Eating the future

One of the problems of Phoenix's extremely limited media market is that reporting on such news as the city's new 2 percent food tax fails to go below the surface (and, of course, many vital stories are not reported at all). Funny how the grand new world of "citizen journalists" and "crowdsourcing" has not filled the yawning chasm of serious journalism done by seasoned professionals.

The tax is one of many bad options faced by a city that is at, and perhaps past, the tipping point. It faces a $241 million deficit through June 2011. The latest cuts total $140 million and more than 1,300 jobs, including eliminating 500 police officers and firefighters. But they are not enough. Thus, the food tax. In general, it's a bad idea. Sales taxes are very regressive, taking much more of the income of lower-income individuals than, say, income and property taxes. This is no small thing in the largest city with so many low-wage jobs. They also risk causing additional "shopping flight" to the suburbs (about which, more later).

And yet the city is in a bind. Or should we say, binds.

For decades, Phoenix, like every city in the region, didn't really pay for its huge population increases. "Growth pays for itself" is one of the biggest lies told by the local boosters. In fact, growth is very expensive, in everything from requiring more roads to more cops on the beat. The minimal fees levied on developers never filled the shortfall. And sales taxes were never stable, although their steady rise thanks to population growth and over-storing cloaked the problem. The reality: Even in the good years of sales taxes, the city was underfunded, failing to keep up with its expansion or address its growing list of urban problems. The problem hits Phoenix hardest because of its age, its size, and the large number of poor and costly linear slums. It's been getting worse. "Growth," in the Arizona lexicon, does not pay for itself. At best, when a place is new with a relatively affluent population, it allows government to push forward public obligations into the future. Even that is at risk in the Great Reset and Great Disruption ahead, where the Growth Machine is not coming back.

A Legislature that both doesn't understand urban issues and is hostile to Phoenix has steadily boxed the city in. Much of property taxes go to a bloated community college district that operates with minimal oversight — certainly from the press — and of dubious utility in an economy of low-wage jobs and real-estate schemes. State shared revenue has been consistently scaled back, and as suburbs such as Gilbert have become cities, Phoenix has gotten less and less of a share. Cities and even counties in Arizona are weak creatures under legislative control; thus, for example, Phoenix would have a nearly impossible time instituting a city income tax. Worse, it has allowed so many jobs to migrate to the newer suburbs that such a tax might be the last sucking sound heard, as Phoenix grows to resemble the Midwestern center cities it so vowed not to emulate. Sales taxes are very appealing to the wealthy elites, who get an easy pass, so this is one tax Arizona lawmakers have allowed.

So the food tax is probably a necessary step. To those who say, "I'll shop outside the city," I say, then pay for your city 911 service, as is being demanded in Tracy, Calif. When I lived in Phoenix, I always shopped in the city, conscious of how my customer choices had political and social ramifications. I tried to shop as much as possible in the central corridor. If you want a great, or even passably livable city, you have to spend your money there, preferably with local merchants. Outside of the Poisoned Pen Bookstore, I never shopped in Scottsdale, which has become a cancer for the city of Phoenix. Well-heeled Phoenicians regularly spend their retail dollars in downtown Scottsdale, especially at Fashion Square. Then they are shocked that the city must fire police officers. If they notice at all...

Phoenix should be in a hair-on-fire mode to rebuild its economy. I am beginning to believe the Greater Phoenix Economic Council has outlived its usefulness, now needing to please more powerful suburbs that also have the spec leasing boyz in their corner. Phoenix should be implementing the meds-and-eds strategy, luring companies from Southern California, building up its logistic capabilities (Cincinnati owns a railroad — why can't Phoenix buy the western leg of the old northern main line to Yuma?), and setting up shop in China to lure foreign direct investment. To the city. Alas, this doesn't seem to be happening.

Instead, Phoenix is making cuts so draconian that they will leave a place totally unfamiliar to most Americans. In the near term, these cuts ripple out with great effect, from the small-business vendors and the unemployed rapidly slipping from the middle class, to libraries that must also serve schoolchildren because Arizona schools are so poorly funded. In the long term, everything those of us older than 30 take for granted — the commons — will be at risk. One thing is certain: Every cut leaves Phoenix less capable of competing in the 21st century, less able to lure talent and capital.

