Letter from Washington — From the November 2018 issue

Blood Money

Taxpayers pick up the tab for police brutality

Download Pdf
Read Online

Over the past three years, the city of South Tucson, Arizona, a largely Latino enclave nestled inside metropolitan Tucson, came close to abolishing its fire and police departments. It did sell off the library and cut back fire-truck crews from four to three people—whereupon two thirds of the fire department quit—and slashed the police force to just sixteen employees. “We’re a small city, just one square mile, surrounded by a larger city,” the finance director, Lourdes Aguirre, explained to me. “We have small-town dollars and big-city problems.”

Almost half the population of South Tucson is below the poverty line, resulting in tax revenues so modest that the loss in sales tax from the closure of a local restaurant can significantly impact the overall take. But although the painful cuts may have saved the fire and police departments, one budget item could not be cut, can never be cut: the $600,000 in annual payments, two thirds of it interest, on the city’s bonds.

The origin of this obligation goes back to a July night in 1977, when twenty-four-year-old José Sinohui was driving his pickup down South Sixth Avenue and passed officer Christopher Dean, who was confronting a crowd of unruly youths outside a fast food restaurant. For reasons that were never satisfactorily explained, Dean drew his gun as Sinohui cruised by and fired seven .45-caliber bullets at the truck, one of which hit Sinohui in the back and killed him.

Following years of angry protests in the community, a judge ordered the city to pay Sinohui’s family $150,000 in compensation, a sum steep enough to cause South Tucson to lose its $1 million liability insurance coverage. Consequently, in 1980, when a jury awarded $3.5 million to the paralyzed victim of another police shooting, Roy Garcia, himself an officer who was wounded when a fellow policeman blasted away at a schizophrenic man barricaded inside a house, the city could not afford a down payment on the award and was forced into bankruptcy. After protracted negotiations with Garcia, the city finally opted to borrow the money. Turning to Wall Street, South Tucson solicited its first small contribution from the multitrillion-dollar municipal bond market, floating a bond worth some $1.9 million. No one ever asked the local taxpayers to vote on whether they wanted to be saddled with this obligation.

Having committed future generations to paying off this initial debt, the city council later compounded matters by resorting to so-called scoop-and-toss borrowing—paying off old bonds with the proceeds from new ones, like putting credit card debt onto another credit card. The obvious drawback to such a scheme is that each time repayment is pushed back, the amount of interest owed grows larger. With the first refinancing, in 1987, the debt grew to $4.5 million. Again, no one outside the city council was asked to vote on the measure, nor on the next trip to the Wall Street ATM, in 1990, nor on subsequent refinancings, in 1991, 1998, 2003, and 2007. With each rollover, South Tucson was obligated to cough up extra cash in the form of fees to underwriters, lawyers, bond insurers, credit-rating agencies, printers, the bank ensuring that bondholders received their money, the firm that furnished each bond with its identifying number, and other fees. Today, the seed planted by that long-ago shooting generates an annual harvest of $600,000 in interest and principal repayments to bondholders—the second-biggest item, after the police department, on the city budget. By the time the debt is paid, Aguirre informed me sadly, South Tucson will have paid $6.3 million in interest alone, out of a grand total of $13.9 million. That will not happen until 2037, fifty-three expensive years after the first trip to the bond market.

Illustration by John Ritter

Policing is a comparatively safe occupation, ranking far behind logging, commercial fishing, roofing, groundskeeping, and other civilian jobs in terms of fatality rates. Nonetheless, police culture appears to be imbued with the notion that officers’ lives hang by a thread at all times, thus justifying a violent response to anything they perceive as a threat, such as the eighty-seven-year-old Georgia woman hit with a taser this August thanks to a knife she was carrying to cut dandelions. Prosecutors and jurors generally accept this dubious presumption of constant peril, so officers can usually avoid punishment by testifying that they feared for their lives.

