Tag Archives: fiscal sustainability

Planning for Fiscal Sustainability

Posted on by

Introduction

We are continuing our series of posts on building a more sustainable community. This week we introduce a framework for long-range planning that can tie together the elements we have introduced over the last several weeks.

Context and Scope

The Government Finance Officers Association provides a good introduction to long-term financial planning. Their definition of long-term planning as a combination of forecasts and strategy is useful in the context of fiscal sustainability. Forecasts are our best educated guesses of how key economic and finance variables are likely to change. Strategy is simply considering how those forecasts may impact our goals and identifying actions to improve the chance we get outcomes we want. This is all easier said than done.

Every city has an annual budget process, but planning adds new dimensions and takes time. It requires more than just looking further down the road. It also requires a more open and transparent process where city staff can support local leader decision making and help the public understand the costs and benefits of different levels of public services.

Though planning takes time, any community can afford some level of forecasting and strategic assessment. The key is finding the right balance. One option is to include phasing the process in over a few years, adding more functions. Another approach is to do long-term forecasts for select departments every few years so that all city operations are addressed at least once every two or three years.

The most important factor is that long-term planning become part of the annual budgeting process. The forecasts can help assess risks and needs in the upcoming annual budget. The extra value comes from the longer-term forecasts and how their results can inform changes in overall financial policy. These forecasts can also identify the need be proactive with operating procedures and capital projects.

Key Elements of the Planning Process

Using the GFOA outline, here are our recommendations for how to set up a long-range planning process:

  • Time Horizon – five years is adequate for operational planning. Economic forecasts are unreliable beyond five years. If a community wants to consider longer term consequences they should identify a number of long-term scenarios with varying economic conditions and service assumptions. They can then simulate how these would impact their budget and key fiscal sustainability indicators.
  • Scope – The plan should cover all major funds. The general fund is the priority, but enterprise fund analysis can be just as important to maintaining the viability of those fee-based operations.
  • Frequency – Communities should evaluate at least some of their economic, revenue and operating drivers annually. This helps make the long-term approach a recognized and expected part of the process for decision-makers and the public.
  • Content – The plan should include all types of financial indicators discussed last week: economic and demographic, revenue, spending and operations, debt and infrastructure.
  • Visibility – The plan needs to be a highly visible part of the annual budgeting process. As we pointed out previously, community engagement is key to making these key decisions with public input.

Willingness to pay for services and decisions on priorities require solid public involvement up front. If not, a community may find it difficult to sustain those efforts down the road.

Engagement and City Staff

If communities are going to become more fiscally sustainable, dialogue is at the foundation of the process. We recommend community engagement at each phase of the process. Citizen advisory councils can help staff and local leaders communicate the complexities to the public. By carefully nurturing this translation process, city staff and local leaders can make sure that citizens can constructively contribute to the discussion.

Running a more open and transparent process may raise staff concerns. Staff may worry about their ability to deliver effective and efficient services if the public has greater access. The opposite may be true, however. Current budgeting practices wait too long to engage the public. Cities build a proposed budget and have a big reveal when elected officials and engaged citizens can react. This process involves too much confrontation and can feed public cynicism about government and bureaucrats. In the public reaction, sometimes the political consequences are that staff knowledge and experience is ignored and decisions are made based mostly on emotion.

That technical knowledge found in city halls across the country can be better used in a well-coordinated long-term financial planning process – if that process is inclusive and transparent. Staff can support public decision making with their skills and experience. They become like consultants to local leaders and the public in the planning process. They can help others understand the costs and benefits of short term budget decisions. They can also help local leaders understand the long-term consequences of major changes in the economy and city services, (or be the translators of that information if provided by outside consultants.) In this way, a more open, long-range planning process should strengthen the role of city staff, help local leaders make better decisions and lead to results that are more satisfying to the entire community.

Next Week

Next week, we begin a series of posts looking at some of the major causes of current city financial stress.  Axianomics can help your community implement a long-term financial planning process. Let us know what you want to accomplish.

