How Better Together’s Plan Will Circumvent Democracy and Bankrupt St. Louis

How Better Together’s Plan Will Circumvent Democracy and Bankrupt St. Louis

At first I thought it was an oversight.

When Better Together announced its plan to merge St. Louis city and county, I was excited by the long overdue energy around a regional vision, but the decision to refer the proposal to a statewide vote worried me. I had seen supporters claim that their hands were tied, because the approval of state voters would be necessary to effect the broad constitutional changes envisioned by the plan, but I thought I could offer a way out.

I had served as director of economic policy for Mayor Francis Slay, and as an adviser through Mayor Lyda Krewson's transition. That is to say, I've worked with many of the plan's advocates, so I called someone who had helped edit the language of the proposed constitutional amendment.

I asked if they had considered including a provision requiring majority support at both the statewide and local level. The Supreme Court approved just such a mechanism in Town of Lockport v. Citizens for Community Action. I explained that this approach would simultaneously afford the legal authority to amend the state constitution while protecting local rights to self-determination.

To my surprise, I was informed that the statewide vote was critical because they did not expect the proposal to pass at the local level. I asked if imposing a new government on an unwilling population might not foster resentment and further division. They said it was worth it.

The casual display of cynicism left a bitter taste in my mouth, and it compelled me to take a hard look at the proposal. I wanted to understand why the plan's proponents had such little faith in their ability to persuade local voters to support their vision.

What I found was that, despite marketing materials that speak in the language of equity and progress, the text of the proposed constitutional amendment reads quite plainly as a blueprint for a city structure designed to entrench white, wealthy political power and obstruct real reform. Better Together's decision earlier this week to abandon provisions that would have enthroned County Executive Steve Stenger as king of the unified city through 2024 represents a step in the right direction. But the Stenger-related components were just the most dramatic flaws in a fundamentally broken structure that deprives vulnerable communities of political power.

I don't say this lightly. I desperately wanted to get excited about a plan to finally unite our great region. The City-County Divorce of 1876 is the original sin behind a St. Louis that is defined by its silos. Lines drawn over a century ago have proven surprisingly durable, and our fragmented political structure has taken a moral, economic and psychological toll. We waste resources competing against ourselves in a race to the bottom instead of putting our best foot forward toward the nation. We forget that we are a major metropolitan area with enviable collective assets. Most significantly, we neglect the needs of our most vulnerable neighbors just because they live across arbitrary geographic lines. This is a profound moral failure, but it's also shortsighted. Isolation may be the path of least resistance, but it is not a viable long-term strategy.

Furthermore, having worked in local government, I know it's easier to tear down imperfect compromises than to build a better future. I recognize that there are many laudable aspects of the plan and that the perfect can be the enemy of the good. I understand why so many have been seduced by the plan and its vision for a more equitable future.

Unfortunately, a thorough legal and financial analysis has led me to conclude that the proposal is not merely imperfect, but likely to make life worse for a broad swath of vulnerable St. Louisans across the region. While many will benefit from merging our police departments and reforming our nightmarish municipal court system, Better Together's plan also puts the city in a financial hole, forcing deep cuts. By erecting a political structure that largely disenfranchises underserved communities, the plan all but ensures, barring uncharacteristically enlightened leadership, that they will bear the burden.

Ultimately, I fear that the proposal is little more than a Trojan horse designed to advance a libertarian billionaire's quest to cut taxes on the wealthy and defund government.

Part I: Undermining Democracy

The plan advances this agenda, which does not have popular support, by establishing a series of anti-democratic mechanisms and structures. The problems start with the statewide vote, which allows the new city to be established without a local mandate, but they go much further — to the foundations of the new city's political system.

The work of designing the new government's charter and political map is entrusted to leaders whom the proposal takes various steps to insulate from political checks. Furthermore, the plan establishes a budgeting scheme that privileges wealthier municipalities and affords their elected representatives disproportionate influence. While certain pieces of this structure are individually defensible as necessary political compromises, their cumulative impact is to create an indefensible system that deprives vulnerable communities of political power.

