DATA – Designed to Fail

Posted on August 24, 2010 by Matt Drew

If you were going to design a bus system to fail, what features would you include? I would make sure that the system is not managed directly by the city it serves, while still leaving city taxpayers to foot the bill.  I would also ensure that the new TTA management chooses a new, non-local private operator with a known history of stranding disabled riders.  And I would make sure that I hired said private operator for the express purpose of ensuring that DATA employees are unionized, in a successful effort to bypass the North Carolina prohibition on state and local government collective bargaining.  Also, despite this use of a unionized private operator, I would require six full-time city employees to oversee the program – including at least one job which apparently pays $87,000 a year (search for Transit Administrator), not including benefits.  That’s one administrative employee for every eight buses.  Further, when transferring management over to the TTA, I’d make sure that none of those expensive city employees are let go despite a “tight” budget, and that I allocated an additional two million dollars (14%)  to the budget, probably by adding free routes to increase my costs.

Is it really any wonder that the DATA bus system will probably cost Durham and North Carolina taxpayers over ten million dollars in losses, increased fees, and usage fees this year?

Of course, the counter-argument is that the city receives benefits from this system in the form of helping people move around.  While true, the argument ignores the “unseen” – the negative effects of running the system the way we do.  Yes, it does provide transportation for a very small percentage of Durham residents (repeat riders are often overcounted in transit ridership statistics, so the percentage of the population that even sets foot on a bus is probably 1-2% – we don’t know the exact numbers because DATA apparently doesn’t release detailed ridership information or rider-mile calculations).  However, the bus system, combined with the taxi laws that severely restrict private transport options, crowds out private transportation services that would almost certainly be far cheaper, and definitely more time-efficient for riders – as well as providing jobs and boosting our economy.  ( Try riding the DATA buses from Woodcroft over to 15-501, and you’ll see what I mean – you’d get there at least twice as fast in a cab, on a scooter, or on a bicycle).  Far from benefiting the city, the bus system actually helps prevent its riders from finding better, cheaper transportation while funneling taxpayer money away from our local economy.  It’s long past time – we need to stop pouring money that isn’t ours into a system that is designed to fail, with the increasing costs being born by Durham taxpayers and the profits going to politically-connected unionized companies and unnecessary city employees.

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Updated Numbers From the County Budget

Posted on May 25, 2010 by Matt Drew

The 2010-11 Durham County proposed budget is up for review.  Coverage is available from Bull City Rising, the News & Observer, the Herald-Sun, and even WRAL.  The proposed County property tax increase is 6.1%, or 4.29 cents per $100 of assessed value.

EDIT: The Indy also has coverage.

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Here Come the Taxes

Posted on May 23, 2010 by Matt Drew

The Herald-Sun editorialized on the 2010 numbers for the Durham budgets this morning.  We’ll know more tomorrow and Tuesday, as the proposed budgets are released for the City and the County, but the numbers reported by the Herald-Sun are disappointing, to say the least.  According to the Herald-Sun, the City plans on increasing property taxes by 1.19 cents for every $100 assessed, and the County plans on an increase of 7.435 cents per $100 of assessed value.  What does this translate to?  Money Magazine reports that the median home price in Durham is $160,000.  If these tax increases go through, it will increase the median property tax bill by about $138 – from $1997 to $2135 per year.

Of course, an increase in taxes was pretty much inevitable, given the City and County unwillingness to even freeze budgets, let alone actually cut them.  Note that despite the noise about the budget, the City budget proposal increases spending from $345 million in 2009-10 to $353 million in 2010-11, an increase of $8 million or 2.2%.  The County’s proposal is not up on their budget website yet, but the budget the Commissioners approved for 2009-10 increased the budget by about $39 million or 4.9%, from $791 million in 2008-2009 to $830 million in 2009-2010.  (Note that the County did not spend that much, probably because sales tax receipts continued to decline.)  Since the County approved $80 million in new debt for a new building this year, bowed to pressure from the goverment school system, and added additional taxes, it seems likely that we’re in for another substantial increase in spending.

