Is the City of Tucson in the Business of Selling Insurance?

Every household receives a lot of mail.  We rifle through this stack separating it into two piles: the mail we want or must deal with – bills and official notices – and ‘junk mail,’ usually made up of advertisements and promotions from businesses in which we are disinterested.

But what if you receive mail that looks like this:

It is a letter in an envelope with the City of Tucson’s logo.  It is typed on City of Tucson letterhead.  And it is signed, “Sincerely, City of Tucson.”

But it is in fact a letter from a private company selling a warranty product of your home’s water and/or sewer line that runs from the public utility connection to the home.

After weeding through the series of statements such as, “The City of Tucson has authorized [Service Line Warranties of America] to be made available to homeowners,” and “endorsed by the Tucson Mayor and Council” as well as the official City seals; no one could blame a homeowner for being confused.

Or irate.

Surely this is a scam. After all, how could the City of Tucson approve such a advertisement or be allowed to endorse a product and use the City’s logo like they are a professional athlete hawking sneakers?  Are they in the insurance business now?

It turns out this is completely legal, and Tucson isn’t the only municipality that has entered the endorsement business. In the last six years over 400 cities across the country have begun renting their logo out to private companies and endorsing products.

The city of Tucson has collected approximately $500,000 from their own agreement with the insurance provider.  The majority comes from the leasing of the logo, but the city also receives a kickback of 50 cents on every enrollee with 13,000-15,000 citizens enrolled in the program each year.

The idea for local governments to enter the endorsement business came from the National League of Cities and Towns, where a nationwide agreement exists between Service Line Warranties of America and the League to peddle this idea to all their member cities. Lest anyone thinks this is an altruistic endeavor on their part, the National League receives their own kickback for every policy sold.

Suffice to say, there are several reasons this practice should be outlawed immediately by the state legislature.

Government should NEVER endorse any product or service.

The substantive problem with this endorsement is not the product or service being sold, it is the government’s role in endorsing any product, service, or company to its constituents.

Our interactions with government usually include a coercive element.  The choice to pay our taxes or follow the law is not voluntary. That’s why whenever we get a letter in the mail from a government entity – we open it.

Contrast this with our relationship to entities in the free market.  They are completely voluntary.  Private companies are free to advertise, convince, and negotiate with us all they want.  And we are completely at will to ignore, engage, purchase, or renegotiate with them.  We throw away letters in the mail from businesses without even a second thought.

Governments mandate and private companies market.  For one to do the other is a fundamental erosion of our system and leads to corruption.

Just imagine if you received a letter with the seal of the Internal Revenue Service emblazoned on the front promoting a tax preparation program from H&R Block that has been endorsed by the IRS.  Even if the IRS didn’t send the letter itself, does anyone think this is a good idea?  Audit fearing taxpayers would be forced to wonder if they should continue to use Bob the accountant or switch over to the IRS’s preferred vendor.

Federal government has laws and codes strictly prohibiting their agencies and public officials from “endorsing,” giving “preferential treatment,” or giving “governmental sanction” to non-federal entities.  The fact that the State doesn’t have similar restrictions is baffling.

Picking winners and losers.

This policy also puts the government in the position to pick winners and losers.  They decide which businesses and which services will be allowed to use their logo for profiteering.  This is a very slippery slope.  Not only are they giving some businesses an “edge” in the marketplace, but they are using their authority, credibility, and public trust to “persuade” their citizens about what services or goods they should buy.

Hopefully this practice will end soon.  Representative Todd Clodfelter (LD 10) has drafted legislation this year to prohibit the State and all political subdivisions from promoting or making endorsements of non-public entities.

After all, government logos don’t belong to the government, but to taxpayers.  Seals are public property meant to convey only official government business.   It undermines and diminishes the very integrity of a government seal when we allow it to be sold to the highest bidder.