Saturday, September 22, 2007

Northwest Quadrant of Neighborhood Associations

I went to the Northwest Neighborhood Association Meet the Candidates forum on Thursday night. I like these forums. It gives candidates a chance to speak to residents and to hear what the other candidates have to say.

I must admit I was getting tired of hearing many candidates talk about attracting business and individuals to Fort Wayne using a number of incentives; grants, abatements, TIF’s, etc. These candidates then turn around and say something has to be done about property taxes and support increasing the sales tax and lower the property tax. Are they just going to shift the burden from property taxes to sales tax and income tax? Do you really believe that shifting property tax to sales tax will reduce your overall taxes?

The cost of government will not change, which means the amount of taxes we pay will not change. In essence it is nothing more than rearranging the chairs on the Titanic as it sinks.

Last night I asked how many in the audience knew how much in sales tax they paid last year? Even though I keep track of what I spend, I have only a rough guess as too what I pay each year. I like the property tax bill over the sales tax because it is a one time bill, which shocks you into taking action. If we did not have a property tax, but a sales tax, how many would be complaining about the sales tax? Who would you complain too? I believe an increase in the sales tax will remove our last means of accountability.

One incumbent had a chart showing School costs, inflation and property tax increases. Property tax increases since 1990 have outpaced inflation by a good amount. He was attempting to show that something has to be done to bring this under control.

This chart is likely correct. Another candidate stated that wages in Fort Wayne used to be 101% of the national average and now was down to 80%. The chart and this information gave the reason behind why property taxes have outstripped inflation these past 17 years, yet none of the incumbents presented the simple reason.

Inflation is the change in cost of a basket of goods over a period of time, normally a year. Inflation has both labor and raw material components. If the raw material components increase faster than the labor components, then inflation will be greater than the growth in wages. If raw material costs grow slower than wages, then inflation will be less than wage growth. The majority of our tax dollars go to pay police, fire, teachers and government workers wages. As these wages increase, the Fort Wayne budget also increases. Since the majority of the increase is due to wages, our property taxes will increase faster than inflation. Combine a drop in wages and of course you will have property taxes exceeding income and inflation. The problem I have is they still don’t realize the relationship and the problem even after looking at the chart.

The only way for our property taxes to grow at the rate of inflation is to some how do more with fewer governmental workers. Teachers would have to teach more students (productivity increase); governmental workers would have to serve more people with the same or fewer employees (productivity increase). The hard cold truth is that as government grows, so does the rate of increase in our property taxes. This is why it is imperative that we accrual costs for pensions, and maintenance of our infrastructure so that we minimize tax increases.

Our current city council along with the previous eight councils has failed to accrual costs. We now have a $214 million unfunded liability in police and fire pensions. We have a water, sewer and storm water problem to fix that could cost up to $500 million. We need to clean house and take back our city.

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