Looking at the Earnings Tax

I've been paying a lot of attention to the Kansas City Budget lately, and trying to see how we can pay for basic services, attract and retain good jobs, and become a better, safer city. I suspect that the budget for the coming year will focus mostly on the first goal I listed, but there simply isn't going to be a way to make significant strides on the other two without additional investment. In future years, we need to consider the revenue side of the equation.

What about graduating the Earnings Tax, coupled with a tax credit to negate the tax on our urban core and low-income workers? I've been told that 55% of the earnings tax is paid by nonresidents, that compliance is fairly high, and most is paid in through corporate withholding. (There are tweaks that need to be made to compliance and withholding which could have a good impact on revenue, but let's set that aside for the current discussion.)

Just to toss out some numbers, while acknowledging that I do not have the data to fine tune the proposal and come up with real numbers, let's say that we say that we will tax income under $40,000/year at the current 1% rate, and income over $40,000 at 1.5%. At the same time, we will establish a refundable tax credit of $400 for Kansas City residents. That would mean that if you earn $40,000, your tax bill would be $400, and your refund would be $400, so you would not pay any earnings tax. If you live outside Kansas City, you would continue to pay your $400, just like you do today.

If you earn $50,000, you would pay tax of $550 (1% on $40,000 and 1.5% on the amount over $40,000), so, if you live in Kansas City, you'd be getting a reduction of $350 when you count the tax credit, and if you live outside of Kansas City, you would only face a $50 tax increase.

Of course, all these numbers would need to be fine-tuned by someone who has access to the data on how much is paid by income levels. My gut feel is that these numbers would work out okay, but I really don't know that for certain. Perhaps the break-off point would need to be $30,000, with a $300 tax credit.

But tell me what you think of the concept. The advantages, as I see them, are that it would give employed workers a reason to choose Kansas City instead of suburbs. It would give the urban core a little more spending money, which could help generate some trickle up economics where it's needed most. On the other hand, it could cause some mobile businesses to relocate to the suburbs, to dodge the tax (to the extent that such businesses have not already left). It would also be somewhat harder to administer than it is currently, though I doubt that would be a huge hurdle.

Cauthen Consistent, Council Confounded

For the second week in a row, Wayne Cauthen has demonstrated his disdain for the City Council by skipping the Finance and Audit Committee meeting.

While I tend to criticize our City Manager for his resume lies and participation in the looting of the city, I have to admire him for this one.

Wayne Cauthen claimed in his resume that he has "Corrected the city’s previously structurally imbalanced budget." Now, if he shows up and participates in a committee meeting where the City Council is struggling to come up with $85 million to correct the city's structurally imbalanced budget, wouldn't that be inconsistent? In Wayne's World, the budget problems don't exist.

The Council's frustration with Cauthen must have been heightened by the fact that Cauthen sent Chuck Eddy, a $140,000 expense item, to attend the hearing in his place. That's just kind of rubbing their nose in it, don't you think?

While I certainly understand their frustration, I hope that the Council uses this opportunity to ponder the fact that Funkhouser was right to fire Wayne Cauthen, and their childish decision to give Cauthen a 3 year contract out of spite was the single most destructive mistake made by this City Council.

Kraske Whiffs Again - What He Should Be Asking

Steve Kraske claims the upper right corner of today's front page of the Star, and manages to look good while whiffing almost entirely. It's kind of like watching an unschooled rookie with a sweet swing face the famed knuckleballer Tim Wakefield. Kraske swings mightily, but can't quite make his wooden analysis impact the baffling trajectory of local politics.

The headline in the dead tree version of the story is "Has mayor run out of political capital?", and the lede is an anecdote claiming that Funkhouser failed to gladhand at a democratic fundraiser. In short, Kraske asks the wrong question and answers it with conventional wisdom from the chattering class. That, my friends, is not "analysis" worthy of publication.

First off, the question is not whether Funk has run out of "political capital". The guy won by fewer than 900 votes and walked into a council chamber poisoned by hardball politicians seeking to become mayor. The guy never really had political capital - he walked in with a target on his back, and nobody on earth was going to trade that target for a 7 member dependable majority. And, to give his critics their due, he certainly has not behaved in a fashion well-designed to accumulate it, either.

