Guest Blog (Doug Enevoldsen): "Healthy Cities, Healthy Oklahoma"

Doug Enevoldsen is City Manager for the City of Bixby. He has served in a variety of legislative and executive branch positions at the highest levels within Oklahoma state and local government.

Cities and towns are the backbone of Oklahoma’s economy, and the state’s health is critically dependent on their well-being. Virtually all commerce, common education, higher education, health care, state, and even many county government services take place inside a city or town. Those institutions cannot fully achieve their own respective missions if their host cities are not healthy, functioning entities. We are all in this together.

Ours is the only state in the nation whose municipalities are required to operate primarily on the sales tax, a highly volatile revenue source whose base has steadily been eroded over time through legislated tax exemptions and rising Internet sales.

Because they are so reliant on sales taxes to pay their daily bills, most cities and towns focus the bulk of their efforts on attracting retail sales instead of industries which feature higher-paying jobs, or adding rooftops. This is understandable, since the latter pursuits increase demands on municipal services without directly providing commensurate operating revenues. However, as UCO economist Mickey Hepner points out, this ultimately results in a less diversified, less prosperous Oklahoma economy.

Pursuit of retail also pits communities against one another since there is only so much of the retail pie to go around, creating an unhealthy competition which undermines regional collaboration which might otherwise emerge, and limits cost savings opportunities for all.

Last year, the Coalition of Tulsa Area Governments developed a statewide initiative known as “Healthy Cities, Healthy Oklahoma”, to promote awareness of the plight of municipal finance in our state and its critical link in our state economy. In response to our request to “stop the bleeding”, lawmakers adopted HB 3054,  the Municipal Fiscal Impact Act, a simple, but important new law requiring they measure the fiscal impact of proposed laws on cities and towns before adopting them. Unfunded mandates can be very harmful to financially-strapped local governments.

We also asked lawmakers to stop enacting sales tax exemptions that do not pay for themselves, and to create a legislative Task Force on Municipal Finance to produce recommendations for reform. That group’s report is due early next year. Fortunately, they will have at their disposal the impressive set of policy analysis and recommendations forthcoming from this month’s 2010 Oklahoma Academy Town Hall conference, whose focus was also our state’s beleaguered municipal finance system. The work of over 100 citizens from throughout our state, I hope the Academy’s fine work product will receive the serious consideration it deserves, now and in the coming years.

The Tulsa Metro Chamber recently concluded a three month strategic planning process involving a diverse array of officials from throughout northeast Oklahoma to produce a unified “One Voice” legislative agenda.  One of their top recommendations? “Support legislation allowing municipalities to diversify their sources of revenues to fund essential local government operations”.

I personally believe this effort will need to include allowing local governments access to the more stable ad valorem revenues type on a local option basis, to suit local circumstances and voter preferences, with revenues possibly dedicated for public safety.

Lawmakers should also take steps in the future to broaden the sales tax base (on which local sales tax is applied, as well) to include personal and professional services, either using the additional state revenues to lower the state income or other tax, or to preserve essential state programs and services. Similarly, when state revenues recover sufficiently to allow for same, lawmakers should increase the relatively meager share (only 4 percent) of state transportation revenues currently being allocated towards municipal streets, since these carry the majority of road miles actually driven in our state.

Experts advise that the solution to municipal finance woes in our state will require attention on both sides of the balanced budget equation, i.e., not only revenues but also expenses. In that regard, they suggest lawmakers revamp state laws which either help drive up the cost of local government services (including procurement of that most important input, personnel) and/or which impede cost sharing arrangements from forming.

City officials recognize that the current municipal finance structure was not formed overnight, and it will realistically take some years to reform it. The budget situation in many Oklahoma cities and towns is in critical condition, and work must begin now to get our cities, and in turn our state, healthy.

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