Americans have been sold on the free lunch. Taxes must always be cut. Guv'ment is the problem. The public investments and safeguards put in place by previous generations, a legacy that is the fumes keeping us afloat — that goes unnoticed. American Idol's on, after all. The wrecked civilization outside the wall, well, that's somebody else's fault: the liberals, the Mexicans, the man who won't show his birth certificate.

Don't be smug, out-of-towners. You may be seeing our collective future playing out in Phoenix.

Comments

[Patrick]

Mr. Talton,

I am one of those "citizen journalists" you describe, aka neighborhood activist or community leader according to one of my politico friends. I have earned these labels simply by giving a damn about my community -- apparently a rare attribute throughout America anymore (http://blogs.hbr.org/haque/2010/02/the_real_roots_of_the_crisis.html, or search NY Times for the column about narcissism -- very enlightening). But as you note, my infrequent and unprofessional blogging will never fill the gaps left behind by the lack of professional journalists in the Phoenix area. If someone is willing to pay me, then I might try to blog more frequently, but still it would lack the depth of coverage that I wish was available here (as demonstrated by many of the "professional blogs" I know).

I'm trying to do my fair share by attending the public budget meetings and working to educate my neighbors about the false dichotomy presented to us: food tax versus protection. However, the city has pulled a real political coup by first co-opting all the low-level city employees, recreation participants, and members of the poorest neighborhoods -- all begging to expedite collection of the tax if it means keeping much needed services and jobs. Next, people like me who must tread lightly while still persistently trying to urge officials to consider other options besides the most regressive possible food tax. If I were too strong in my protest, it would likely be categorized with the libertarians who arrive at each meeting in Guy Fox masks, carrying signs about impeachment, and focusing their discussion on the role of the Rothschilds and the Fed in our current problems.

At these meetings, I have heard plenty of heart wrenching appeals to keep the libraries open for the people who have no other computer access or children who have nowhere safe to go in the afternoons. And then there's the softball community with its incredibly well researched appeal to keep softball fields open and able to host more regional interstate tournaments (thus generating millions in revenue each year). Or the front line streets department and park department employees explaining why they more than earn their $30,000 annual salaries and should not be cut from the city's work force.

The fact that city management still commands six-figure salaries (or close), judging by averages listed on the publicly supplied budget proposal are rarely noticed in comparison to the aforementioned employees. Neither is the information about perks at the top or unnecessary spending on frequent new vehicle purchases, electricity waste, five-day work weeks at city hall (versus 3-day weeks at libraries), and other opportunities for practical and seemingly obvious budget savings.

There's been no discussion about the fact that Phoenix pays a fortune to fund GPEC, yet the businesses GPEC brings are typically either low wage or located outside the city boundaries. Then the officials turn to business leaders like Kimber Lanning to ask if she has an opinion. She says yes, presents a well-reasoned argument that we need to promote local businesses. Then the officials tell people to shop at the Wal-Mart closest to home. Nothing really changes. They go back to Kimber, begging for more help, and she tries again. Then they try to get a second Wal-Mart built since the first one didn't create enough increased tax revenue. The elected officials who truly understand what's wrong with this picture are unfortunately not the ones in the majority (and Kimber has yet to announce any run for office as far as I know).

To live here and try to affect positive change is distressing to say the least. My friends who agree with me are either cycling through burn-out and unable to take on yet another social cause or they too just prefer to stay home and go with the flow. The poor people of Phoenix still don't feel that they can speak out and be heard, or else they've been sold on the food tax as the best thing in the world. And then there's the wide majority of Phoenicians who are just too content to have much of an opinion. After all, the proposed food tax is less than a cable bill for the average family....

[koreyel]

Jon Talton: "Every cut leaves Phoenix less capable of competing in the 21st century, less able to lure talent and capital."

It's not just the cuts that cede land to the barbarians at the gate Jon...

You called it right a few posts back: we are in full kook mode. To which I add: And full kook mode has a culture war to wage. And they are going along at that apace.

Last week it was a push to put the ten commandments up on the public green. In today's Arizona Daily Star (link below) we learn that:

"The House Government Committee voted Tuesday to require presidential contenders to prove to Arizona's secretary of state that they're "natural-born citizens" to get their names on the ballot. The 6-1 vote came on a proposal by Rep. Judy Burges, R-Skull Valley, who said it's only fair to require those who want to lead our country to prove they meet the standards of the U.S. Constitution."

