Participatory Taxation

Luis Godoy
Aug 23, 2017 · 11 min read

Participatory Budgeting 2.0, Integrating a Participatory Property Tax System in New York City

SUMMARY

There is a growing desire for citizens around the world to become more engaged with their local governments by taking an active role in deciding how to best allocate public money. The widespread adoption of Participatory Budgeting showcases the recognition of this demand by municipal governments. However, their efforts are stifled by a lack of engagement by citizens and bounded by limited resources that are needed to truly allow PB to have the impact it was intended for. Therefore, we believe that by connecting actual property taxes that citizens have to pay to a marketplace using a Participatory Budgeting model would resolve greatly improve the current PB system in its reach and impact.

OVERVIEW

Participatory Budgeting (PB) was founded in the 1980s in Brazil based on the principle of extending basic democratic rights of the electorate to beyond the ballot box. Now, this relatively naive democratic process has been adopted in over 1,500 municipalities around the world. The popularity of PB arises from a desire from ordinary people to have a decision-making role in identifying, discussing, and prioritizing public spending projects. According to Smith (2005), PB gave us a direct and clear answer to the question why engage in to the public? With the evolution of Information Communications Technologies (ICTs), it has now become easier for citizens to connect with one another and to share their interests, needs, and desires with their communities and the world. There exists a great opportunity to help connect concerned citizens and their local governments through ICTs in deepening the impact and broadening the reach of the PB process. Participatory Budgeting in New York City New York was the second city in the United States to adopt a PB model in 2011 just after Chicago. Today, NYC’s PB system is the biggest in North America with 27 out of 51 districts participating, with a funding of approximately $1 million for PB per district. The public can submit ideas for a PB project with a cost of at least $35,000 USD, a “useful life” of at least five years, which also involves the construction or an enhancement of a physical public improvement. Any district resident over 14 years of age can vote. As you can see in the following image, it is a straightforward and easy to understand process.

PB Process

THE PROBLEM

Part 1 — Low Engagement & Low Budget of PB

Although the PB in NY is a functioning public democratic process, there are two main problems to overcome: a relatively small budget, and low levels of participation. In 2015, the 27 municipal districts participated with a total PB budget of $32 million. PB is a tiny fraction of the overall budget, it represents only 0.04% of the total NYC Expense Budget ($78 B). Also, in 2015 only 51,000 voters participated (1.2% of eligible voters). This would mean each vote accounts for $625 of allocated funds. To put this number in perspective, it would be 15% of the average property tax in Manhattan, which is around $4000 per year. With so much decision-making power at hand, it begs the question then, why so few people are participating?

This screenshot shows the current online method of voting for a district’s proposed PB projects. However, this voting system is disconnected with the NYC-PB marketplace that displays project details, therefore voters only see very limited description of what they vote on. Furthermore, each resident gets to vote five times in their district without any preferential ranking or weighing, which may lead to an issue of under or over-representing the importance of the projects voters truly want to support.

Part 2 — An Outdated Property Tax Collection System

Current Online Platform to Pay Property Tax in NYC (1)
Current Online Platform to Pay Property Tax in NYC (2)

Currently, every property has their tax history including the dates of taxes paid and the amount paid displayed publicly on the NYC.gov website as shown in Image 2. Anyone can search for a property tax log as long as they know the Borough, Block, and Lot numbers. Given that this is public information, we believe there exists an opportunity to incentivize a greater number of participants to actively contribute to the PB process. If given the tools, citizens, and especially property taxpayers, would have a strong motivation to see their tax dollars in action through a PB process that determines what local projects are funded and to what extent. Therefore, our proposal is two-fold: (1) Provide a choice to property-taxpayers to attribute a percentage of their taxes to the PB process as they pay online — see Image 3; and (2) Create a digital marketplace that utilizes these PB dollars in a crowd-sourcing model.