The correct question is "Can Funkhouser work with this Council to accomplish good things for our city?". Because, really, that's what people wanted when they elected him, and that's how he will be judged. Maybe a few of the insiders and professional game-players such as Kraske care about style points or how well he shakes hands at a cocktail party, but the rest of us care far more about accomplishments. By focusing on shaking hands and fuzzy concepts of "political capital", Kraske focuses on the parlor game aspects of city government rather than on the street level effectiveness of city government.

Now, before the anti-Funk brigade reflexively misinterprets what I have written so far, I'm only saying that the question ought to be "Can Funkhouser work with this Council to accomplish good things for our city?" rather than "Has mayor run out of political capital?". I hope we can all agree that my question is the better question - who cares if he never shakes another hand and the verdict at Kraske's chattering class cocktail parties unanimously states he has zero "political capital", if he is able to work with our council to accomplish good things for our city?

Having thus refocused the issue from image to substance, I'll go ahead and answer my own question.

Yes, Funkhouser can work effectively with this Council to accomplish good things for our city. He can do that by continuing to work creatively and subtly through other council people, the majority of whom will, when push comes to shove, get on board for the right reasons on the big issues for the good of the city. Jan Marcason and Beth Gottstein, for example, are not going to vote for a lousy Cauthen budget no matter what they think of Funkhouser or his wife. Most of the council is composed of grown-ups, and they can separate their disagreements on the anti-volunteer ordinance from good policy in facing the substantive issues they need to address.

All that said (and apparently beyond Kraske's imagination), Funkhouser has an opportunity right now to jumpstart his working relationship with the City Council and kick off 2009 in the most productive way possible for our city's future. In one fell swoop, he could eliminate his biggest problem in image and the city's biggest problem in reality.

In my opinion, Mark should approach those city councilmembers who really do have the good of the city at heart with a proposal to dismiss his Volunteer Ordinance lawsuit in exchange for their support in getting rid of Wayne Cauthen. Most agree that Cauthen is simply the wrong man for the foreseeable future, and I believe they would welcome such an opportunity to get back on track in solving our city's very real problems.

I feel like I owe some explanation, since I loudly called upon Mark to file his lawsuit, and I continue to think that the anti-Volunteer Ordinance is an unconstitutional bastard born in a backroom from spite and dishonesty. Despite my dislike of the Ordinance, though, that single issue need not continue to distract attention and dominate the public discourse.

Right now, Mark is working just fine with his geographically flexible Mayor's office, just as most of the councilmembers work effectively while spending little time in the four walls of their offices. While it feels wrong to let such an ugly little ordinance remain on the books, dismissing the suit does not make it constitutional. Someday, in a less critical time when we can afford to focus on "B" level priorities, the ordinance can be challenged in a more favorable environment. In terms of impact on the city, the Volunteer Ordinance is tiny in comparison to the damage wrought by the wrong City Manager.

Dismissal of the suit would also unplug the electricity surrounding rumors of Koster investigations and other nonsense. In short, Funkhouser would be rising above the Council's petty mistake, diminishing a danger, and accomplishing a larger goal. It would also provide the good Councilmembers with a way to redeem themselves from their current tarnished, bickering image, and make a clean break from the past.

Would Funkhouser ever make such a deal? I have no idea.

But it's a lot better question than Kraske's breathless insider chatter about "political capital".

Remember Cauthen's $2.50/gallon Gas?

While pumping gas recently at $3.75 or so a gallon, I happened to recall that a few short months ago, Wayne Cauthen submitted a budget assuming gas would be available for $2.50 a gallon. Even at the time he submitted the budget, you couldn't find it for under $2.80.

I hope the City Council people who gave Cauthen a cushy 3 year contract are ashamed of themselves. Rumor has it that several of them are admitting they made a huge mistake.

They did.

Subtle Brilliance - Funkhouser's Triumph of Leadership

When I went trout fishing over the summer, my guide would often whisper, "Do you see that one out there?", and gesture toward a patch of stream. Despite my polarized sunglasses and best efforts, I did not have the experience to see clearly into the moving water and distinguish the shape and color of a trout among the rocks and moss in the stream. "No", I would whisper back, but cast to the spot anyhow, knowing that my lack of vision didn't mean the fish wasn't there.

