Via Wall Street Journal
Few years back I was approached by an acquitance to support their run for local office. Coincidentally I had just reviewed some economic news on their budget situation in the town he was running in. The person gave me a beautiful speech about “giving back” and helping the poor. I asked him a direct financial question pertaining to the financial issue he would have to deal with once in office. His look was all I needed to know he had no clue in what I was asking about.
Liz Farmer addresses this question in an article from February 2014 about the impact of municipalities not having people elected with economic knowledge.
In the fall of 2012, the Minneapolis suburb of Vadnais Heights found itself with a credit rating downgraded to junk status. Local leaders in the town of 12,000 were not only insulted, but shocked. Vadnais Heights owed its disgrace to one action it didn’t think was that crucial: It had stopped making bond payments on a $25 million sports complex. The town had expected the complex to meet its borrowing costs through added revenue, but it had fallen short of estimates. So town officials had ceased paying bondholders rather than choosing to bill taxpayers for the unexpected costs.
What is particular events led to misunderstandings of laws?
Failure to understand financial outcomes, even when combined with good faith, is more dangerous to states and localities than it has ever been. Tougher ratings standards are part of the picture, but the problem goes far beyond those. Municipal and state leaders face an entirely new regulatory climate with the passage of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act. That law, which is still being implemented, is bringing increased scrutiny of government financial performance on all levels.
Overall the above situations are not isolated cases. Smaller jurisdictions have issues getting economic competent people into office and usually make decisions on the fly.
I found this quote in the article to be very telling:
“When you think about it, I’m a retired cop and now I’m chairman of a finance committee of a $3 billion organization and the 10th largest city in the nation,” says San Jose, Calif., Councilman Pete Constant. “Can you imagine a corporation taking someone like that and putting them in charge of it with so little experience?”