Indicators for Fiscal Sustainability

Posted on by

Introduction

We are continuing our series on building a more fiscally sustainable community. This week we will look at standard fiscal indicators and how they can help local leaders make more sustainable fiscal and economic choices.

Broad Categories of Indicators

There are two broad categories of fiscal and economic indicators. The first category covers economic or social activity outside the organization. These include measures of community population, jobs and other economic and demographic indicators. These are important because they determine municipal resources through the tax base. They also influence need for municipal services and infrastructure spending.

The second class of indicators measure features of municipal operations and finance. These are internal or organizational indicators. These reflect a combination of policy choices by the city and the influence of external indicators.

There are many metrics in each category. Our review will focus on high-level, summary indicators. After starting with these high-level indicators, each community may want to identify more detailed metrics that are important for its circumstances.

Revenue Indicators

Most cities begin budgeting and planning by reviewing revenue performance and projecting future revenue. This is practical, but communities could just as easily start budgeting by looking at service needs. It would be an interesting experiment if a community were to begin budgeting with an ongoing engagement process similar to the one we discussed in recent posts. The goal would be to developed a budget that citizens were willing to pay for. This might support sustainability by starting with citizen willingness to pay rather than automatically budgeting to the maximum available revenue. Whatever process a city uses, key revenue indicators for sustainable finance include:

  • General operating revenue by source in total and per capita terms
  • Grant and other inter-local agreement revenue

Operational / Service Indicators

City revenue sources differ some from state to state, but spending priorities are similar. Public safety, parks, libraries, streets and other infrastructure dominate general fund spending in every city. Detailed studies of major programs can find potential improvement and efficiency opportunities, but tracking overall spending is a good place to start. Important service indicators include:

  • Growth in total and per resident expenses by function or department
  • Total employment by function and department

Operating Position Indicators

A city’s operating position means its ability to balance its budget on a current basis with current revenues. A sound operating position will support day-to-day liquidity and prevent a city from having to dip into operating reserves for ordinary expenses. Every city will experience periodic emergencies, but repeated drawdown of reserve funds is a sign of long-term structural financial problems. In these cases, a city needs to have a serious conversation with taxpayers. The community needs to decide if it is willing and capable of supporting current service levels or whether city operations need to be simplified. The most important operating position indicators include:

  • Total annual revenue minus total spending
  • Liquidity measured by ratio of cash and short term investments to current liabilities
  • Fund balances

Debt and Infrastructure

It can be helpful to citizens and decision makers to report debt indicators with key infrastructure indicators. This will improve understanding of the conditions of city capital assets in the context of debt capacity. Key debt and infrastructure indicators include:

  • Net debt per-capita
  • Total debt-service as a percent of tax base
  • Road, bridge and other asset conditions

External Indicators

There are many economic indicators that help local leaders understand what is influencing city spending and revenue. The most important to track are total population, total households, household income and jobs in the city. Central cities may also be interested in measuring commuting and other indicators of how their services are supporting nonresidents.

Fiscal analysts and economists have identified hundreds of potentially useful indicators. It is a good idea to start with a small set and learn what you can from them. Any community will gain important insights from the few listed above. For more detailed information you can consult the Government Finance Officers Association and the International City/County Management Association.

Next Week

Next week, we will look at the long-term financial planning process for fiscal sustainability. For more information on how Axianomics can help your community build and use a fiscal trend monitoring system, fill out our contact form.

More Community Engagement for Sustainable Planning

Posted on by

Introduction

Last week, we emphasized the importance of citizen involvement to build a fiscally sustainable community. This week, we focus on specifics to help local leaders and the public move away from reacting to day-to-day challenges and toward a longer-term discussion on priorities.

