Backgrounder: A Bit of Sympathy for Public Officials

October 27, 2016

by Maryann O. Keating, Ph.D.

At times, one has to sympathize with public officials. Put yourself in the shoes of a member of the South Bend Board of Public Works.

On Monday, Nov. 24, a plan to shelter up to 60 homeless men from Dec. 1 to April 1 was submitted to South Bend Common Council, and on the following morning, the Board of Public Works was expected to consider the proposal.

According to the plan presented by the Department of Community Investment the city would pay up to $125,000 to purchase a building across the alley from Hope Ministries’ Project WARM, a weather amnesty program that provides overnight shelter to homeless individuals living on the street during the winter.

Project WARM is willing to contribute $45,000 for staffing and general maintenance, and Hope Ministries as much as $30,000 for long-term maintenance and rehab. Hope Ministries, the South Bend Center for the Homeless and Life Treatment facilities are all private nonprofits with experience in providing these services locally, but they presently project limited excess capacity for men, women and families. Last winter, over 50 people were living on the street. The number is expected to increase but not to exceed 100 this year.

Last May, the city closed the southbound lane under a viaduct. An encampment has grown in recent months of men and women sleeping under shelter of the viaduct. Community activists have provided food, sleeping bags, tents, pillows, coolers and shoes.

The encampment raises issues of public health and safety and negatively impacts costly new apartment and tech businesses planned for the area. The City has allocated $500,000 of federal grant money to a permanent supportive project in the Rum Village area, but it will not be completed until Fall of 2017. Some members of the Common Council are calling for immediately providing portable sanitary facilities for the encampment; other members hope to find alternative intermediate solutions to avoid a visible and growing encampment on Main Street.

Does any policy tool exist to assist you if you were a member of the Public Works Board having to make a quick decision on spending $125,000 in tax dollars for this proposal?

No doubt, you are aware that private households could benefit from retaining these funds for personal needs and also that the revenue may be better allocated to other public projects. And do not forget that the contributing nonprofits will need to cut back on alternate projects. A $125,000 tax expenditure forfeits economic value that perhaps could be better used elsewhere. If the Board approves this proposal, can you be certain something of equal or greater value will be created?

As an individual, you may be vehemently opposed to such social projects or you could be wildly in favor of them. But all this is beside the point; the vote is immediate and the City Council is committed to addressing the problem. The issue, then, regardless of which residents are receiving the benefits or paying costs, is whether the proposal being considered meets your back-of-the-envelope calculation of positive net benefits.

The total cost of the proposal is estimated at $200,000 ($125,000 paid in tax revenue for a property with no residual value to the city and $75,000 in private non-profit contributions). The facility would be open by Dec. 1 and would close its doors in approximately 120 days. If the facility, which is designed for 60, averaged 50 men per night, the shelter would offer lodging for 6,000 nights. This works out to about $34 a night per occupant ($200,000/6,000).

Overestimation of needed beds could easily double costs per person, in which case distributing hotel vouchers may be the best approach. If, however, the estimate of 50 residents per night is in the ball park, you, as a voting Board member, need to determine if the per-person-per-night value is approximately $34.

Homeless residents, valuing their health on severely cold nights, may voluntarily seek shelter in the facility; this choice indicates that the shelter would create something of value. However, in addition, you need to determine the public good — moral, safety and heath values for town residents in general — if the homeless were legally directed to shelter this winter.

If the sum of private benefits to the homeless and public benefits equals or exceeds $34 per person per night, this proposal passes the positive net benefits hurdle; actually, it does not appear outlandish. Ultimately, as a Board member you would need to vote yea or nay in trust for the rest of us. Good luck.

Maryann O. Keating, Ph.D., a resident of South Bend and an adjunct scholar of the Indiana Policy Review Foundation, is co-author of “Microeconomics for Public Managers,” Wiley/Blackwell. An expanded version of this review is available at www.inpolicy.org.



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