Why City Councils Canât be Publicly Traded Companies
A short essay by Ben Relko
City Councils are effectively entities which receive funding from two sources:
1. Taxes, rates, bills etcetera
2. Government funding (state and federal)
In the case of publicly traded companies these companies have one primary objective; and that is to maximise shareholder value; that is, to increase the stock price as much as possible. If city councils were publicly traded companies then the only way they could increase profit would be to either increase taxes (the easiest method) or apply for more government funding (a method with a most likely lower success rate).
If the publicly traded council were to raise taxes this would force residents out of the city and thus the council would receive fewer taxes, leading to fewer profits and then a decreased share value (meaning company failure).
If the publicly traded council were to get increased funding from the government profits and share value would rise (if the publicly traded council were hypothetically successful in receiving government funding for the cause of raising their companyâs profits).
Here the problem though, all (if not most profits) would have to go to shareholders (in the form of raised stock value); also, the council would have minimal funds to pay its workers or upgrade n infrastructure/increase policing etcetera. All of these things would lead to a decreased quality of life. This, along with the increased taxes would drive residents out of the city in droves; with no one around to pay taxes and the government refusing to give funding to a soon to be ghost-town; the âcompanyâ would fail, its âprofitsâ would drop and shareholders would sell out, thus making it a failure. This is a description of why city councils cannot theoretically be publicly traded companies.
A short essay by Ben Relko
City Councils are effectively entities which receive funding from two sources:
1. Taxes, rates, bills etcetera
2. Government funding (state and federal)
In the case of publicly traded companies these companies have one primary objective; and that is to maximise shareholder value; that is, to increase the stock price as much as possible. If city councils were publicly traded companies then the only way they could increase profit would be to either increase taxes (the easiest method) or apply for more government funding (a method with a most likely lower success rate).
If the publicly traded council were to raise taxes this would force residents out of the city and thus the council would receive fewer taxes, leading to fewer profits and then a decreased share value (meaning company failure).
If the publicly traded council were to get increased funding from the government profits and share value would rise (if the publicly traded council were hypothetically successful in receiving government funding for the cause of raising their companyâs profits).
Here the problem though, all (if not most profits) would have to go to shareholders (in the form of raised stock value); also, the council would have minimal funds to pay its workers or upgrade n infrastructure/increase policing etcetera. All of these things would lead to a decreased quality of life. This, along with the increased taxes would drive residents out of the city in droves; with no one around to pay taxes and the government refusing to give funding to a soon to be ghost-town; the âcompanyâ would fail, its âprofitsâ would drop and shareholders would sell out, thus making it a failure. This is a description of why city councils cannot theoretically be publicly traded companies.
