One of my earliest jobs after graduate school was to join the Koch Administration doing economic development. It provided a wonderful and exciting opportunity to use the skills I had learned as a student with degrees in both psychology and business . The chance to create employment and business opportunities, especially in distressed areas of the city, appealed to my desire to help others. It was a challenging time, with the city teetering on the brink of bankruptcy, and President Ford’s famous “drop dead” attitude towards bailing the city out. I spent twelve years working with Ed Koch while he was Mayor, the last four of which as his appointed President of the New York City Public Development Corporation (http://www.nytimes.com/1986/05/24/nyregion/2-are-named-by-koch-as-chiefs-of-agencies.html).
Even after the Koch years, I’ve always felt a strong affinity to work in and with the public sector, serving on: the Municipal Water Finance Authority during the Giuliani Administration; the NYC Design Commission as its President for eight years under Mayor Bloomberg; and, being appointed by former President Bill Clinton and current Republic of Haitian President Michel Martelly as a member of the Presidential Advisory Council on Economic Growth and Investment to help restore Haiti after the 2010 earthquake (http://www.pacihaiti.org/members/). As the late Mayor Koch said, “Public Service, if done honestly, is the noblest of all professions.”
What few people understand, however, are the complexities involved in running a major metropolitan area. There are constant conflicts between what programs should be funded: housing or jobs? Transportation or environmental protection? Parks or sanitation? Highways or subways? Education or police? And, the list goes on. Communities compete for limited resources. Some areas believe they are deprived of schools, but others protest if a new high school is proposed nearby. Some residents want parks that are quiet places to read and meditate, while others seek active playgrounds for their children to run or play ball. Parents and their college age children seek affordable housing, yet area residents protest new developments of scale. In many cities, like New York, there is a decreasing amount of vacant land to build on, and most of that land is in industrial and environmentally challenged areas.
There are also endless constituencies, ranging from homeowners to renters, non-profits to religious organizations, labor unions to business executives, students to retirees, and, of course, the press. For virtually every area of government there is a constituent or a lobbyist, and they turn out in barrels whenever there is a bill, law or regulation proposed, considered, or debated. Elected and appointed officials are constantly being hammered by one group or another that focuses like a laser beam on their particular issue, but who rarely consider how that issue fits into a larger picture.
Leaders, however, must look at the big picture. And, when they don’t, you have Detroit. Like many other major cities in America, Detroit has been impacted by elected officials who refused, or didn’t have the fortitude, to say “no” to labor unions and special interest groups. They found creative budgeting techniques to dodge a bullet on their watch, while pushing the disaster off to future Mayors and elected officials. This is no different than New York City under Mayors Lindsey and Beame, who creatively used the city’s capital budget (the money used to pay for bridges, schools, parks, roads, etc.), to fund the city’s expense budget (the money used to pay salaries, benefits, rent, office supplies, etc.). The problem was, the city pledged tax revenue to repay the capital budget bonds (which is normal and customary), and that same tax revenue was to used to pay for the expense budget items. It was a New York City Ponzi scheme. The city at the time had $14 billion in debt, about $6 billion of which was short term. At the time, it was running what is now known to be a $2.2 billion deficit, and shut out of the credit markets. The city also underfunded pensions, and raised money using “revenue anticipation notes”; however, many of the anticipated revenues never arrived.
There are lessons here for Detroit and other municipalities similarly facing bankruptcy. The largest of those lessons is that you can’t spend money you don’t have. The second is that you have to learn to make tough decisions and say no. There are countless good men and women in Detroit who worked hard and honestly for decades. Many of them now face the prospect of losing their pensions and being wiped out. Tell me, did their labor leaders and elected officials really represent them? I think not. Leaders must look at all the consequences of their decisions, intended and unintended, immediate and long term.
Detroit’s elected officials also failed to examine and test new and creative economic development strategies; they did little to educate and prepare their workforce for a changing economy. Forget that they didn’t see the automotive industry’s decline in America, or the fact that modern factories where replacing people with machines. They stubbornly succumbed to union pressure, and blindly turned their eyes on the future. Those union leaders became very wealthy, and now their members may lose it all. What really was gained?
So the question now is what should we do with Detroit? Should we give it to Canada? Should the US government bail it out? Wait, didn’t we do that when Obama bailed out the auto industry? Personally, I think the solution is to study what can be privatized. Throughout the country, states, counties and municipalities are finding ways to work with business to more effectively provide services. What I did under Mayor Koch was an early experiment when we helped correct the New York City fiscal crisis (http://www.nytimes.com/1987/04/04/business/cities-turn-into-entrepreneurs.html?pagewanted=all&src=pm). Officials in Texas are publicly bidding the right to build roads to private developers. The government gets the road, and the the developers keep the tolls for an agreed upon period of time, as well as development rights off some of the road’s proposed exits and entrances. While in the private sector, I worked with Giuliani administration officials to build a new Family and Supreme Court in downtown Brooklyn; had the city done the project itself, it would have taken 2-3 more years and cost hundreds of millions of dollars more, because of public bidding requirements and antiquated work rules.
What’s clear to me is that Detroit, and government generally, can’t keep doing things the same way. America, the great experiment, is failing, because we are failing to experiment.
© 2013 James Stuckey