Facing fierce pushback, Better Together recently ditched its plan to put County Executive Steve Stenger in charge of the new metro city until 2024. But big problems still remain with the merger proposal. - PHOTO ILLUSTRATION BY TYLER GROSS, BASED ON A PHOTO BY RYAN GINES
Facing fierce pushback, Better Together recently ditched its plan to put County Executive Steve Stenger in charge of the new metro city until 2024. But big problems still remain with the merger proposal.

Government Reorganization Plan: Minority Rule

Better Together's proposed constitutional amendment is best understood as a framework, establishing the ground rules under which our new regional government will take shape. Section 2.7(c), which entrusts the formulation of what the report calls a "reorganization plan" to the individual serving as county executive on January 1, 2021 ("Metro City Mayor") and Mayor Lyda Krewson ("Transition Mayor"), is at the heart of the amendment's efforts to limit who gets a seat at the decision-making table. The plan would rewrite our government, superseding "charter provisions, ordinances, resolutions, rules, regulations and orders."

Some decisions are necessary in order to make unification real — consolidating departments, eliminating contradictions in city and county codes, and much more. But unlike today's charter amendments, these changes would not be subject to a public vote, or even the approval of the Metro Council, the new city's legislative body. In what may be the proposed amendment's most extraordinary language, it provides that the plan goes into effect unless it is rejected by a two-thirds vote of the new Metro Council.

This approach runs against our nation's most fundamental democratic principles. When such important issues are on the line, it is imperative that changes have clear popular support. Constitutional amendments do not go into effect unless they are approved by a two-thirds vote in Congress (and ratified by the states). The city's current charter goes even further, requiring a two-thirds vote of the people. Better Together's approach does the precise opposite. Instead of permitting a third of the legislature to obstruct change, it empowers a minority to impose a vision developed by just two elected officials, and bypasses a public vote altogether. The absence of real checks is especially problematic because much of the substantive work will be done by privately funded lawyers and consultants — making this precisely the time we need rigorous oversight.

It is also worrying that, for all the equitable rhetoric associated with the plan, the governing legal standards concern necessity and efficiency. Specifically, the amendment empowers the two executive officers to design the reorganization plan "as necessary and proper, to effectuate this section and to ensure the proper and efficient administration of the affairs of the metropolitan city." The "and" is important, as it means that changes to our laws implemented through this process do not have to be directly tied to the merger process, and may instead simply advance the new city's efficiency — deregulatory measures including a weakening of anti-discrimination laws could be passed under this provision. It is telling that the word "equity" appears just once in the legal text, in a section allowing the metropolitan mayor to appoint a deputy mayor focused on community engagement and equity.

Redrawing the Map: Unchecked Self-Dealing

The establishment of the new city's Metro Council, which would redraw the region's political map in the form of 33 council districts, is also fraught with potential for abuse. In any districting effort, the key questions are: Who gets to draw the lines, how are they selected, and how are they constrained. As others have noted, the proposed amendment raises concerns in each respect, but fails especially dramatically with respect to selection.

Flying in the face of best practices, which are designed to minimize self-dealing by affording a variety of conflicting stakeholders an opportunity to veto the selection of a demographer, section 2.(5)(c)(i) of the amendment confers complete appointment authority to the co-executives. For comparison, Clean Missouri, which was approved by Missouri voters in 2018, lays out a map-drawing process that charges the state auditor and Senate majority/minority leaders with jointly selecting a demographer, and subjects the resulting map to a committee selected jointly by the Republican and Democratic parties, as well as the governor. It's a convoluted process, but it's designed to minimize the abuse that emerges when one set of political interests is able to take over.

Conversely, under Better Together's plan, the only check on the map designed by the demographer lies in the current County Council and city Board of Aldermen, provided that they manage to agree to and pass identical plans. Setting aside the reality that this level of coordination could prove a challenge for occasionally dysfunctional legislative bodies, the fundamental problem is that this structure puts the status quo bias to work in favor of the interests of the co-executives. In fact, they could use this power to design a map that delivers a legislative body that affords them the one-third support they need to pass the government reorganization plan. Each legislative body can veto the other's effort to change the map, and like the reorganization plan, the new map goes into effect even if the legislative bodies do not approve it, meaning that wherever the County Council and Board of Aldermen disagree, the executives set the default outcome.

