March 7, 2010

Creative Revenue Enhancement

Taxes and Fees… the Birds and the Bees

A government fee is defined as a charge imposed upon persons or property for the purpose of defraying the cost of a particular governmental service. Lawmakers often propose fees for government services, with the theory that those utilizing a particular service should be the ones paying for it. Government entities charge targeted licensing fees to pay for the cost of regulating an activity or profession. Driver license fees and motor vehicle registration fund DMV activities. Hunting and fishing license fees pay for game wardens, wildlife management activities and fish hatcheries. Professional licensing fees fund regulators. Road and bridge tolls are fees for using that roadway.

A tax is different from a fee in that taxes are not activity specific. Taxes may be levied on specific goods or services, but apply generally across the population. The purpose of taxing is to raise general revenue funds and pay the day-to-day cost of doing business. Police, fire, EMS, water & sewer and trash collection tend to be services funded by general revenue and require no specific fee.

In case you’ve failed to notice, there’s a recession going on. People are hurting… out of work… having trouble paying bills. Businesses are going bankrupt… closing the doors. Well, unless they’re too big to fail, of course. Fallout from the sinking economy is coming close to sinking state and city budgets, too.

Individuals and businesses that fall into the cracks have little alternative other than bankruptcy. This strategy won’t work so well for government entities.

Cities and states must pay as they go. Certain services are statutorily mandated, and citizens are wont to give them up, but because of the fractured economy, tax and fee revenues are shrinking. But how do we pay for them? Cities are stretching to regain lost income and the already strapped citizen is unwilling to see taxes increased.

Most city and state governments are mandated to maintain a balanced budget, so how can they compensate? Some municipalities have turned to creative revenue enhancement.

Swallow this… its for your own good…

Recent news stories illustrate creative and enhanced traffic and parking enforcement as a transparent and obnoxious revenue enhancement tactic. The Dallas ABC affiliate, in an online story, points to an explosion of parking tickets issued in that city.

In December 2008, about 300 wrong-way parking tickets were issued in Dallas. In the same month last year, that number jumped to nearly 3,400. In January 2009, there were fewer than 500 tickets written for parking against the flow of traffic. Nearly 4,000 were issued in January of this year.

Dallas employs only 15 parking enforcement officers, but this effort has proved so lucrative that the city plans to hire eight more.

Dallas Police Department officials say the increase in tickets isn't revenue enhancement, but intended to make the streets safer. Residents in one highly targeted area are calling bullshit.

"We have people selling drugs on the corner," resident Robert Walker said. “They should focus on that rather than the people who live here. There's a [homeless] campground here on this vacant property; they sleep there, but they don't do anything about that."

At 1.2 million, Dallas comes in as the ninth largest U.S. city. North and west of Dallas, straddling Hwy. 114, is the tiny town of Westlake, a bedroom community with an area just over seven square miles and a population somewhere south of 300, yet in 2009 this little spot in the road was responsible for more speeding tickets per mile of highway than any other city in the state. Westlake police drive nice, new cars, the fire department has shiny new apparatus, and tax rates remain low.

Red-light cameras have become real hot items with many municipalities across the country. With the cameras came controversy, as citizens immediately began complaining that the devices have far less to do with traffic safety than with revenue enhancement. Studies have shown the complaints to be valid.

Desperate cities sometimes stack the odds against their own citizens by shortening the yellow light cycle. This behavior, while potentially achieving the revenue goals, very negatively impacts the alleged traffic safety goal. Reviews of these camera monitored intersections show an increase in rear end collisions as drivers, caught in the intersection as the yellow lights unexpectedly change, jam on the brakes or punch the gas to avoid tickets.

The revenue enhancement aspect is nowhere more apparent than in California, where governor Arnold Schwarzenegger, when proposing a budget that included a proposal to add speed sensors to 500 existing red-light cameras, never mentioned safety. However Schwarzenegger declared clearly that the state could expect annual revenue enhancement of $338 million.

Check please!

All of these schemes have a singular goal; revenue enhancement without raising taxes. A politician advocating tax increases commits an often career-ending move. Nobody wants new taxes.

Conservatives and libertarians tell us government is too big. Big government requires a big budget, but how much is too much? How big is too big?

The people demand services, and those services must be paid for. Cutting services for “them” is acceptable, but don’t even think about cutting “my” services. Obviously there is no means of paying for it all, so we can’t give everyone all that they want.

But where do we draw the line? Everyone has different criteria. We the people, it seems, have forced our society into an irreconcilable situation. In the end, we have only ourselves to blame for the creative efforts of municipalities to fund the programs and services we demand, yet refuse to pay for with our taxes.

Like the old advertisement said; “you can pay me now, or you can pay me later.”

One way or another, we will all pay.