When it comes to city budgeting — the complexity of the financial statements, the complexity of the budgeting, with all the things you have to account for — is because our cities have gotten very complex. They have taken on charitable activities, commercial activities, and many more. They do business.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

Bus ridership at Dallas Area Rapid Transit (DART) peaked forty years ago.

In August 1986, DART reported average weekday bus ridership of 199,000, and the agency had not yet laid a mile of track. It has since built a regional line to the airport and 93 miles of light rail — which DART still calls the longest such system in the country. DART’s 2025 annual report puts average weekday boardings across the system at 171,000. Before the pandemic, DART reported 220,000.

Ridership remains below its pre-pandemic level, and DART’s focus now is retaining its city members, not its riders.

Highland Park voted 70 percent to leave DART on May 2. DART service ended May 14. The town replaced its bus route and its paratransit service with on-demand vans, under a six-month contract of less than half a million dollars. It will also keep sending DART half of its local sales tax, about $9 million a year, against an exit obligation DART estimates at $30 million to $40 million — about four more years of it.

The DART service stopped. The payments to DART did not.

What kind of tax and debt structure absorbs a ridership decline and still bills a town that voted itself out?

The Risk of Loss Used to Be a Private Concern

In January 1931, the Texas Electric Railway went into receivership, unable to cover the interest on its bonds. The reorganization swapped those bonds for common stock, and the cars ran another eighteen years. When the stockholders voted to quit in 1948, the wind-up took seven years, but there was a way to do it. Whether anyone rode was the lenders’ problem, and when enough people stopped, it was their loss.

None of that made Dallas transit a free market. The city’s last private bus company, the Dallas Transit Company, held a franchise, and a franchise is a negotiation: the operator petitions the city council to raise a fare or drop a route, and in exchange the council keeps competitors off city streets. In January 1964, the city purchased it for $5.5 million because the service had become inadequate. The private operator bore the losses, but it did not control all the decisions that determined them. Public ownership removed that distinction.

The City of Dallas paid for the bus company with revenue bonds secured by the system itself, and within thirteen months the council was setting fares for a system it owned. One relationship survived the sale: the debt still depended on what the system earned.

In August 1983, voters in fourteen cities approved a one percent sales tax — half of what state law lets local governments collect — to create DART and fund an $8.75 billion program: double the region’s bus service in three years and build 160 miles of rail by 2010. The program had completion dates, but DART did not. The statute grants DART perpetual succession — statutory immortality.

A bond trustee has stood between the rider and the service in Dallas since 1964. What changed in 1983 is what it holds as collateral: not the flow of fares, but a claim on half the local sales tax, paid by everyone, rider or not. The cities were called “members.” On the financing side, their tax base had become the collateral.

Now the Cities’ Tax Revenues Are the Collateral

DART’s master debt resolution routes the sales tax from the state comptroller straight to a bond trustee, which funds the debt service before releasing anything to DART. Fares are pledged too, but only as a backstop. The test for issuing more debt is that projected sales tax cover twice the resulting annual bond payments. Ridership is not a consideration.

A KBRA analyst told The Bond Buyer that the legislation “ensures full and timely payment of debt service regardless of whether one or more member communities opts to withdraw.”

Total debt reached $4.04 billion at the close of fiscal 2025, on a schedule running to 2058. DART’s own executive committee calculates each withdrawing city’s share of it, and new borrowing raises that price for the twelve cities still inside. Voters rejected bonds for the rail program in 1988, approved $2.9 billion in 2000, and have not been asked since. The debt that locks them in grows without them.

No Price and No Competitors

DART charges riders a price that does not have to cover the service’s cost. Its most recent annual report puts fare revenue at an average of 82 cents a boarding against an operating cost of $14.47 that counts neither depreciation nor interest. Ridership never has to justify a route, a station, or a rail line, because the money that pays for them arrives either way.

While state law does not prohibit a member city from providing its own transportation service, that permission is exceedingly difficult to exercise when DART occupies half of the two percent local sales-tax capacity allowed by state law. Arlington, which never joined, buys on-demand rides under a contract it can rebid, and pays for transportation once. Highland Park currently pays for it twice. Missing is any way to compete against an 82-cent ride without the tax room to pay for it.

The Cost of an Early Check Out

An agency whose debt is secured by its cities’ tax revenues has to keep its cities. In February, DART’s board created a program for keeping them.

The program was presented as a rebate. DART returns five percent of the sales tax collected in a member city, rising to seven and one-half percent by 2031, spendable only on projects DART approves.

Two provisions clarify what the cities traded away. One bars a participating city from seeking legislation to reduce or impair the DART sales tax through September 2031, except in collaboration with DART and consistent with priorities DART’s own board approves. Violating it costs the city its unencumbered program funds and every payment to come, unless it cures within thirty days of DART’s written notice. A second requires a city with a pending election to rescind it within seven business days of signing, and the deadline to sign fell two days before the May 2 election. A city could take the rebate, or proceed with its council-called election. It could not do both.

Six of thirteen cities called elections. DART’s board approved the program on February 20, and three canceled within six days. Addison’s council was told before its vote that proceeding would mean giving up $8.2 million. Council member Randy Smith said DART’s poison pills “take away the right of the people voting.” It proceeded, and its voters chose to stay by 70 percent, as University Park’s did by 54. Both cities appear in the program’s first-year project schedule as ineligible because they held a withdrawal election. Two member cities in good standing, paying the full penny, get none of the rebate, not because their voters left but because their voters were asked.

The retention program was funded by reducing services. DART said the cuts were “largely driven by the implementation” of the program. Two of the seven routes it dropped were in Irving, which signed for $54.5 million over six years and then approved a $1.7 million van-service contract that included replacing the routes DART had just cut.

Put Dissolution on the Table

DART goes to Austin in 2027 to ask for a regional rail authority and a vehicle registration fee: a new entity with a new revenue stream and no expiration date, offered as relief from the last one. Ten member cities are bound contractually to refrain from asking that same Legislature to reduce DART’s share.

The statute that created DART provides for abolishing a regional authority, by the Legislature or by a vote of the whole service area, in one place: a subsection setting the conditions under which a city may build a replacement. But there is no procedure for that vote and none for winding DART down. The statute contemplates DART’s end only as a step toward its replacement.

The Legislature can end DART, and it should.

That would not make the $4 billion debt disappear — somebody pays it either way. What would change is who decides, and when. Against the debt stands $624 million in land and rights-of-way, carried at original cost.

A phase-out is the easiest thing for a later session to extend, so four conditions belong in the bill:

• The expiration date is placed on the tax, not the agency.

• The assets are sold, not transferred to a successor.

• Proceeds retire the debt, and any remainder returns to the jurisdictions that paid it.

• No successor holds taxing power.

Without those four provisions, abolishing DART produces DART under another name, with the same penny and the same debt.

The Legislature should also keep the exit price from rising. HB 3187’s committee substitute last session would have barred DART from issuing debt that increases a withdrawing city’s obligation once notice of an election arrives, and cut the withdrawal cycle from six years to three. It cleared committee 9-2 and never reached the floor. Refile those two provisions on their own. Every other proposal argues over the size of the rebate. None changes who decides.

I am not arguing that cities should run transportation. The difference is that contracts need to end, and an operator’s financing should not be insulated from its ridership. Ridership is information an operator can act on. DART is oblivious to such information, because nothing it does changes what secures its debt.

In 1915, Dallas had hundreds of drivers hauling passengers around town for a nickel, until the streetcar companies sued and the city zoned them out of the business district by 1918. Keeping them out was the point. The on-demand vans the cities are hiring now are that service, bought back a century later — and they are paying DART for the privilege.

Highland Park checked out in May. The obligation remained.

The Legislature can write a way out in 2027, or the twelve cities still inside can ask again in 2032, one at a time, at whatever the price is by then.

We have candidates campaigning on the platform of improving government efficiency; we have all these activities and initiatives to make government more efficient — yet we never achieve efficiency that is satisfactory. There are things you cannot change overnight, the way you would if you were appointed CEO of a private company. Why is that? Listen to the podcast to find out.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

The Town of Apple Valley’s mission promises “a better way of life through local control of public safety, development, services and amenities.” This leaves unanswered what the town should leave to someone else.