Politics: And You Thought "Aldergeddon" Was Bad

Thus far we have discussed the roles of metro city mayor and transition mayor in abstract terms. This is partly because Steve Stenger's political (and legal) troubles create substantial uncertainty about the identity of the metro city mayor, but also because this degree of concentrated power should worry us, regardless of who wields it.

For example, I respect Mayor Krewson's integrity. Like all administrations, however, her team is disproportionately connected to, and thus responsive to, her political base, which is disproportionately white and wealthy. The structure of city government balances those tendencies, imperfectly, with other voices in government who represent a diverse set of interests. Better Together's proposal both raises the democratic stakes — the design of a new city charter, new political map and the city's first budgets (more on this in a minute) — and eliminates checks. It extends Krewson's term to five and a half years, cuts the city's legislative branch out of the work of designing the new city and sidesteps a public vote on the city's new charter. This approach is unjustifiable. The new city should serve all communities equally, which means all communities must be represented in its design.

The potential for democratic failure was especially high when it looked like Stenger and Krewson would serve together as co-executives. Their overlapping constituencies made it unlikely that they would seriously check each other. In the wake of the news that Stenger's administration is the subject of a federal investigation, however, his removal is a real possibility, so it's worth turning to the question of who will serve as Mayor Krewson's partner through the transition.

There are three basic scenarios. First, Stenger could survive to serve as metro city mayor through 2022. The truth is that proving political corruption is not easy, and barring felony conviction, the County Council's authority to remove Stenger is limited. Instead, voters would need to submit an initiative petition to recall the county executive. The county charter sets the bar high for such an action, requiring 20 percent of the local votes in the last gubernatorial election: 100,000 signatures.

If, however, he is removed, the ball would be passed to the County Council to nominate a temporary successor from their own ranks. Because the new county executive is legally required to be a Democrat, it's likely that the Council's three Republican members would support Sam Page, the most conservative Democrat on the Council. If the recall question went to the voters in November 2020 on the same ballot as Better Together's proposal, that would leave Page as county executive on January 1, 2021, and thus, as metro city mayor. While Page may, like Krewson, operate in good faith, the fact remains that the co-executives will represent a narrow set of interests — in fact, the vast majority of the new city's voters will not have voted for either of them.

Finally, if Stenger was recalled in November 2019, or in the 2020 primary season, this would trigger an election for county executive that would unfold simultaneously with the state vote on Better Together. That prospect would likely draw a slew of candidates with a variety of positions on regional unification. While it is impossible to predict the outcome of such a race, the one thing that is clear is that it is a recipe for bad outcomes.

For example, given that Better Together does not expect the proposal to pass at the local level, it does not seem far-fetched to imagine that the county could elect a candidate dedicated to obstructing consolidation, plunging the new city into an unproductive political mess even as Better Together's proposal defunds government. Alternatively, a crowded primary could result in the election of a county executive with a small fraction of the vote, mirroring Mayor Krewson's election in 2017 with one-third of primary voters. The odds of inclusive representation among the co-executives seem slim at best. Conversely, the three scenarios outlined above point to serious risk that Better Together's unaccountable structure will be abused to elevate the interests of white wealthy St. Louisans in the design of the new city.

Municipalities: Separate and Unequal

Unfortunately, the catalog of anti-democratic provisions does not end here. The last big piece of this puzzle is how the new municipal structure will result in uneven distribution of power within the new Metro City. While the proposal preserves county municipalities, it affords them varying degrees of autonomy depending on the strength of their property and sales tax bases.

Sections 5.4(a) and 5.2(b)(ii) give municipalities within the new Metro City the authority to set their own property (and utility) tax rates, as well as control over how they choose to spend these revenues. This puts the budgets of municipalities with strong property tax bases (places like Ladue, Kirkwood and Webster Groves) largely out of reach of the new Metro City. Conversely, sections 5.4(b) and 5.2(b)(i) place municipalities that rely on other taxes under the control of the metropolitan government, though those with strong sales tax bases — that is to say, with malls — retain some autonomy, the extent of which will ultimately have to be settled through practice, or litigated. Finally, after 2022, the city of St. Louis itself would be dissolved into a municipal corporation, with its debt managed by a committee of five appointed individuals. At that point, city residents would rely solely on the Metro City to determine service levels.

