In an old Broadway musical, "Music Man," a lead song warned of "trouble in river city." It would be difficult to find any time in the last half-century when Seattle or most other American cities have been in as much trouble. No, it's not just floods, tornadoes, tropical storms, or oil gushing out of the ocean floor; it's the realization that our economic bubble has burst. So mesmerized by the bountiful life we all have had, many Americans and their leaders didn't take the need for austerity, even at the local level, seriously enough.
Our financial trouble lingers from a recession that hasn't been safely overcome even now. The trouble now isn't from trading in derivatives, but from not having the revenue to meet governmental payrolls that swelled during the booming years, along with cities borrowing excessive amounts of money for infrastructure that existing economies can't repay.
While of little solace, we aren't alone. Over half of the nation's cities are in a form of fiscal crisis. San Francisco, Houston, Los Angeles, and Pittsburgh are among many who have contemplated bankruptcy. Revenue, much from sales taxes, has plummeted, and with unemployment hovering around 9 percent nationwide, people simply aren't spending as much as they did a decade ago. With record numbers of homes in foreclosure, property taxes aren't always collected, and the same can be true with real-estate excise taxes.
To make matters worse, while there are some bright aspects to the economy, world financial advisers are more than a little concerned that there are so many nations carrying debt they can't repay and that their collapse might take healthier nations along with them. Last year's bailouts of financial institutions both here and abroad weren't much more than the Dutch boy with his finger in the dike.
European nations and the IMF have agreed to bail out Greece, which can't pay its debt, and they are worried about Portugal, Spain, and Italy. Many Greeks are rioting in the streets in opposition to the austerity requirements for getting international financial aid. The Greek people feel entitled to pensions and government subsidies.
The problem for our local leaders seems to lie more in their unwillingness to realize the few who are shouting “fire” really mean it. The attitudes of local governments are a bit like the tendency to deny that we each are getting older. We don't really want to believe it, but things just aren't what they used to be. Denial is one stage of death.
Here in Seattle, which was slower to feel the effects of the recession, our leadership is just starting to wake up to the realization that we are in far greater financial trouble than we were willing to acknowledge. At first, budget deficits of $40 million were discussed. Now that revenue is unlikely to rebound in the near future, budget deficits as high as $120 million (over the next two years) are being discussed.
There was a day when the mayor and city council would, with an almost cavalier attitude, choose some city service to take the hit, such as closing a library or park. The actions had the appearance of inflicting pain more than doing any serious budget decision making. Another tactic was to trim a few percent from all departments.
This time, cutting library hours, increasing parking fees, or closing bathrooms in parks won't come close to solving our financial crisis. Those won't be enough because in those affluent years our progressive spirit initiated many new programs that responded more to ideas of what we wanted and less to what was essential. We hired new city workers to implement the programs because we had the money. Now the money is gone.
Seattle has always had an aura of adolescence about its image. We perceived our zits were visible, that they somehow prevented us from becoming that "world class city" we wanted to be. We dabbled for years in cosmetic improvements rather than setting aside money to replace things that were certain to wear out. The Magnolia Bridge was but one example.
We wore rose-colored glasses when it came to paying city workers. We wanted the best, hired more than were needed, and we got the best and paid the best.
Several former union people hired by the city of Seattle’s personnel department were part of the team that negotiated the 24 union contracts the city has with its unions. We can wonder how hard they bargained on the union contracts. So far, the city's unions haven't been jumping forward with enthusiasm to make concessions significant enough to solve the city's financial dilemma. The average pay for a city worker in 2008 was around $73,000 a year. Maybe not excessive, in a high cost of living city, but since the average household income of two people in Seattle identified in the 2000 census was $44,000, city workers would survive if taking less meant saving their jobs. The 9 to 10 percent of Seattleites who are out of work are paying their share to support the much higher paid city worker.
We also spend on new equipment and continue to create cosmetic improvements throughout the city that could easily wait, like SeaTrans putting in new roadway medians, fancy street signs, or expensive trails. We do a lot of discretionary spending.
The mayor and city council are wringing their hands and holding hearings on what to do. Privately, they likely talk about raising taxes and fees. They also are seriously studying turning over city operations to a wholly different kind of taxation and municipal management. These schemes go by a variety of names, but most follow guidelines established by the state that allow entire civic operations to be run, not by the city, but by management entities with separate taxing powers, such as a park or library district.
They can assess taxes, have the right to eminent domain even hire their own cops. Does it work? Since they can levy taxes, they have no reason to trim operations or reduce staffing.
Those opposed to special districts to handle municipal services believe that the arrangement would allow current government leaders to cop out of cost-cutting. Will there be special districts for libraries, water systems, where even the police could operate within this framework? Opponents argue, where would it stop?
In 2008, Seattle employed about 11,000 city workers, who were paid about $800 million. Seattle is also obligated to fund its retirement program. In 2008, the city paid its retirees almost $46 million, with that number expected to rise by 14 percent. The bursting of the financial bubble wiped out $527 million of Seattle employee retirement funds invested in the financial markets. It;s unclear whether the city will need to pick up the tab for retirement benefits that would have come from now-gone investments.
Seattle has become known for progressive public policies. We have a variety of housing programs that range from help with rent to financing near market rate housing. With homeless still on the streets, there never seems to be enough. Seattle passes housing, school, and parks levies. Seattle has stepped up to the plate more than neighboring cities in offering programs to the less fortunate. So effective, in fact, that other Washington cities with inadequate public assistance are more than willing to let their needy move to Seattle. With the revenue shortfall so severe, there may be limits to what even Seattle can do.
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