That omission can become expensive for the residents, even in the absence of corruption or spectacular incompetence. In three decades in municipal government, I watched many cities start things. But amid the excitement of initiating a new program or “investment,” I never witnessed a council pause and ask two questions: Should we be doing this? And what will it cost to stop?

Such questions do eventually get asked, 10 or 15 years later, by a council trying to free the city of something it never fully understood it had signed up for.

Apple Valley, a town of about 75,000 in California’s high desert, has run this progression more than once across a variety of utility and commercial activities.

The Cheapest Way Out Was to Buy It

On November 18, 2008, the town council agreed to buy the Apple Valley Country Club, which was headed for closure. That was the last day that saying no would have cost the residents nothing.

Escrow did not close for nearly three years, because the purchase of the golf course depended on disputed water rights, and settling that took until late 2010 and cost $750,000. By July 2011, the town had spent $3.2 million on the course.1 The town proceeded with the purchase because not closing risked “legal action that would have potentially far exceeded the cost to close escrow.”2

The best argument for buying the golf course, three years in, was that backing out would have cost more.

The cash to close escrow came from the town’s own sewer fund — an account funded by sewer bills and managed on the ratepayers’ behalf. The town’s sewer enterprise purchased the golf course’s water rights for $2.9 million, and the golf fund used the money to complete the purchase. Sewer ratepayers had involuntarily financed the town’s golf-course purchase.

By 2021, a decade later, the golf course owed the General Fund $3.7 million for keeping it afloat. The town’s auditors flagged the growing debt, and town officials said they were developing a repayment plan. That plan turned out to be forgiveness. The following year, the General Fund erased the debt by giving $4.1 million to the golf course.

Three years later, the town’s budget projected the golf fund’s balance at $3.2 million below zero. The latest budget no longer discloses that balance or what the golf fund now owes the General Fund. Last year, the course was budgeted to spend $1.9 million on operations and take in $1.1 million from greens fees, pro shop sales, and rents. The council approved the budget without acknowledging the $800,000 gap.3

The 2026-27 golf course budget shows revenue and expense suddenly matching at $2.1 million each, with budgeted revenue jumping 85 percent from last year. Nothing the town has published explains how.4

The golf course is not a story about a golf course. It is just one instance of how this town makes decisions that come with a high exit cost.

Ignoring Better Judgment Because They Wanted to Do It Anyway

The water system is the one activity where somebody asked one of the right questions on the way in.

In December 2011, a council-appointed Blue Ribbon Water Committee studied the potential acquisition of the local private water system, Apple Valley Ranchos Water Company, and recommended against it. Because the water company was not a willing seller, the town could acquire the system only by condemning it — taking it by eminent domain, at a price set by the court. The report warned: “It would not be prudent for the Town in this economic environment to incur $5 million or more in legal and consulting fees for a hostile condemnation proceeding, when the Town’s annual [general fund] budget for 2011-2012 is only $25 million.”5

Four years later, the council ignored the Committee’s recommendation and sued to take over the water system. It borrowed $6 million to pay its attorneys. In September 2021, it issued a $10 million, 20-year bond to refinance that debt and finance additional legal expenses. Repayment will cost the General Fund just over $12.7 million through 2041.6

Two months after the bond issuance, the trial court dismissed the case and later ordered the town to pay the system’s owner, Liberty Utilities, $13.2 million of its litigation expenses. The town appealed and won in January 2025. Liberty appealed that, and on August 24, 2026, the state Supreme Court set the appellate ruling aside and sent the case back to the Court of Appeal, where it sits now.7

Ten years, a 67-day trial and two appellate courts later, the town does not own the water system and does not know whether it owes $13.2 million. Its own committee had warned against $5 million or more in fees; the town put its water litigation costs at $8.5 million before the award and the appeals. However it ends, the bond repayment continues to 2041.

The Wrong Businesses Are Funding Town Services

The town runs sewer, trash and electricity services through separate enterprise funds, paid for by the people who use them. Every year, the town’s General Fund bills those utilities for what it calls “administration” — nominally their share of the clerk, the town attorney, the payroll office. In the 2025-26 budget, the last time the town published the administration charges for the three utilities, they totaled $2,484,900. The largest of those, $946,500, fell on Apple Valley Choice Energy, the town’s electricity buying program, which already buys its accounting, invoice processing, rate setting, and regulatory work from a joint powers agency for about $980,000 a year. The golf course, another town-run business, was charged $191,747 as recently as fiscal 2022 and is charged nothing now.8 The town has not explained this. From what I can tell, someone decided it was pointless to charge a program that had no ability to pay.

I have prepared such administrative cost allocations myself, for other cities. The difference between a legitimate reimbursement and an unjustified transfer is whether the charge can be reasonably traced to the actual cost. None of the three “reimbursement” amounts changed between the last two budgets that disclose them, and the sewer share has not changed since at least 2022. That suggests that the calculations are not being updated with current information.

In the 2026-27 budget adopted this past June, the General Fund shows a $335,673 surplus. Without the $2,484,900 in transfers from utility funds, the surplus melts into a $2.15 million deficit.9

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Two Lawsuits, and Nothing Changed

When I first came across these utility transfers I thought, “this is a Proposition 218 lawsuit waiting to happen.” Proposition 218, which California voters added to the state constitution in 1996, limits what a government-run utility may charge its customers to the reasonable cost of providing the service. A charge used to fund a transfer to the General Fund must be supported by the reasonable cost of services the General Fund provides to the utility; to the extent the charge exceeds that cost, it can become a tax requiring voter approval.

Then, I learned that residents had already sued.

Twice.

First, in 2016, a resident sued over the sewer transfers under Proposition 218. The town settled in February 2017, agreeing to return nearly $800,000 to the sewer fund and cutting the household monthly rate from $35.04 to $31.43.

Later that same year, the same resident brought a class action under Prop 218 and Prop 26, challenging the trash franchise fee passed on to garbage customers on the same theory: money collected for a service was funding general government, which makes the charge an illegal tax. Under the Town’s agreement, Burrtec Waste Industries collects the trash under a franchise agreement; the town charges its own trash enterprise for administration and retains an 18 percent franchise fee.

That case settled in 2019 for $3.15 million.10

The town resolved both cases, but changed neither its opaque reimbursement methodology nor its 18 percent trash franchise fee. The California Supreme Court has held that a franchise fee exceeding the reasonable value of the franchise is a tax to that extent — and the town bears the burden of establishing reasonableness. For comparison, the town charges the electric, gas, and water companies two percent to run their wires and pipes under its streets.

Whether the administrative reimbursements or the trash franchise fee is unlawful is a question the town cannot answer about itself. Its budget publishes no allocation schedule, and its last audited financial statements, for fiscal 2022, arrived two years after that year closed. A town that cannot close its books cannot say with authority what its services cost and, thus, cannot demonstrate that its administrative charges do not exceed them. A cost-of-service study would cost a small fraction of either one of these settlements.

The town is left with an intractable problem. Its General Fund is kept afloat by $2.5 million a year billed to three utility funds without supporting documentation. Reduce those charges to what the services actually cost and the budget breaks. Terminate any of the three utility activities and the budget breaks. The only way to keep the General Fund whole is to stay in all three and keep the unsubstantiated internal billing in place.

If I were the town attorney, I would prepare for a third and fourth lawsuit.

A Rejected $15 Million Offer to Walk Away

In July 2025, San Bernardino County offered to buy the town’s animal shelter. The terms: $10 million at closing and a $5 million credit against ten years of sheltering services. More than 800 residents signed a petition against the sale, worried their lost dogs would end up in Devore or Big Bear. In the face of this pressure, the council voted 5-0 to keep the shelter.11

Wanting to keep the shelter is understandable. The town contracted its sheltering out for years; in 2004, when the nonprofit doing the work raised its rates, the town opened a shelter of its own. In 2010, it replaced it with a 36,000-square-foot animal shelter residents called the $8 million Taj Mahal. By 2025, the council was not deciding whether the town should be in the sheltering business. It was deciding whether to undo 20 years of bad decisions, each of which was priced when diving in and none of which calculated the cost of getting out.

