2002-12-07 / Columnists

The Rockaway Irregular

Increased Property Taxes or Governmental Efficiency?
By Stuart Mirsky

Mayor Bloomberg's recent push for increased property taxes (a prelude to even more taxes in other areas?) poses a special problem to Rockawayites. Home ownership is substantial on the peninsula and even renters stand to have tax increases passed along to them, though they may be among those least able to afford them. This all comes as something of a disappointment to many who supported Bloomberg in his race for the mayoralty since he presented himself as a Republican, someone in Rudy Giuliani's image (a mayor who lowered taxes and reined in government during his years in office).

The fear, of course, is that our current Mayor "bought" his nomination from a party without any substantive contenders of its own, in a Democratic town, and so has no real commitment to the historic platform of that party: less government through lower taxes and strict accountability of government agencies. Now that he has responded to a major fiscal crisis, as a Democrat would have, by calling for increased taxes in lieu of painful spending cuts, many feel let down at best and betrayed at worst. But is this the end of the story?

The truth is, as a businessman, Mayor Mike has extensive experience with the need to control costs and to innovate. Although he clearly came to City Hall with a desire to change the tone set by his combative predecessor, and has gone out of his way to establish better relations with the various interest groups that dominate City politics, it's highly unlikely that he has forgotten what he learned during his years in the private sector. True, he has taken the lead on tax increases in order to avoid painful service cuts. But it's not yet clear what he means to do beyond this.

The first thing he should do, of course, is make clear that he is not wedded to the tax and spend policies of the discredited seventies, even while pushing for increased taxes to keep city services operating at their current levels. He needs to clearly state that tax increases today are not necessarily tax increases forever and that he is as keen to lower them as raise them . . . when the environment is right for it. And that means that he needs to be looking at the workings of city government now, if the environment is to be made right again!

If New York City is not to simply slide back into the stagnation of the seventies, the Mayor has to use this present crisis to reshape city government. If he can successfully do that, then the time for lowering taxes again will not be far off, since he will have made New York City a more viable "business" than it was when he found it. Can this be done and, if so, where to start? A few modest suggestions:

City agencies annually rent many millions of dollars worth of privately owned space while city space goes begging or is underutilized. And, while city agencies are paying market rates, or more, for their rented space (often renting more space than they actually need!), city-owned space gets "rented" out to non-city organizations for a pittance compared to actual costs . . . or for no payment at all! The difference between operating costs and the rentals paid by non-city agencies are sometimes as great as ten to one ($1 in rent paid for every $10 of city expenditures to maintain the rented space). Such cheap or non-existent rents amount to subsidies paid for by each of us through our taxes.

Another area with opportunities to obtain savings in order to offset the need for new (or to actually reduce) taxes is the city's capital process. City-run capital jobs routinely incur construction costs of $300 - $500 a square foot (or greater) against comparable costs in the private sector of between $150 - $200 a square foot, at the high end! Why the big discrepancy? The reasons include an attenuated and inefficient bidding and contracting process, inadequate agency monitoring of work done and failure to monitor actual costs. But the main reason is probably that the city agency charged with management of capital work obtains a substantial portion of its annual operating budget based on the value of the projects it manages for other city agencies. Thus, it has a built-in incentive to accept higher costs!

Where else can the city find needed savings in lieu of tax cuts? Telephone costs have risen dramatically in recent years across city agencies, reflecting an inability to track agency's usage or to impose a system of accountability on such usage. As a result, city agencies maintain far too many phones for the number of staff requiring them. Many city agencies also operate independent fleets where a substantial percentage of their vehicles may be underutilized. Costs here reflect excessive purchasing outlays and increased maintenance for the vehicles in question, along with garage space rentals.

City personnel management and hiring processes also foster inefficiency in the workforce, reducing worker output and causing managers to over-hire to compensate for the reduced output. At the same time, the structure of the city's budgeting process encourages spending rather than saving since it rewards excess spending at year-end rather than frugality and the efficient use of funds.

The point here is that there are many areas which offer an opportunity to reduce city operating costs without resorting to endlessly raising our taxes, areas which the Mayor ought now to be addressing. Increasing taxes only feeds the inefficiency monster while damaging the long-term viability of our communities. Granted that finding and fixing these problems is not something that can be done quickly enough to stave off the current crisis in the short term. Still, the Mayor should demonstrate now that he is seriously interested in addressing the problem of government inefficiency, even while he is pushing new taxes at us.

If he wants to win back the confidence of Rockawayites and all New Yorkers, he needs to undertake a serious and focused restructuring review of where our taxes are really going. If he misses this historic opportunity, it's hard to see how New Yorkers will forgive him in the next election cycle . . . or how we will avoid another 1970's style municipal depression as a legacy of the Bloomberg years.

Stuart W. Mirsky, a life-long Rockawayite, recently retired from city government where he last served as an Assistant Commissioner of Operations in a mayoral agency. He is currently at work on his second novel.

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