Various commentators have failed similarly in looking at the budget battles that ended this week. They think they know what leadership looks like, but they don't see Funkhouser standing out in the moving waters of the negotiations like they think a big fish would.

The visible leaders in the process were Deb Hermann and Jan Marcasson, and they deserve every bit of praise they are getting. They did a superlative job of crafting a budget that everyone could sign off on, blunting Cauthen's attempts to undermine it, and making the most significant steps toward fiscal responsibility this city has seen in a decade. We are miles and miles from Cauthen's "happy face" budget that he produced in February. Instead, we have a fiscally responsible budget that begins to tie hard numbers to citizen priorities.

If Hermann and Marcasson were the visible leaders in this process, why am I praising Funkhouser's triumph of leadership?

He's the guy that made it happen. Just as Grant and Sherman deserve credit for leading the Union Army to victory, Lincoln (another tall elected official without Hollywood good looks) was the leader that saved the Union. I'm not equating Funkhouser and Lincoln, but I am pointing out that great leaders are wise enough to create conditions for other great leaders.

Back when Cauthen issued his deeply flawed budget plan, Funkhouser did something that no other recent Mayor has done. He sent it out immediately to his cohorts on the council and to the entire city, demonstrating a commitment to exactly the sort of integrity, competence and transparency which guided the voters to elect him. He set out on an ambitious and well-attended series of forums, empowering people who have never been invited to a political backroom to participate in the process.

Most importantly, he directed the City Manager to come up with a budget that really solved the structural imbalance in our budget (offering Cauthen an opportunity to atone for one of the lies on his resume). Of course, that budget was a harsh document full of painful cuts that everyone knew was dead on arrival. But it set a baseline, and grabbed the attention necessary to create change. If Funkhouser had not demanded that document, of if he had created his own harsh budget, the budget passed this week would have been a tinkered version of Cauthen's fantasy-world opening budget, and we would still be speeding on the path to financial ruin.

Another great stroke of leadership was to get behind the Hermann/Marcasson budget, even though it did not match up to some of his goals, such as putting 20 new cops on the streets, etc. Those are promises that will simply have to wait until our financial house is in better order, and a great leader is one who recognizes and supports solid work by others. Hermann and Marcasson crafted a solid budget based on financial reality, and Mark would have been foolish to let his version of the best become the enemy of the very, very good.

Remember a couple months ago, when people were actually talking about recall? Here we are, 8 weeks later, and we have a Mayor with more political capital than ever, a council with a dozen responsible members, and a budget that reflects our Mayor's values instead of our City Manager's fantasy world.

Sometimes, leadership means standing up alone in the howling storm and, through incredible feats of strength and courage, changing the future. If you were expecting Funkhouser to seize the podium at City Hall and, through a dominating personality and brimstone-filled speech, force the Council to accept a budget that was his, all his, you were probably one of those who wondered where Mark's leadership was this week.

Some people aren't very good at seeing beneath the surface.

The Pitch Ripped Off My Cauthen Resume Story?

David Martin published an account of the fabrications Wayne Cauthen loaded up his Austin resume with in yesterday's Pitch. According to blogger tradition, I should now respond with a dose of righteous indignation and self-important bluster about how they're ripping off my work and completely dependent on citizen-journalists like me for everything they do.

But I don't take myself quite as seriously as some bloggers.

While I've been a critic of David Martin's penchant for publishing guess work and sloppy personal attacks instead of trying his hand at real journalism, I see no reason whatsoever to believe that he ripped off my story idea. The fact that Cauthen told Austin that he had corrected a structurally imbalanced budget and then submitted a structurally imbalanced budget a couple months later was the sort of thing that would attract the attention of any thoughtful, alert person (I'm too kind to speculate as to why the Star didn't catch it).

And, even if he had read it first here (which I doubt he did), he went back and did a far better job than I did. He noticed a whole lot more creative writing on Cauthen's resume. He caught the numerical flim-flammery that Cauthen made up about reserve funds and the Downtown redevelopment. In short, I picked a piece of low-hanging fruit on Cauthen's resume and David Martin shook the tree. Good work.

Did Wayne Cauthen Lie on his Resume?

