Corrupt city governments: is Norman one?

Matt Taibbi narrates the story of Birmingham, Alabama and how it got financing to build a sewer plant. In short, banks paid a middle man who paid off corrupt commissioners. In return, the city put itself in hock for far more than it could afford. The commissioners have gone to jail, but the banks got off with fines that are so small that they are less even than the fees they got on the deal. The story ends with a classic Taibbi screed:

The city of Birmingham was founded in 1871, at the dawn of the Southern industrial boom, for the express purpose of attracting Northern capital — it was even named after a famous British steel town to burnish its entrepreneurial cred. There's a gruesome irony in it now lying sacked and looted by financial vandals from the North ... These guys ... find suckers in some municipal-finance department, corner them in complex lose-lose deals and flay them alive. In a complete subversion of free-market principles, they take no risk, score deals based on political influence rather than competition, keep consumers in the dark — and walk away with big money.

The Norman city government has been going around trying to raise bonds to build all sorts of things -- everything from parks to schools to bridges. And in the last election, they did refinance the stuff to a long-term, fixed low-interest rate. On the surface, it sounds like the opposite of what Birmingham did -- prudential refinancing and not any complex swaps. But is it? Another memory gives me pause.

Taibi's story also talks about "consulting companies" that essentially get paid by banks. They then go out and bribe city commissioners to purchase the banks' services. And this is what reminded me of something: when Norman wanted to build a new library, they went out and got a consultant who'd had experience designing libraries for other cities.

I volunteered to be on the city committee to advise them on the library -- my aim was to ask why we needed a new library in the first place -- we're quite happy with the existing library and any extra money could go towards a better collection. Imagine my surprise, when at the first meeting, the citizens on the committee were told that the question of whether the city needed a new library was "settled" and we couldn't address it. Instead, we were asked to put down what we'd like to see in the extra space the new library would have. And a few weeks later, our list came out as part of an advertisement on what city residents wanted in a new library -- with no mention that we didn't get to sound off on whether we'd want a new building in the first place. Voters voted down the new library building anyway (luckily).

With the new information about how these consultants work, the whole episode strikes me as being incredibly suspicious.