Fix City Finances 5: Put a Price Tag on Everything
Transparency is the first step in spending tax dollars wisely
This is the fifth in a series of common sense solutions for fixing municipal finances.
How much do city services cost?
How much does it cost your city to install a park bench?
Or fill a pothole?
Or clean up the streets after a snow storm?
Most of us have no clue. And why should we? Our city budgets rarely provide this level of detail.
It’s time to start telling citizens how much things cost.
Let’s start putting price tags on everything.
For two reasons.
1. Help people evaluate trade-offs
All spending involves trade-offs.
This is true for individuals – like when we decide whether to buy a new phone or put money into our savings account. It’s also true for governments – every dollar spent in one area means less money available for other priorities.
At the city level, residents have little idea of the trade-offs involved. When we spend, for example, $100 million to widen a road, there is little discussion on what that money could do for other priorities, such as affordable housing or public transit.
And while we tend to grumble at our tax bill, might we be willing to pay a little more taxes if we got specific services in return?
For example, some people would be willing to pay a little more to keep city swimming pools and beaches open during late season heat waves. Or to have libraries open on Sundays. Either of these examples could be funded with a few extra dollars on our tax bill each year. Maybe residents would be willing to pay a little extra for additional services.
2. Make city spending more transparent
We’ve all heard examples of exorbitant spending on city services.
Like the Toronto city quote of $65,000 to $150,000 to build a set of steps in a park, which a local resident went ahead and built himself for $550. The city eventually tore out those DIY steps and installed their own, but managed to do so for $10,000.
If we had a price tag on everything, cities would be forced to defend their cost estimates. In the Toronto park example, it was the action of the resident that pressured the city to come up with a reasonable price tag for these steps.
Also, we should be told the full lifecycle costs of spending. Like the earlier example of road widening, cities should be transparent about how much it would cost to maintain that wider road every year in the future, because that is an ongoing cost directly charged to your tax bill.
Shining a little sunshine on costs – in advance – can go a long way to ensuring that city spending represents good value for taxpayers.
When we find out after the fact about extravagant spending, we can get angry at the waste, but we’re never going to get that money back. We need to see the price up front to keep city spending in line with public expectations.
Better than a spending review
So let's do it. Put a price tag on all city spending. It is a far more effective way to contain costs than the usual “spending review” that politicians love to trot out during election campaigns, in which they promise to identify and eliminate waste that no one else was able to find.
But public sector spending reviews rarely work out as hoped for. Bureaucrats tend to offer up politically attractive programs that are difficult to cut. And so these exercises focus on reducing training, travel and consultants. Travel and training, however, never amount to much, and bureaucracies that have over-relied on outsourcing quickly find that they cannot do much to reduce consulting budgets.
A better solution is to spend money more carefully in the first place. That requires being transparent about how much different items cost, and having the courage to put those cost estimates out for public scrutiny.
In other words, put a price tag on everything. It’s our money and we should know how it is being spent.
Best wishes for the season
We hope you have a restful break. We are going to take a week or two off over the holiday season. We have some exciting announcements for 2024, and we look forward to sharing those with you in the new year.