The council turned down the county’s $15 million offer and ended its paid contract to house animals from county areas. The county moved its animals elsewhere, ending its roughly $1.1 million annual payment to the town. Apple Valley kept the shelter and responsibility for operating it. This year, the town has budgeted about $2 million to operate the shelter, against roughly $200,000 in fees in the last published revenue schedule. Contracting the same sheltering from the county would have cost about $615,000 — a saving of some $1.2 million a year.

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They Couldn’t Say What They Had, But They Knew They Needed Money

On July 23, 2024, the council voted to put a sales tax increase on the ballot for the upcoming November election. The newest audited financial statements in existence that night were three years old — the ones for the year ended June 30, 2021.

So the town council had no current audited statements from which to tell residents what the town owned, what it owed, what its activities actually cost, or whether the transfers into the General Fund were made as the council approved them.

Yet, it told the residents with certainty that the town needed a new tax.

Everything that should have been on the table — the future of the golf course, the trash business, the electricity operation, and the sewer utility — would have required current financial information. What cannot be reported does not get considered. And the wait has turned out to be a long one. The financial statements for fiscal 2022 were eventually released, but more than three years after the end of fiscal 2023, we are still waiting for that year’s audited statements, and for every year since.12

Such is how financial ignorance becomes a means to maintain the precarious status quo.

The voters approved the new sales tax. Two years later, the additional $11 million in revenue has not solved anything.13 The General Fund is still dependent upon the unjustified utility transfers and retains financial risk associated with the utilities and golf course operations.

Now Every Exit Has a Premium Price

Apple Valley has cornered itself. Sell the golf course and the town may have to book a loss. Hand the electricity customers back to Edison, which never stopped owning the wires, or unwind the town’s trash enterprise, and the General Fund loses the two largest of the three administration charges, about $1.7 million. End the town’s shelter operation and the council chamber fills up again with residents who don’t see the connection between subsidizing the shelter and the tax increases that will eventually be needed. The sewer utility has no obvious buyer, because the town has been the only provider long enough that nobody else is set up to be one. That is a cost of the original decision, not a reason to keep it.

The town contracts for electricity years in advance and resells it to residents, who can leave for Edison at their next meter reading. At the end of fiscal 2022, those contracts committed the town to pay $63,387,964 through 2036, whether or not it still had customers for the power. That year, the electricity fund lost $2.3 million and ended with enough cash to cover just three weeks of operating expenses. It paid the General Fund $1.2 million anyway.14

If customers leave, the town still must meet its power-purchase commitments. Anyone considering taking over the electricity business would have to weigh those obligations against revenue from customers who remain free to leave. The town has never published a calculation of what that business is worth.

Every right move now costs something: money, or the goodwill of people who became attached to a program the town should never have owned. That is the argument that will be made for never making any move.

And it is still going on. On June 9, on the consent calendar — the block of routine items a council adopts in one vote — the town extended its waste disposal agreement with the county to 2035 in exchange for a lower rate per ton. What it gave up was the right to leave that agreement without having to prove cause. It had given up that same right once before, in 2022, for a cap on the same rate.15

This is what a mission problem looks like after nearly two decades of being treated as a budget problem.

Ask at the Door

The time to decide whether a town should do something is before it does it. That is the only moment the decision is free.

One question belongs in every major staff report, on the night of the vote, next to the cost estimate: does this activity require the town’s legislative and enforcement powers to protect residents, businesses, and their property? Not whether it is good, or popular, or cheap, or well run. Nearly any service or amenity can promise “a better way of life.” That does not establish why the town should provide it.

For what a town is already doing, the solution has to be a definitive act — sell the asset, transfer the operation, or settle the contracts and withdraw — with any proceeds from ratepayer-funded assets going to those ratepayers. A phase-out on a timeline is what the next council quietly extends.

A corporate board facing a hostile takeover sometimes creates a poison pill: terms that make the company too expensive to acquire. No council in Apple Valley wrote such terms. They took on one more activity, and then another, each in a form that made termination financially burdensome. The effect is the same. The town is now too expensive to turn around.

The difference is that a corporate poison pill is swallowed deliberately. This one was assembled a small dose at a time, in staff reports that priced everything except the way out.

This started with one city’s ventures into golf courses, water utility and where that led that city. How when cities convince themselves tehy want to get involved in a new venture, it invariably ends up in them having losses related to these activities.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

The traditional city budget process results in frustration, dissatisfaction, and cynicism.

The process typically begins with the council setting goals for the coming year. Staff estimates revenues and develops a spending plan. Council members deliberate over the proposal, hear from residents, and direct changes. Finally, they adopt the budget, authorizing spending for the new fiscal year.

But how is it that a city can follow that sequence faithfully and still face recurring budget deficits, service reductions, hiring freezes, and deferred maintenance? Why does next year’s budget promise another round of the same struggle?

Professional guidance is not lacking. The National Advisory Council on State and Local Budgeting’s 1998 framework, developed by eight national organizations, spells out four principles:

1. Establish broad goals to guide government decision making.

2. Develop approaches to achieve goals.

3. Develop a budget consistent with approaches to achieve goals.

4. Evaluate performance and make adjustments.

This guidance is clearly reasonable. Let’s assume our officials follow it conscientiously, with accurate figures, public deliberations, and the budget adopted on schedule. Now consider two hypothetical cities with comparable resources, inherited commitments, and equally capable employees.

Setting the goals

City A sees its purpose as improving the community’s quality of life. The City of San José, California, provides an example: its mission calls for services that “create, sustain and enhance a safe, livable and vibrant community.” Meanwhile, City B limits its purpose to activities requiring legislative and enforcement powers to protect residents, businesses, and their property.

Apprehending and detaining a burglar requires the city’s authority to enforce laws protecting people and property. Organizing a neighborhood festival does not; residents and merchants can arrange an event without requiring everyone else to pay for it.

At City A’s goal-setting retreat, improving theft investigations and expanding the festival both qualify. The mission gives officials no reason to exclude either from the city’s responsibilities. Officials rank their priorities, but postponing a proposal leaves it on the list of things the city ought to do when money becomes available.

City B leaves the festival to its sponsors. Its council can still set a broad goal of improving theft investigations throughout every neighborhood.

Making the numbers work

During budget development, City A’s staff tries to fit both proposals into the revenue forecast alongside existing programs and commitments.

Several years ago, I was working as finance director for a city similar to City A. The revenue forecast for the upcoming year allowed for new programs. Two programs were added, not because they were judged more important than the work the city was already doing, but because funding was available. In the middle of budget deliberations, the revenue forecast came down. The city council decided to keep those new programs in place and directed staff to find other places to reduce spending. The result: facility maintenance and vehicle purchases were delayed to make room for the new programs.

Somehow, these programs were given priority over the existing commitments of maintaining facilities and replacing vehicles. Deferring these expenses added to the problems of the subsequent budget cycle.

In City B, maintaining facilities and replacing vehicles are part of the cost of fulfilling its continuing responsibilities. For theft investigations, staff examines caseloads, staffing, training, equipment, and continuing costs. It can plan replacements and reserves around that work. Existing activities outside the mission can be terminated as commitments and practical considerations allow.

When City A’s budget reaches the council, members hear why each proposed reduction will hurt someone. Cutting back the festival expansion undermines neighborhood vitality; postponing improvements to investigations compromises safety. Both arguments invoke the mission. The council is asked to prioritize again. But what are the priorities based on — citizen surveys, lobbying, the path of least political resistance, the mayor’s favorite?

City B’s officials debate the proposed staffing and case assignments. They have to judge what would improve investigations and what the city can afford. They can also decline requests outside the city’s purpose even when money is available.

Will next year be any easier?

City A adopts its budget with relief, but its council is concerned that the budget will need to be reopened during the year. Officials are already thinking about what they would do with more money. There is always another way to make a community more livable or vibrant. Neither this budget nor a larger one can ever fulfill that open-ended purpose. Better technology and greater productivity will not prevent pressure to raise taxes and fees to fund other activities that also fit the mission.