So where are the painful budget cuts?  It should be clear at this point that when the City and the County talk about budget cuts, they are talking about cuts in the assumed cost increases, not actual cuts.  An excellent example of this is the pay freeze for Durham City Employees – the money “saved” by such a move is the removal of the automatic pay raise, not an actual reduction in salary.  It should be noted that the entire 2.2% tax hike, $8 million, could have been avoided by reducing City employee pay and benefits by 5% – which should be a familiar number, since it is exactly what I proposed two months ago.  Every department budget process has built-in assumptions of expenditure increases, and it is these, not the actual budget, that are being cut – as you can see from the City’s own budget documents.  Some of these are valid, such as increases to account for inflation and population growth, while others are more suspect.  However, even the inflation increases are often based on numbers that, for the last two or three years, simply haven’t been there.

Why do City employees escape the belt-tightening that has been going on everywhere else in Durham?  Why is the City avoiding actual budget cuts, while “just squeaking by” with an additional $8 million funded by tax increases?  The answer is simple – because we elected a City Council and County Commission who believe the solution to every budget problem is to raise taxes.  They increase the financial pain for Durham residents so they don’t have face the music of their poor financial management themselves.  Wouldn’t it be nice if you could simply increase your company’s revenues to make sure that no one had to lose their job, or take a pay cut?  Unfortunately, that’s not the way it works in the real world – and that’s not the way it should work in our local goverment, either.

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Neal Boortz No Longer Speaking at Libertarian National Convention

Posted on April 18, 2010 by Matt Drew

A few days ago I received a message from the national Libertarian Party organization that Neal Boortz will not be speaking at the national convention,  but has instead been booted, apparently for publically recommending that voters support the Republican Party in the upcoming elections.

I see this as a good thing – a very good thing.  I’ve listened to Neal’s program a few times in the past, and he certainly calls himself a libertarian and is a national Libertarian Party member.  However, he’s a public face the party can do without, and it’s not because he is a controversial figure.  It’s because of the tone and tenor of his broadcasts and speeches.  Mr. Boortz engages in precisely the same kind of demagoguery that is used by many of those currently in power.  He attempts to use the same fear- and anger-based formula that has worked for decades to inflate minor crises and smooth the expansion of government under both major parties.  His talk is all about what is wrong, and very little about what is right; all anger at “them” while directing even more anger at “the other them”; all problems, no real solutions.  What he offers is not ideas to solve our national issues, or encouragement to become politically active, instead, he offers a comfortable place for people to complain and feel victimized.  His show is essentially an incitement to ineffective whining, and when he did call for action, he called people to support the Republicans, who are a major part of the problem!

That attitude, I believe, does not and should not have a place in the Libertarian Party.  Fear-based diatribes like Boortz’s are part of the problem, not part of the solution.  I want to be part of the solution.  Real solutions require more than simply identifying the problem – they require action, not complaints.  They require effort, dirty hands, participation, argument, compromise.  In the past Mr. Boortz has not helped with this, and now he is actively working against it.  Thus, this was an excellent call by the Libertarian Party.

The replacement for Boortz is going to be our own Mike Munger, who kept the LP on the North Carolina ballot in 2008 with 2.8% of the votes in the gubernatorial vote.  I’ll be there, and I’m now really looking forward to the convention.

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The Three P’s

Posted on March 6, 2010 by Matt Drew

The Herald-Sun covered the City Council’s budget retreat two weeks ago, where the basic theme of the story was this:

Council members coupled their willingness to consider a tax increase with a demand for additional spending cuts, which they conceded would likely translate into staffing reductions.

And Kevin Davis over at Bull City Rising asked this question, with regard to a local realtor who proposed starting a group to campaign for Council replacement:

Which means we really aren’t sure what’s accomplished by wanting to throw out Council and the mayor, given that we’re spending on projects they already implemented, after we voted for the projects.

