Sunday, September 23, 2007

Pork Barrel Heaven: Reflections on the City’s "Living Wage" Ordinance

With the recent announcement of the G-P Tissue Mill finally closing down, with the loss of 210 more truly Family Wage jobs, and with the continued adverse trends of increased poverty levels and un-affordable home prices, it may be appropriate to revisit discussions that started 5 years ago that somewhat related to addressing these problems at the local level.

Because this particular Ordinance impacts the City's budget, but without measurable compensating benefits, it is fair game for scrutiny.
As the article reprinted below demonstrates, this unplanned, un-prioritized and unfunded measure is a 'poster child' example of what can happen when citizens aren't paying attention to the forces at work to influence Council decisions.

In its initial version, this Ordinance was estimated [by Finance Dept & Human Resources] to cost the City over $450,000 ANNUALLY. That amount is currently the equivalent to about 3% in new property taxes!
Of course, the Council can only authorize by itself, a 1% increase in property taxes each year, without a public vote.
Fortunately, the estimated costs per year were reduced in the final version to about $56,000, but because no accounting was provided for, even this remains an estimate.

But, it was not only the ongoing fiscal impacts that were so troubling to me; it was the short-sighted arrogance, driven by organized labor's hidden agenda that was so brazen!
This was mainly a 'feel-good' measure, that was admittedly symbolic in nature; but also one that had hidden costs and other impacts that do not help anyone at budget time.

Just after this Ordinance was passed, I published this Herald Guest Editorial - Circa November 2002:

Aren’t there better ways of achieving the goal of providing more livable wage jobs?

The so-called ‘Living Wage’ ordinance recently passed by City Council supports the Eric Severeid theory; that often a chief cause of problems, are the very ‘solutions’ that politicians devise.

A more accurate title would have been "Minimum Wage" ordinance, but this title was avoided because it loses the cachet of popular appeal.
As supporters of this measure readily admit, it is mostly symbolic and will do very little to actually achieve its professed goal. Let's go a step further and say it will likely just hurt taxpayers by perpetually saddling them with more unnecessary taxes and creeping bureaucracy.

Every City Council member strongly supports the goal of providing more living wages for our community.
But major differences do exist in the methods advocated to achieve this goal.
Without carefully targeting those recipients who are most in need, the effectiveness of this ordinance cannot even be measured.
This is certainly not the kind of law likely to honestly achieve its stated goal.
Whose interest is served by expediting such a symbolic 'shotgun' approach, calculated to attract a bare majority of Council votes, plus the Mayor's blessing?

H.L. Mencken once said that every complex problem has at least one simple solution – which is absolutely wrong!
By passing such a ‘pseudo solution’, more is promised than can be delivered, and already scarce tax money is wasted.
The $55 thousand dollars per year estimated price tag represents the equivalent of about one-half percent property tax increase, or half the amount the Council can legally raise each year without a citizen's vote.
If the Council wants to give this money to people truly in need, why not just award it to the Opportunity Council, or another deserving non-profit with desperate needs?

Recently, a local economist described such inherently futile efforts as examples of the ‘Lake Wobegone Scenario’.
Like that fictional Minnesota town, where ‘all the women are strong, the men are good-looking and the children are above average’, this ordinance rests on a false ‘Alice in Wonderland’ economic theory that suggests we can simply tax and spend our way out of complex problems.
That is wishful thinking.

The most troubling part of this process was that it was mostly conducted in a few Council discussions.
Although these are public meetings, this is typically not an effective way to meaningfully involve those citizens who will later have to pay for resulting programs.
Since this measure is to be funded from existing accounts already earmarked for other purposes, additional revenues will need to be found to make up the shortfall - meaning still more taxes.
It is ironic that the Council was also expected to approve a one- percent property tax increase the same night this ordinance was so hastily passed.
If both measures had passed, over half of the property tax increase would have already been committed to paying for this ordinance.

A wider and more candid discussion, involving the community, might have revealed, and avoided, an unstated objective; that of establishing the precedent of a higher minimum wage to give organized labor a greater leverage in bargaining with the city.
Hidden agendas like this are sometimes disguised as ‘Trojan Horses’, designed to finesse the approval of ‘unintended consequences’.
The understandable reluctance of city officials to openly discuss this sensitive, and potentially very costly, aspect of the issue may have unintentionally aided and abetted this tactic.
Backers were simply able to pass this ordinance with a combination of friendly persuasion and old-fashioned arm-twisting.

Everyone knows it is the duty of public officials to avoid conflicts of interest and not violate the appearance of fairness when engaged in official business.
Our state sunshine laws are designed specifically to insure their accountability to the public.
Unless a consistently careful and balanced approach is followed on all public business, criticism and distrust are invited.

Aristotle was right when he considered politics to be a practical, but inexact science.
Unfortunately, politics has also become a symbolic dirty word because of adverse public perceptions.
Good perceptions are difficult to gain, but easy to lose.
Much more public discussion and deliberation is needed to make effective progress on this important issue.
Additional taxes, if required, should be raised by a public vote.
Two years later, in December of 2004, I considered proposing this ordinance be rescinded as one item on the list of budget cuts to be considered for the following year's budget.
But, because no one really knew how much this 'Living Wage' Ordinance actually costs the City, and that four Council votes were still there to defeat the idea, I didn't bother.
But, here were my thoughts anyway:

[Recall that this measure was passed 4-3 after hot debate, even though its estimated effect was to add approximately $56k in costs in the first year]

I continue to have serious concerns in several areas regarding this ordinance:

1.The rates themselves, while well intended, are artificially high for our local economy.
The skills which warrant such rates are already demanding them in the marketplace, and without City subsidy.

2. The City has no mechanisms for:

• capturing the actual additional costs being incurred each year, whether they occur in the General Fund or not

• insuring that contractors & subcontractors are actually using this ordinance to develop bids for City work

• insuring that contractors & subcontractors are actually paying their employees these rates

• insuring that Whatcom County and Bellingham residents are the primary recipients of these wages

• insuring that recipients are truly heads of household, permanent employees or other classes of people needing such financial assistance

• regularly auditing the effects of this ordinance and paying for these costs

3. The rates have the overall effect of increasing costs without any discernable increase in the services received.
In so doing, they may amount to a gifting of scarce public funds to unknown persons

4. The rates themselves exceed other rates paid to City employees, thereby causing salary compression and potential discontent in the work force

5. The precedent set by establishing these rates has the effect of giving more leverage to collective bargaining units, which then tends to increase pressures on escalation of wages and benefits generally

In my mind, this is not responsible legislation and it adds unnecessary costs to our already overburdened General Fund.
I don't know the exact provisions of reconsidering ordinances, but recommend further researching this question.
Unfortunately, the 'Living Wage' Ordinance still stands to this day, costing taxpayers an unknown amount for unknown services.

I wonder if the new Council and Administration will do anything about rescinding this Ordinance and relegating to the scrap heap of bad law where it belongs?