On Wednesday, April 27, the State Senate Select Committee on Property Tax Reform & Relief met in Arlington to receive public testimony. During the hearing, I had the opportunity to testify. The chairman, State Sen. Chairman Paul Bettencourt (R-Houston), posed a question to me regarding the spending problem during my testimony. Below are his question and my response.
“Bettencourt: What’s driving spending increases—what’s the problem?
Wilder: Public safety is 70% of our general fund expenditures. For us, I really believe it is deferred maintenance of infrastructure.”
My response was in reference to 1) prior testimony from municipal leaders and Senators regarding the increasing portion of general fund expenditures represented by public safety, and 2) comments about deferred maintenance from earlier in the hearing from State Sen. Charles Perry (R-Lubbock).
Local legislative bodies choose to defer infrastructure maintenance and repair cost into the future. This practice is fiscally irresponsible since these are known costs the city is already obligated to pay. As a result—when infrastructure needs arise—cities issue debt by asking voters to approve general obligation bonds.
After I left the hearing, I reflected upon Chairman Bettencourt’s question and my testimony. If I could go back, I would have responded:
“Local spending increases are also attributable to scope creep and corporate incentives.”
“Scope creep” is the ever-expanding wish list of local governments, and is more prevalent than ever before. It happens when a local legislative body fails to deny a non-essential funding request or when a “need” in the community arises that staff and local leaders seek to “fix” with governmental spending.
Local government is not the answer to all local problems. Yet local governments often spend money on non-essential efforts, which takes existing funds away from other core services the city has already committed to providing.
In my opinion, this is the main reason why property tax rates do not decrease when property values rise. When the city receives a windfall in additional tax revenue, local leaders find a way to spend it as opposed to reducing tax rates. The typical justification is that there are always more “needs” than tax revenue to cover them. But these “needs” exist primarily because the government is spending funds over and above its core mission of basic infrastructure, public safety, and other customary services.
Harry LaRosiliere, the Mayor of Plano, testified earlier in the hearing that a therapeutic pool was added at the Carpenter Recreation Center, which he referenced as a “necessity.” A therapeutic pool is not a government necessity, and is outside the scope of customary services. If the community has a need for it, let the private sector provide a response and have those who “need” it pay for it. Instead, the city chose to subject all taxpayers to the subsidization of this specialized service.
In the fall of 2015, the Carrollton City Council chose to repair the flood damage at our city-owned golf course, which had already been closed for 6 months. The price tag was steep and was for a non-essential “need.”
A government-owned golf course may be nice, but it’s not a core government service. The private sector can easily provide the service without subjecting taxpayers and small businesses to shouldering the cost. This council decision will lead to a potential subsidy of $5.1M from the general fund to the golf course fund over a twenty-seven month period. Regardless of the subsidy amount, any subsidy for leisure services is not acceptable as long as core needs exist and debt is being incurred to meet those needs.
As for corporate incentives, they are a form of “scope creep” in government. Earlier in the hearing, Chairman Bettencourt suggested that Dallas remove the incentives and tax abatements that are made available in their TIRZ/TIF areas. Mayor Mike Rawlings suggested this would be unfair to the “millionaires” who would need to pay more in property taxes. I recognize that commercial property owners (i.e. millionaires as Mayor Rawlings referenced them) pay a considerable amount of the property taxes in some communities, but to provide special treatment to some of the commercial property owners as opposed to decreasing tax rates across the board is unjust. To be frank, to justify corporate handouts as a reason to oppose any type of property tax reform is ridiculous.
On the one hand, cities claim they lack sufficient revenue for basic needs. But in the same breath, they offer enormous subsidies to large corporations who are likely to come to (or stay) in the community anyways. For example, would Costco refuse to build a store in Dallas if the city refused to pay them $3 million?
It’s worth pointing out, state allows sales tax revenue to be used for a variety of different purposes other than corporate handouts. They include DART—which Carrollton pays over $30 million a year towards—roads, parks, and property tax cuts.
As public officials, we are charged with providing basic public services. We cannot hand out corporate subsidies and simultaneously claim we lack sufficient tax revenue to meet our basic needs.
Our local governments should focus on delivering to citizens what’s expected—our core mission. Unfortunately, scope creep and corporate incentives are actually diverting tax dollars away from our ability to deliver a less costly, more efficient government that our taxpayers deserve.
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