Washington, Copenhagen And Beijing Cities In Terms Of Financial Stability

While Washington D.C. is the capital of the United States, it is also a model for other major cities for its financial stability and fiscal health. Ranking 9th in the country, our nation’s capital and the city I call home is known for its great social service programs, affordable housing for low-income families, great public libraries and a growing intention of improving safety and education.

Mayor Muriel Bowser is a DC native who takes deep pride in making the city a great place to live and want to raise children. In 2016, the city budget totaled $11 billion, funding over 115 agencies including the preceding list of public services above. Mayor Bowser is praised by her financial management in comparison to former administrations. She has made it a point to collaborate with the federal government to share expenses on metro, federal roads and bridges and public schools. Bowser is risky, proposing budgets that focus on maintaining and growing low-income housing support, such as her “$10 million fund to preserve the city’s remaining stock of low-rent housing — on top of $100 million for an existing affordable-housing trust fund — and increase funding for homeless services by $15 million”. She wants to invest in the city, including the generational poorer families that have been gentrified, more money in dilapidated buildings and roads and schools (both public and charter). Taxes have increased and are the main source of gross funds, yet still remain on the lower side compared to most states.

The mayor and her administration, including the 8 ward councilmembers, based their annual budget and proposal on the statistics that show DC as a growing city attributing to its overall fiscal health. Ten years ago, the District of Columbia was unrecognizable. Besides commuters using metro to come from the Virginia and Maryland suburbs to their government jobs, the city was barren, drug ridden and unappealing. On several polls, Washington continues to rank in the top ten as best places to live/move to in the last two years. Fox ranked it 8th for its increasing opportunities in work, living and education. With its booming economy, local government has had more opportunities to put money back into the infrastructure of the city, schools and renovations on other projects. More folks are opening restaurants and other local businesses that are staying open longer than its previous 2-year average, and the city is only continuing to grow and develop.

The “FY19 A Fair Shot” operating budget for 2019 is proposed at $13.9 billion, a 3.7% increase from the current spending plan of $13.4 billion. It is also an increase of $408.9 million or 2.9% since the last fiscal year. In fact, because of how local government is utilizing funds, investing in the city, its residents and the future, it has the highest bond rating of a triple A plus from major rating agency, Moody’s Investors. The mayor and her constituents know that their “Fair Shot” proposal being approved as is will be an uphill battle; therefore, most of the 302-page proposal is a justification of those expenditures and a suggestion on how to fund each item. The only cost reduction component mentioned is the opportunity for agencies to merge and reallocate funds as such. A major initiative in the District is to better education across the board. Public schools, like in many major US city, are under-resourced resulting in some of the worst test scores (and thus lack of funding) in the nation. Critics say that while local government is pouring millions into education, highest in the country in fact, the results are still very poor. In last year’s fiscal budget, an additional $25 million was allocated to DC Public Schools. So where is the disconnect?

Infrastructure. Schools, even after they are funded, are still in non-desirable areas. With investments in parks, increased street lights and grocery stores moving into areas, this will diversify the population living in the city and encourage them to enroll their children into the local public schools. That is why the holistic approach to give the full picture of the needs of the city and how they are all interconnected matters. There are some investments however that will save money over time, but still have upfront expenses. I used to work for a subcontract for the Department of Energy and Environment in the District of Columbia, supporting the Clean and Affordable Energy Act of 2008, making a real dent in the overall energy expenses on the micro level in the residential and business markets. Moreover, this increase in energy efficient choices in lightbulbs, appliances and solar power will reduce the carbon footprint of the city, and is predicted to reduce the energy budget by 29.8% by the year 2022.

I also had the pleasure of sitting in on Mayor Bower’s city hall annual budget meetings, and she makes it clear that the health of this city is more important than the fiscal health of the local government. She also stresses that a strong, balanced budget is what continues to make DC a great place to live, work and play. People and families flee when there is no opportunity and Mayor Bowser makes sure that anyone that has invested their time in the District of Columbia will be taken care of as well. Across the pond, Denmark is known to be the happiest country in the world, which is why I chose to analyze the fiscal health in Copenhagen. The capital of Denmark continues to make smart financial decisions repeatedly. The city government is known be strategic, long before most countries realized it was necessary to make smart fiscal choices that would impact the future. Healthcare as well as higher education is free, increasing the overall average of intelligence and health of residents of Denmark. This contributes to the business acumen and technological mindset of the city on a whole.The city of Copenhagen is known to have an intermediate, decentralized government system with a Lord Mayor and chairmen of the standing committees. While the city certainly poses as a model for other cities regarding innovative solutions, research shows their real potential is rooted in their fundamentals of sound governance. Instead of needing to develop proposals, Denmark offers block grants on an annual basis to Copenhagen for the local government to negotiate how to spend it. The main expenditures are social protection and healthcare, similar to DC’s in the sense that money is supporting equality for all residents.

