Thursday, December 12, 2013

Governance By Referenda?

Certain members of our community are circulating a petition for direct legislation to require that any capital project relating to the arts of $1,000,000 or more shall require a binding referendum for approval of the project.  While some may think that this is a petition relating to the Confluence Project, it really is a fundamental change in how the City will address any future project dealing with the performing arts.  Therefore, from both a professional and personal viewpoint, I am opposed to the notion of governance by referenda.

The City of Eau Claire has a long history of operating under a Council - Manager form of government.   Council - Manager government combines the strong political leadership of elected officials with the strong managerial experience of an appointed manager. All power and authority to set policy rests with an elected city council. The city council in turn hires a nonpartisan manager who has very broad authority to run the organization. The elected council members represent the community and develop long-range vision for its future. They establish policies that affect the overall operation of the community and are responsive to residents’ needs and wishes.  To ensure that these policies are carried out and that the entire community is equitably served, the governing body appoints a highly trained professional manager on the basis of his/her education, experience, skills, and abilities (and not their political allegiances).
Residents calling for an ordinance to require a referendum for capital projects may think that large capital projects are too important of an issue to be left in the hands of their elected officials.  The United States, State of Wisconsin, and City of Eau Claire were each created as a representative democracy.  As such, council members are elected to represent the community and be responsive to residents’ needs and wishes.

Large capital projects and the operations of the City are complicated issues that take time and knowledge to make informed decisions.  For elected officials, time and knowledge mean working through an issue or budget by gathering background information, participating in public presentations and discussions, and conducting their own research.  This process is open and transparent and often takes time.  So much time, that government is often criticized for taking too long to reach a decision.  To help put this in perspective, the total City Budget is almost $132 million.  Of that, $60 million is for the day-to-day operations. The City prepares a five-year capital improvement plan that totals over $136 million.  For 2014, the budget appropriates over $22 million for capital projects.
When reviewing the Confluence Project, it is important to understand that the total cost will be around $80 million and that it will consist of three separate elements; a community arts center, a mixed-use building, and a public plaza.  It is important to remember that approximately 50% of the community arts center will be funded through the State of Wisconsin.  It is equally important to realize that the value of the mixed- use building will generate property taxes that will be used to cover the pledge made by the City.  Since I started with the City just over one year ago, I have spent countless hours researching, discussing, and presenting the facts surrounding the Confluence Project.  As with any project of this size, there are many issue that need to be considered and addressed.  In fact, there are still some elements that will be changed.

I view the Confluence Project as an economic redevelopment project.  One may ask, why and how does the City gets involved in economic development projects.  The City tries to promote the expansion of our tax base and works to protect values for the investment made by all property owners.  Not only will the Confluence Project increase the property tax value of the City, it will generate economic vitality in the downtown area by creating a sense of place and a destination.  It will also add jobs and provide a selling point in attracting business and creative,  talented people.   In that light, the Confluence Project can be viewed as an investment just like the Phoenix Park area. 
If one were to measure the return on investment in the Phoenix Park area, you would find that the City’s return on investment was 177.2%. I would think that most people would accept that return over a 10-year basis.  That return on investment was calculated on the fact that the City provided and paid for $17 million worth of improvements and experienced an increase in the tax base of $30 million from 2002 to 2012.

This tax base investment was NOT made by the general taxpayer--taxes were not raised to pay for the investment.  The City used “tax increment financing” to allow for the tax base expansion.  Through tax increment financing, the City creates a special and specific district, and then creates a baseline of the value for the entire district.  The taxes generated on the baseline value are distributed to all taxing jurisdictions as if there were no increase in value.  The taxes collected for the incremental value (the difference between current market value and the baseline value) are retained by the City and placed in a separated fund to off-set the cost of the improvements.  In the case of the Confluence Project, the taxes generated by the incremental value of the new mixed-use building will be used to honor the pledge by the City.  The bottom line is that the City cannot raise property taxes to pay for its commitment to the Confluence Project due to levy limits imposed by the State of Wisconsin.  
As I stated earlier, the elected officials are to represent the citizens and respond to their needs and wishes.  One way they can perform that function is to receive input into the process.  The entire community has an excellent reputation for encouraging and promoting civic engagement.  It was actually through a civic engagement process that the concept for the Confluence Project was initiated.  This commitment for civic engagement continues with an online public comment forum called the “Electronic Eau Claire Conversation”.  Currently, this forum allows people to voice their opinion on the Confluence Project.  The elected officials can then use this input to assist with future decisions regarding the Confluence Project.  If fact, one could make an argument that this input is more thorough than a yes  or no vote made by a binding referendum.

In closing, I would like to get back to the original question as to the need for a referendum.  I recently read an article in a professional blog that suggested that there are three common denominators shared by those who insist local governments should conduct public referenda: 
  1. They oppose any measure in which they receive no personal gain
  2. They don’t want to see any increase in their local property taxes
  3. They see no value in improving the community or local programs to make life better for others.  They survived under the prevailing conditions, so why shouldn’t others
I am sometimes frustrated by those who embrace the “status quo”.  As City Manager, my goal is to move Eau Claire forward.  We need to make the City and downtown better and to promote the expansion of our tax base.  By expanding our tax base, we will continue to provide and support City services. Let’s make Eau Claire a better community for future generations.