WHITE PAPER: Better Together’s New Math

By on March 25, 2019
Regionalism Drill Down White Paper #4

by David Rusk
Special to Construction Forum STL

“Taken together, St. Louis spent $2.3 billion annually to simply operate and administer these governments [i.e. St. Louis City, St. Louis County, and its 90 municipalities]. Through its studies, Better Together found that $750 million in excess tax dollars are spent each year…. [emphasis added] (January 2019: Task Force report, page 5)”

“[All of this government costs over $2.3 billion annually….[I]t is clear that there is a significant overspend on local government in the St. Louis region. In fact, that overspend adds up to over $750 million annually on local government services [emphasis added].(June 2016. The Will to Change report, page 17)”

“Our region spends in excess of $2.3 billion annually for local government services…. Our analysis identified $750 million in excess spending annually for government services under our current structure [emphasis added] (January 2019. Executive Summary of Task Force report, pages 6 and 17)”

Wow! The Better Together plan would save local residents almost one-third on their taxes and fees.

Well, maybe not quite, because (almost as an afterthought on page 15 of the Executive Summary but not in the report itself) Better Together acknowledges that:

“As our recommendations leave fire protection untouched and municipalities largely intact, we don’t expect to reap the full measure of those savings.   However, we estimate revenues to Metro City would exceed expenses by approximately $250 million.”

$250 million – that’s still over a 10 percent savings in taxes and fees.

Thirty-three percent or 10  percent – either sounds like a pretty persuasive “elevator argument” in support of the Better Together constitutional amendment.

The other “elevator argument” is that the Better Together plan would restore St. Louis City’s national prominence, making it the USA’s ninth most populous city.   (As I’ve already shown in a previous white paper, “The Incredible, Shrinking ‘Metropolitan City of St. Louis,’” in accordance with US Census Bureau policies, the new Metro City would be about 29th largest, not 9th largest.)

I am one of the USA’s foremost advocates for “Big Box”, “elastic” cities through annexation and city-county consolidation. But that assertion of big savings from unification instantly gave me pause.   That’s not what I’ve seen in other city-county consolidations or in my detailed study of the potential consolidation of the City of Wheeling and Ohio County, WV (2007).

Wheeling city (27,321) and Ohio County (42,906, including Wheeling) are a much smaller, simpler community than St. Louis City and County.   (Five small villages and towns totaling 13% of the population would have been excluded from the merger as would St Louis County’s 90 municipalities.)   

I analyzed line-by-line the FY2007 budgets for Wheeling ($25.3 million) and Ohio County ($10.4 million).   It turned out that only a small portion of the city’s and county’s budgets reflected some possible duplication of costs for maintaining two separate governments (two elected governing bodies, two managers, two finance managers, two purchasing agents, two personnel offices, etc.).   These common services/activities represented only 11 percent of the city’s budget and 14 percent of the county’s budget.

The only significant common service was public safety (police, fire and emergency medical services) which was 52 percent of the city’s budget and 28 percent of the county’s budget. However, they served different people. The only measurable savings might have come from unifying the two communications centers.

All the rest of the two budgets were providing services that either only the city or only the county provided.

At best, by a generous estimate, I could hypothesize possible joint savings of $850,000, or about two percent of their combined budget.   (That might translate into a five percent cut in property taxes.)

Better Together projected 15 times that percentage of savings (at the $750 million level) or five times that percentage of savings (at the $250 million level).   Is that the result of their own line-by-line analysis of the annual budgets of St. Louis City, St. Louis County, and the 90 smaller municipalities?