City B’s adopted budget includes maintenance, replacement costs, and reserves for its continuing responsibilities. Staff can identify remaining shortfalls and the changes needed to close them. Productivity gains can help close those gaps or reduce future spending. If better case management saves investigators time, the council can reconsider planned overtime or additional positions. It need not find new activities to use up the savings. Inherited commitments still have to be met, and a recession can disrupt the plan. But the council can plan for financial stability because it knows what work it has to fund.

As the year proceeds, both councils evaluate performance, following the framework’s final principle. City A counts festival attendance, surveys participants, and reports nearby business sales. Those measures can help improve the festival. They cannot establish whether the city should run it. Higher attendance can support expansion; disappointing attendance can support more promotion. The council ends up judging whether to continue the program by measures that already assume the city should be running it.

City B first asks which activities belong within its responsibilities, then examines their results and methods. A program can meet every target and still be something the city should stop doing. For theft investigations, the council has further questions. Are investigations protecting residents and their property? Would different staffing, schedules, or assignments improve that work?

In my three decades in municipal government, I never had a conversation about what a city government is. I never avoided such a discussion. The topic never arose. How were we supposed to evaluate our work without discussing what the organization was for?

What would an earlier start change?

In my earlier article, I urged officials to start work before the conventional budget season. But it needs to be the right work. City A could start six months earlier and remain in the same predicament, with more time to debate requests that all fit its mission.

City B needs time to change how it does the work it keeps. If its review of theft investigations calls for different schedules, those changes may require renegotiating a labor agreement, which can govern work methods as well as compensation. Such labor-related changes can take more than one negotiating cycle. By budget deliberation time, it is usually too late to make those changes for the coming year.

Changing accumulated commitments takes time. If your city has recently adopted its budget, start the discussion now: what should the city be doing?

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

The Union Gets the Final Say

School districts have begun giving labor unions veto power over whether a promising technology may ever be used to increase the productivity of their workforces.

On June 25, 2026 the Seattle Education Association proposed that its school district “shall not implement, utilize or promote AI Systems that eliminate, reduce, or replace work traditionally performed by bargaining unit members without prior written agreement of the Association,” and “any productivity gains from AI System implementation shall not be used as a basis for staffing reductions or increased task and workload expectations.”1

Four months earlier, in California, the United Educators of San Francisco (UESF) carried similar phrases into a four-day strike — down to the definition of the systems covered, which in both documents reaches any “computer system, software, algorithm … or automated process” performing “pattern recognition … language processing … or data analysis.” That describes most modern payroll and benefits software.

San Francisco Unified School District signed a contract with OpenAI for up to 12,000 ChatGPT accounts just a few weeks before the strike but then accepted UESF’s AI restrictions in the midst of it. So, it purchased the tool, then agreed not to use it to change how the work gets done. Sacramento City Unified’s teachers hold the same guarantee in a ratified contract of their own.2

Los Angeles Unified School District (LAUSD) wanted a committee to sort things out. For months, it advocated for a joint task force to study AI and make recommendations. In March 2026, the chair of a fact-finding panel recommended that the district concede the AI consent requirement — and so it did. On June 16, 2026, its board approved in a single sentence: the “Establishment of a task force to discuss Artificial Intelligence (AI)-related issues including AI not replacing Bargaining Unit positions or members without the express written agreement of union.” A body was created to study the question but then handed the answer before it could schedule its first meeting. 3

During my thirty years in municipal management, we were accustomed to giving the union notice before changing how work was done. We would negotiate how a change would affect people — schedules, workload, assignments. That is effects bargaining, required by law for decades in the states that bargain with their public employees. But a manager required to give notice, or meet and confer, still gets to decide. A district management that must obtain written permission does not decide at all.4

The AI-related obligations are decidedly lopsided. San Francisco’s article requires the district to give ninety days’ written notice, documentation of what the system does, and an analysis of its effect on bargaining unit positions. Nothing in it requires the union to answer, sets a standard for a refusal, or provides an appeal from one. Seattle’s is the same. A teacher’s worry that a district in fiscal trouble will reach for AI to cut headcount is not irrational. But effects bargaining is in place to address such circumstances. The school districts’ AI concessions amount to an abdication of management.

Everyone Else Gets to Find Out

Employers elsewhere are overwhelmingly not firing people over AI. Gartner attributes about one percent of studied workforce reductions to AI productivity gains. Boston Consulting Group projects that 50 to 55% of U.S. jobs will be reshaped within two to three years: the same role, with very different expectations about how the work gets done.

That is the workplace question that is alive everywhere else — which tasks move, which roles change, what a job description should look like in three years. Nobody knows how it will turn out. Organizations learn by experimenting, not by negotiating permission to experiment.

Private schools face no such restriction on using technology to improve their outcomes and make their teachers more productive. Many of them will discover what AI can do and adopt it where it helps. These government school AI clauses are the taxi medallion of 2013 — a legal restriction that protects incumbents, raises the price, and holds only until the alternative arrives. Medallion owners bore their own losses. Public districts socialize theirs. The students who pay first are those whose families cannot afford another school. The taxpayers pay next, including those who leave and go on paying for the school their children left.

The Tutor Their Parents Can’t Buy

The greatest cost here is not administrative productivity as such. It is what students lose. If AI turns out to be even a fraction of the tutor it promises to be, the children who gain most are the ones whose parents cannot afford one. Just as the internet brought a world-class library to children without proximity to one, AI brings the possibility of a versatile tutor — one that keeps the precocious child from being anchored to the class average and gives the struggling child the help his parents cannot afford.

A school district that puts friction in the way of finding out what a promising technology is worth in a classroom is working against its own educational purpose. That it would bargain away the right to find out is unconscionable.

So They Cut People Instead

The districts giving up their right to manage the workforce are the ones that can least afford it. LAUSD enrolled 408,083 students in 2024-25, down from 746,831 in 2002. It is spending about $2 billion more this year than it takes in, and it has hired an outside consulting firm to build models for closing and consolidating schools, with consolidations deferred to the following school year. Seattle Public Schools has already committed its $42 million rainy day fund, borrowed $27.5 million from its own capital program, and closed a roughly $100 million gap — and warns that if its fund balance goes negative it faces binding conditions from the state, “potentially losing local control over how we spend money.”

An organization can control costs in only two ways: by changing what it does, or by changing how it does it. The AI restrictions neutralize the second in organizations far more likely to expand what they do than to trim it.

What that costs is on display at LAUSD. On June 16, the board adopted the AI memorandum without discussion, as part of $1.48 billion in labor agreements. The item it did discuss that evening was the Fiscal Stabilization Plan immediately preceding it — $2.488 billion in cuts and 6,008 positions, which the district had to pass first, or its chief financial officer could not certify that it could pay for the agreements. Two weeks later the county issued its first Lack of Going Concern determination for the district.

The potential to change the way the work gets done to make the teachers more productive is now frozen in the name of preserving jobs just as the organization was forced into massive personnel cuts.

These agreements further invert the district’s relationship between productivity and pay. Generally, technology makes a worker more productive, the output is worth more, and the worker earns more. That is a trade, and it is what makes a pay raise sustainable. Here the increase came first — an average of 13.86% — and the ability to execute improvements that could have paid for it is contractually prohibited. Nor may the district put the money where it would do the most good: teachers are paid on a single salary schedule keyed to training and experience, and departing from it also requires the union’s agreement. The excellent teacher is paid on the same scale as the one who is not — under the same permission requirement now extended to AI.

The district does not decide.

There is a structural contribution to this dysfunction. A private firm that refuses to adapt loses customers to one that does, so the employer and workforce have a mutual interest in productivity. A government school system faces no such test. Its revenue arrives as per-pupil funding. The people who bear the cost of operational stagnation are students and taxpayers, and they are not at the table. The organization across the table influences who sits on the board and is the gatekeeper to the tools of adaptation.

Nobody Had to Disclose

How does something as egregious as bargaining away one of the two means a district has for controlling cost get approved in a public meeting?

Because the only question anyone is required to answer is what it costs, from a very narrow perspective on what constitutes cost.