Stuck in the Present

Local leaders and the public will benefit from an ongoing two-way engagement. Currently, both sides tend to react to limited feedback. Local leaders mostly only hear complaints about specific service problems. Average citizens have a limited concept of municipal operations and tend to lump all public services under “government” no matter what level of government is responsible. For these reasons, current communication tends to support reactionary responses.

Elected local leaders get a general affirmation from success at the polls. Voter feedback is typically responding to high-level priorities promoted by the candidate. Municipal elections seldom depart from generic calls for fiscal responsibility, public safety or more economic development. It is difficult to communicate specifics while campaigning, so there is little detailed information on what exactly the voters are sanctioning the candidate to do. Typically council members and mayors begin exploring options once in office.

Professional city staff like City Managers, Department Directors have detailed knowledge on how to help elected leaders deliver on campaign promises. These staff, however are often overworked and struggle to maintain existing services. They spend much of their time “putting out fires” that are called out by public complaints. It is difficult for staff to have the time to maintain an ongoing dialogue with the public.

The public is also generally reacting to what they perceive as failures in a limited set of municipal services. Missed garbage pickup and slow street repairs are concrete experiences for citizens and can prompt a call or email to their council member or the city’s hotline. Unfortunately, the usual way citizens learn about the more arcane public policies is through a crisis. A good example in the media lately is the serious financial stress of public pensions such as the Dallas Police and Fire Pension Fund or the Illinois Teachers Pension Fund.

Even in circumstances where two-way conversation is possible, such as town hall meetings, the items under consideration are often only incremental changes in the budget. There are few instances where the public has the chance to reflect on long-term policies or discuss the overall vision for their communities.

Tools for Citizen Engagement

Building a community engagement process that shifts a city from reacting to proactive discussions about the future takes time. This is a cultural shift that will need to be implemented over the long-run. There needs to be education all around – for elected and professional leaders and the public. It is best if cities start with a specific issue or take advantage of the rare opportunities that come along with strategic plans or citywide comprehensive plans. Each community should thoughtfully explore how it wants to conduct the engagement process. Some helpful questions to ask include: Is this process for a one-time action like a city strategic plan or comprehensive plan or for ongoing feedback for a city service? Are citizen interests homogeneous or are there specific groups or neighborhoods that are more affected than others? What is the budget in terms of staff time and funding for conducting the engagement process?

With goals in hand, there are many tools for improving community engagement. One-way methods to communicate issues and options to the public include council briefings, reports on city websites (such as budget documents, performance measures or annual financial reports) and citizen surveys. Two-way methods include the notice and hearings process, town-hall meetings, focus groups and facilitated feedback sessions and social media.

Both one-way and two-way tools have a role to play. The important thing is to use the tool with the intention to shift the discussion to questions of long-term priorities and sustainability. This requires asking the public to consider the costs and benefits of city programs, services and investments. It also requires getting citizens to think explicitly about when those costs and benefits will happen. As examples, some choices have high up-front costs and offer benefits over the long-run. This includes investments in infrastructure paid out of current funds. On the other hand, using debt to fund infrastructure spreads costs among taxpayers today and in the future.

Everyday Language and Citizen Perceptions

Once cities select their communication tools, they can focus on the content. City budgets and operations are very technical. Successfully engaging the public means local leaders translating cityspeak into terms the public can understand. One approach is to recruit a volunteer community group to review presentations and reports to identify confusing terms and jargon.

The public also needs to understand the big-picture of city operations, not just the high-profile services they see every day. Police, fire, streets, parks and libraries are visible. The attorney’s office, fleet management and debt service are among the many mostly invisible city functions. Concepts like “overhead” are a useful term for summarizing support departments. Debt burden can be broken out by service area showing what past investments are being paid off. For example: 50 percent for streets, 25 percent for parks and 25 percent is for the new library.

Finally, local leaders can help citizens understand municipal services and finances in the overall context of local government. It is easy for tax payers to confuse what their money is funding. Simple summaries of total local property tax by school district, county and city government help citizens better appreciate exactly what they pay for municipal services. This can help citizens give good, specific feedback on exactly what is important to them.

