Dissecting city spending

If you are a homeowner in Southwest, as I am, I’m sure you look forward to those annual rites of spring — the return of the birds and green grass, and perhaps less eagerly, to the arrival of your property tax statement.   

I don’t think I’m unique in not recalling a single time when my tax statement — whether the value of my home was up or down — did not call for more money than I paid the year before. Over the years, I discovered that my puzzlement over what caused those constant increases was shared by my equally baffled neighbors — friends and business associates who live in the same neighborhood. The required “Truth in Taxation” form was not helpful. When we asked our elected officials, we were greeted with the usual finger-pointing: the city blamed it on cutbacks in state aid, the state fingered the city for excessive spending.

Eighteen months ago, NAIOP — an association of professional real estate developers, owners and property managers of which I am a member — decided to look closely into the issue. Although our association had worked for years to defend business tenants against higher commercial property taxes, the gains we made at the state level were frequently offset by increases in local levies, and the continuing call for more and more local property tax revenues and fee income. And the discussions often pitted business owners against residential property owners to no one’s benefit.

With the goal of identifying the key cost “drivers” behind continually rising taxes, NAIOP established a task force of its members, consisting of private citizens, real estate industry leaders and even some elected local government officials. With the help of the Minnesota Taxpayers Association (MTA), a non-partisan, nonprofit research organization founded 85 years ago to advance sound tax policy and government efficiency, we spent hours of volunteered time attempting to identify and understand all of the factors which influence local government cost structures and ultimately drive public spending.

We learned that there is a huge disconnect in how local governments report to their constituents on budgeting and spending, and the ability of average taxpayers to know and understand what their tax money is actually buying. City budgets and financial reports are typically overwhelming and complex. Many report spending only under broad functional or program headings, such as “parks,”  “police” or “streets.” As a result, taxpayers have great difficulty understanding what underlies local spending decisions, including what is mandated by state and federal governments and what local government can control itself. The situation clearly calls for greater clarity, simplicity and uniformity in such reports if taxpayers are to be sufficiently well-informed to take an active part in these decisions.

Based on what we learned, NAIOP and the Minnesota Taxpayers Association have jointly launched an initiative which calls on Minneapolis, St. Paul, and all communities across the state — big and small — to adopt new uniform financial reporting by “objectcode,” reporting budgeting and spending by specific line item, such as salaries and wages, health benefits, office expenses, fuel, utilities, maintenance, professional services and the like. Such reporting by object code, if uniformly put in place, would reveal year-over-year cost trends and spending growth rates.  The result, we are convinced, would be better-informed citizens, capable of making wiser judgments about the use of their tax dollars.

As a task force participant as well as a homeowner, object code reporting would help me understand what my tax dollars are buying, not just how the money is being spent. It would also enable me and other taxpayers, as well as the media, to compare our city’s spending with comparable communities’ spending decisions and their costs in delivering similar services. It would also provide early warnings when local spending in particular areas is in danger of being out of control.

Uniformly applied, the greater transparency of object code reporting would provide the informational tools taxpayers need to actively join with their local officials in the serious business of setting budgets and making tough spending choices in this very challenging economy. It would create a more trusting partnership between taxpayers and local government officials and substantially improve the quality and content of the ongoing public debate over local spending and taxing.

As part of our initiative, NAIOP has established a comprehensive informational website, opengovernmentmn.com, and, as a public service, is distributing statewide an educational publication, “What Does Greater Transparency in Government Spending Have to Do with Your Property Taxes?” (Copies may be downloaded from the website.) I invite every Southwest resident who is concerned about constantly rising property taxes to check them out, learn more and join with us in our appeal to local elected officials and legislators.

What we are proposing is not revolutionary. All local governments already collect this information internally. Our initiative simply asks that it be organized and reported in a simpler, uniform, more user-friendly way. It is basic information we all need and deserve  if we are to do our part as responsible, concerned citizens of our respective communities.

Michele Foster is president of Foster Real Estate Advisory Services LLC and serves on the board of directors for the NAIOP Minnesota chapter. She has lived and raised her family in Southwest for almost 25 years.