From what I can tell, the State of California has the most detailed process for approving a school district labor agreement. Before the board may vote, the district must lay the major provisions of the labor agreement in front of the public, and the superintendent and the chief business official have to formally certify that the district has the means to pay for it. Wages and benefits are calculated to the dollar and projected across the contract term. Everything that is not about money gets one line. On Los Angeles’s June 16 filing, that line reads “Not applicable.”5

Nothing in the process requires anyone to evaluate, quantitatively or qualitatively, the opportunity cost of losing control of the ability to improve work processes and work methods. Nothing requires the district to disclose that a key right of management will now be unavailable to the next school administrator and the next district board.

In Washington state, where the same restrictive AI clause is pending now, the requirements sit in a different place. A Seattle board member votes on the labor agreement in a public meeting, and his finance office gives him a cost figure — as a matter of the board’s own policy rather than state law. The state aims its attention at the budget rather than the agreement: every district must maintain a four-year plan estimating what it will cost to sustain current programs and service levels, and the state ranks every district by financial health to head off insolvency and the binding conditions that follow. [5]

Today, nobody can quantify with precision what AI might save a school district. But a district can recommend that its board forbid finding out. And in neither state does anyone have to discuss this when approving the agreements.

Three questions belong in front of every governing board before it ratifies a labor agreement: (1) what operational authority are we giving up, (2) what is it costing us to give it up, and (3) what would it cost to buy it back?

Districts already estimate the cost of a one percent raise. But the ability to manage the workforce is just as important, arguably more so. The two district officials who certify that the district can pay for the agreement should have to certify these answers as well.6

History will not record that AI failed America’s public schools.

It will record that we negotiated away the right to find out.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

In 2026, Monterey Park, California, became the first city in America to permanently ban new data centers. The council chamber was packed for months — and then residents settled it at the ballot box, with roughly 86 percent voting to stop a building that would never enroll a child in local schools, never clog the roads at rush hour, never call 911, and never ask the city to build a playground, library, or recreation program for it.

It was a quiet, windowless neighbor, and it was treated like an invasion.

Meanwhile, the ordinary projects that actually burden residents escape moral panic. Apartments bring real traffic, real students, real policing needs, and real road wear. Retail development brings cars, deliveries, trash, and endless fights over parking. Nobody loves those impacts, but they are familiar. They fit the old categories. The data center did not. So the city turned its fury on the building that asked almost nothing of the people already living there.

That is not just a story about one proposed building. It reveals how cities judge private development.

Every Building Gets a Grade

Years of attending city council meetings have taught me that cities develop an opinion about every type of building. Housing worries them because it “demands services.” Warehouses disappoint them because they “do not employ enough people.” Enough by what standard? There is no market standard for how many people a warehouse should employ. There is only an elite class that has decided headcount is the scorecard.

Then comes big-box retail, which offends the refined civic palate. Costco is too vulgar, Walmart too large, the parking lot too plain, the shoppers too ordinary. The same people who claim to love “community” cannot bear the places where actual families buy paper towels, tires, and affordable rotisserie chickens. Retail is tolerated anyway — but for the money. Sales tax makes it respectable. The transaction is admired not because people want the goods, but because the city organization gets a cut.

Notice what is really being graded. Not the value a property creates for its owner. Not the voluntary trades it makes possible. Not the burden it places on neighbors. The city is grading land uses by what they do to the city’s own budget.

That is why cities can maintain the appearance of financial stability while they grow, only to panic when the music stops. They spend more every year, expand their missions, layer promise upon promise, and quietly depend on new growth to cover old commitments. The result is a demographic Ponzi scheme with a master plan and public comment periods.

Then the data center arrives. It has an invisible product, few workers, a large footprint, heavy power use, and a low service burden. It fits no column — not housing, not jobs, not shopping, not sentimental “sense of place.” So the people holding the report card reach for the ban.

And the officials with the report card are not the only ones who reach for it. In Monterey Park the voters banned the box themselves, and overwhelmingly — a collective mood, formalized. Most of them, I suspect, were not considering the city’s budget at all; they were uneasy about a windowless building doing something they could not understand. A different impulse from the council’s ledger, and yet, as we’ll see, the same mistake. Whether their vote makes it legitimate is a question I’ll come back to.

The left-wing snobs and the crony dealmakers fail the same test.

The snobs want to ban the data center because it offends “community character” — usually the taste of people who already got theirs, sometimes dressed up as a worry that the development is not “sustainable.” Either way, they elevate a fuzzy concept over the property owner’s right to build and treat the neighborhood’s preferences as a veto over a lawful use. And the snobs are not always a crowd of homeowners; sometimes they sit on the dais. Tucson’s city council voted unanimously in 2025 to reject the Amazon-linked Project Blue — turning away tens of millions in projected tax revenue and thousands of jobs — on the ground that the industry was not “sustainable” and that the city needed protecting from it.

The crony dealmakers commit the same error with the opposite sign. They do not defend the owner’s right to build; they ask what the city can extract — an abatement, a ribbon cutting, a negotiated tribute. Prince William County, Virginia approved what would have been the world’s largest data-center campus in a single 27-hour hearing — an outgoing board majority overriding its own planners’ recommendation to reject it — because the tax revenue was too tempting to refuse. Less than two years later, courts voided the approval, and the project collapsed for good in 2026. The same building is treated first as a prize and then as a menace, but never once as a right.

This is why the political right is often a poor advocate for development. It shows up only when there is a deal to be had. The left opposes building in the name of impact; the right supports it in the name of opportunism. So builders and developers have no principled defender.

The corruption was never the data center. It was the abatement.

What Cities Are For

A city should not be in the business of bribing growth into existence through tax incentives or banning it out of existence through legislation. Its job is simpler and harder: protect the rights of residents whether the population or business activity rises or falls. Courts, police, and the roads the city already owns are basic obligations. Manage them honestly, finance them transparently, keep the mission bounded — and if each new use pays its own way, growth is not a fiscal emergency and decline is not an existential crisis. The boom-bust panic is not a feature of population. It is a feature of an addiction to growth.

This is also the answer to anyone who calls the Monterey Park ban simple democracy at work — the community deciding what it wants. There is something to that: a community’s character is a real thing, and the wish to shape it is not disreputable. But a right is precisely the thing a majority may not vote away. The owner whose land was placed off-limits was almost certainly not among the thousands who voted to forbid his project, and he bears a cost none of them will. “The community decided what it wanted” turns out to mean the many decided what the few may do with their own land. That is not self-government. It is the oldest problem in politics wearing a city planner’s hat.

This is not the claim that new residents are costless. More people require more policing; more cars wear roads faster. The point is that those costs scale and self-fund when each resident and each use pays its way. What makes a newcomer a fiscal question mark is not the cost of protecting his rights. It is the unbounded city mission layered on top.

Under such a standard, the data center is easy to understand. It is one of the lowest-burden neighbors a city will ever be offered. It pays its own way and asks little back. Nobody across town should be stuck subsidizing it — and nobody across town should be allowed to ban it because it fails an aesthetic test.

A grocer never holds a hearing on whether it can “handle” more customers. Every customer is a voluntary exchange, so more of them is simply good. Cities fear more residents because they have inverted that relationship: the resident is treated less as the principal being served than as a claim on a common pool. Fix the relationship, and residents become as unthreatening to a city as shoppers are to a grocer.

More Than a Windowless Box

So far I have defended the box on the modest ground that it asks little of anyone. But that undersells it — because the objection to it was never really about municipal burdens, and neither is its value. A data center is the physical machinery of the AI age — a combine harvester for the mind. Cheap energy once gave the average person the equivalent of dozens of servants doing physical work; this is the equipment that begins to do the same for mental work: a tutor for the child a school failed, an adviser for someone who could never afford one, a researcher for a person no institution credentialed. Notice who that threatens. It is the same class that sneered at Costco for making abundance vulgar and common, now recoiling from the building that would make intelligence itself common. Water, noise, and power use were the stated objections — but they do not explain the fury.

Many people fear what they cannot picture, so they fill the windowless building with imagined dangers: vast quantities of water, diesel fumes, forever chemicals, and AI itself.

The largest fear of all was electricity. The proposed Monterey Park facility reportedly would have drawn roughly twice as much power as the city itself. But a giant new customer does not, by itself, raise everyone’s rates. Often it does the opposite. A data center is a steady, around-the-clock buyer, and a large steady buyer spreads the grid’s fixed costs across more kilowatt-hours. That is why the states absorbing the most new demand have generally seen rates rise slower, not faster, than the states that turned it away.

