Monday, June 08, 2009

Bankrupt: The Fundamental Incoherence of the Recall Argument.

The nature of the recall campaign allows each discontented resident to project his particular gripe onto the Mayor. Job losses? Mayor's fault. Money spent retaining or wooing employers? Mayor's fault. Crime? Or "out of control" police? Check and check.

As a result trying to take on the recall argument is no easy task. And it's made harder by the slipperiness of Recaller-in-Chief Warner Mendenhall. The Beacon Journal has been braving the fray and reporting on the major arguments raised by the Warneristas. Two weeks ago the paper examined the Mayor's travel expenses (Yielding Warner's precious "The business of the city is not business" quote). Yesterday the lede was an analysis of the argument that the city's debt load is excessive (the city is "broke" they like to say.) None of this will matter to the hard core of the recall movement, but at least they do not vent their folly in a vacuum.

The bottom line of the ABJ story is that Akron's debt is not out of line with that of similarly situated Midwestern cities. The story could have been better -- I would like to have seen opinions of experts who are more generally hawkish on debt that the CSU prof they rely on. But overall it's a good read.

The major lesson of the article is that not all debt is the same. Much of the $760 million that Team Mulligan goes on about is special obligation debt -- that is, debt incurred with a funding stream already in place to pay for it. The best example of this is the school rebuilding project for which the city has taken out $200 million in debt to be paid for by a voter-approved income tax.
Confronted with evidence that the debt is not crushing the city, Mendenhall shift the subject. The problem, says he, isn't the debt. No, that's not what he's saying at all. It's what we've spent it on:

    Mendenhall said Akron should have spent more on neighborhoods, rather than on public improvements to assist projects like the Northside Lofts and a student housing and retail complex being built on South Main Street downtown.

    ''When you have strong neighborhoods and good housing, this supports the tax base and the schools,'' Mendenhall said. ''The neighborhoods have clearly suffered.''

First and foremost, if that's the argument, it surely is not a recall argument. I might listen to an argument for recalling a Mayor who has recklessly spent a city into bankruptcy. But this amounts to different policy priorities, which is not an appropriate reason for upending an election result.

Second, the city has spent money on neighborhoods. When I first moved to 'Akron in the early 90s we lived in a neighborhood a little dicier than the one we're in now, one in the midst of a city-sponsored street-level upgrade. The city fixed sidewalks, driveway aprons and sewer lines and provided grants to homeowners to bring their houses up to code. This was going on all over the city in "transition neighborhoods" -- basically those that could go either way. Neighborhood level work has limitations in that people will only allow the city to do so much on their private property, but the city does have a history of doing that sort of work.

And of course the AMHA has been revamping housing projects and trying to create mixed-income subsidized housing developments, first in Cascade Village and in now in Edgewood. Not the city per se, but certainly the city has been at that table.

Moreover, the school/community learning center building project is all about neighborhoods. Good schools grow good neighborhoods. A shiny new building isn't the end of school reform, but at least anecdotally the new schools have seen improvements in student and parent morale which can't hurt.

Ultimately a lot of how people feel about the recall comes down to how they feel about Akron. Team Mulligan has been poormouthing the city from the start. I see a city no longer reeling from losing it's one-time manufacturing base and reinventing itself as a tech center. Doing so requires investment, and not just from the private sector. Akron may have debt, but we also have a more discernable future than most of the metro areas in Northeast Ohio.


Warner said...

How much debt is too much debt? That is the question we have asked from the beginning. I would say $766 million is too much. Especially given the other liabilities such as the EPA mandate and the pension lawsuit which could now bankrupt us.

Pho said...

Oh, well if you say it, that changes everything. We won't bother with the analysis of an actual expert. We will ignore the comparative data. What good are facts when we have the opinion of a Warner Mendenhall.

After all, if anyone knows about excessive debt, it's you Warner.

Warner said...

My opinion is based on knowledge of the city's current and future liabilities. The expert failed to include about $500 million in liabilities that are coming due--Sewers and Retiree Health Care. When those future, but imminent, debts are accounted for we are bankrupt.

The expert is only as good as the information he is given to review. The input from the City was junk. The expert never called Change Akron Now to become informed about what our concerns are.

The Bond ratings companies are similarly kept in the dark about these liabilities and property values. (the median sale price of houses in Akron fell 50% over last year).

How much debt do you think is too much debt today; given the information available today? (give or take $50 million).

The Mayor wouldn't answer. Probably because he knows we are going to exceed that number very soon.

Instead of answers we get ad hominem attacks.