Accordingly, although police kill, on average, about one thousand people a year, of the eighty officers charged with homicide between 2005 and 2017, barely more than a third were convicted. But even when juries or prosecutors balk at criminal charges or guilty verdicts, victims or bereaved relatives are increasingly able to exact some financial satisfaction when overwhelming evidence is available. In part, this is due to technology. Ubiquitous smartphone, dashboard, and body cameras, as well as DNA-based checks on forensic evidence, which can reverse past frame-ups, have caused compensation payments to rise. A 2015 Wall Street Journal study found that the ten biggest police departments in the country had over the previous five years spent a collective $1.02 billion to settle cases that included shootings, beatings, and wrongful imprisonments.

Such payouts are generally thought to not only compensate for suffering but to serve as punishments for the perpetrators and deterrents to future bad behavior. This assumption certainly seems to be shared by ordinary citizens serving on juries in such cases. “They can’t get away with this,” declared Andrea Diven, a juror in a 2017 Chicago trial that awarded $44.7 million to a man shot and seriously wounded by a drunken officer with a record of violent behavior. “It’s something that’s embedded, and it needs to change.” She and a fellow juror emphasized to reporters that the enormity of the award was intended to send a message to the city to do something about errant police behavior. (The four cents awarded by a Florida jury in 2018 to the fiancée and three children of Greg Hill, shot by police through his garage door following complaints about his loud music, was presumably intended as a different kind of message.)

In theory, Diven’s supposition that the huge award should have a beneficial effect was well grounded. The concept of retribution for injustice is enshrined in Section 1983 of the US Code, which states that any person depriving another of his or her civil rights “shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.” (The law derives from the 1871 Civil Rights Act, introduced by President Grant to implement the Fourteenth Amendment and, more specifically, to crush the Ku Klux Klan.) According to ­the UCLA law school professor Joanna Schwartz, the law, as it relates to police brutality, is expressly directed at individual officers, in the hopes of improving their behavior in future. “That certainly has been the way in which the courts have talked about the effects of litigation,” she told me. “Their underlying notion is that these lawsuits are not only going to compensate [victims] but also to deter police from doing it again.” So deeply ingrained is this concept in legal theory that in recent years the Supreme Court has relied on the concept of “qualified immunity,” which essentially gives a pass to misbehaving public officials, especially law enforcement, so long as it can be argued that they were behaving “reasonably.” The idea, Schwartz says, is that courts will let officers off the hook out of concerns that “the financial threat, as well as the threat of litigation, will cause people to decide not to become officers, and will cause them to be overly timid while they’re on the job.”

In reality, Schwartz argues, the idea that delinquent cops are ever threatened with personal financial sanctions is “fiction.” As she concluded after studying thousands of cases from 2006 to 2011 in eighty-one law enforcement agencies large and small, individual officers paid just 0.02 percent of the $735 million awarded in suits against those departments. Furthermore, as she noted in a 2014 article, they paid nothing in punitive damages “even when officers were disciplined, terminated, or prosecuted for their conduct.” (As it happens, Christopher Dean, the officer who kicked off South Tucson’s problems, was a rare exception, and was ordered to pay $50,000 to the Sinohui family.)

Although individual officers are rarely on the hook, the police forces they belong to sometimes do pay a slice of the cost. But this money usually comes from a portion of their budget expressly set aside for that purpose, so, as Schwartz demonstrated in a later study, payments have no impact on department operations. If lawsuits end up costing more than is set aside in these special budgets, the city pays the excess, not the law enforcement agency. All too often, as in South Tucson, governments put it on the municipal credit card by issuing bonds.

In a blistering June 2018 report, the nonprofit Action Center on Race and the Economy coined a memorable term: “police brutality bonds.” Over the course of several years, ­ACRE researchers unearthed and detailed the increasing amounts that cities across the United States have had to borrow at interest to pay for pain and suffering inflicted by police. As with the South Tucson case, the costs can hang over a community like a curse for a very long time.