Where rates have spiked, the culprit has been a shortage of reliable supply — plants retired faster than new ones were permitted — not the new customer as such. And a growing share of new facilities now build their own generation, leaning on no one’s grid at all. Where added capacity really is needed, that is a pricing question: the utility should charge for it, or the customer should finance it, so the load carries its own cost instead of landing on everyone else’s bill. That is a reason to write a contract, not to outlaw a lawful building.

Some concerns are real. Noise and backup-diesel emissions are real, preventable pollution; water matters where it is scarce and subsidized. Regulate them at the margin with setbacks, objective emissions standards, and market-priced water. That is the opposite of banning the category. A city that outlaws the box has not protected its character. It has voted to keep capability scarce — and a people that withdraws its own tools out of fear of a thing it will not trouble to understand is not being cautious. It is disarming itself. And it does so at the very moment its rivals abroad — China chief among them — are racing to build the machinery it is voting to keep out.

The honest fiscal upside is not a larger city payroll. Quincy, Washington, is the useful example because its property-tax levy rate fell by roughly 70 percent after data centers arrived — the burden on residents went down, not up. In Loudoun County, Virginia, data centers now generate nearly half of county property-tax revenues. Yet those revenues have also proved volatile when server equipment is not refreshed on schedule. That is a warning against fiscal dependence, not an argument for bans. A surplus is proper only when it shows up as lower burdens on residents — retired debt, lower rates, fewer claims on taxpayers. If it becomes new payroll and a larger mission, residents were right to be suspicious, just not about the data center.

A city should be as indifferent to whether its population grows as a court is to how many contracts get signed. Its job is to protect rights, not to hit or hold a number. Growth is something residents and businesses do, not something the city government engineers or defends against.

Cities should not merely tolerate data centers — and they certainly should not bribe or ban them. Under the proper standard, the windowless box stops looking like a threat and reveals itself for what it is: one of the most productive and least demanding neighbors a community will ever be offered, and, behind its blank walls, part of the machinery by which a free people builds a better future. That is not a thing to fear, or to grade, or grudgingly to permit. It is a thing to welcome — and, yes, to praise.

Participatory budgeting—sometimes called “community budgeting”—lets residents propose and vote on how a slice of public money will be spent. It is usually presented as an innovative budgeting reform.

In reality, it creates a new source of legitimacy for government activity—and with it, another pathway for government to expand its scope.

Cities face chronic budget scarcity because their missions are vague, broad, and unbounded. Municipal mission statements routinely frame the city’s purpose in terms that carry no outer bound—maximizing services, enhancing quality of life, pursuing excellence in municipal efficiency, service, and innovation. With an open-ended mission, every new activity can be treated as if it had been properly vetted. Unlike a business or a chartered nonprofit, the city has no external check—no loss of revenue, no investor revolt, no charter violation—when it adds another responsibility. The result is an organization that continually accumulates responsibilities because its mission provides no stopping point.

No budgeting process can reverse that dynamic. Some simply make expansion harder to challenge. Participatory budgeting is uniquely pernicious precisely because it launders expansion in the moral prestige of “democracy” and “community,” which disarms the people who would otherwise object.

Advocates claim participatory budgeting improves both outcomes and legitimacy. By letting residents propose and vote on projects, the process surfaces needs that standard budgeting supposedly overlooks, directs resources toward historically underserved areas, and builds trust through direct participation. The result, they argue, is spending that better reflects community priorities and a public more invested in local government.

The Architecture of Expansion

In practice, participatory budgeting feeds a city’s unbounded mission. When residents vote to fund a new bike lane or a community garden, the money has to come from somewhere—but participants are asked only which projects to fund, never whether government should be funding any of them. That question never enters the room. And each approved project arrives with the imprimatur of “community voice,” which makes the underlying activity harder to challenge later.

The council’s role is eroded not by the amount spent, but by the creation of a new officially sanctioned constituency with its own claim on city funds. Whether the new channel is a citywide ballot or a steering committee, the result is a parallel track of political legitimacy that operates alongside the council. In New York, participatory budgeting shifted council members’ discretionary capital spending away from parks and recreation toward schools and street improvements—inside a capped pot. The Parks Department was never relieved of its obligations. It still maintains the same acreage, answers the same complaints, and faces the same expectations—just with fewer dollars. The reallocation was never debated as a policy choice. It emerged as a side effect of the participatory vote, a tradeoff nobody owned. The vote changed priorities within government; it never asked whether those priorities belonged within government’s proper scope.

Participants in these processes do not need to justify their choices against every other city function. They answer to the logic of their own process—identify needs, allocate resources—not to the constraint that the council must consider the city as a whole. The council can adopt or reject their recommendations, but the existence of the channel itself shifts the burden. What was once a single budget process with one set of trade-offs becomes two, one of which has no reason to consider the whole.

What Counts as Success?

Participatory budgeting claims democratic legitimacy. It does not earn it. Suppose the representativeness problem were solved—every resident informed, every resident voting. The outcome would still be illegitimate. The problem is not that the wrong people showed up. It is that the money is treated as a collective pool available for whatever wins a vote. Democracy is not the standard; the rights of residents and business owners are.

The cities running these programs track participation rates, demographic reach, and dollars allocated, but none define what a better outcome would even look like. There is no standard of success external to the process itself. Participatory budgeting is considered successful because it engaged participants and allocated public funds. The process becomes both the means and the measure of success. If participatory budgeting was functioning as democratic accountability, someone would need to say what improved and why conventional budgeting could not have achieved the same result. The official city announcements do not.

Official announcements from cities that champion participatory budgeting reveal what they themselves consider success. New York celebrates record voter turnout, unprecedented participation, and the number of projects funded. Boston highlights millions of dollars allocated and community-selected investments. Greensboro emphasizes ideas submitted, residents voting, and projects funded. Such metrics demonstrate that the process functioned as designed. What they do not demonstrate is that residents became safer, businesses freer and more prosperous, infrastructure more reliable, or public resources more appropriately allocated than they would have been under conventional budgeting.

That omission is revealing. The announcements read like audits of the process rather than evaluations of the results. They measure participation, not municipal success. A budgeting process cannot establish its own legitimacy simply by documenting that people participated. Before government can claim success, it must first identify the standard against which success is judged.

Proponents also claim participatory budgeting gives voice to otherwise marginalized groups—residents who lack political connections or visibility. But the mechanism does not check whether that actually happened. It counts heads and categories. A process that seats the same activist organizations cycle after cycle is not amplifying the voiceless; it is giving an institutional microphone to people who already know how to work one. The claim of inclusion functions as moral cover: it makes the program difficult to criticize without appearing indifferent to the people it says it serves.

Participatory budgeting gives public officials distance from priorities they would otherwise have to defend. When a project is unpopular, they can point to the community process. When it is popular, they can claim credit for listening.

The people who participate see themselves as civic-minded residents filling a gap left by unresponsive government. The structure they operate in, however, gives them no reason to weigh competing claims on the same city funds. They face no trade-offs with other city functions, no requirement to justify the total footprint of government, and no electoral consequences from those who stayed home. Their mandate is to identify unmet needs and spend to meet them. When a council adopts its recommendations, it is not deferring to “the community” in any meaningful sense. It is deferring to yet another interest group whose incentives are perfectly aligned with fiscal expansion.

The Missing Standard

Participatory budgeting does not constrain spending. It creates a second, unaccountable channel that competes with the one voters can actually discipline. Without a principled boundary—an external limit on what counts as a legitimate city function—every new allocation simply adds to the total. That limit is not a tighter process or a clearer mission statement. It is a standard that can tell you when to stop: one that answers to something outside the preferences of whoever is in the room.

The only standard that does that is rights. Government exists to protect people from force and fraud, and whatever that turns out to require, it excludes everything that is not that. Grant government the most generous rights-based role you like—courts, police, and, if you insist, the roads and water mains that let people move and live under law—and it is still bounded, because it answers to something outside itself. “Enhancing quality of life” is bounded by nothing, because there is always one more thing that would enhance someone’s quality of life. It excludes nothing and therefore constrains nothing.