The Final Steps to Pay your Property Tax

OUR SOLUTION

The goal of our solution is to (1) increase public participation in PB and (2) increase the amount of dollars that are allocated through PB. In order to achieve these goals, we plan to pilot our project in New York City (NYC) due to the growing public interest and the political will to support PB. Our solution is to create an online portal for residents of NYC to pay their property taxes while also giving them an option to apply a percentage of their property taxes (i.e. up to 10%) to a project they wish to support (Graphic 1). This will require an effort to interconnect two different platforms that depend from two different Departments. Currently, the New York City Council has a website that allows any resident to submit their community improvement ideas and also allow public comments during the idea generation process. However, this system is limited to only a “showcase” function once final proposals are vetted and finalized by the City. This means users cannot actually vote on their favorite projects or show their support publicly other than the 1-week long voting that takes place at the end of March each year.

The Flowchart of our Model

Integrating Voting System and the “Marketplace”

Currently, as you can see in Image 4, the City displays all the final projects on their website. However, this website is very limited in functionality. For example, it only displays the name, address, and a one sentence description of a lighting project that cost $950,000!

Screen capture of one of the proposed projects on NYCC-PB website in District 7 — Morningside Heights on March 26, 2017.

Our proposed solution would improve this existing website with functionalities that include:

  1. Login and Account Management portal to give users interaction privileges
  2. “Like” button and a public display of number of likes
  3. “Contribute” button connected with the online pay system of property tax and a public display of public dollars contributed
  4. “Comment” to advocate for a project and a public display of replies or likes
  5. Detailed project proposal and budget breakdown for users who wish to learn more

A secondary aspect to the proposal involves upgrading the existing Department of Finance property tax payment portal with the following features:

  1. Mapped tool to identify final projects that are proposed by the public in their district
  2. A special PB account that can allow taxpayers to attribute their property tax dollars (i.e. 10%) to projects they would like to support
Our Model Applied in the Current On-Line Property Tax Payment

Our proposal requires NYCC to dedicate a digital integration team that will help design, code, and upgrade the existing NYCC-PB platform as well as work with other city agencies like the Department of Finance to improve upon their existing payment portal of property taxes as well as how taxpayer data is stored.

We expect to have three streams of users that would frequent the website:

  1. The general public
  2. Property tax payers
  3. City officials, municipal politicians

The scope of the project will be under the supervision of New York City Department of Information Technology & Telecommunications (DoITT) which serves a network of 120 City agencies, boards, and offices and a population of over 8 million city residents and 300,000 employees. There are currently 1,000 staff across seven locations within DoITT and an operating budget of $440 million. We expect to either draw existing human resources from DoITT or to hire IT consultants to fill any gaps. The budget required to complete this project will therefore depend upon how much shared resources we can obtain and can range between $1 million to $3 million dollars spread over two years. This cost is based on having at least two full time software data-engineers and a frontend web developer. We also assume that the City would cooperate willingly to share various important datasets to allow us to integrate the two major systems of property taxation and geo-based information of PB projects.

Our Target Customers

  • Property Tax Payers
  • Local Residents (non-taxpayers) of participating NYC districts

Customer Acquisition Strategy

  • Work with City to provide this additional opt-in option on their property tax bill to sign-up online — which can be automated if taxpayers are already paying their taxes online
  • Work with existing Participatory Budgeting supporters to expand network and allow for social media sharing of their ideas or ideas they like

Pricing and Business Model

Long-term contract with municipal governments with a cost estimate that is based on number of users and amount of funds being managed. The more districts that participate, the higher the contract-cost will be. Furthermore, additional costing will be based on the number of website visitors per day and the average daily data-load on the server.

Customer Acquisition Challenge

There exists a potential selection-bias that may leave the economically-disadvantaged without representation. However, we believe given that the current traditional-PB model helps encourage in-person participation, we will continue to leverage this method to help include as many people as possible at all levels of engagement.

BARRIERS

We have identified the following challenges for the correct implementation of our project.

Political Barriers

There may be strong institutional and political resistance to align actual tax dollars to the public’s input/vote as this would take away their power and influence. However, the current administration has shown a compromise with participatory and direct democracy processes.