All of which, of course, is going to lead to a court challenge. Which is going to cost a state "in the red" plenty of money to defend and probably lose. This paragraph makes all that very clear:

"Matt Benson, lobbyist for Secretary of State Ken Bennett, said there are all sorts of problems with HB 2441, which now goes to the full House.First, he said it likely would bring a challenge that Arizona was illegally imposing its own standards on candidates for federal offices. Benson said federal courts previously struck down an attempt by Arizona to limit the terms of members of Congress."

Fools just never learn do they?
Even if it costs them cold hard cash...

So here is a good question: How much money will these frivolous state laws passed by our culture war heros cost the taxpayer? Seems to me if you had an ounce more intelligence that you do hate, then you'd avoid passing a law that will drain your state coffers in a recession. Couldn't they at least be partially adult about it and wait until the state is flush to get their hate on?

But I am a realist. Not a hater.
And obviously, Arizona has got a lot of hate in her. Which is all to say: We will be paying for those 911 calls anon...

http://azstarnet.com/news/state-and-regional/article_a6758d4e-d899-58d9-9cf5-575612e54afb.html

[Patrick]

Here's the article on narcissism I referenced above: http://nyti.ms/9BAFpL.

As I'm sure others will relate to this column, I once had trouble fitting in at my corporate workplace because I just couldn't get as into the materialism (another article on that topic: http://bit.ly/csQnKI). Furthermore, my concern for things like culture and community tends to make most other adults I know quite nervous, which makes me sad. I can only hope that a new golden age of intellectualism and innovation will rise out of this wasteland's ashes (like a Phoenix -- just in case you weren't already following the cliche imagery), and I desperately wish to play a part in such a renaissance.

[ChrisInDenver]

Patrick, you may be "just" a citizen journalist, but I am very impressed with your first posting. You made some excellent points, especially your comment about being a resident of Phoenix and trying "to affect positive change is distressing to say the least." That affected me emotionally.
I may live in Denver now, but I was born in Arizona and spent the first 27 years of my life in Phoenix (for simplicity's sake, I'll include the four years that I spent in Flagstaff attending college at NAU in those 27 years). I love Arizona, but eventually I had to leave. I couldn't stand to watch the state be overrun by intolerance, a mean Legislature and crappy, cookie-cutter subdivisions as far as the eye could see. I took a job in Boston in 2004 and immediately fell in love with the city. That is a real city; it is cosmopolitan, has a real downtown, a vibrant economy and a rich, ethnic diversity that Arizonans will never understand.
I know what you're talking about, Patrick. I commend you for expending the energy to write about your frustrations and concerns with the direction that Phoenix and the rest of the metro area are headed in -- even if you're not getting paid for it. And this is coming from a former professional journalist.

[Emil Pulsifer]

There are really two issues here, and neither of them is limited to Phoenix:

(1) The decay of central city areas, resulting from inadequate assessments on new growth suburbs and the consequent economic incentive this gives to developers and individuals:

"As far back as the early 1900s, Clayton—which is the county seat, and which bills itself as the hub of the St. Louis metropolitan area—attracted people looking to escape the crowded city. In recent decades, St. Louis, like Cleveland and Detroit, has been plagued by a legacy of racial segregation and fiscal inequality as middle class and wealthier whites have moved to suburbs like Clayton in search of better schools and lower taxes, says Myron Orfield, a law professor at the University of Minnesota. That has depressed values in the city's downtown office markets, Mr. Orfield says. "If you can have all the advantages of a metropolitan area and none of the costs, that's where people and businesses that can choose will choose to be," Mr. Orfield says."

http://online.wsj.com/article/SB20001424052748703798904575069550184235576.html

(2) A tax structure that is vulnerable to recession:

"Some 55% of state revenue, before federal transfers, comes from personal and corporate income tax and sales tax, according to Donald Boyd at the Nelson A. Rockefeller Institute of Government. All three get killed in a downturn, and the first three quarters of 2009 were the worst for state tax receipts since at least 1963."

