November 17, 2010
November 17, 2010
The folly of the Portland Leaf Fee
By Patrick Emerson
Oregon Economics Blog
In this recessed economy municipalities are struggling with diminished revenue in the same way states are. It is becoming harder and harder for them to provide the same services in this new economic reality. So many cities are looking for new ways to impose fees for services that were once funded with general revenues. Portland is no different.
And so the mayor saw the big wad of money spent on fall leaf removal as an opportunity to raise new revenue by imposing a leaf cleanup fee for the neighborhoods where the cleanup occurs. The problem with this tactic is twofold: charging specific fees for public goods is dumb public policy, and ironically, allowing households to opt-out actually makes it dumber.
To properly frame the policy we should begin by discussing public goods and to properly discuss public goods we can start by asking the question: why does government provide things like roads, parks and fire departments? The answer should be clear to anyone who has had even the most basic economics education: these things are public goods – they have elements of non-rivalry (one person’s consumption does not leave less for another) and non-excludability (you cannot prevent people from consuming). City parks are a clear example, you cannot prevent people from using them and if I stroll through a park, there is plenty left for the next person. The moral of public goods is that given these two elements, private provision of them is always going to be inadequate relative to what is optional and so government steps in to correct this market failure.
Roads are also public goods – especially city roads. Yes, I use the road on which my house is situated more than the average Portland resident, but I rely on the entire network of Portland’s roads to walk, bike and drive and to keep traffic evenly spread throughout the city. This is why the network of safe and well-maintained roads is the city government’s responsibility and a big part of what my taxes pay for. So while the leaves that my and my neighbors trees deposit on the street may seem like and obvious thing to charge us for, the benefit of clearing them from the street accrues to everyone. Streets free from leaves are safer for anyone who travels on them and also prevents clogging up the city’s sewer system that we are all responsible for.
The logic of why we don’t leave street maintenance up to individual neighborhoods is obvious. One neighborhood’s decision to spend less and degrade their streets imposes a cost to local residents in terms of bad roads to traverse to get to and from home, but it also imposes a cost to the the rest of the city. Of course a cost is imposed on those who travel through the neighborhood, but also in terms of displaced traffic from those who avoid the neighborhood and thus cause congestion and additional wear and tear on other neighborhoods’ streets – a classic externality problem.
Using the same logic of the leaf fee removal program leads to plenty of other absurd policy options. We could charge an extra police fee to residents of high-crime neighborhoods. Or we could impose a park fee for those that live within two blocks of a park. [As an aside, we already pay for this in the differential values of our homes though Measures 5 and 50 have de-linked taxes with market values but the historical value remains the basis of the tax assessment] Clearly, these are absurd suggestions, crime affects us all, we all enjoy parks, etc.
So the leaf fee policy is dumb, but the opt-out actually makes it dumber. You see, since the leaf fee can be avoided be cleaning up the street in front of your property yourself, this creates a dis-incentive to have and maintain street trees – something the city is actively promoting (the water bureau Environmental Services bureau even has, or had, a program by which they gave you a $50 credit for planting a tree). It is also not going to be very good for neighbor relations – what if I sweep my leaves over in front of my neighbors house? What if I have no trees, but by neighbor’s trees drop tons of leaves on my part of the street? In fact, I think perhaps each block should pool and every house but one sweeps their leaves in front of one house and everyone chips in to play that house’s leaf fee. You can see how this program creates perverse incentives.
I understand the cities desire to find new revenue to help support its services, but this policy is just plain dumb.
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