Data and Privacy

Given that this model would attribute actual tax dollars to a marketplace, there needs to be strong levels of security to protect these electronic funds and the privacy of taxpayers who participate. However, we also have the option to open some public data from the PBNYC by selecting the non-sensitive datasets. Today there is no available data that can be freely used, and redistributed by anyone. The Open Data NYC Initiative has completely forgotten the relevant information that can be open from the PB process.

Stakeholders

We expect to face resistance from various non-profit organizations that may be affected by any reallocation of actual tax dollars as the decision-making power is slightly shifted towards taxpayers. Also, working with two city departments (Department of Finance and the New York City Council) and gaining regulatory and legal approvals will be a hard test.

Communication

Informing taxpayers and citizens about the new option they have to engage in the spending of their taxes is key for the success of the project. An specific communication strategy should be planned and implemented, one that focus on fighting the distrust that citizens have towards their public spending.

Technology

Advances in technology are changing the tax environment in NYC because the flourishing of the digital economy. Technology is already offering tools to tax managers and policymakers in the Department of Finance to observe and monitor individuals and transactions, but those technologies are old, complex, and there is not enough human capital in the city government to develop this type of technologies.

NEXT STEPS

Partnership with NYC

We will aim to meet with all city councillors in New York that are currently participating in the PB process over the next two months to pitch our proposal and receive their suggestions and feedback. We will also ask them for further networking opportunities with volunteers and staff members that have worked in the past PB project gathering and voting processes to seek their advice and feedback on our proposal. Ideally, we hope to partner with the NYC Council to be the 2018 partner in the PB process.

Our Team

Luis is currently working with various stakeholders within the civic tech community from NYC and the OpenData sector around the world, he will be in charge on delivering a detailed plan of action for the next months. Andy has web development experience as well as political lobbying experience. We will seek to recruit another co-founder with programming/coding background that can help guide the project on the major database and software engineering challenges.

Funding

We hope to apply for various start-up challenges in the 2017/2018 year with our idea that can help us land opportunities with potential investors or grant funding. By end of year 2017, we hope to secure $50,000 funds to help cover costs associated with hiring student programmers/coders to help us design the initial prototypes. Ideally, we expect to be entirely self-sufficient with our initial product launch by signing a contract with the City of New York.

Future Growth

As more and more municipalities start to experiment with PB, we believe we have an edge over potential competitors once we can demonstrate the effectiveness of our product and service in New York City. We will aim to expand our services to five major US cities by 2020 and at least 25 major cities in North America and Latin America by 2025.

Showcase

We will present the project in the next Open Government Partnership (OGP) 2017, as well as in the Participatory Budgeting Conference 2017. We think that our project is also of interest to all the fiscal-taxation community. While innovation and openness in the public spending seems to be an ongoing process, on the other side of the fiscal policy (taxation systems) are practically the same: no innovation nor openness. Not enough people are thinking how to collect taxes in the 21st century or how to use technology for that purpose. That is why engaging in a democratic processes and through technology taxpayers with their governments is something necessary in our modern societies. We also want to promote a solid movement towards innovation in taxation to have more fair and efficient fiscal policies.

REFERENCES

Smith, Graham (2005): Beyond the Ballot. Democratic Innovations from Around the World. Available at:http://www.soton.ac.uk/ccd/events/SuppMat/Beyond%20the%20Ballot.pdf

Gilman, Hollie (2016) . Democracy Reinvented: Participatory Budgeting and Civic Innovation in America (Innovative Governance in the 21st Century). Brookings Institution Press.

Beth Noveck (2010). Wiki Government: How Technology Can Make Government Better, Democracy Stronger, and Citizens More Powerful. Washington, DC: Brookings Institution Press.

Rajani, Rakesh (2010). Capacity is political, not technical: The Case of Hak iElimu in promoting accountability in education in Tanzania. Available at: http://www.africa-platform.org/resources/public-accountability-capacity-political-not-technical-ase- hakielimu-promoting

APPENDIX

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