Pay close attention to the graph showing states' tax revenue vs. U.S. GDP:

http://online.wsj.com/article/SB10001424052748703315004575073403314799286.html

Of course, when states get in trouble, so do municipalities, especially when state's "sweep" tax and fee funds which would otherwise have gone to smaller administrative units like cities.

Phoenix needs to institute a special property surtax. The City Council can do this without a public vote, provided they hold a public meeting and take a roll-call vote. The decision still needs to be ratified by the Maricopa County Board of Supervisors, but no public vote needs to be taken.

This surtax (which in part would specifically target outlying areas) would be based on the rationale that the increase in city infrastructure cost for fringe growth and development has been born disproportionately by central city residents.

The surtax would also be progressive (and this citywide), i.e., a property surtax would amount to a kind of luxury tax for the most valuable properties and for areas whose properties have been less affected by the housing downturn (e.g., Paradise Valley, Camelback Mountain, etc.), so that these properties paid the highest surtax rate; and this rate would decrease as property values decrease, phasing out at some point, so as to avoid burdening the working poor and lower middle classes at a time of personal financial strain.

The surtax on property, which even in the case of foreclosed properties would eventually be paid by banks with interest, would be less vulnerable to recession than other taxes, since property taxes result from: (a) the existence of property, not jobs or income; (b) property value and rate assessments determined by counties and cities.

This would also alter the structural incentives which at present encourage sprawl, by making land use more expensive at the fringe.

[Patrick]

Great discussion here, and Emil, I absolutely agree that a property tax is a somewhat better solution -- even if politically unfathomable to most. In fact, I'm about halfway through reading David Ricardo's book on Political Economy and Taxation. And while Ricardo still argues the downsides of property tax, it seems like the most efficiently passed through the economic system so that the government can fund itself. General economic theory aside, it makes more sense in these times than a highly regressive tax. But keep in mind that the naysayers will invoke the high property tax rates instituted by those declining Midwestern cities you mentioned, which I think is a somewhat fair point unless Phoenix can transform itself to effectively promote a larger tax base to limit the need for absolute tax increases.

And thank you so much for shining light on the mismatched economic needs of the community and the investment community. This is an area of regional economics that I think deserves much greater exploration -- and when I brought it up to Michael Schuman (of BALLE) a few weeks ago, I had no idea that the WSJ of all publications would dare tread this turf. I didn't get to read the full article, but will try to find a free copy to see whether WSJ proposes that this is a problematic misalignment with community needs.

Chris, thank you for the kind note. I reread my earlier post and realized that it may have read somewhat defeatist. But please understand, as I hope I made clear in other comments to Mr. Talton's articles, that I remain guardedly optimistic. As I read this article and some of the comments to my wife last night, she simply asked, "Can we move? How about somewhere in the northwest or California?"

But I know that those places too, even with some great cities, suffer many similar problems that we see here -- even Colorado. Throughout the West, there seems to be a major divide between the urban/suburban populations and those in the lower density towns and secondary cities. See for instance eastern Washington versus..... well, Seattle, basically; or Portland versus Oregon; San Francisco versus the Central Valley; Denver versus Western Colorado. Despite my frustrations here, at least its the problem that I know, even if I don't fully understand it.

So thank you for your kind words, and please trust that I plan to stick it out for as long as I can do so, and I hope to keep pushing people out of their armchairs and into the discussion. Maybe I'm still naively optimistic, but this I thought was the Arizona where I grew up: one where ideas could be debated freely by a bunch of independently minded people who minded each other's diverse backgrounds.

[Patrick]

Of course, by "minded" at the end of that last comment, I meant something along the lines of "respected" or "heeded" or such. Granted, it seems that in these times many Arizonans do indeed "mind" others' backgrounds quite a bit -- but in the wrong way. This, I see as a huge threat to sustainable and integrated cities -- much like in the Midwest.

And even as much as we see the somewhat popular public face of the Minutemen movement or Arpaio's Gestapo, I'm encouraged by the kind of beautiful regional integration of cities like Tucson, where I spent a few years in college. Tucson also faces significant problems with its growth, but lets focus on the central part of town, where many families across socioeconomic lines have cohabited neighborhoods for many generations. And despite economic cycles, the Tucson lifestyle seems fairly persistent.