This structure has various implications, including for airport privatization, which could possibly be carried out through the municipal corporation. For the purpose of this analysis, however, the most relevant piece is that while wealthy municipalities will control their municipal district budgets, insulating them from city-wide cuts, the areas that are currently St. Louis city, the unconsolidated county and poorer municipalities in north county will rely on a vote of the full 33-member Metro Council to set spending levels, making them more vulnerable to forced cuts. This system also affords Council members representing municipalities that are able to fund services through property taxes disproportionate leverage over their counterparts, who will need their votes on countless bills, but are excluded from the same decisions affecting their more affluent peers.

It's also worth highlighting that section 5.1(a) of the amendment prohibits redistribution in the provision of municipal services. Municipalities that are already under-funded will have no prospect of improving basic services for their residents unless they dissolve. Reducing the number of county municipalities is a good thing, but we should be uncomfortable with a world in which the only remaining municipalities are in wealthy, white parts of the county. Furthermore, because the proposal empowers municipalities to serve as local planning commissions, the dissolution of the city and poorer municipalities would result in an unequal level of local control over development across the new Metro City.

Fundamentally, the proposal would shift the locus of elected representation subtly, but powerfully, towards wealthier areas of St. Louis County, and erect a financial wall prohibiting the redistribution of property tax revenue among municipalities.

Under Better Together's proposal, the new metro city of St. Louis would grow from 66.2 miles to 588, and boast a population of 1.3 million. - ILLUSTRATION BY TYLER GROSS
Under Better Together's proposal, the new metro city of St. Louis would grow from 66.2 miles to 588, and boast a population of 1.3 million.

Part II: Fiscal Impact

These anti-democratic structures are especially worrying in light of the fact that the plan seems designed to put the new Metro City in a financial box, forcing a series of painful cuts. Better Together's financial story is simple: consolidation will generate savings that can fund tax cuts.

Unfortunately, this story breaks down at every level. The projected savings are speculative and reflect the same kind of magical economic thinking that Rex Sinquefield's advisers used to devise trickle-down economics, and that resulted in Kansas' fiscal failure. Furthermore, any realized savings should be reinvested in our community, not used to eliminate a tax regime that enjoys broad democratic support.

Illusionary Savings: Voodoo Economics

Better Together asserts that merging will bring efficiencies that save the region more than $3 billion from 2023 to 2032. These projections are not based in rigorous financial analysis. In fact, Better Together only cites $6 million in specific operational savings. Instead, they are based on a faith that rejects the expert consensus, articulated in a series of studies that fail to find any relationship between consolidation and reduced spending.

The closest that Better Together gets to justifying its guess that merging will save the region hundreds of millions annually is its assumption that merging will allow St. Louis' $1,900 in regional spending per capita to fall closer to Indianapolis and Louisville's spending rates of $1,100 and $1,300. The truth, however, is that these dramatically different spending rates are a function not of these governments' efficiency, but of their decision to provide a lower level of public services to their residents. In fact, when a Pennsylvania think tank analyzed the Indianapolis and Louisville mergers on behalf of Pittsburgh, their research found that significant budgetary savings were neither expected nor realized from consolidation.

Furthermore, if you compare St. Louis' regional expenditures to those of the 100 largest American cities, we are precisely in the middle of the pack — 48th — while Louisville and Indianapolis are well below average, spending the 18th and 11th least, respectively. If we take a closer look at the data, there is no reason to believe that a lower rate of expenditures per capita is associated with municipal prosperity.

After merging, St. Louis would become a city of over one million people. Of the nine cities with a population over one million, all but one, San Antonio, spends more than $2,000 per capita. New York is at the top, with $8,700 per capita, but Austin spends nearly $4,000, Chicago spends $2,704 and Phoenix spends more than $2,300. While I am not arguing that St. Louis should spend more — each city finds its own balance — there is no basis to claim that St. Louis can or should be spending less.

Earnings Tax Phase Out: A Quixotic Quest

This plan relies on these imaginary savings to justify phasing out the earnings and payroll taxes, which together generate more than $200 million in revenues. The legal dynamics of the earnings tax phase-out are a little tricky, so it's worth pausing to discuss how it would work.

