Buying out Trenton

Saving Trenton from its crazy self

The idea of the state having to take over Trenton has come up recently. However, many citizens, even when faced with the evidence that Trenton clearly can’t take care of itself, suggest that the state would do an even worse job. They have a point; even with its broad financial resources the state clearly hasn’t fixed Camden.

So, let’s imagine for a moment that state oversight is a bad option. We already know that we can’t run the city ourselves. What then are the remaining options?

Let me “modestly” suggest an idea sure to offend everyone.

I’m proposing a corporate buy-out of Trenton.

That’s right; the city of Trenton will sell all of its assets and rights to a corporate entity set up to make a profit from running the city.

I know. I know. But before you go diving into the comments section to write a nastigram, hear me out.

First off, I know this probably isn’t legal and there’s no precedent in modern America. However, there have been lots of times in the history of civilization when we’ve created new precedents to meet a need. We can change laws can’t we? Clearly this new “Trenton” won’t be governed by the Faulkner Act. We’ll simply have to write some new rules.

To make this work we’re going to need to be able allow the managing corporation to do several things:

1) Receive assets from the city such as roads, parks and buildings. Setting a price is the main issue. Cities are non-profits and therefore are essentially worthless to an investor. Therefore the assets of the city are fundamentally worthless. And who would the proceeds of the sale go to anyway? The state? The Mayor? They don’t own the city. Neither do the citizens, really. But more important than the money that changes hands is the alignment of interests. Therefore, I suggest that rather than force the issue of a cash transaction, the corporation issue stock to pay for the city, and give that stock directly to land owners in the city. Ten percent of the stock will be reserved for the management team to incent them, but 90% goes to land owners so that if the city prospers, they do too.

2) The corporation must have the ability to levy a fee to property owners within the city limits and to create various usage fees. While certainly this may smack of providing a license to steal, it’s not much different than today’s system. The big difference is that should the management team abuse their power they can be fired. A new board of directors is elected every year by the shareholders (as opposed to every four years) and that board can simply fire the management team. Furthermore, to the extent the city makes a profit from the return on its shares, those returns go to shareholders anyway either in the form of dividends or re-investment in the city.

3) The corporation must have the power to enforce laws. This is tough. However, it is not without precedent that non-governmental entities enforce laws within a jurisdiction. University campuses are good examples as are large housing developments. Neighborhood associations are often given the right to enforce standards and we can enforce similar rights in Trenton Inc.

I’m sure there are many issues to work out, but the question is can we use corporate governance to better align the interest of the city’s management with that of its citizens? It can’t get much worse than it already is.

A corporation would have quite a few advantages:

  • Decisions will be made faster. Discretion to act within defined budget limits can be given to managers and not require approval of a city council. There would be no council. In fact, the oversight function will be vested in a board of directors that meets quarterly and then has limited latitude to micro-manage. Rather the board will set corporate policy, approve large deals, approve executive compensation and hire and fire the CEO. It’s hard to do business in Trenton or with Trenton today, a corporation focused on the bottom line can’t stand for that. With that in mind we’ll find a way to make the inspections process easier, sell abandoned property in 5 days rather than 5 years and fix broken signs the first time a resident calls it in, not the 10th.

  • The management team will be rewarded for success and penalized for failure. This stands in contrast to today’s system which only penalizes when things spin wildly out of control and provides no upside when things go well. An increase in economic vitality or ratables should lead to bonuses for the management team. A decline might get you fired.

  • Property owners will be incented to do the right thing. You can be sure that a board of directors made up of property owners will be quick to punish those who fail to maintain or develop their property. This does not happen today. It’s only when Trenton reaches its best use for all its properties that shareholders will start to see dividends. You’d think this would be obvious already, but perhaps making the linkage between investment and return clearer will help.

The concept of corporate takeover for cities is no joke; rather it should illustrate several points. Citizen interests are not aligned with those of our government leaders. This is a result of our form of government which should be changed. And finally, we need a top to bottom overhaul of the way we think about running our city.

There are many things to work out and several important issues I haven’t addressed. Should schools be free? It’s a fair question. Should renters get a vote? The corporation isn’t a democracy so I don’t see why, but again it’s a fair question. Would the corporation force the State out of town? Tempting isn’t it.

The fact is that all Trentonians do have a large financial or quality of life interest in the management of our city. We’re not getting our tax money’s worth out of it and haven’t for a long time. In my mind, we’re due for some structural change. I invite a citizen petition to change Trenton’s charter to allow for a form of government more in line with a modern city.

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2 Responses to “Buying out Trenton”

  • Robert Lowe:

    A major item is existing debt. Would the corporation absorb all debt obligations?

    Likewise, will the corporation fund existing obligations such as unemployment benefits, and existing pension obligations?

    Not also, that the State would likely require such an entity to be a non profit, there certainly would be political pressure in that direction. In which case, I’m not sure that a non profit would have the incentives you seek to capitalize upon.

  • Well, of course if enabling legislation couldn’t be obtained to allow a for profit company to own/run the city, any deal would be off.

    There’s all sorts of political pressure I’m sure stop any kind of new idea. But yes, I’d assume that debt obligations would be acquired. The debt would be paid off and financed as part of the investment (that includes the hotel).

    But union contracts would NOT be acquired, and that’s a big potential win.

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