It turns out that Better Together did no such analysis. According to Ray Hartmann, a highly-respected local journalist, who spent an hour recently grilling Better Together staff:

“BT is basing its projections on assumptions, not facts. Those assumptions are derived from the predictions of city and county budget officials who, even setting aside biases and even respecting expertise, have produced nothing more compelling than assigning an arbitrary alleged-savings factor of one percent — that would be an arbitrary three percent, less two percent for inflation — and to present it as financial analysis.   (Riverfront Times: “Better Together Has Zero Facts To Back Up Its Most Crucial Claims,” March 13, 2019)”

Okay. Three percent savings on a $2.3 billion annual budget would be only $69 million.   How does Better Together get to $750 million? After many spreadsheet simulations, I realized:

They must do it by running out the numbers for 10 years.   

Nowhere does Better Together reveal that maneuver – neither in the key statements cited above nor anywhere else in the 160-page Task Force Report and appendices that I can find.

Compare 10 years’ worth of projected budget savings (about $750 million) with a one-year budget ($2.3 billion). One-third savings!   That’s BT’s New Math.

Perhaps we should be thankful for Better Together’s restraint.   If they’d run the same numbers for 30 years, it would have yielded $2.3 billion in savings –totally free local government!

The Old Math (that you and I were taught in school) would compare one year’s projected savings ($69 million) with one year’s budget ($2.3 billion).   Or (properly accounting for the inflation factor) 10 years’ savings ($666 million) with 10 years’ cumulative budget ($22.0 billion).

Or perhaps the quantum complications of BT’s New Math counsel follow the example set these days in Washington, DC: just make up a number and repeat it over and over again until it is accepted as fact by a substantial chunk of the citizenry.  Let’s dub this “Alternative Fact Math.”

Old Math or BT New Math or Alternative Fact Math – which will Better Together employ in its campaign to convince statewide voters to approve its constitutional amendment to upend local government in St. Louis City and County?

Stay tuned.

Previous David Rusk Regionalism Drill Down White Papers in This Series

#1 St Louis City and St Louis County – The Fake Region

#2  The Incredible, Shrinking “Metropolitan City of  St. Louis”

#3 Scenic Overlook: Beware the O’Hara Rule

David Rusk is a former mayor of Albuquerque, New Mexico legislator, and federal official who has consulted on regional issues in over 130 metropolitan areas in the USA as well as in Canada, Germany, England, South Africa and The Netherlands.    He is author of Cities without Suburbs (4th edition 2012), called “the bible of the regionalism movement,” and three other books.

Mr. Rusk began analyzing the Better Together report for ConstructForSTL as soon as it was issued. In this series of white papers he will be drilling down into items ranging from savings from consolidation, to size and ranking of the “statistical city”, economic development, planning and zoning, bond ratings, taxation, political representation, and Metropolitan Council composition

    

About Tom Finan

2 Comments

  1. MP

    03/26/2019 at 3:50 PM

    Does David Rusk have anything positive to say about Better Together’s plan? I would like to see a much, much more critical analysis of the pros and cons of the plan. Given his four current drill downs, I am left to conclude that Mr. Rusk is not interested in that, at least not yet.

    I find this current white paper the most constructive yet, as saving money is one of the main reasons to pursue a city/county merger. It should be said that while citing Ray Hartmann may earn Mr. Rusk a bit of local credence, the article cited, which criticizes some financial aspects of the plan and proposes that Better Together has “zero facts”, is itself suspiciously short on actual facts. Mr. Hartmann provides a critical “review” of Better Together, but does not back up his forceful opinions and assertions with hard facts. He does, however, provide some provocative insights and beliefs. Moving back to numbers, what I find concerning about Mr. Rusk’s analysis is that he culls data from a much smaller merger (which he does admit is smaller and simpler, but calculated line by line). By simply carrying over this 2% yearly savings as a multiplier for a merger that is much larger and more complex, he is undercutting his entire argument. while it has been shown that pre-merger estimates of cost savings in Nashville, Louisville, and Indianapolis were larger than realized, that does not invalidate their eventual savings, nor the calculations and statistics used to predict them. These numbers are often best-case scenarios. If Mr. Rusk’s estimate of $69 million per year saved (based on the 2-3% from Wheeling/Ohio County) is closer to reality, will that be worth it? I would argue absolutely…there are many needs that can be addressed with an additional $69 million dollars. Will it be disappointing, based on Better Together’s estimates? Yep, no doubt about that. $69 million saved out of a “proposed” $250 million is, however, still a large net savings and something that should not be disregarded merely because it is a small percentage of the annual budget, or because its possible reality would be less than estimated.

