When Municipal Governments Depend on Businesses

There are municipal ethics issues that will never find their way into any ethics code, but which should certainly be covered in ethics training courses. Many of these issues involve the relationship between government and businesses.

If there were no money to be made in and through municipal government, there would be far less need for ethics programs. Power does corrupt, but it's no accident that corruption so often involves relations with developers and contractors. It's also no accident that parties which ally themselves with local developers and businesses generally have more money to spend on elections. Municipal ethics programs are intended to lessen the power of money and of individuals'relationships with those who depend on municipal government approval to make money. But ethics programs can only do so much.

When it is the other way around, when municipal government depends on businesses, it is even more difficult for ethics programs to deal with the ensuing issues.

One issue involves whether a city or town should accept large gifts of money, equipment, or goods from a company that does, or might be interested in doing, business with it. Most ethics codes do not deal with this, and most cities are happy to take what they can. But there are many cases where cities say no or make it an official policy to say no. It is sometimes a matter of how it looks when interested businesses seem to be buying the city's support. But sometimes it can be more specifically unethical, for example, when the gift supports a favorite program of a top official. A similar problem occurs when gifts are made to charities favored by officials. In both instances, the officials' involvement (e.g., sponsoring the charitable event) makes the gift appear more like a bribe.

When it comes to schools, many cities set up Local Education Foundations to deal with (and encourage) gifts from businesses, foundations, and individuals. This creates a separate level, a board of directors that is supposedly independent, to accept gifts for the good of the school system. If the board is controlled by officials or their associates, a gift to a Local Education Foundation can be just like a gift to a city, complete with pet program and officials' involvement problems.

Another way that governments depend on business is, of course, taxes. Municipalities often try to attract businesses by offering tax concessions, and often try to keep businesses by keeping business taxes down, at least relative to residential taxes. This is difficult, since it's residents who vote, but it's amazing how many Connecticut towns, for example, have managed to resist delaying or phasing in revaluation, even though both of these programs benefit the great majority of homeowners, whose property values have recently increased enormously compared to business'. Usually, the town officials succeed by failing to say anything about the programs or, when someone brings them up, making misrepresentations about them. Such irresponsible and unprofessional actions (not to mention risking the ire of angry taxpayers, if they actually caught on) demonstrate how corrupting the relationship between government and business can be.

One limitation of municipal ethics programs in dealing with the relationship between government and business is that many towns do not have ethics jurisdiction over businesses, but only over town officials and employees. This means that they can require ethical conduct from only one side of each transaction. Businesses can go on tempting all they want, since nothing can happen to them, except possibly the voiding of a contract. I have not researched this jurisdictional issue, but it's certainly an issue that should get a lot of attention, because no ethics program can be truly fair and complete without such jurisdiction.

Recently, municipalities have found a new way to depend on businesses: selling names of streets and buildings in order to make ends meet. Here there is no conflict between the interests of residents and businesses. But there are two problems. First, there is a built-in advantage for businesses with more money or with better contacts. A national company or big local business can more easily afford to put its name on a street or building than a small local business can. And any business that has a special relationship with those in power is in a better position, at least if the name sale is not competitively bid. The playing field for naming playing fields is not level.

The second problem involves the nature of government. Should government be in the advertising business? Buses and bus stops have already become advertising banners in many cities, but at least the playing field is fairly level and the names constantly change. Where should municipal government advertising stop, and what considerations should determine the boundary? For example, what is it about advertising on police cars, school buses, or senior citizen vans that bothers us? Why would we not want our town hall, high school field, or main street named after a company that wanted the advantage of having children grow up identifying with their company warm feelings about their town?

One consideration is why we name these things in the first place. My town's Memorial Town Hall is meant to memorialize town war veterans. The main street is named after George Washington. A playing field is named after a prominent citizen (deceased), and the town pool after a town official who fought to build it. These are all things that meant something important to people when the decisions were made, things that those people wanted future generations to remember. What price can be put on these feelings? Or, more properly, what is the price of exchanging these feelings for money?

But with dependence on property taxes and increasingly less money from state and federal sources, towns are looking for creative ways to get more money, and selling names is one to consider. An open debate about the value of the ways we name streets and buildings and fields is a worthwhile way for people to see what's most important to them. Perhaps what's most important has changed. If so, there is no reason why municipalities should not recognize this and act accordingly.

Robert Wechsler
Director of Research-Retired
City Ethics, Inc.