A lot of us were hoping that Wayne Cauthen would get the job in Austin. It would have been a positive end for him, it would have given the city an opportunity to hire someone more in line with the new council's priorities, and it would have allowed the Nine Councilpersons off the hook for the silly petulant tantrum they threw when they tried to stick us with Cauthen for 3 more years.

Alas, it didn't happen. And I think I may have found out why.

Take a look at the resume Wayne Cauthen submitted in his quest for the Austin job. Pay attention to his very first bullet point: Corrected the city’s previously structurally imbalanced budget.

What?!?!

Friends, that's what we call a whopper.

Contrast Wayne Cauthen's recent resume with his recent memorandum submitting the budget to the Mayor, with the subject line City Manager’s Preliminary Budget for Fiscal Year 2008-09. Pay particular attention to the section entitled "The City’s Structural Budget Problem":

Kansas City, like a lot of major center cities in the country, has a structural budget problem. A structural budget problem occurs when costs of current and future expenses exceed current and future revenue streams. There are four criteria for a city budget to be structurally balanced and they are as follows:

1. Current ongoing revenues equal or exceed current or ongoing expenditures;
2. Planned or future revenues equal or exceed planned or future revenues;
3. Reserves are at an adequate level; and
4. Infrastructure maintenance is at an adequate level.

This budget that is presented for your consideration meets none of the above criteria. While significant progress is being made on the funding of infrastructure maintenance, and we have made progress on our reserves, the proposed budget uses a significant amount of one-time resources to balance the budget for next year; the projected deficits in the out years continue to grow and our reserves remain below desired levels.

This City has wrestled with its structural budget problems for decades. Previous budgets made great strides in dealing with the expenditure side of the equation through workforce attrition efforts such as consolidation of services; span of control reviews; middle management staffing reductions; and an early retirement program that significantly reduced overall staffing levels. In addition, the City has better aligned annual salary increases closer to annual revenue growth. Even with these significant changes, the structural budget problem persists. When revenue growth is strong, as it was anticipated just one year ago, the underlying structural budget problem is mitigated, but when there is uncertainty as to the strength in the local economy and new expenditure commitments are made, such as the City’s commitment to increased maintenance spending, the City’s structural problems re-emerge.

For a guy who claimed on his resume to have corrected our structurally imbalanced budget, he doesn't seem to have a problem submitting a structurally imbalanced budget. He even includes a segment on page 14 entitled "Staff Initiatives to Address the Structural Imbalance."

Lying on resumes is serious stuff. It's not only a major lapse in fundamental integrity - it shows a willingness to engage in fraud to accomplish personal goals.

Can anyone explain to me how the Wayne Cauthen's claim on his Austin resume was not a lie? If not, can anyone explain to me why he should not be told to clean his desk out and escorted to his car on Monday morning?

Update: Terry Riley Proposes Keeping Cauthen, Converting Channel 2 to Travel Channel

Terry Riley is choosing to get out in front of the Cauthen termination. Alerted that Funkhouser has no intention of introducing an ordinance to retain City Manager Wayne Cauthen after disclosure of his wild and extravagant personal travel billed to the taxpayers, Riley is fighting back.

His plan is to convert cable Channel 2, currently devoted to City Government, to a new Travel Channel, to be called Wayne's World. In it, Wayne Cauthen will chat about his world travels paid for by the taxpayers.

They're still working on the concept, but the first shows will be airing soon -

"3 Days of 'Work', 4 Days of Play" - a recounting of the lavish trip to Victoria, British Columbia with his wife, at which he spent less than half of his weeklong, three grand trip attending a "conference".

"Mile High Club" - how to spend more than $1500 on a flight to DC.

"What the Halifax?" - spending $1400 on a trip with no further explanation than "business conference".

"River Walking on the Taxpayer" - sometimes, on the way back from DC, you feel the urge for some Tex-Mex, so why not make it a three-city trip for $1500, even if you have no other apparent reason to go to San Antonio?

There's much more in development, of course. The jaunt to Paris, the visit to Bourdeaux . . .

Some of the other City Council members are complaining that they weren't fully informed about the change in Cauthen's outlook. Of course, as a taxpayer, I wasn't fully informed about their desire to change Channel 2 into a travel channel, but I won't complain. Like them, I should have expected something to change when I picked up the Pitch . . .