The question is never whether a service sounds worthy. It is whether the standard behind it can ever be satisfied. Once a mission answers to “quality of life” rather than rights, no mechanism can prevent expansion. The mission is downstream of the standard. Fix the standard, and the mission bounds itself. Leave the standard unnamed, and every redesign of the mechanism will leak in the same direction.

So the next time a city announces that residents will “decide how to spend” some slice of public money, ask the only question that matters: What are they not allowed to spend it on? If the answer is “nothing,” the issue is no longer budgeting. It is the absence of limits on government itself. And if the answer is “they can only rank projects already in the maintenance plan”—fine, but then stop calling it participatory budgeting. Sorting a pre-approved punch list is clerical work with a civic veneer. The label is only honest when the scope is broad enough for participants to set real priorities, and that is exactly the condition under which no one can say where their authority ends.

The real question is not who decides how public money is spent. It is who decides what government is for. Until that question has a principled answer, every new budgeting reform will simply become another pathway for government to expand its scope.

Taylor Swift’s Manhattan wedding generated headlines after New York City billed her approximately $160,000 for permits and the city’s response to the event. Predictably, the internet erupted. Some insisted Taylor should have paid even more. Others rushed to defend her. Perhaps before more people scamper to take sides, we all need to calm down.

Because the more interesting story isn’t Taylor Swift’s wedding. It’s why Mayor Zohran Mamdani thought it was important for New Yorkers to know exactly how much she paid for city services.

For much of the twentieth century, cities generally treated police protection as one of the services funded through general taxation. If a private event required additional police presence, the costs were usually absorbed as part of the city’s overall responsibility to maintain public safety.

That began to change during the municipal fiscal crises of the 1970s.

As cities searched for ways to cope with growing financial pressures, they increasingly shifted costs from general taxation to identifiable users. Ambulance services became billable. User fees multiplied. Property owners assumed responsibilities once borne by cities. Permits, inspections, recreation programs, sewer laterals, water laterals, and countless other activities that had once been bundled into general taxation gradually became separate charges. As I discussed in The Municipal Financial Crisis, the proliferation of municipal fees became one visible symptom of a broader fiscal transformation.

Not all of that evolution was bad.

In fact, charging users for genuinely special services can be more just than asking every taxpayer to subsidize them. If a private event requires street closures, dedicated traffic control, or security beyond what government would ordinarily provide, there is a reasonable argument that the beneficiary—not the general taxpayer—should bear those additional costs. By contrast, government’s core responsibility to protect the public from force and maintain public order is properly funded through general taxation. The challenge is knowing where one ends and the other begins.

But adopting a user-pays model creates a new obligation.

The rules governing those charges must be objective, published, and established before anyone requests the service. People should know in advance what services are billable, how the charges are calculated, and that the same methodology applies to everyone. Objective rules don’t merely inform people. They constrain government.

That’s where the Taylor Swift story becomes interesting.

Supporters of the city’s billing describe the $160,000 charge as simple cost recovery. But cost recovery isn’t self-executing. Someone had to determine how many officers were necessary, how many hours they should work, which services were required, and which costs would have been incurred regardless of the wedding. Those are judgment calls.

And even the word “cost” does more work than it appears. Overtime is only the most visible number. A city can also load onto the bill a pro-rated share of training, equipment, and medical benefits—costs the taxpayer already paid to have a police force at all, and that don’t rise because one more wedding takes place on a Saturday. The very decision to staff an event on overtime, rather than by adjusting shifts already scheduled, pushes the total toward the most expensive labor the department buys. Assembled this way, a bill can look precise to the dollar and still recover far more than the event actually cost the city. That isn’t cost recovery. It’s revenue wearing the costume of cost recovery.

We already know what honest cost accounting looks like, because we require it elsewhere. When a city spends federal grant money, every charge must be necessary, documented, and not already paid for from another source—and an independent auditor can test it. Special-event billing carries no such discipline. The same government agency writes the rule, estimates the cost, sends the invoice, and keeps the proceeds, with no one independently checking the math.

Were those judgments guided by a published methodology that would produce the same result for anyone planning a comparable event? Or were they the product of discretionary decisions that inevitably vary from case to case?

The distinction matters. The issue isn’t whether Taylor Swift was charged. It’s whether the charge was governed by objective law or subjective judgment.

The rule of law requires more than charging people for services they use. It requires that similarly situated people be treated similarly. A fee that can be adjusted according to politics, publicity, or the popularity of the person writing the check is no longer simply an invoice. It begins to resemble a shakedown.

That’s why Mayor Mamdani’s decision to publicly highlight the $160,000 payment is more significant than it first appears. The bill was no longer simply an invoice; it had become a political trophy. For a mayor whose political identity is built around taxing the rich, publicly celebrating a six-figure payment from one of the world’s wealthiest entertainers was entirely consistent with his political platform.

The episode illustrates the political uses of discretionary fees. Once government has the authority to determine individualized charges, public officials can claim credit not merely for enforcing the rules, but for demonstrating how much they extracted from particular people. Today it’s Taylor Swift. Tomorrow it could be anyone seeking a land entitlement, organizing a community event, or simply asking a city for a service.

And in practice the treatment is anything but consistent. Consider how the same city handles an almost identical activity: commercial film production. A film shoot is a private, profit-seeking venture that closes streets, occupies public space, and draws on the NYPD—the very footprint that produced Taylor Swift’s bill. Yet New York’s standing policy is to give productions free police assistance, free parking, and free access to most public locations. When the City Comptroller audited the program, it found that in a single year the city spent at least $3.9 million serving film productions but recovered only about $1 million in fees. Nearly $1.9 million of that gap was the base salaries of a dedicated 24-officer NYPD unit permanently assigned to assist productions—police costs the city simply never billed, because it wants the film business. The auditors added that even this understated the true cost, since it excluded equipment, other city services, and the disruption the shoots caused.

Same category. Opposite treatment. Nothing about the underlying cost explains the difference; only the politics does. Whether you receive a free escort or a six-figure invoice can depend not on what you cost the city, but on whether the city, at that moment, wishes to court you or to make an example of you.

Cities increasingly rely on user fees instead of general taxes to recover the cost of specialized services. That isn’t necessarily a problem. In many cases, it’s a fairer approach. But a general tax carries a fairness that individualized billing does not: it applies to everyone by the same published formula, so no official decides what any one person owes. Strip that away and fairness no longer takes care of itself—it has to be rebuilt deliberately, through published rules, consistent treatment, and a charge that reflects what the service actually cost.

Taylor Swift will almost certainly shake off both the bill and the criticism.

The real question isn’t whether she should have received an invoice. It’s whether everyone requesting the same services would have known the rules beforehand, understood how the charges were calculated, and received the same treatment.

If the rules are knowable in advance, applied equally, and the amount charged is demonstrably tied to the cost of the service provided, it’s an invoice. If not, it’s a shakedown.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

Every major city that adopted its budget during the past several weeks found a way to close its shortfall while preserving the missions, goals, and activities that define the status quo.

New York City confronted a multibillion-dollar fiscal challenge. Los Angeles closed a nearly billion-dollar gap. Chicago adopted a budget after confronting another massive deficit. San Jose resolved a roughly $50 million shortfall while acknowledging that deeper structural problems remain. Oakland reopened its two-year budget to address a roughly $265 million gap while continuing to wrestle with insolvency concerns.

In each case, elected officials eventually did what they were charged to do: they adopted a budget. And with that, the status quo was preserved for another year.

The budget-balancing tactics varied somewhat. New York relied on new taxes and massive state support. Los Angeles reduced headcount and cut spending. Chicago relied on spending reductions and tax measures. San Jose froze positions and drew down reserves. Oakland eliminated vacant positions and raised taxes and fees. Each approach had its own flavor of pain, but they shared the same pattern: find money somewhere and use it to continue doing what the city was already doing.

The same pattern plays out in smaller cities across the country, only on a different scale.

But why do the same fiscal problems keep returning? Why are large budget deficits so common?