Beginning in 2004, for example, the city of Bethlehem, Pennsylvania, levied a tax on its citizens to pay off what was officially described as “the Hirko settlement debt.” Twenty-one-year-old John Hirko Jr. had been killed in 1997 by a local ­SWAT team who raided his house after an informant suggested that he was a drug dealer. Wearing no insignia identifying them as police, the raiders tossed a flash grenade through a window only moments after knocking, and shot Hirko multiple times, mostly in the back. The house, set aflame by the grenade’s explosion, burned to the ground. Although a local prosecutor ruled that the young man’s death had been justifiable homicide, the jury in a federal suit brought by Hirko’s family con­cluded that his civil rights had been violated. Then, just as the jury was about to begin deliberations on damages, the city hurriedly agreed to grant the family $7.39 million, almost a quarter of the annual budget. Not having the money at hand, the city issued a bond and levied an extra property tax specifically linked to the settlement and known locally as the Hirko tax. Ultimately, the city paid off the bond in 2015 with a final payment of $876,960. But this brought no relief to Bethlehemites, as the city government decided to keep the tax anyway, and used it to make interest payments on newer bonds it had issued in the meantime.

Other examples cited in ­ACRE’s survey include Fullerton, California, where in 2011 six police officers beat a homeless man to death with their fists and batons over the course of nine minutes and forty seconds. Even though an Orange County jury accepted the defense’s argument that the officers acted in accordance with their training, the city agreed to a $1 million payment to the victim’s mother, which came from the proceeds of a larger bond issued by the city. Hammond, Indiana, issued a bond in 2008 to pay Larry Mayes $4.5 million in compensation for the nineteen years he spent behind bars for a rape he did not commit. (He had originally demanded $1 million for every year he spent unjustly incarcerated.) As in other such cases, the city’s costs for locking up an innocent man went far beyond the amount of the award. In the formal legal statement regarding the sale, the city noted that it would be issuing “a second series of bonds . . . in an amount not to exceed $1,190,000, in order to reimburse the City for certain legal and related costs incurred as a result of this litigation.”

Even without such fees, borrowing money can be a very expensive way to pay for police misbehavior. Chicago, for example, raised $709.3 million in the bond market between 2010 and 2017 to settle claims such as the $5 million awarded to the family of Laquan ­McDonald, shot sixteen times—all but one while he already lay wounded on the ground—by police who then faked evidence to justify the killing. Commenting on the city’s hefty settlement tab, John Mousseau, a bond specialist who is the president of the money management firm Cumberland Advisors, calculated that with interest, “the final cost will be more than double that.” In fact, ­ACRE concluded, Chicago taxpayers will end up paying a staggering $1.7 billion on just these settlements.*

* According to ­ACRE’s research, Chicago resorts to brutality bonds far more than any other city. Los Angeles ranks second, having borrowed $71.4 million. New York City does not appear on the list, but only because data isn’t available for the ways in which the city pays its settlements, which amounted to $308.2 million in 2017 alone.

The ongoing cost inflicted by Chicago’s police is partly a function of the city’s shaky credit rating. In an era when the Federal Reserve has kept interest rates at rock-bottom levels—2 percent, currently—the “search for yield” is of paramount importance for investors. In this respect, police brutality bonds are no exception. A $225 million bond issued by Chicago in 2017 for the stated purpose of “settlements and judgments,” for example, carries a 7.045 percent interest rate. Fees exacted by the various financial institutions involved, beginning with lead underwriter Goldman Sachs, creamed off at least $1.8 million. This particular loan, it should be noted, was taken out in anticipation of future payouts to police victims, since Chicago mayor Rahm Emanuel pledged a few years ago that his administration would stop borrowing to make payments for police brutality settlements and judgments against the city by 2019. (On average, the city spends about $50 million a year in this way.) As Saqib Bhatti, an executive director of ­ACRE, explained to me, “It’s this convenient way for Rahm to be able to say, ‘Oh, we’re not borrowing anymore,’ but he actually just borrowed ahead of time. It sort of shows that there isn’t much of a plan to actually try to curb police abuse in the future.”

A high interest rate is a presumptive indicator that high-risk investors will not get their money back, which would be the case if Chicago went bankrupt. According to Bhatti, however, that view is completely unjustified. “The credit-rating system itself, when it comes to municipalities, is completely out of whack, given that the default rate is less than point-zero­­-zero-one percent for municipalities to default on bonds,” he told me. Furthermore, “Chicago, under state law, is not allowed to file for bankruptcy. Chicago cannot go bankrupt. So it means that actually Chicago is a very safe investment. Literally, if the state does not allow you to go bankrupt, that means that the city has to find a way to pay the money.” Despite being such a safe investment, though, cities are still at the mercy of credit-rating agencies, whose arbitrary power determines just how much money Wall Street will be able to extract.