A state law pushed by Rex Sinquefield currently provides that the earnings tax gets phased out over ten years unless St. Louis votes to re-approve it every five years. Yet section 7.2(a) of Better Together's plan would prohibit the new city from going to its voters for re-authorization, triggering an automatic ten year phase-out of both the earnings and payroll taxes starting in FY 2022. Through this vehicle, Sinquefield finally gets around the pesky requirement for a local vote.

Sinquefield's vendetta against the earnings tax has no basis in economics. Even a study he commissioned found in 2011 that alternatives to the earnings tax were not fiscally sufficient, politically feasible or economically desirable. (Unsurprisingly, this study has since been taken down, but you can read my summary, written back in 2016, here.) Independent studies, including one by the Brookings Institution, have found that "different sources of tax revenues have dramatically different impacts on growth, with property taxes exerting consistently negative effects, and income and corporate taxes usually exerting positive effects." Finally, while many in St. Louis are struggling, the idea that our region is too impoverished to justify an income tax is a myth. James Bullard, president of the St. Louis Federal Reserve, has noted that, when you adjust incomes for local cost of living, St. Louis places twentieth out of the nation's 381 metropolitan areas, and seventh of the nation's 53 largest metro regions.

The earnings tax is not perfect, but regional consolidation is actually an opportunity to make it fairer and more progressive. A regional earnings tax would apply to city and county residents equally, regardless of where they work, and generate enough revenue to fund the establishment of a progressive rate. Hypothetically, an individual's first $25,000 in income would be tax free, and the tax rate would ramp up gradually to one percent for income above, say, $200,000. Such a tax regime would place our region on solid financial footing and help finance the overdue collective investments that we have failed to make for decades. We should be working to ensure that residents across our region feel safe and that parents across our region feel confident that their kids are getting a good education. The city alone has a backlog of hundreds of millions of dollars worth of critical infrastructure needs. The truth is that crime, struggling schools and crumbling infrastructure hold St. Louis back, not an unremarkable tax regime.

Delusional Financial Projections: Misleading and Dangerous

Unfortunately, this plan threatens the new city's capacity to address these long-term challenges. While Better Together claims that the city will have more money than it knows what to do with ("revenues to Metro City are expected to exceed expenditures by up to $342 million by 2032"), these rosy financial projections have no basis in reality.

Better Together's "Pro Forma Budget" assumes that government expenditures, which typically grow at a pace of two percent, reflecting inflation, will instead shrink by one percent annually for ten years. That means that in real terms the region is expected to cut roughly $75 million (three percent) out of the budget annually for ten years, cumulatively shrinking government by 26 percent.

The idea that local budgets are riddled with useless fat is a myth. I can only speak for the city of St Louis, but having gone through the budget process, I can assure folks that the recession left the city's finances extremely lean. I'm sure there's some waste, and good people are constantly working to find it, but cuts will mean hard choices and a real reduction in services. I fought, with varying degrees of success, to restore funding to St. Louis youth jobs, drug courts, recreation capital and the Affordable Housing Trust Fund in the 2017-2018 budget, but there's only so much you can do with creativity, and at some point you have to cut positions: nurses, engineers, neighborhood improvement specialists and more. Though we were successfully able to avoid layoffs by cutting temporarily vacant positions, it will be all but impossible to implement the cuts imposed by Better Together's plan without eliminating occupied positions.

Better Together's claim to the contrary hinges on the assumption that these cuts will be paid for out of operational savings, but as the Pittsburgh think tank's research shows, there is no evidence that consolidation is likely to generate dramatic savings.

The financial analysis consistently fails to reflect reality. For example, one could be forgiven for looking at Better Together's "Pro Forma Budget" and concluding that, because "Status Quo" expenditures do not exceed "Total Revenues" until 2026, cuts are optional and the Metro City can simply choose to run smaller surpluses. In fact, however, the dollar figure that Better Together claims the region will spend in 2023, roughly $2.4 billion, and which is subsequently indexed to inflation through 2032, is what the region is currently spending in 2018, as the Pro Forma acknowledges.

That means Better Together's "Status Quo" does not factor in four years of natural inflationary growth, effectively reducing government spending upfront by roughly $200 million. This may be a reflection of a tool that Better Together deploys to force governments into making cuts: Section 5(6)(a) imposes a mandatory budget freeze. That is, before we cut taxes — before we even start shrinking government by three percent a year — government will already have been forced to shrink its FY 2022 budget back down to FY 2019 levels.

