Future Of Municipal Finance on Your Windshield

By Michael Silverstein

I have seen the future of municipal finance. It was on the windshield of my car this morning. It was a parking ticket. It’s easy to find humor in the quirky, often grotesque stories about the aggressive way parking regulations are administered in different parts of the country. They read like smutty jokes you shouldn’t find funny but somehow do. 

Stories in this looking glass realm include a widely reported incident in New York where a parked car was plastered with tickets while its driver lay slumped dead over the steering wheel. A report about drivers in Toledo who get ticketed in their own gravel driveways because a local ordinance only allows parking on paved surfaces. How Salt Lake City has boosted its parking income by deputizing volunteers to give out parking tickets — with the predictable emergence of Rambo-esque ticketing vigilantes.

There is, however, a much bigger story about parking meters and ticketing that doesn’t generate the giggles. It involves municipal finance present and future. 

Local governments are facing a financial crisis. Traditional sources of municipal revenue have plummeted. Sales tax and real estate tax-related exactions are way down, as is revenue sharing from states facing their own budget shortfalls. Stimulus money from Washington is only picking up some of the slack.

It’s natural for cities and towns to look to their local assets to meet this fiscal challenge. Parking metering and fines, which together constitute a kind of “curb tax,” is a natural place to turn.

All the cost, effort and negative public feedback can nonetheless be worth the effort — at least from a municipality’s perspective. A trendsetter in this field was Boston. When it refurbished its parking system in 1985, parking revenues jumped from $3 million to $34 million in a single year. The well run and comprehensive parking ticketing regime in New York brought in a reported $624 million last fiscal year.  

Nobody likes taxes or other government exactions. They’re always needed, however, and when times are tough, local governments must look to whatever fiscal resources seem worth tapping. Why, then, single out the parking resource for special note, and see in it a possible harbinger of a more toxic future relationship between municipalities and their citizens? The answer lies in some uncanny resemblances between the way parking authorities toy with their meters and ticketing, and the way banks set rates and fines on their credit cards.

Credit cards are a convenience for which banks deserve to be paid. On-street parking is a municipal service from which municipalities deserve to make money. The basic problem in both cases arises from administration. More specifically, from the fact that both systems operate at the near-total discretion of the system operator [though banks’ discretion was somewhat limited by a recent federal law that goes into effect early next year].

Banks gamed the courts in a way that allowed them to disregard usury laws and charge whatever interest rates the market would bear, which was often exorbitant. They lobbied Congress and gained the right to charge whatever fees and fines they wished, again only checked by barely operative market forces. For many people this has turned credit card banking into a form of predatory lending.

The meter settings and parking fines charged by municipalities are not determined by elected officials but by bureaucrats whose operational limitations are more theoretical than actual. Indeed, with the complicity of local elected officials, who rarely take direct responsibility for curb tax increases, almost any city or town can boost its parking income dramatically. All that’s needed is resetting meters, shrinking the number of legal parking spaces, boosting ticket fines, putting more ticket writers on the streets, and upgrading collection procedures.

Thus, in a very real sense, parking practices in many jurisdictions have become near classic examples of taxation without representation — or more specifically, taxation via overly aggressive administration. And as anyone who has visited a place where parking tickets are paid or disputed, and looked at the people queued up there, it is a highly regressive tax as well.

Why is the aggressive curb tax model likely to be taken to new heights in coming years? And why is comparable regulation-based revenue enhancement likely to be applied to other (trash collecting, et al.) locally controlled sectors? This mode of taxing with skewed administration can appear to be the easiest way to replace reduced sales and real estate-related collections, reductions in state aid, and the tapering off of help from a Washington buried in its own debt.

The same morning I found the future of municipal finance on my car windshield I found the future of banking in my mailbox. It was a monthly VISA bill announcing raised rates and higher fines for late payments and overdrafts.

Michael Silverstein, formerly senior editor with Bloomberg Financial News, is now an investigative poet whose books of satirical poetry include Songs Of Wall Street, Beltway Follies and Street Verse. See www.wallstreetpoet.com.

From The Progressive Populist, September 1, 2009

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