As to who is actually supporting Chicago’s finances, including the brutality bonds, it’s shockingly clear that poor people, mostly black, shoulder an undue burden. ­ACRE bluntly termed this a “transfer of wealth from communities—especially over-policed communities of color—to Wall Street and wealthy investors.” Chicago, with its huge portfolio of brutality borrowings, presents a striking demonstration of this transfer at work. Not only do poor Chicagoans bear the brunt of police misconduct itself, but as taxpayers they must share in compensating the victims. In fact, they are actually taxed more onerously than their wealthy neighbors across town (who are, of course, less likely to be shot or brutalized by law enforcement). This striking example of racial injustice was laid bare in a detailed 2017 investigation by the Chicago Tribune, which revealed that the Cook County tax assessor’s office, which oversees Chicago, had for many years been routinely overvaluing homes in poor neighborhoods and undervaluing properties in wealthy ones. As a result, homeowners in lower-income neighborhoods such as North Lawndale and Little Village had been paying double the property tax rate levied on the more affluent residents of areas such as the Gold Coast or Lincoln Park.

Further compounding this disparity is Chicago’s heavy reliance on parking tickets and traffic fines as a source of revenue, collecting nearly $264 million in 2016—7 percent of the city’s operating budget. A recent ­ProPublica investigation revealed that poor black neighborhoods furnished most of that sum, not least because of the proliferation of cameras to detect red-light violations in these areas. The take for city coffers is additionally boosted by residents who have trouble finding the money to pay initial fines, which then balloon with late fees and even more fines, forcing many to chose between losing their driver’s license and going bankrupt. Fines for failing to display city vehicle stickers—which now cost $200, thanks to a steep hike introduced by Emanuel in 2013—are a major cause of bankruptcy among black residents of Chicago.

But there is another, and even more insidious, way in which poorer city residents pay for the behavior of lawless law enforcement. Schwartz quotes a former Chicago city attorney who told her,

When you had to budget more for [police] tort liability you had less to do lead poisoning screening for the poor children of Chicago. We had a terrible lead poisoning problem and there was a direct relationship between the two. Those kids were paying those tort judgments, not the police officers.

Screening for lead poisoning is a discretionary expense, which can be and often is deferred in favor of what are considered more urgent demands on the budget. Payments to bondholders, on the other hand, are absolutely mandatory: the unpalatable alternatives being default, bankruptcy, and “restructurings” of city finances and services by stonyhearted outside overseers. ­ACRE, which highlights the attorney’s quote in its report, cites further examples of how Chicago has cut essential services, such as mental health clinics, a disproportionate number of which have been shut down in the predominantly black South Side. Given that at least one in four—and perhaps as many as half—of all fatal police shootings involve victims with untreated mental illnesses, according to the Treatment Advocacy Center, this would seem a particularly shortsighted, not to say heartless, economy. School cutbacks (the school system is independent but relies on the city budget for funds) have equally disastrous consequences for poor black communities. In 2018 alone, Chicago has shuttered four different South Side high schools. As Miracle Boyd, a student protesting the closure of her school, put it, “Whether you kill us slow or kill us fast, you still kill us.”

There is therefore a tragic paradox underlying the entire process by which brutality bonds are issued and paid off. Investments in after-school programs, mental health clinics, and violence-prevention initiatives are sure ways to reduce violence and crime, and thereby reduce the perceived need for aggressive policing. But these services get slashed when their budgets are diverted to pay for the consequences of police misbehavior—costs that are exacerbated by resorting to bonds, and the inexorable interest payments they require. Police departments’ budgets, however, tend not to suffer in these cutbacks. Law enforcement spending across the nation has actually been steadily rising over recent decades. Thirty-eight percent of Chicago’s budget is consigned to law enforcement—$1.46 billion—a proportion exceeded only by Oakland, California, where 41 percent of the city’s spending goes to the police. (Tiny South Tucson’s current sixteen-person force consumes 40 percent.)