Next Week

Next week, we will identify some specific metrics that local leaders can use to track and communicate the fiscal and economic health of their communities. For more information on how Axianomics can help your community start a community engagement process fill out our contact form.

Community Engagement for Fiscal Sustainability

Posted on by

Introduction

Last week, we looked at factors that influence local leader’s ability to put their communities on a more sustainable fiscal path. Today, we will look at how changing the public engagement process is essential to achieving better long-term fiscal outcomes.

Citizen Demands and Changing Economic Circumstances

The U.S. has a strong tradition of community input into local government decisions. Immediately after the American Revolution, local offices that were once appointed by colonial governors became elected positions. The New England Town Hall model practiced direct democracy even earlier. Historically, citizens participated in local politics by voting, campaigning or running for office, attending hearings and keeping up through the local press.

The current mix of municipal services came about through a long-term process of increasing citizen demands for government as the economy grew and changed. This took many decades. As the economy grew and became more complex with industrialization, communities across the country sought new city services: professional police and fire departments, better streets, water supplies and garbage disposal. City budgets grew with their local economies and the changing ideas about the appropriate role of government.

The scope of municipal services has changed very little in decades. Yet, economic and fiscal conditions are very different than in the era of growing local government. Today, many cities face ongoing financial stress. The reasons for this stress come on the spending and revenue sides of the equation. There are growing salary, benefit and retirement costs and a seemingly never-ending list of technology and equipment upgrades. At the same time, the tax base has stagnated, even in communities with growing economies. Growth in services, declines in manufacturing, internet sales and other factors have reduced the share of the economy subject to local taxation. In the face of these new constraints, demand for city services have not changed. Any hope of improving local fiscal sustainability must begin with new conversations with and among citizens.

Reexamining Demand and Costs for City Services

Many cities appear trapped in an incremental budgeting process. They practice an ongoing series of short-term adjustments to deal with what are long-term, structural challenges. The results gradually weaken city services, harm morale and recruitment and increasing citizen frustration. Incremental budgeting is a prudent strategy in good financial times. It slows spending growth. It also works during temporary downturns by managing painful cuts until funding returns to a growth trend. It is not a great strategy when communities face systematic financial stress. Incremental budgeting becomes kicking the can down as financial strain builds.

The solution is a deliberate engagement with the public that goes beyond the annual budget hearing. The challenge is to have conversations on priorities that help local leaders make tough decisions with the full support of their constituents and stakeholders. Local leaders need to begin a new community engagement process if they want to achieve lasting reforms. Historically, public participation in municipal finances was annual outreach for input on the proposed budget. That budget seldom represents a major departure from the previous budget. Town hall participation is usually very low. Programs facing cuts rally friend’s groups or neighborhood associations, but there is little real dialogue and the point of contention is simply a change in funding levels. There is no discussion of priorities in the context of long-term change. There is no really useful feedback to local leaders who what to build a more sustainable city.

Information for Change

The economy is always changing. Recent trends have been hard on local governments. Nationally, job and income growth is becoming more and more concentrated in fewer and fewer localities. Migration, rural to urban, and from north to south weakens the tax base in the cities losing businesses and residents. The destination cities face growing service demands and the risk of budget hangover down the road. State and national government finances are in little better shape so not much help can be expected from them. Cities need to develop a clear picture of their economic foundation and how that is changing. Local governments should be rethinking their services and operations with these long-term changes in mind.

Local leaders also need to develop good measures of the costs and benefits of municipal services. This is the only way to determine what a sustainable level of services might look like. Municipal services can be very technical, but this information needs to be collected and packaged in a transparent way so it can support a serious public discussion. Communities need this information to set priorities and identify when they need to look for alternative, lower-cost ways of achieving their goals.

