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COLUMN

If city wants tax increase, it must promise to stop wasting money

More Information

Income tax fact

The current local income tax is 1 percent and generates about $75 million annually.

Source: Allen County auditor's office

There can't be a budget problem if it has money to waste on inflated construction contracts

Tuesday, March 5, 2013 - 12:01 am

Any day now, Mayor Tom Henry's “fiscal policy” advisors will release a series of proposals to deal with a budget gap that could reach $6 million next year.

But before City Council even considers raising the local income tax – an option Henry and others have said is possible if not likely – city officials owe taxpayers something in return:

A promise to stop squandering increasingly scarce dollars through a state law that encourages the public sector to behave in ways that in the private sector might invite accusations of gross waste, kickbacks or even bribery.

The problem, as I've written before, is the Indiana common-wage statute that requires governments to establish wages before accepting bids on construction projects costing $350,000 or more. Committees established by the city and others generally have two choices, both of which are legal: wage scales submitted by the AFL-CIO and by the Association of Builders and Contractors, which represents non-union “merit shops” and can cut costs by between 15 and 30 percent, according to spokesman Ken Neumeister.

With the city poised to award millions of dollars in construction contracts next year – last week it advertised the sale of $75 million in bonds to pay for sewer projects alone – even a savings of considerably less than 15 percent could represent real money. Neumeister said the city usually bids between $50 million and $80 million in projects annually and City Utilities contracts are generally funded through water and sewer rates, meaning ratepayers could get less for more, too.

The city simply can't be allowed to spend that kind of money frivolously while simultaneously insisting it must increase taxes and/or cut services on which the public relies.

Even the most benign defense of this law is irrational on its face. In order to prevent competition for large public contracts from eroding workers' salaries, defenders insist, governments must establish minimum wages that allow contractors to pay more but not less.

But such a policy does far more than thwart the very market forces that might save taxpayers money. It also tends to foster an unholy alliance between special interests and the politicians who rely on them for financial support. That's why governments run by Democrats such as Henry tend to choose union-level wages for their projects and are supported by unions in return.

To be sure, merit-shop owners often contribute to Republicans and are rewarded by the appointment of officials who will choose the lower ABC wages. But at least that arrangement can also protect taxpayers' interests.

This is hardly the first time members of the public have faced the prospect of paying higher taxes to officials who for the most dubious of reasons got less than full value from those dollars. Just last month, in fact, a Fort Wayne Community Schools' committee voted 3-2 to adopt union-level wages on nearly $25 million in projects, most of which will be funded through a $119 million property tax increase approved by voters last year. A savings of 15 to 30 percent would have allowed the schools to complete another $3.6 million to $7.2 million in building improvements school officials insisted were essential – but apparently are not.

New FWCS Board member Glenna Jehl blasted the decision at the time. Now her son is demonstrating equal critical awareness of what may – or may not – happen when the mayor's task force issues its recommendations.

City Councilman Russ Jehl, R-2nd, is not on the fiscal policy committee but is not particularly supportive of a tax increase under any circumstance but will be especially critical if the administration does not change its common-wage policy. Currently the administration appoints two of the committee's five members, “but maybe the Council should get one of those two (appointments),” he said.

Because most votes are 3-2, that could tip the balance in the taxpayers favor and is the very least the Republican-dominated Council should demand in return for any agreement to increase taxes.

Time will tell whether the recession and property tax caps have created a shortfall that justifies a tax increase. But it's obvious already that taxpayers should not pay more, or receive less in return, simply to benefit workers who enjoy more political clout than employees in other sectors.

Other states have similar laws, and the Davis-Bacon Act imposes similar wage guidelines on federal projects. That 1931 law, it should be noted, was in part designed to protect whites from competition posed by lower-paid black workers.

The politics have changed, but government is still favoring the well-connected, at taxpayers' expense.

You'd think more people would notice.

This column is the commentary of the writer and does not necessarily reflect the views or opinions of The News-Sentinel. Email Kevin Leininger at kleininger@news-sentinel.com, or call him at 461-8355.