Cities including Seattle are really up against it this budget year, with Seattle needing to make about $60 million in cuts. Stimulus relief boats will stop arriving. You can't do many more furloughs. You can't borrow any more money, since debt limits have been reached. In liberal cities, deep cuts in services will provoke serious political repercussions from human-services groups and public employees, a key source of political support. Now what?
You can get one inkling of what may be in the offing by the way Seattle Center sent out a distress signal last year and put up for lease the Fun Forest South area, originally planned for public open space but now likely to be a commercial Dale Chihuly showroom. But that's just $350,000 a year in new income to the Center, if it happens, a small dent in the Center's annual shortfall of around $12 million.
So how about talking real money? This is where a small army of consultants and bankers comes in, peddling "rescue investing." An alarming story in The Wall Street Journal lays out the details. One good example is Chicago, which raised $1.16 billion from a consortium led by Morgan Stanley that now runs the city's 36,000 metered parking spaces for the next 75 years. The city sets the rules and the rates and still gets overtime parking fines, while the investors keep all the meter revenue, which is said to have tripled once the consortium took over.
Other countries, notably in Europe and Canada, have done this for years. The article notes that California is looking to sell state office buildings, Milwaukee has suggested selling its water supply, Dallas has peddled its zoo, and some other cities are putting airports on the block. San Francisco and Las Vegas are among the dozen cities with parking-meters and city-owned parking lots up for bid.
The upfront money goes to balance city hall budgets and to fund pension liabilities. If all goes well, the city might use the windfall to make sound investments in efficiencies and to avoid raising taxes in a recession. But lots can go wrong. Some of the systems are selling at current fire-sale prices. Many cities are badly overmatched by the fancy consultants. (The inspector general in Chicago figures the city was short-changed $1 billion on the parking meters deal.) And cities give up long-term income streams that will compound problems later.
Such an idea would have a hard time convincing Seattle voters, who have a populist suspicion of public-private deals; remember the near-loss of the Pike Place Market to New York investors? (By the way, Dallas is considering privatizing its farmer's markets.) However, we'll see how this snake-oil idea sounds after swimming pools are closed and library hours are pared back further.
The more likely approach in Seattle would be to move some popular governmental departments to a separate, voter-approved tax, usually a property tax levy. That gets the department out of the general fund, freeing up some money there for other services, while retaining city control. The spun-off departments, usually those such as Parks and Libraries that tend to suffer the deepest cuts in a downturn but have broad public appeal, get stable funding — stable, but often not ample enough to grow in the future.
This maneuver is easier said than done, however. Mayor Mike McGinn shot down such an idea for a parks district earlier this year, leading to the departure of Supt. Tim Gallagher. McGinn has his own priorities for the next two years of special levies, especially transit and a walk/bike/ride initiative. The city council is better disposed, and council president Richard Conlin says he's looking at phasing them, with libraries next year and parks the following year. How the voters will feel about this will depend on how the recession is going.