Overall, the United States spends $100 billion a year on its police, and another $80 billion on incarceration—three times what was spent on police and corrections forty years ago. At the same time, of course, violent crime rates have until recently been steadily dropping, a phenomenon that has had no discernible effect on the level of policing or mass incarceration—notoriously larger, by an order of magnitude, than other countries’, even those with higher crime rates. Given the phenomenon of brutality bonds, it could therefore follow that high police budgets are, in effect, a worthwhile investment as far as bondholders are concerned. They are a bet placed on increased levels of police violence that generate lawsuits and payouts, which ultimately lead to profitable investment products. Renewal of the process is further guaranteed by cutbacks required to service the debt, thus ensuring that underlying societal problems will endure and generate even more investment opportunities.

Ironically, efforts at reform—one driver of high police budgets—can actually boost the cost of police misbehavior for cities. Egregious cases will often generate a wide-ranging federal investigation by the Department of Justice that can stretch over years, identify deep-rooted problems in the relevant police force, and eventually lead to a consent decree by which the city agrees to clean up its officers’ act. But such agreements tend to be expensive. A DOJ investigation into the Cleveland police, for example, identified a pattern of using unreasonable force, including shootings, tasings, and beatings, often of the mentally ill. The ensuing agreement to end such behavior, city officials calculated, would cost as much as $45 million over the next five years. The city, which had already borrowed $12.1 million at hefty interest rates on the bond market to pay for settlements, has had to go deeper into debt to finance the cleanup, including $800,000 for mandated police body cameras­. Along with the added debt, the cost of reforms necessitated cutbacks in city services, including those dealing with opioid addiction and mental health.

If these costly reform programs led inevitably to improved policing, the expense might be justified. But the record indicates this is not always the case. The effects of Cleveland’s agreement with the Justice Department, for instance, were only temporary. Although police behavior, as measured by declines in lawsuits and settlements, tends to improve overall while such an agreement is in force, studies have suggested that it begins to deteriorate again once the decree is lifted.

This is not to say that efforts to improve police behavior are invariably fruitless. Requiring officers to exhaust all other means to resolve a situation before opening fire reduces killings by 25 percent, according to Campaign Zero, a nonprofit founded in the wake of the 2014 police killing of Michael Brown in Ferguson, Missouri. Rules banning strangleholds bring down killings by 22 percent. The culture of individual police departments, in terms of leadership and training, clearly makes a difference. Between 2013 and 2016, for example, police in Buffalo, New York, killed zero people, while police in Orlando, Florida—a city similar in population, demographics, and crime rates—killed fifteen. Schwartz pointed out to me that insurance companies, which smaller cities tend to rely on as cover for police settlements, have gotten results by threatening to pull coverage unless a police department demonstrates that it has taken actual steps toward improving its behavior. ­ACRE suggests, among other proposals for reform, that police officers should have to take out malpractice insurance, just as doctors do, and that local governments should be transparent as to which officers are provoking settlements, how much they are costing, and who pays. Fundamentally, though, the problem is that the costs of errant policing are cloaked, if they are mentioned at all, in the opaque legalese of bond offerings or tax bills. No official document links police violence to a lack of lead-poisoning screening for children, or to the interest payments to Wall Street that will take precedence for years and decades to come.

When I called John Mousseau of Cumberland Advisors to discuss the question of brutality bonds, I asked him whether that was really the way we should be paying for police misbehavior. “How do you justify taking the mistakes of today and giving them to the citizens of tomorrow to pay off?” he replied. It was a rhetorical question, but the answer was clear: it’s the way we do business.

You are currently viewing this article as a guest. If you are a subscriber, please sign in. If you aren't, please subscribe below and get access to the entire Harper's archive for only $45.99/year.

= Subscribers only.
Sign in here.
Subscribe here.

Download Pdf
Single Page
Share
is the Washington editor of Harper’s Magazine and the author, most recently, of Kill Chain: The Rise of the High-Tech Assassins.

More from Andrew Cockburn:

Get access to 168 years of
Harper’s for only $45.99

United States Canada

THE CURRENT ISSUE

December 2018

Close

Sign up to receive The Weekly Review, Harper’s Magazine’s singular take on the past seven days of madness. It’s free!*

*Click “Unsubscribe” in the Weekly Review to stop receiving emails from Harper’s Magazine.