Armed with this strategic economic and operational information, local leaders can start having conversations with their citizens. This type of engagement can change public perceptions of local government. The current approach wears down citizens and city staff and nurtures nothing but a mindset of diminished expectations. This can be demoralizing and wasteful for a community. When presenting a clear description of the long-term costs and benefits of city services, local leaders help citizens explore and articulate what is most important. The community can begin to feel empowered and in partnership with their government.

Next Week

Next week, we will take a deeper dive into community engagement and look at specific practices to build citizen participation and commitment. Part of the answer is helping citizens reimagine their role in creating a more fiscally sustainable place to live. In the meantime, let us know how we can help your community begin the journey to fiscal sustainability.

Macro Trends and Fiscal Sustainability

Posted on by

Introduction

Last week, we looked at definitions of fiscal sustainability or fiscal stress. Local leaders need to proactively choose policies that improve their community’s long-term financial health. Today, we will briefly look at four major trend areas that influence City Hall. Economic, demographic, political and technological changes create new challenges and opportunities for local leaders. Asking the right questions about trends in these areas is the first step to improving fiscal sustainability.

Key External Trends

Local leaders can have an important influence on municipal priorities, plans and operations. All these issues have implications for municipal financial sustainability. The choices local leaders make can change service levels and costs or alter revenue options. Making the right call on these issues depends on what is happening outside the municipal organization. Four important trend categories to consider include changes in: economics, demographics, politics and technology. Historically, these trends have changed the dynamics and influenced the costs and benefits of local policy decisions. Each of these four areas are extremely complex and deserve careful attention. What follows is merely an overview of some of the most important items, and what questions local leaders should address to their staff and other community experts.

Economic Trends

The most important items for local leaders to consider are employment and income of their residents. (Changes in their local business industry mix and sales are the second most important.) Too often local leaders focus only on the absolute levels of employment to gauge the health of their communities. Measures of family or household income are equally important. Further, it is also essential to look at how economic rewards are being spread across the community.

The distribution of income in a community matters for the tax base. Income growth in a narrow segment of the population is not as beneficial as improvements across the community. This is because municipal funding sources like sales tax and property tax do not grow proportionately with income. At a certain point, household spending and the size of homes reaches a limit. Beyond that point, family income growth goes mostly into non-taxable activities. In the same manner, as business activity changes, there may be gains or loses because sales taxes apply to only a small share of industries. In Texas less than a quarter of business activity is taxable.

Demographic Trends

The most important demographic trends are counts of households, total population and the age and education distribution of the population. Households are a better measure for fiscal monitoring because each household is a separate, independent economic unit. Families may be spread across multiple households. Total population is similarly grouped into households for economic statistics. Demographic variables influence economic conditions such as the size and location of markets. Other important demographic trends are responses to economic conditions. Better economic conditions lead to more in-migration, family formation and fertility. All these factors influence long-term community needs.

Political Trends

Local government takes place within the larger national and state political framework. Changes in policy at the higher level impact the spending and revenue options of cities and counties. Politics often follows long-term economic trends. The relative importance of different levels of government has changed over time. Before the economic and political crises of the early 20th Century, local governments spent more than the federal government. In recent years, state and local governments have increase their responsibilities slightly.

It is critical for local leaders to continuously engage their constituents. What are their thoughts on municipal finance and service levels? Local governments across the U.S. have been facing increasing pressure from activist citizens to reduce taxing flexibility. This action typically takes place at the state level. In some communities, it is through statewide referendum. In other cases, state legislatures are enacting legislation to limit local responsibility and flexibility.

Local leaders also face a continuous struggle to engage citizens. In an age where national politics dominates issues and social media dominates attention, achieving local fiscal sustainability is an even harder challenge.

Technological Trends

Technology influences the way municipal services are produced. New technology changes the relative prices of labor and equipment and the best way to organize a municipal service. Local leaders need to question whether or not new technologies are really an improvement, or just different. The proof is in how they change prices and effectiveness. Some lower-tech approaches may be better from a cost-benefit standpoint. Truly revolutionary changes are few and far between.

