An interesting approach has been taken by the mayor’s office to present the city budget on the basis of what taxpayers receive in return for their “investment” (spending) on city services.
Unsurprisingly, it finds that taxpayers are getting a good deal.
It says: “The conclusion: the median Jacksonville household pays $2,864 per year into city government and receives $8,738 in measurable economic value in return — a 3.05× return on investment at the lowest combined property tax rate of any large Florida city.”
But the city’s analysis shouldn’t be dismissed outright.
Mayor Donna Deegan, Democrat, has at least attempted to take a business-like approach to the matter.
Return on investment (ROI) is a basic measurement used in business. Essentially it compares what you spend for something against what you get in return – almost always in coin of the realm.
Deegan is saying households on average pay $2,864 and get back a profit of $5,889.
What a deal! I started to call my broker and tell him I wanted to buy 1,000 shares of City of Jacksonville.
After our own examination of a fact sheet explaining the methodology, Eye on Jacksonville ran it through an artificial intelligence tool, which declared it to be “professionally presented, but with a mixture of sound arithmetic, a few arithmetic inconsistencies, and several methodological choices that deserve careful scrutiny.”
The arithmetic errors were minor, rounding errors mostly and of little concern.
The method used for determining the return on investment on the various components varies, which is a bit of a problem. Assumptions matter.
In the case of public safety, it measures the difference between the homicide rate here and elsewhere, assigns a value of each human life and calculates the benefit.
EMS services also used lives saved as a benefit. The report effectively values every cardiac arrest survivor at $13.2 million using the federal Value of a Statistical Life.
That is standard in regulatory economics. However, the calculation implicitly attributes those saved lives to the city’s EMS system without estimating how many victims would have survived without the current level of service. Critics could argue this overstates the marginal benefit attributable to the city’s budget.
Road paving was evaluated by estimating the amount of vehicle damage avoided.
For libraries, the report essentially asks:
“If the public libraries disappeared tomorrow, what would residents have to spend to replace those services?”
It cites studies estimating that each public dollar spent on libraries produces $5.63 in benefits through book borrowing, internet access, literacy programs, meeting spaces, and other services.
The report adopts this “outcomes-based” framework. This is a recognized economic method, but it depends heavily on assumptions.
Another disconcerting fact is the component totals, which are
- Public Safety = $1,281
- Infrastructure = $1,299
- Direct Services = $4,034
- Social Investment = $2,136
The sum of these numbers is $8,750, as the table reports.
However, immediately below, the ROI calculation uses $8,738 instead of $8,750, with no explanation. Not a huge difference, and possibly due to bad copy editing, but puzzling.
City officials deserve credit for the fact that nearly every figure cites a published study and the calculations utilize conservative estimates on benefits in some cases rather than grasping for the highest possible number.
But the report treats many benefits as if they accrue equally to every household.
Again, using the library, it implies every household receives $563 in annual library value.
If you never borrow books, never use library computers, never attend programs, and never use meeting rooms, have you personally received $563 in measurable economic value?
It might be better to distinguish between direct household benefits (services a household actually uses or avoids paying for), community-wide economic benefits (broader effects on the city), or social benefits (improvements in education, health, public safety, or quality of life).
AI points out that the report combines these different kinds of benefits into one ROI figure, each using a different methodology. This creates the appearance of precision that the underlying methods don’t necessarily support.
Still, there are many ways to look at a government budget and Deegan’s ROI rating adds one some people might find useful. Another way Eye has mentioned before is to compare typical household costs related to government, such as taxes, electricity rates, garbage, water and sewer, for several cities in Florida. This was done for many years, then inexplicably dropped from the budget.