The Financial Box: A Manufactured Budget Crisis

This gets us to the real core of the problem. It's not really Better Together's laughable projections, which future elected officials can choose to ignore, but that the plan imposes its assumptions in the form of a series of mandatory cuts — which will force the city to reduce services dramatically. The budget freeze, earnings and payroll tax phase-outs, as well as property tax reductions, are all locked in by an affirmative statewide vote, and will put local government in a deep financial hole. Even provisions that make sense in the abstract, like the requirement that the new city save three percent of its revenues, as St. Louis County already does, effectively impose yet another two percent tax cut, as two-thirds of regional expenditures are not currently subject to this limitation. Together, these require the region to shrink its budget by a little over eleven percent.

Furthermore, the new city's financial laws explicitly insulate certain accounts from cuts. The first is debt service, which the amendment bends over backwards to emphasize is the new Metro City's number one priority. Next are municipal property and utility taxes, which are explicitly protected from redistribution. Finally, in one of the plan's strangest moves, it carves out a roughly $300 million property tax revenue stream for a new Metro City Fire Department governed by its own board of directors. Bizarrely, the plan takes one of the few St. Louis city departments that could benefit from some serious consolidation (and that city budget staff have long believed may have some politically protected fat) and expands its budget. While the city's budget shrinks at a rate of one percent, Better Together's Pro Forma shows the fire district growing from a budget of $278 million today to $299 million in 2023 and $357 million in 2032.

When you combine parts of the budget that are legally insulated from cuts with the pieces that are politically untouchable (namely the half-billion we spend on policing) and the components that are operationally untouchable (refuse, water, streets, etcetera), I worry that the cuts can't help but focus on discretionary services like public transit, parks, the county's Children's Service Fund and the city's Department of Human Services, which disproportionately benefit vulnerable populations.

To be fair, there are ways out of this self-imposed financial crisis — they just aren't desirable. The city could raise sales taxes, a regressive mechanism disproportionately impacting low-income families, or it could sell the airport for a short-term solution. The unfortunate reality, however, is that while these measures would buy us breathing room, they would not set us on a sustainable financial path capable of funding transformative collective investments in our community.

Conclusion: We Can Get This Right

This analysis is meant to be constructive. All of these problems can be fixed by amending the text of the proposed amendment. I hope the plan's proponents, many of whom I respect, realize that the text does not do what the marketing materials claim, and seize the opportunity to align the product they are selling with their rhetoric. For example, if we want the new city to be inclusive, why not provide for the reorganization plan to be the product of a public commission, with appointments made by both co-executives and approved by the County Council and Board of Aldermen, with certain requirements to ensure adequate geographic and demographic representation? Similarly, if we want to set our city on strong financial footing, let's stop kidding ourselves with magical thinking. Instead, let's be serious about how we can make the earnings tax better, specifically by providing those who can't afford to pay with tax relief through a progressive rate.

Some compromises will be necessary for unification to pass at the local level. County municipalities will demand certain protections, and practically speaking, the regional balance of power will not permit the new city to embrace a wholly progressive agenda. But the new city should not reflect a radical libertarian vision either, and its formation cannot be an excuse to entrench establishment political forces.

If, however, no changes are forthcoming, we must reject the false dichotomy that the only way to end the city-county divide is to acquiesce to the whims of the same billionaire who broke Kansas, and who is using our region's deep desire for unity as a carrot to advance his vision to destroy government. The truth is that rewriting our laws will take years of hard work. It represents a serious investment of time and energy, and though we can't afford undue delay — our fragmented government has a very real human cost — it will not translate into real change unless we get it right.

We cannot rely on a private process to define the future of our region. Instead, the vision must emerge organically from an inclusive, public process that builds off the valuable work that's already been done. While I can't predict what such a process will produce, it should place equity at the heart of its analysis, and I hope it engages with hard questions about our tragically fragmented school system and innovative ideas like rank choice voting, which would strengthen our democracy instead of weakening it.

This is an opportunity to think boldly about the future, about what we demand from our democracy and the type of community we want to build together. We cannot afford to waste it.

Nahuel Fefer previously worked as director of economic policy for the city of St. Louis. He is currently a student at NYU Law. Reach him at [email protected] or via Facebook or Instagram.
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