Two examples of revolutionary changes for city services include the steam engine and radio. In the mid-1800s, steam-powered fire engines finally gave firefighters the ability to contain major urban fires. This new effectiveness also lowered the manpower requirements of fire brigades. Cities moved quickly to create municipally-funded, full-time fire departments.

Radios dramatically improved the awareness and responsiveness of police patrols. As cities began to grow dramatically in the early 20th century, radio gave departments the ability to better coordinate patrols and dispatch.

Fire engine capabilities and police communications have been continually refined since, but many basic operating principles of these services have remained unchanged. Local leaders should ask whether proposed new technologies represent real cost savings or improvements in effectiveness. Or, are these new tools more of a fad.

Next Week

Next week, we will look at how local leaders need to engage the public as they proceed with reforms to improve fiscal sustainability.

Municipal Fiscal Health

Posted on by

Introduction

Last week, we noted how city sustainability has been made more difficult by prevailing financial and development practices. Before we can discuss solutions, we need ways of measuring fiscal health of a community. There is little consensus on these. The fiscal constraints cities face and their unique responses complicate accurate measures of fiscal health.

Constraints on City Fiscal Health

Before looking at a few specific definitions of fiscal health, we need to appreciate some fundamental constraints that limit local leader’s flexibility in making fiscal and economic choices.

Cities must balance their budgets. State laws require cities to approve balanced budgets. This forced discipline helps , but doesn’t always prevent, cities from making catastrophic financial problems. Cities, unlike the national government, can’t print their own currency. They may still fall into a trap of using debt to cover operating costs. Eventually this is unsustainable also because debt funding must be repaid from ongoing revenue.

City revenue authority is granted and limited by state law. States grant cities general and dedicated revenue options. In no case do cities have total flexibility on how they raise revenue. Most states permit their cities to levy a property tax and a sales tax. Some states permit other local taxes on income or business operations. States impose maximum tax rates and administrative procedures for raising revenue. It has been a trend for state legislatures to tighten these restrictions. For instance, Texas cities face the potential for a reduction in their property tax rollback rate from 8 percent to 4 percent in the upcoming 2017 legislative session.

It is hard for cities to escape debt through bankruptcy. Federal bankruptcy law requires a majority of each class of creditor to approve any debt resettlement. Further, the default judicial assumption is that cities can always increase taxes or raise fees – that they can always cover debt service. State policy also influences this option since states must explicitly give their municipalities permission to declare bankruptcy.

Cities differ in the expected scope of services they need to provide. Expectations on the type and level of services vary from state to state and across cities of different sizes. This often limits the options a city has in making financial decisions. Every public service has a constituency that is interested in its continuation. Cities do ultimately have a great degree of legal flexibility, but what they can accomplish in practice depends on how well they can engage their citizens and communicate both the costs and benefits of services. Then they may be able to secure public support for significant spending changes.

Many Concepts of Fiscal Health

Keeping the above fiscal constraints in mind, it has been difficult for practitioners and researchers to agree on a single definition of fiscal health. In reality, a single definition might not be useful in every circumstance. Some of these are more meaningful for internal operations and some are more useful for communicating with citizens. Others interest potential investors and bond rating agencies. Some of the common concepts include:

Fiscal health – the extent to which a city’s financial resources exceed its spending obligations

Fiscal strain – comes from a failure of the locality to adapt to changing economic and fiscal challenges

Fiscal stress – is a difficulty in balancing the budget (related to the potential for the city to raise taxes or fees)

Financial condition – depends on the relative level of city revenue to spending at a given time

Fiscal capacity – ability to generate funds from a city’s own revenue (measure of revenue autonomy)

For many of these, qualifications for health apply, including not regularly tapping into reserve funds or using debt to balance the operating budget.