Over a decade ago, the “Act on Industrial Promotion” reform increased the role of local government in industrial and economic development. This strong local power has supported the public sector which is comprised of educated, driven citizens that want to help improve the quality of life in Copenhagen for future generations. Unlike the United States, Denmark offers tuition-free university for post-secondary students. There are US politicians, such as the infamous Senator of Vermont, Bernie Sanders, who has said on more than one occasion that the US should be more like Denmark. While tuition is free, citizens are still paying for it with their very steep income taxes of ~56% and sales taxes which can climb as high as 180% on vehicle tax.

Another way Copenhagen can keep a balanced budget is how the Danish view healthcare. In the United States, we are reactive — focusing on resolutions after a problem such as obesity or diabetes. In Denmark, they are more preventative and integrate their overall health into their daily lives. They bike more frequently, have nutritionists to support proper eating in a preventative manner and because of this are less prone to disease. Prescriptions are not covered, so they are more concerned on staying healthy. Since they are not covered and less people go to the doctors for reactionary purposes, Copenhagen can keep healthcare costs down without any major repercussions. Likewise, “childbirth in Denmark is overseen by midwives, which costs about one-fifth of what it does in the US,” another cost-effective alternative. Copenhagen is one of the biggest champions on green living, aiming to become carbon neutral by 2025. In fact, it is known as the “first mover on sustainable urbanization”. Everyone will have to commit to this, from residents to small business owners and public companies. This will help the overall economy by reallocating those energy funds into other parts of the budget that need more support. For the most part, the people of Copenhagen understand the opportunity and benefits this net-zero life will have on them. Like the US, this is not solely about LED lightbulbs and energy efficient appliances, this is about a pledge to improve traffic technologies by using solar power and wind turbines, supporting the infrastructure of the city by creating more bike lanes and bus routes and considering new fuels. Copenhagen’s long-term vision and concern for its people is truly unmatched. You can see how Denmark supports local government instead of combatting it. The deep care and concern of the people encourages everyone to contribute and thus all citizens benefit from a balanced budget and healthy, happy city.

Traveling 4,427 miles east to Beijing, and the picture looks quite different. “Beijing stands as the political, cultural and economic center of China, and is one of the country's most dynamic and competitive regions”. Beijing ranks 17th on PricewaterhouseCoopers’ Cities of Opportunity list and ranked number 1 in economic clout. Beijing has a solid industrial base and strong fundamentals in economics, making smart investments and innovative choices. This fiscal year, Beijing ranks tenth in the world, according to data from Oxford economics, with a Gross Domestic Product equivalent to $570 billion, a 43% increase since 2011. Beijing continues to focus on advances in transportation, electronic, automotive, biological engineering, bio-medicine and environmental protection to name a few. 20% of the city’s industry revenue comes from manufacturing. Exports are a major source of city funding as well as investments into real estate. Much of Beijing’s revenue is from its state-owned enterprises, comprising of 44 of the 79 Fortune 500 companies in China.

Along with the many banks, Beijing is becoming the financial center with its increasing global influence. This has garnered more interest in foreign investment, supporting municipal economic growth as well. Beijing has a mayor, eight vice mayors (one of which is a woman) and a secretary general. As a communist country, mayoral duties are limited and it is more of an overseeing role than anything else.

Beijing and Copenhagen are actually sister cities, a fact I did not know until beginning research on these countries. As anchor capitals in their regions, they aim to “play a better demonstrative and leading role in the local exchanges and cooperation”. In fact, the mayors of each city just met a week ago to convene their conversation about the integration of their urban plan. Copenhagen will help Beijing on their sustainable development projects and they will collaborate on cultural and creative initiatives. While the economy is growing, the city is facing some debilitating challenges. There was a significant drop in GDP from 2016 to 2017. For one, city revenue is not at pace with fiscal expenditures; in 2012, Beijing’s income grew by 12% but the expenditures were reaching above 15%. With the promise to increase social welfare such as healthcare, public education, and environmental education, government spending must rise too. One way China as a whole keeps costs down is with their one-child policy. This of course, leads to other issues that will need to be mitigated by social services as well.

All three of these “fiscally healthy” cities are major players in their respective countries as well as the world. Each has strengths and weaknesses that show up in different ways. Washington DC is striving for equality, Copenhagen has the luxury of focusing on future innovation and Beijing is reliant on export management all while maintaining a balanced budget. What is even more interesting is that all of these cities interact with each other and have the opportunity to collaborate and learn from one another. The question is, do they take anything away from these summits and conferences? It may show up differently based on governance and culture, but ultimately all of these cities have the same goal of caring for their citizens and growing their visibility and revenue in the process.