Denver, Mike Krause

Mayor Hancock’s proposed permanent property tax increase the wrong way to solve Denver’s spending problem

Mayor Hancock’s proposed permanent property tax increase for the November ballot shows a political timidity that has no place in the governance of a great city like Denver. Rather than re-thinking how the city operates, the mayor wants Denver homeowners to balance his budget for him.

Denver is recovering some housing value, and property tax revenue will rise along with the housing market. But the mayor’s new money grab could jeopardize an already shaky local economy.

The mayor’s plan assumes that as property values increase, so too does property owners’ income. This is a false assumption. Higher home values and an increase in equity are unrealized gains. Homeowners don’t see that money until they successfully sell their houses. For many homeowners, incomes have been stagnant, or even declining. New tax burdens in a struggling economy mean less money in homeowners’ pockets for groceries, gas, insurance, home improvements and mortgages.

Moreover, the mayor’s scheme assumes that Denver’s ongoing budget deficits are solely a revenue problem, that the city just needs to find new sources of tax dollars and all will be well. But other Democrat mayors in cities such as Los Angeles, Newark and Jacksonville know better; they are embracing privatization and managed competition to trim costs, rather than raise taxes.

Writing in the Wall Street Journal, Leonard Gilroy and Harris Kenny from the Reason Foundation note that Chicago Mayor Rahm Emanuel has privatized or opened for competitive bid curbside recycling, the city’s water bill call center, airport and library custodial services, and the city-worker benefits-management system, among other innovations.

In short, write Gilroy and Kenny, “Mr. Emmanuel is doing what sensible leaders do: focusing resources on the core functions of government and using competition to lower costs on the rest.”

In a recent Denver Post guest column, Joshua Sharf (writing on behalf of the Independence Institute) points out:

The government has an obligation to exhaust all reasonable efforts at cost savings before asking taxpayers for more. But the mayor hasn’t just “gone small” on savings; he’s also ‘gone vague.” With the exception of specific personnel moves, the overwhelming proportion of savings includes studies to find cost savings, rather than delivering actual cost savings.

In another Post column, former Denver City Council member Susan Barnes-Gelt points out that personnel costs make up a significant 70 percent of Denver’s operating budget, and they increase every year. Yet, while the mayor’s proposal would restore employee furlough days, it “avoids long-term systemic changes to an arcane personnel system,” writes liberal Democrat Barnes-Gelt.

In recent municipal elections in San Diego and San Jose, voters chose overwhelmingly to significantly reform their public employee pension and health plan systems instead of raising their own taxes.

The mayor wants to prop up the status quo with a property tax increase, while avoiding hard choices that might result in substantial cost savings and the long-term fiscal health of the city.

He should go back to the drawing board.

Mike Krause is Vice-President of Operations at the Independence Institute, a free market think tank and a Denver property tax payer


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