Even these terms don’t share universal agreement. The common denominator seems to be the different emphasis each definition puts on the spending verses the revenue side. A financial problem can be solved by adjusting either. Some cities are in a better position to make various changes and that is the ultimate key to crafting a sustainable fiscal strategy. The policies of city management and other local leaders are they key variable to success. This includes the way cities respond to external economic conditions. If the local economy is strong, city leaders may be able to increase revenue somewhat and not damage the perception of the government or endanger economic development. When economic or political conditions make it hard for cities to increase revenue, the only solution is on the spending side.

Next Week

Most of the most important factors that influence city fiscal health are out of its control. These include national and state economic trends, (including federal monetary and fiscal policy) and long-term demographic trends. Local leaders must understand these trends and how they impact their fiscal and development choices. Making choices to adjust revenue or spending need to happen with an awareness of these external factors.

Sustainable Municipal Finances

Posted on by

Introduction

Cities and towns across the nation are struggling to maintain infrastructure and levels of service. These municipal programs were created and expanded to support wave after wave of new households after WWII. Most subdivisions and shopping centers were built to accommodate these new families. They were built to accommodate the peak of these families’ commercial activity. Those young founding families aged and their spending and economic activity changed. The municipal services needed and demanded by those young families are still in place. Many of those communities have changed so much that they no longer generate the tax base needed to keep municipal services running. Fiscal sustainability for cities comes from strengthening the tax base, but also from improving the efficiency and effectiveness of city services.

Municipal Financial Pressure

This last month, we engaged local leaders from across Texas through several state conferences. We participated in Texas Municipal League, Texas Economic Development Council and the Government Finance Officers Association of Texas. As expected, the topics were wide ranging, but a common thread ran through them all. Municipal financial sustainability is on the lips of panelists, speakers and attendees alike.

Communities across the state face growing inventories of aging and failing infrastructure. The scope of the challenge includes every component of municipal capital: streets, storm sewers, water mains, street lights, facilities, equipment and computer systems. Even the more prosperous communities have a growing maintenance challenge.

Likewise, municipal operations and staffing is a challenge. Municipal services need upgrades, and new technologies mean city staff need more advanced skills. Local governments have an older than average workforce and are competing with the private sector for many of the newly needed skills. Pensions and retiree health costs are a growing expense for many governments.

In recent decades, Texas cities, suburbs and towns grew and government finances grew with them. Cities built their infrastructure to accommodate this growth and design standards increased the scope and scale of many infrastructure projects. It is becoming clear that this pattern of growth has had consequences for the sustainability of local governments. Today, the economic foundation in many communities cannot support that level of municipal services.

Waves of Growth

The growth that benefited so many communities in the past, especially in the 1960s, 1970s and 1980s, took the form of adding new fully-built subdivisions. These communities were built quickly, at about the same time with essentially identical residential and commercial real estate. Their founding families were mostly at the same point in their economic life cycle. They bought the new homes and began filling them with children, furniture, appliances and clothing. This supported the large retail centers being built on the edge of growing cities.

Those founding families eventually entered a less spendthrift phase of life. The children left for college and jobs. The spending has decreased as retirement becomes a more pressing concern. The shopping centers that were built for peak use struggle to stay open. Many now present fading marquees, pot-holed parking lots and too many dollar stores.

This is not a new process. City neighborhoods have gone through these cycles for generations. The challenge today is that so much of our urban environment is experiencing this trend at once. Even more serious is that entire cities were built at the same time and now face across-the-board challenges as every neighborhood experiences this relative decline. This has consequences for the sustainability of our municipal governments.

For many years, the conversation among local leaders has been about how to grow their way out of this situation. Traditional economic development strategies are unlikely to make much of a difference for most communities. Most places are off the site-selection radar. Their challenge is to make better use of their existing assets, grow from within and focus on core municipal responsibilities. Aligning services to support a more sustainable economic model and better infrastructure management are the immediate concerns.

Next Week

We will continue exploring the evolution of local government services created to support post WWII growth and what cities and towns can do to improve their financial sustainability. In the meantime, sign up for email updates and let us know how we can help.