Can Silicon Valley Sic Schumpeterian Disruption On Bloated City Governments?
It’s one thing to ship your tax money off to Washington, resigned to the fact that you have little control over the distant bureaucracy that consumes our nation’s fisc. But when it comes to your own city or town, where spending decisions impact everything from garbage collection to your daily commute, such resignation costs dearly. So what to do?
Imagine you could quickly and easily pry the cover off your municipal government’s books and look inside. Imagine every citizen being able to hold politicians accountable down to the penny: Where is my tax money going? Are we getting our money’s worth? Should I believe the mayor when he tells me he needs to raise taxes? Are we overpaying our civil servants? Can some city services be outsourced? How come my friend in the next town over pays fewer taxes yet gets better services in return?
Imagine bondholders getting the answers they need to accurately price risk: Can this city service its debts? Is it operating as efficiently as similar cities? Are expenses and revenue out of whack? Are ominous trends brewing?
Imagine every candidate running for office having the power to become as well-informed as the incumbent: Are the current officeholders doing a good job? Can I do better? Where are the improvement opportunities? Is the city in trouble? Is the mayor a crook?
Imagine no more. A Silicon Valley startup named OpenGov.com is putting city finances online, along with a suite of analytic tools that make it easy for both city managers and any citizen to dig into the details of their city’s finances, past and present. Since its launch in 2011, OpenGov.com has helped city governments as large as Anaheim, CA and as small as Rockport, Texas, (population 8,766) become more transparent to the citizens they serve and more easily manageable by the elected officials and civil servants who run them. What was once an opaque morass is now a publicly accessible resource.
The key to making this work is biting off just the right amount to chew. OpenGov.com doesn’t attempt to replace the antediluvian accounting software most cities use to keep their books, nor does it implement real-time controls. Rather, it offers a subscription service that gives everyone access to historical spending and budget data from both their own and other cities, stored in the cloud, where it can be sliced, diced, displayed, and compared, enabling users to shine a light on best practices, uncover clever innovations, and root out incompetence and malfeasance.
Of course, increased transparency alone won’t bring some of the nation’s more intractable cities back from the brink, but it’s a start. OpenGov.com (and its competitors that are sure to follow) is a tool, and like any tool, it must be used properly, and cannot solve every problem.
For example, it can’t do much to solve the largest fiscal problem facing many cities—unfunded pension liabilities. Governments don’t use private sector accounting standards and make payments into their pension funds according to discount rates based on unrealistic investment return projections. This allows politicians to make generous pension promises, buying votes from unionized government employees today with money to be squeezed out of taxpayers tomorrow. Only current pension payments are recorded, the tip of an iceberg threatening to sink cities like Chicago and San Francisco. Meanwhile, the politicians who ran up the check know they’ll be out of office when the bill comes due.
Still, OpenGov.com is off to a great start. The country will be well served as it collects and disseminates more complete financial information about our cities and towns, making information about pending shortfalls accessible to citizens and municipal bondholders alike. Information is power, especially when the ultimate showdown comes, as it has in Detroit. If taxpayers are going to face down militant government unions trying to collect on impossible-to-keep pension promises made by long-gone politicians, they’ll need to know what they’re up against and what it’ll take to dig their cities out of their fiscal hole. Because if changes aren’t made in time, abused taxpayers may be left with little choice but to follow in Detroiters’ footsteps and vote with their feet.