There are two primary reasons we need to replace the City Council.  The first reason is precisely the reason Kevin cites – spending.  Our spending is out of control.  Yes, voters did approve the bond referendums.  But those referendums were planned, pitched, and supported by the current City Council.  It’s our job to elect good leadership, while it’s their job to anticipate economic conditions, handle crises, prepare for contingencies, and present us with their plans.  In hindsight, it is now clear that the current City Council spent more than we could afford, and convinced the voters to do so.  Now, we find ourselves in a situation where we are trapped by malinvestments made during the boom years, struggling to maintain city services against falling revenues, and discussing tax increases and budget cuts.  Poor prior planning leads … well, you know where.  And we should judge the City Council on performance, right?

The chart below graphs how the city spending and debt has developed from fiscal year 2000-2001, which is the first year for which we have an easily available budget record.  As I said during the 2009 City Council campaign, Durham is on an unsustainable fiscal path:

The City’s expenditures are the blue line, and the City’s total debt obligation, including interest, is the red line (see note 1 at the end of the post for more details).

Further, this spending doesn’t include what still needs to be spent to catch up on our streets – in the article, Mayor Bell is proposing another bond issue, taking on more debt, to catch up on our street maintenance.  We’ve increased our budget by roughly 15% over and above inflation, and increased our debt load by over 50%, and yet we still have to borrow more money to perform a basic government service like street maintenance?  This shows a serious problem with priorities, particularly in today’s lean times.  We simply cannot sustain borrowing money to pay for basic services – it’s like paying your bills with a credit card when you don’t have a job, it just digs your financial hole deeper and deeper.

Those confused priorities are the second reason to replace the current City Council.  It is apparent, at least to me, that the priority confusion extends beyond the budget.  The quote from Council member Cora Cole-McFadden in the article is a good example:

The council held the line last year on pay for workers other than sworn police and firefighters. Doing so again this year while asking employees to absorb higher insurance bills could be a morale-killer, they said.

“We must show our employees we value their service in some way,” Councilwoman Cora Cole-McFadden said.

Let’s be clear about what she is saying.  In the current economic climate, with revenues falling and taxpayers struggling to make ends meet, Ms. Cole-McFadden is suggesting that we raise taxes in order to give city employees a raise.  Not to hold their salaries, or keep their jobs.  An across-the-board raise.  That shows a level of … disdain for the taxpayer that I find pretty disconcerting.  Ms. Cole-McFadden, city employees aren’t the only ones facing higher insurance bills.  Out here in the real world, people are facing those bills as well as the threat of losing their jobs and their homes.

I have a different suggestion.  Let’s rescind the police and fire pay raises from last year that are about 18% of the current $13 million shortfall ($2.3 million according to the Herald-Sun story).  Let’s also cut other city employee pay by 5%, and look to eliminate departments and capital projects that are not core to the City’s basic services.  If city employees aren’t happy with the same belt-tightening everyone else in the city is doing, then they are welcome to seek employment elsewhere.

Are such reductions painful?  Of course.  But they are necessary.  As economist F.A. Hayek said decades ago, it’s the boom we should fear, not the bust.  Our unsustainable spending habits over the last decade have put us in this uncomfortable position.  Instead of using our extra revenue to drive down debt and put us on a better financial footing, the current city council chose to spend it all and borrow even more, treating the taxpayers as cash cows to be milked as needed.  And that’s why we need a new City Council.

1. The numbers are taken from the Total Appropriations line of the Actual column on the Budget Summary for All Funds from each fiscal year, which reports the actual spending of the fiscal year two years prior to the budget document. Budgets for last year and this year are taken from the Estimated and Adopted columns, respectively (I’m looking into getting those numbers, as we should have them at this point in the budget cycle). The numbers have been inflation-adjusted to 2008 dollars using the conversion tables from OSU, based on the beginning year of the fiscal year.  The debt numbers are taken from the Debt Management section for each fiscal year, and are also inflation-adjusted to 2008 dollars.

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