Missoula's recent budget debate — one that saw residents making heartfelt, middle-of-the-night pleas to the City Council not to further raise their taxes, only to see a tax increase approved — is part of a national discussion as communities see federal and state money slashed.
Take infrastructure, that catch-all word for roads, bridges, and water and sewer utilities, said Tim Burton, executive director of the Montana League of Cities and Towns.
With the loss of state and federal dollars, counties, cities and towns are left to provide maintenance and upgrades. And with more property tax and special taxing district dollars going toward those needs, communities are searching to either find enough funds for other services, or discussing whether to drop them, he said.
“That brings additional pressure to local taxpayers and communities; those conditions are relatively new in the last decade or so,” Burton said. “That creates the debate — what are we as a city and community, establishing as our basic level of service? It’s clear without more participation at the state and federal level, the challenges are going to be greater at the local level to maintain our infrastructure.”
During last week’s budget hearings, Missoula City Council member Jesse Ramos presented a list of 18 programs funded in part or wholly by the city, which he said could be cut because they’re non-essential and can be provided by private businesses. Among those items were the free Mountain Line bus service; Missoula in Motion, which promotes walking, biking and other alternative transportation options; and public arts and aquatics programs.
Ramos said that with every budget decision, the council makes a de facto choice on how much money people will take home, and that even if people are renters the cost of property tax increases is passed on to them.
“We decide for the people how much they will have for their families,” he said. “… Every time we raise taxes we should bear more of the brunt because we are forcibly making people pay for our pet projects.”
Council member Jordan Hess called Ramos’ suggestions “libertarian,” and said the proposed cuts just weren’t in line with his ideology, a statement supported by the other council members including Heather Harp. She added that while some people may not use the programs that were on Ramos’ list of cuts, they are of value to others.
“Whether it is a program you use today, or a park, or maybe Missoula Aging Services that we might have to use, they’re all of value to somebody,” she said during the seven-hour budget hearing.
Patrick Barkey is the director of the Bureau of Business and Economic Research at the University of Montana. When contacted by the Missoulian after the meeting, he discussed the differences in the philosophies behind the budget decisions.
Barkey said from an economist’s perspective, taxes are seen as a burden, and services are a benefit. The philosophical conflict between the two arises when a community faces the challenge of raising taxes when it doesn’t have enough money to provide for the services.
“There have been cities that privatize services — it’s a dirty word to a lot of people, but not to economists,” Barkey said. “Obviously, Missoula has gone in the opposite direction, like with the water utility.”
Turning Mountain Water from a private business into a city-owned public utility dropped about $600,000 from the tax rolls this year, which contributed to this year’s budget shortfall and the decision by the council to raise taxes by 3.85 percent.
Barkey notes that user fees are typically the most efficient way to pay for services — “I buy my lunch and you buy yours” — but items like police and fire protection are known as a “free rider programs” where everyone pays for essential services.
Barkey compared some of these taxpayer-funded non-essential services to a grocery store co-op, where everyone pays a flat fee and can choose their food.
“You can quickly see the problems that would arise,” Barkey said. “You buy steak and I buy celery, so I’m paying for your steak.”
Ramos’ questions about stopping city subsidies to what he sees as non-essential services gets to the heart of the matter, Barkey added. When the city budget doesn’t contain as much money as was anticipated, choices must be made.
“Transportation is a private good that you capture benefits from. Free fare is good; however, you pay for it even if you don’t ride it,” he said. “But public assumption of private goods isn’t efficient from the point of view of an economist. Missoula is a relatively high-tax city, but if you just look at that you’re missing the other half; it has services like the pool that Bozeman would love to have.
“The fact is Missoula is a high-tax city and in fact always has been. That’s not good or bad, but is well known. So if you move to Missoula and like Missoula you can’t have been surprised” at the tax burden.
VOTE WITH YOUR FEET
Barkey points to one economic theory that people like to be with like-minded people, and they “vote with their feet” by moving if they’re not among those with whom they share values. They may just move outside of the city limits, but they still can move — although that’s more difficult for those with low- and mid-level incomes.
Barkey added that part of the question is an issue of choice: Should the city let people choose what services they want by lowering their taxes and paying for those services, or should the city decide what they think is best for people and tax everyone to provide those services for anyone who wants to use them?
“It goes even further than that,” Barkey said. “Businesses may fail, but governments rarely do. If you’re in the business of selling something no one wants anymore — like dorm rooms — you need to do something different. But the government is isolated from market pressures; they’re under no pressure to readjust and that’s another cause of inefficiency. So if you have free bus fares, you’re under less pressure to close routes without ridership because that’s not their revenue stream anymore.
“There’s plenty of cases to be made for allowing private goods to be paid for with private money.”
Burton, a former Helena city manager and Lewis and Clark county administrator, has heard the comments about running cities like businesses, and it rings hollow for him.
“There is no playbook that says a private business will do something less costly than government. Usually government does it when it’s demonstrated to be less expensive than a private service,” Burton said. “But businesses are not in the business of protecting civil liberties and governments have to do that. Those responsibilities are well beyond dollars and cents.
“Sometimes, being a community, it’s important to subsidize things for people, like the bus route, for those who otherwise would be closed off and stuck at home. That’s a community value to them.”
Barkey agrees that some of the non-essential services make Missoula great and bring people here, so there is merit to providing services like free transportation, art, parks and open spaces. But he thinks more research on the value of those goods is necessary.
“Just the idea that something is helping the economy is cool is quite a different thing than to actually determine that,” Barkey said. “There are plenty of things that private businesses do that are cool, too.”
Barkey also said that regardless of whether someone owns property or rents, they will pay for the tax increases, which in turn affects the affordable housing market — a hot-button issue for the City Council and others.
“But this is a healthy debate,” Barkey said. “Still, from an economists’ point of view, public provision of private goods is problematic, especially if you’re paying for things no one wants, and people who do value it are getting those goods for little or nothing. It’s not efficient.”
The philosophical differences on what services to provide or subsidize is part of both past discussions and future ones, according to Bryan von Lossberg, the Missoula council president.
“Throughout my tenure, we have always looked at those things that were on Jesse’s spreadsheet — they are looked at and should be looked at,” von Lossberg said of Ramos. “Things like the zero [bus] fare contribution the city makes is part of a multi-year appropriation, and we have thoughtful debate and assessments whether to have a contribution like that.”
But he notes that once they’ve committed the money, their partners — like the University of Montana, and Missoula-area hospitals — count on that contribution, making it something that can’t be cut at a moment’s notice during a late-night final budget hearing.
“Whether it’s contributions to the zero fare or to the art museum — does that partnership reflect on what’s best for the community? That question is always on the table, not just during the budget committee hearing or public hearing. It’s always out there,” von Lossberg said. “I appreciate all sorts of opinions on aquatics, that we shouldn’t subsidize it at all or should make it run in the black.
“All of those points are worthy of being discussed, but I don’t lose any sleep at night over the fact that we provide certain subsidies. These are good facilities that the community voiced support for when they passed the bond to do that, and I want to make sure I’m fulfilling our obligations to the people