Over the years, I championed the reforms commonly associated with good government and sound financial management: better budgeting, greater transparency, improved accountability, performance measures, efficiency initiatives, better incentives, and more.

These reforms certainly address relevant issues. Yet they have failed to improve the fiscal stability of local government. If such reforms were sufficient, we would expect better results.

At some point, I discovered that these efforts were aimed at symptoms rather than the sources of chronic budget scarcity.

Organizations are defined by what they do and how they do it. Conventional reform efforts focus on improving how a city does what it does—its execution.

But that leaves a more fundamental question largely untouched:

Why does the city do what it does?

Consider the mission statements adopted by local governments.

The City of Ranson, West Virginia states its mission this way: “Our mission is to maximize services to our customers in the most cost efficient manner.”

San Jose’s mission speaks of creating a “great place to live, work, learn and play.”

Neither statement provides a principled basis for determining where governmental responsibilities begin and end.

The problem is not merely their breadth. It is that they assume an unbounded role for government. What goals and activities do such missions include and exclude?

Across the country, mission statements read like aspirational poetry—broad enough to encompass almost anything and precise enough to exclude almost nothing.

These missions incorporate no limiting principles.

They are blank checks.

And accounts that issue blank checks cannot be balanced.

If a city’s mission excludes nothing, it limits nothing. Any goal that purports to improve any aspect of the community acquires a presumption in its favor. As goals proliferate, so do the activities required to fulfill those goals. And those activities drive costs.

Eventually, budget pressures emerge and attention turns to cost-cutting, oversight, incentives, operational improvements, and countless other efforts to improve how the organization does what it does.

Such issues matter. But they arise downstream from a more fundamental question:

What should the city do, and why?

Mission statements do more than describe goals. They embed assumptions about what government is, what it should accomplish, and how broadly its powers should be employed.

Those assumptions are often implicit rather than explicit.

Which raises another question:

Should we acknowledge what government is before deciding what it should accomplish?

Government possesses powers that individuals do not. It can tax. It can regulate. It can compel. Such powers require justification. The nature of these powers should inform how broadly they are employed. And the consequences of misapplying such powers are not merely financial.

Some governmental activities are essential because they define and protect rights and establish the conditions in which people can freely pursue their goals and values.

But every commercial and charitable activity government undertakes consumes resources and displaces private initiative, investment, innovation, entrepreneurship, and voluntary cooperation that might otherwise emerge through residents, businesses, charities, churches, and civic associations.

When government assumes broad and unbounded missions, it becomes easy to substitute political solutions for voluntary ones.

The result is not simply higher spending and taxation. It is the crowding out of institutions, relationships, investment, innovation, and problem-solving capacity that create wealth, solve problems, and strengthen communities outside of government.

Over time, I came to see that questions about mission and scope point to still deeper questions about the relationship between government and the people it serves.

Does the city exist as a means to the ends of residents and business owners, providing the political environment in which they can freely pursue their goals? Or are residents and business owners the means through which the city pursues goals detached from their own?

Those questions changed how I viewed many of the reforms I had spent years advocating.

I still believe budgeting methods, transparency, accountability, and efficiency matter. But I no longer believe they can solve problems whose sources lie upstream in missions, goals, and activities rather than in the execution of those activities. In other words, improving how an organization does what it does cannot compensate for an unbounded scope of activity and purpose.

The relationship between government and the people it serves points to something even deeper.

If a city is considered an end rather than a means to the ends of residents and business owners, conventional financial reforms can only take us so far. At best, they manage symptoms. At worst, they encourage us to perfect the administration of an ever-expanding mission rather than reconsidering the mission itself.

In that sense, they can reinforce the very way of thinking that gave rise to the problem in the first place.

If broad aspirations are accepted as the mission, then every activity defended by appealing to a purported desirable outcome acquires a presumption in its favor.

Every new activity creates new constituencies. Every new constituency invites new costs. Under such a framework, budget scarcity is inevitable. And this is how cities across the country now operate.

By accepting the premise that government should address every aspirational outcome and then focusing our efforts on administering that ever-expanding mission more efficiently, we leave the source untouched.

No budget process can solve a problem created by an unlimited mission.

But chronic budget scarcity is not embedded in the nature of city government. It is the predictable consequence of an unbounded mission pursuing open-ended goals and activities through the special powers of government. Perhaps that explains why large budget deficits are so common and why cities so often find themselves back in fiscal crisis mode.

Year after year, elected officials do what they are charged to do. They adopt budgets. The immediate crisis passes. The status quo is preserved. And before long, the cycle begins again.

Cities do not need bigger budgets nearly as much as they need clearer missions.

And clearer missions require prior answers to questions we have not been asking:

What is a city, and what is it for?

Does a city exist as a means to the ends of residents and businesses?

Or do residents and businesses exist to serve the goals of the city?

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The many California agencies that plan to place new taxes on the November ballot owe it to their residents and businesses to wean their organizations from reliance on serial tax increases to remain afloat. It’s disconcerting that such a clearly unsustainable strategy has become the go-to solution for so many municipal leaders.

The problem is that most government agencies begin their budgeting process four to six months in advance of the upcoming fiscal year. By then, they’re already too late. The two major cost drivers – scope (or “mission”) creep and multi-year labor agreements – are locked in. Under pressure, a city council can make cut costs on the margins, implementing hiring freezes, perhaps, or across-the-board budget cuts.

But these do little to affect the agency’s financial trajectory. Soon, there’s talk of raising sales taxes or persuading voters to approve yet another bond. And soon after that, as revenue fails to keep pace with the agency’s expanded mission and residents complain about poor service delivery, officials will find themselves replicating the budget-balancing scramble that no one wants to experience again.

How can municipal leaders remedy the constant state of budget scarcity?

WHAT IS GOVERNMENT FOR?

First, the budget scarcity affecting municipalities throughout California (and the country) has been decades in the making. Organizational scope creep has become systemic as agencies have embraced missions without bounds. Breaking the cycle of budget scarcity will require asking, “What is government for?” – which types of activities are appropriate for a government agency to undertake?

Anything less than this – imposing rigorous limits on mission – will result in the organization’s relapse into the operational path of least resistance. And that will produce the familiar byproducts of intractable budget problems, scarcity as an organizational way of life, and betrayed residents and business owners.

Municipalities must understand that their foundational problem is broad scope creep – government missions so broad, so nearly limitless, that it’s hard to imagine disqualifying any spending proposal on the grounds that it is outside the organization’s purview. Each new proposal that is accepted increases the scope of the organization’s activities, thereby driving costs upward and ensuring budget scarcity. Likewise, every exhausted activity that cannot be retired – despite its obvious ineffectiveness – further binds the organization to scarcity.

An organization that cannot limit what it does creates and sustains its own scarcity. Such is the cause-and-effect relationship unacknowledged throughout most fiscal sustainability plans.

IT’S ALWAYS BUDGET SEASON

Second, treating the budget process as an annual process, rather than an ongoing one, impedes municipal leaders’ ability to affect the budget in the long term. Government union leaders understand this. That’s why they push for multi-year labor agreements that drive 70 to 80 percent of a city’s operating budget.

The impact of labor agreements is not limited to the fact that such agreements set the cost of personnel. Labor agreements also dictate how the organization will deliver services. For anyone who doubts this, try to introduce a cost-savings change to public employee work schedules or implement a technology that changes job duties and job descriptions without conducting a lengthy meet-and-confer process and/or reopening a labor contract.

Unfortunately, entrenched labor agreements with sacrosanct, untouchable terms (e.g., minimum staffing, traditional work schedules, etc.) are kryptonite to management’s ability to exercise its best judgment; such agreements preempt a municipal leader’s ability to call upon better and best practices in deciding how the organization will deliver services. Changing such entrenched conditions of work and work methods may require multiple negotiating cycles – not just multiple fiscal years – to achieve.

CONCLUSION

The Government Finance Officers Association bestows annual awards for municipal budgets and financial statements. Such awards are based on the organization’s successfully following a process rather than achieving any specific organizational or financial results. But defining a limited mission for the organization and successfully taking charge of how services are delivered requires a multi-year commitment. An award for that achievement – for officials’ ability to produce real change in the trajectory of the organization over the course of years – would be an award worth giving.