their main interest is political visibility in fight against crime.

Selling Savings

On the same day that Director Godwin was dismissing functional consolidation, his boss, Mayor Willie W. Herenton was once again singing the praises of consolidating city and county governments. As he often does, he made his case on the basis of saving money although the history of successful consolidations suggests that budgets generally increase at least in the short-term as services are combined. In fact, consolidation advocates in other cities share an opinion on one thing – never sell consolidation on the basis of savings because they don’t materialize or are negligible.

In Memphis, consolidation is as much myth as fact. Conventional wisdom to the contrary, almost every major metro area operates, and competes, within a government structure just like ours. In fact, of the about 3,200 counties in the U.S., about one percent have consolidated governments. Only nine of the top 100 cities have merged in the past 100 years, and no community the size of ours has been consolidated since World War I.

If anything, consolidation has always been an anomaly in movements to make the public sector more efficient. For every consolidation that is approved at the voting booth, about three are rejected, and most of the cities that we measure ourselves against have two layers of government – with the exception of Nashville/Davidson County and Indianapolis Uni-Gov (which is the only consolidation mandated by a state legislature and it exempted law enforcement).

Government Simplicity

In fact, Memphis and Shelby County have one of the simplest governmental structures of any major region in the country. After its highly-publicized consolidation in Louisville/Jefferson County in 2000, the number of government units there dropped all the way from 92 to 91.

All of this does nothing to tarnish consolidation in the minds of some as the magic bullet to solve all of our local problems. Unfortunately, because we start out with consolidation as the answer, we rarely ask the right question, which is: what can be done to equalize the tax rate for Memphis so it is more in line with the ones paid by citizens of Germantown and Collierville?

Now, Memphians pay a disincentive to live inside the city limits. Over the past 15 years, Memphians have been forced to subsidize its own decline.

It’s done it by paying the lion’s share of the costs of new roads, bridges, parks and schools that fueled sprawl and enriched developers. In the process, the lure of new housing lured Memphians to buy substandard housing that required reinvestment before the mortgage was even paid off, hollowing out Memphis’ middle class and driving up the tax rate even more.

Paying More Than Their Share

It is a cruel cycle of tax unfairness that in the end devastates Memphis and its taxpayers. After paying a premium to remain loyal to their urban neighborhoods – where their infrastructure declined at the exact same time that they were paying for new parks, roads and schools in the suburbs – they deserve today a rational tax structure that eliminates the extra burden that they have too long had to bear.

For example, Memphians pay twice for the FedEx Forum, Autozone Park, the Health Department, Office of Planning and Development, Memphis City Schools and The Pyramid. That’s because Memphians pay 100 percent of the city’s funding, and then in addition, they pay about 60 percent of the county’s half. Then, to compound the inequity, Memphians pay 100 percent of assets like museums that are enjoyed by the entire region.

That’s why the ultimate goal for Memphis isn’t consolidation, but a lower tax rate for Memphians. It could be done by eliminating Memphis’ funding of city-county agencies and schools (after all, county government has a constitutional duty to provide schools and public health, not Memphis) and then shifting regional assets to the regional tax base – that of Shelby County.

Tax Equity

With these changes, the City of Memphis would scale down its array of services so they are more in keeping with those of the suburban cities. By shifting public services that are regional in nature to the regional government – Shelby County Government – Memphis could reduce its present $3.23 property tax rate to something more in line with Germantown’s $1.75 and Collierville’s $1.50.

While the lowered tax rate would make Memphis more attractive and competitive when compared to its suburban rivals, more to the point, the lower tax rate would be an exercise of fundamental fair play after the decades of Memphians subsidizing sprawl and paying for duplicative infrastructure.

In the end, there’s the real possibility that consolidation would be good for Memphis and Shelby County. But, a more rationalized tax structure would be even better.

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