Should local government make a profit?

This is part of the ongoing conversation happening right now at the Memphis Boot Camp. Follow us on twitter at #MEMbootcamp or at www.Memphis2014.com.

The very notion is abhorrent to think about. Of course government does not make a profit. Government is about serving people. It is about maintaining streets and parks. It is about job creation and economic development. Local governments should not be in the business of making a profit.

Profit is for companies like Wal-Mart. A company like Wal-Mart has revenues and expenses. Their revenues must exceed their expenses, an accounting term that is called “profit”. We are comfortable with this.

What about an orphanage? Should an organization that cares for abandoned children – the most vulnerable among us – be concerned with making a profit? They have revenues. They have expenses. For the orphanage to stay in business, their revenues need to exceed their expenses. The orphanage, in short, needs to make a profit.

Cities have revenues. Cities have expenses. If a city’s revenues do not exceed their expenses, a city doesn’t go out of business. No. What happens is that things go bad. And people get hurt.

If cities want to do good – if local governments are to be a force for helping humanity improve our collective condition – they have to stay in business. They have to run a profit.

Today. Tomorrow. The next day. Forever.

The long term financial health and solvency of the city must be central to every investment discussion we have. Profit is not something the city of Memphis should seek to maximize at the cost of other goals, but solvency is a prerequisite for everything we want to do.

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