A city's budget first assigns a value to all those things we need & want; then proceeds to choose which of those things we are willing to give up in order to afford as many of the things we want. It is for this reason that it is of vital importance to have a current and valid GENERAL PLAN that grounds our city's values, enlists its priorities, and sets down a vision of what success for our community looks like. Otherwise, how can we measure progress?
In March of this year, Strong Towns released a "financial decoder" intended for anyone to plug the values from their city's financial reports and get a general picture of its fiscal condition. Its main purpose is to provoke a conversation about our city's economic reality, Can you see how former decisions moved our city towards a more resilient financial position? Are we taking on too much debt, making it more difficult for future generations to weather potential turbulent economic times?
Needless to say, we downloaded the available Financial Statements (only 10 years out of the 20 years listed are available for download) from the city's website filled the numbers - If anyone feels the need to check our results, please share them with us. We will happily amend and update this information as needed.
Results
What we learned is not new. For the first 10 years, the city appears to have held strict fiscal discipline; at the expense of maintenance and basic services. Then, as a consequence of this, it had to engage in large deficit spending to build new and maintain aging infrastructure; a trend that continues today. To be clear, deficits are not necessarily bad - they are a financial tool that when used properly can be beneficial to the city.
How do we know if deficits are good or bad?
Things can only be said to be 'good' or 'bad' if they work for or against the common good respectively. This is why it is especially concerning when our city continues refrain from adopting an updated GENERAL PLAN. Without a valid guiding document, the city is left without restraint as it engages in deficit spending; who can say if the behavior of decision-makers aligns with or against the common good? Left in a state of ambiguity, they can claim whatever they want - but the general public has no choice but grow concerned about growing deficits.
A few key points should help you understand the trend lines shown below:
- The city adopted its General Plan in 2005, which states that it ought to be updated every 5-years. 20-years later, it is obviously obsolete. The current administration has halted all efforts to adopt a new one - while at the same time engaging in deficit spending.
- Before 2014, the city had no outstanding long-term debt. The financing of City Hall triggered the need to issue our city's first sales tax bond.
- 2015, The city decided to withdraw from county services for public works - at first the council tried avoid the expense of creating a massive new department, and instead; hired a professional firm to handle snow removal and other public work projects (terracare). Later, in October 2016 and after public outcry, the council reverses itself and decides to in-house its Public Works Department. A sales tax bond is issued.
- The city is found to have deferred maintenance of vital infrastructure for more than 15 years. Damages to homes from flooding in 2019 triggers the need for the city to issue a substantial fee to pay for necessary maintenance work the failing stormwater infrastructure requires.
- In 2022, the city decides to build a public works building. An sales tax bond is issued.
- March 2023, the city purchases the Hillside Plaza; issues a sales tax bond.
- November 2024, the city approves its largest bond to date. A $30-million General Obligation bond to initiate the public-private "City Center" project. A general obligation bond is yet to be issued (2025).
Deficit Spending - Is the city spending more than it earns?
The city early years of tight fiscal discipline went the way of The Dodo in 2014 and under the current administration our fiscal postion has nose-dived. Admittedly, debt is sometimes a necessity, but such expenses must be justified against stated long-term goals. By 2014, our city's General Plan was already long overdue for an update.
How Much of the Budget is Spent on Interest?
Less than 10% of our city's budget is not a number that might trigger much concern. However, we are certain to continue to see the rapid upward trend as the city begins to make payments on its new City Center Bond in the coming year. The erratic curve might also be representative of poor Strategic Planning: without certainty of what we need versus what we want, the city might be finding itself at the mercy of impulse shopping.
Are We Taking Good Care of our Infrastructure?
There city began investing heavily in maintenance and replacement of aging infrastructure in 2014. So far the numbers show that we are doing a fair job. What should be of concern is the fact that two of the largest buildings (City Hall and the new Public Work's building) have yet to get to the point where they need much maintenance work (a new roof, leaking pipes, etc) Eventually those expenses will add to the burden currently expressed in this chart. Will our city be ready to pay for these maintenance expenses without needing to issue new debt? As it was shown above, our city is currently engaging in deficit spending and adding to the expense of servicing debt. These two key issues make it less likely that future generations will have the funds to pay for these expenses.
Final Word - moving CH Froward?
For a local government to do its job well, it must be financially solvent. For a local government to be financially solvent, its revenue from taxes and utilities must be higher than the expenses to maintain its liabilities. For cities to function properly, running a surplus and remaining financially solvent is essential. When a city is prosperous, proficient, and prudent, it’s well on its way to enduring, which is a city’s primary goal.
An insolvent city doesn’t cease to exist. It will linger on, performing its functions poorly and failing to serve the people it governs. If we want to make wise decisions that keeps us on the path toward financial solvency, we have to start by making a long-term plan, do the math, and consider the long-term implications of our decisions.
So, what can we do to ensure that the projects we say “yes” will keep us on the of financial solvency in the future?
- First, we need an updated General Plan: In order to hold our local officials accountable we must first agree on a document that defines what success is. Then we can argue about how we can best get there.
- Do the MATH: Even with a good target in sight, we need clear accounting and a transparent narrative that communicates clearly how each public investment project adds to the long-term prosperity and sustainability of our community. Failure to do so, puts us in danger of flying blind into financial ruin.
Lastly, the strength of a democracy resides in the inclusion of diverse (sometimes contrary) opinions, weighing in as equal participants throughout the decision making process. Any efforts to exclude community voices is contrary to this democratic principle.
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