[Emil Pulsifer]

A few more points, both in regard to Mr. Talton's essay and subsequent comments.

First, when I mentioned Paradise Valley in the context of a discussion of Phoenix city tax revenues, I suppose I should have clarified by saying "Paradise Valley Village" which I think is the correct name for the portion of Phoenix abutted by the "urban villages" of Desert View, Deer Valley, North Mountain, and Camelback East (also within Phoenix city limits).

Second, one needn't consider geographical sub-boundaries at all where the "luxury" portion of the proposed property surtax is concerned. The county has a list of all property values, and those lying within Phoenix city limits are easily obtained by the city. Then, one simply looks for those properties whose assessed values are a certain percentage over the median citywide value for their class of property (e.g., residential), and those are instantly candidates for that portion of the surtax, with the exact rate depending on just how far above the median value the assessment is.

Third, with respect to timing (critical when funds are needed as soon as possible), note that the new Phoenix food tax won't take effect until April 1st. It should be possible, using the most recently applicable property valuation (roughly 18 months ago, since I believe that is the lag time), to apply the surtax, due in the same fiscal year that the food tax is to be collected. I think that property taxes are currently due March 1 and October 1, and become overdue two full months later. Surely a surtax could be tacked on, and if necessary, a special, one-time billing date for it this year.

Fourth, Patrick wrote:

"But keep in mind that the naysayers will invoke the high property tax rates instituted by those declining Midwestern cities you mentioned, which I think is a somewhat fair point unless Phoenix can transform itself to effectively promote a larger tax base to limit the need for absolute tax increases."

The best way to broaden the property tax base is to make sure that it applies to all city properties, whether business, residential, commercial, industrial, etc.; my impression is that there are already far too many exceptions and decreases for various categories. Whatever your primary revenue source is, it has to be broad, and it has to be sufficient to fund expenditures.

If tax incentives are needed to lure base industries to Phoenix (i.e., those which pay well and tend to multiply the benefits well beyond their own immediate payroll), they could be given in the form of corporate income tax breaks: but only if we don't cut the corporate income tax across the board as Kirk Adams and others are suggesting. But I'm intrigued by your last sentence, Patrick: could you elaborate?

Fifth, as for the "shopping flight" threat mentioned by Mr. Talton, I think that's more of a bluff than an argument. People SAY that they will do this, in order to discourage the tax, but in general they won't. A food tax of 2 cents per dollar adds, at most, $1 to a $50 grocery bill. The average price of gas in Phoenix as of Thursday was $2.62 per gallon, so $1 gets you just 0.38 gallon. Assuming 15 mpg in the city, that takes you just 5.7 miles, which isn't enough to get you out of Phoenix unless you're living on the margin already. Furthermore, you're not saving that dollar, you're just spending it on gas rather than food tax.

Even if people don't "do the math" the mere fact that they must spend extra time driving to another city, looking for a new store, and driving all the way back with their goods, will quickly pall, and the first thing they will ask themselves is exactly how much they (think they) are saving. They'll quickly decide that the extra headache and driving time isn't worth it for $1 (which in fact, a moment's additional reflection will convince them they aren't saving anyway).

Finally, with respect to citizen muckrakers (journalist seems far too fancy a title for most of these hobbyists), how would we know? There may be some bloody brilliant analyses of the Phoenix food tax out there in the blogosphere; but with 100 million blogs and counting in existence, pulling a good one up from a Google search of general keywords is like finding a needle in a haystack.

The Internet may empower individuals, but the embarrass de richesse simultaneously neuters them. People go to CNN or Fox News or the Arizona Republic not merely because they are staffed by professionals, but also because they know where to find them, easily and in a hurry.

[Emil Pulsifer]

P.S. Also note that "every city that borders Phoenix has a food tax", according to the Phoenix Budget for Community Review document. That makes avoiding a food tax impractical even for those living on the city margins.

[gregd01]

I read the whole article only to see that you finally "get it" in the second to last sentence. :)

For some, there is always some government body in need of more money to do more good with other people's money. As for me, I think Adam Smith's invisible hand theory works remarkably well and that most problems are caused by governments overreaching and trying to "fix" everything, thereby creating a temporary solution that will necessarily need to be "fixed" by the next generation.