    There are myriad propositions contained in Better Together’s plan, but in his previous “drill downs,” he seems to focus on simple, surface items, choosing to present them in a way that appears researched and experiential. His previous white paper spends its entirety on word count, which is laughable for what should be a critical analysis. Focusing on such a mundane, inconsequential detail prevents him from directing his analytical skills towards anything relevant or topical. While documents with long word counts can be cumbersome and certainly take longer to read, is there really appreciable relevance to using this as a means by which to “criticize” the plan? He states that the plan is very detailed (broad strokes don’t need as many words) and is attempting to both address the issues that are affecting St. Louis, as well as try to compose an amendment that is both firm in its realized authority, but flexible in its need for future flexibility.

    His second white paper focuses entirely on the size of “cities,” actually stating his belief that this is a main goal (sales pitch) of Better Together’s plan. This is a horribly short-sighted view of Better Together’s goals with little to no relevance on the ultimate success or failure of the plan, especially when we should be viewing an “analysis” through the lens of Mr. Rusk’s experience. Regardless of census bureau policy and whether or not it tallies the cities in the region as a collective or smaller pieces, the metro city would be composed of the same number of municipal districts and the same number of residents (approximately 1.3 million). Better Together’s plan is focused on a revision to overall city/county governance. A boost in national standing would be undeniably nice, but none of Better Together’s predictions are predicated on that. Call it cheerleading, but it is certainly not relevant to the execution of the plan.

    In his first white paper, he discusses the “region” in a way that suggests that by not encompassing the entire MSA, Better Together has fallen short of regionalism and therefore isn’t proposing guidelines for creation of a stronger, healthier and more economically viable St. Louis. While St. Louis City and St. Louis County are part of a larger region, fixing issues specific to the area is undeniably important to strengthening the region as a whole. Alas, rather than focus his analysis on a far more relevant subject (how reversing the Great Divorce would position St. Louis, as a sub-region within the far larger MSA, in a more economically and developmentally advantageous position than it currently sits, for example), he simply shifts focus to how Better Together makes no mention and proposes no action on how to strengthen regional bodies. Let’s be clear, this is not a focus of Better Together’s plan, but a likely result. Without much conclusion, he then shifts his focus to population size, which only serves to set up his next “analysis.” It seems that Mr. Rusk wants Better Together to be everything for everyone in the region. Unfortunately, Better Together is seeking to address the issues that plague St. Louis City and St. Louis County. In doing so, they are proposing a stronger municipal body that would be in a much better position to do exactly what he says is missing from the plan – that is, address bi-state, multi-county issues that will foster a strengthening of the region’s ability to accelerate its lagging economic growth.

    For all of the hype and billing regarding “drill downs” and “white papers” from Mr. Rusk, I would have expected a much more critical, much more detailed and much deeper dive into the intricacies of Better Together’s plan. I find it disappointing that up to this point, Mr. Rusk has done little to “drill down” into how Better Together’s plan is proposing a better St. Louis, aside from counting words and decrying city size estimates.

    • Tom Finan, Executive Director, Construction Forum STl

      03/26/2019 at 8:52 PM

      Thanks for your comments. This series is indeed a “drill down”. The more Mr. Rusk drills down, the deeper the level of analysis will be.

      Per the end note that runs with each installment: “In this series of white papers he will be drilling down into items ranging from savings from consolidation, to size and ranking of the ‘statistical city’, economic development, planning and zoning, bond ratings, taxation, political representation, and Metropolitan Council composition.”

      We are anticipating a total of 8-10 white papers in the series.