'Surf City' may go plastic to bulk up local treasury

Issuing its own credit card could refill city coffers.

City officials see the idea as a creative new way to fund parks, libraries, seniors' projects, and maintenance, from sewers to potholes.

Opponents worry about the increased commercialization of public life, conflicts of government vs. private interests, and possible invasion of privacy.

This beachside community of 200,000 is planning a citywide credit card that officials estimate will generate $2 million annually. It comes at a time when local budgets have been cut – in Huntington Beach's case, by $950,000 a year.

Following in the footsteps of other corporate-community partnerships here – with Coca-Cola, Chevrolet, and others – Huntington Beach plans to issue a major-company credit card (Visa or Mastercard) carrying the "Surf City" logo. Residents who use the card will get discounts at area businesses, and the city will get a percentage of each purchase made.

That has been done before by non-profit groups. What makes Huntington Beach different – or at least pushing the envelope – is that the city would market the program in its official mailings. Beyond that, a city-related merchants club would also include participating businesses in advertising posters. And there is concern that, though it is not encouraged, the city will give information about citizens – from their activities to their addresses – to merchants who could use it for solicitation.

"The danger here is that we pay our taxes in order for public bodies to behave in the public interest," says Dan Ray, editor and chief of Bankrate.com, a financial information company. "To the extent that they are serving another master, they are no longer serving the public interest."

Mr. Ray says that pairing the list of businesses with their civic promotion crosses an ethical line.

But city officials contend that cultural programs, elderly projects, and maintenance have been socked by the recent economic downturn. State budgeteers in Sacramento have discretion in how much funds they give locales.

"I like this idea a lot because we are so restricted in raising funds in other ways," says city manager Ray Silver. Three citizens' initiatives since 1978 have dramatically cut into the traditional methods cities once used to raise funds: Proposition 13 cut property taxes, Proposition 62 required voter approval for new taxes, and Proposition 218 severely narrowed utility and licensing fees. "This is a win/win as far as I can see ... [It's] the next real innovative move for cities like us who have been caught in the budget squeeze."

The appeal of creative financing

Whatever its merits or potential drawbacks, the idea is already catching on elsewhere. Ron Hagan, the city's director of special projects, says he has been contacted by officials in Dallas, Miami, St. Louis, and San Francisco.

Ray Wickstrom, a Spokane-based consultant on banking and merchant cards, says he is pitching the idea to several communities in Washington and Idaho because it is a way for individuals to contribute to their own communities.

"For those that have a problem with this, I ask, would you rather have your taxes go up?" he says.

Not that everyone in Huntington Beach is united behind the idea or others like it. A few years ago, Coca-Cola contracted out 152 sites for vending machines in town. But some residents complained that those near a park were obtrusive because of ads glowing in a woodsy area.

The city gets about $600,000 annually from the Coke deal. Lifeguards here ride Chevrolet beach vehicles, provided in exchange for their prominent placement during civic celebrations.

But a recent editorial in the Orange County Register says, "It's wrong to use taxpayers' dollars and resources to market certain companies over others.... It opens the door to ethical questions when city officials can pick and choose credit-card companies that will profit."

Local officials shrug and ask for better alternatives. They promise judicious use of advertising and absolutely no sharing of private information about credit card users.

"We don't want to invade anyone's privacy or use their names inappropriately," says City Councilman Ralph Bauer. "It seems to me there's nothing wrong with encouraging people to shop in their own town because the tax comes back to them."

Until the City Council votes on the issue, some say as early as January, the debate in town will be about discretion and privacy, he says. "We will do whatever it takes to honor citizens' concern over privacy."

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