How to Teach Council Candidates About Finance
August 30, 2016 – Charlie Francis
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Municipal elections may be coming to your city in November! In my career, I learned to get out in front of City Council candidates by publishing a booklet of financial information. I organized the material as a catalogue and gave it to each candidate when they filed their nomination paperwork with the City Clerk.
Why did I take this extra effort?
Well, simply put, campaigns often involve a mixture of financial facts, non-facts, half-truths, downright lies, and/or innuendos. My motivation was not to prevent politicians from saying what they must to win an election (nobody can do that!) More specifically, it was for brand management. I was projecting and preserving my personal and professional brand as a chief financial officer; and the City’s finance team’s brand as financial strategists, providing timely and accurate financial information to create, enable, preserve and report financial value.
But rather than go through a list of bullet points, let me illustrate the benefits of proactively informing City Council candidates through an imaginary debate of City Council candidates answering the question:
“Is the City well-managed financially right now? Why or why not?”
- Fred Feeling: With the figures I have seen in the past month, I don’t feel the city is being well managed financially. I feel this is something we need to watch and possibly have a committee to help the council understand and watch the budget.
- Velma-Informed: Yes. The city received a clean bill of health from the Independent Auditor. Additionally, the city has a good credit rating. The city’s expenditure budgets have risen a small 1 percent to 2 percent over the past few years. We are not overspending but instead are limited by flat revenues and property tax caps plus other factors such as higher health insurance costs, lower gas taxes, etc. These factors concern me as they make meeting the city’s financial needs more challenging. City government has not added employees the last several years except in the utilities which are funded by ratepayers.
- Don Riddles: That has been the perplexing question the last four years. We have CPA Controller telling us one thing and the former finance chair saying the sky is falling.
- Kristen Knowsitall: Yes, the city is well managed financially, as reflected by our bond ratings and reports from the Independent Auditor. The city earned unqualified (clean) opinions from the Independent Auditor in the last two years’ reports. This was a significant improvement over the report from 3 years ago in which the Independent Auditor issued no opinion on city financial statements because accounting records were not properly maintained. Revenue will continue to be a challenge for the City due to property tax caps and other unexpected events, but the city has appropriately managed expenses where it could due to the shortfalls. We can make our bond payments, and are actively pursuing ways to increase the property tax base and other revenue streams. The city has lived within, and below, the budgets set by the City Council.
- Vincent Vague: City spending has remained flat in recent years and the current Mayor has done an excellent job spending less than the City Council has budgeted. However, tax revenue has declined which means we must be vigilant in finding efficiencies and cutting costs.
- “Pops” Icle: The administration has consistently spent more in each of its three years than it has taken in, using its reserve funds to make up the deficit gap between its expenditures and its real revenue. This year is no different! The actual revenue to run the city in next year will be $80 million and the projected expenditures are currently pegged at $87 million. The reserve funds applicable for city operations are melting like a Popsicle in the hot, summer sun! Last year, the administration touted a “balanced budget.” It was not. … and it still is not. The vaunted, promised “Spending Plan” has not shown up; and our present path is unsustainable.
- Rosy Outlook: The city is being managed quite well. Property tax caps plus the ever increasing demand from the public for more and better services make it a difficult task to run a City. The current Administration, even with all of these limitations, is doing a remarkable job.
- Candidate Karl Kareful: We need to do a better job of prioritizing projects and pay closer attention to our revenue sources. In private business, we know better than to spend nearly all of the money we make. We keep a cushion. We know that emergencies can occur or our business could take a downturn so we are careful with our spending. In the city, we need to separate what we “need” to do from what we “want” to do and always keep in mind what our fund balances are. We need more careful financial management and a more conservative spending approach.
- Number Kruncher: No. We must look at the present conditions: The Downtown hotel started out with $38.5 million in subsidies, then capped at $20 million in subsidies, the date of construction has changed a few times, the building is now smaller with reduced amenities and some would even argue reduced quality as well. The Downtown Theatre has an annual operating deficit of about $700K before capital expenses. The arena is over its bricks about $600K every year on top of a $8.2 million bond payment. The zoo runs at $3.2 million upside down in operating costs and needs about $40 million in funding. A city budget discrepancy of $7 million and an estimated cost of a medical school of $3.5 million. All of these goals are great but the city has no clear plan of completing these projects or keeping them going once built nor resolving the debt.
- Reasonable Assurance: I feel confident in the current administration and how they are handling the finances. Recently, the S&P gave the City a good bond status rated the City as one of the best places to do business.
- Stu Ward: I do not believe the city is managed financially as well as it should be. It is a fact that the city’s cash balances are declining, but the current City Council, controller and mayor share the blame. Revenue has been overestimated and big ideas have taken precedence over our streets, upgrading our sewers and ensuring our city is safe. Moving city funds between accounts speaks to the trouble that potentially exists. It is crucial that we address the problem that has been identified. We must be better stewards of the taxpayers’ money.
- Tee Party: No. Every administration, either Republican or Democrat, since I have had the opportunity to vote has gambled our city’s finances on one big pet project to “revitalize” the city, but they continue to ignore our citizens’ day-to-day needs. Our sewers have been neglected to the point of the federal government getting involved, our parks are in horrible shape, our roads need more attention, as well as blight and the increase in crime/violence we have seen in recent years.
- Abner (“Ab”) Sent: Did not respond.
A financial management handbook for City Council Candidates and Members could have enhanced this debate by grounding the conversation in a common understanding of financial management and realities.
Download a complimentary template financial management handbook I wrote! You can adjust it to suit your government’s needs.
Charlie Francis is a municipal finance expert. He has more than forty years of local government financial management experience in both the public and private sector, including twenty years of experience as a Chief Financial Officer. Most recently, he served as the Director of Administrative Services and Treasurer for the City of Sausalito where he earned the unofficial title of “OpenGov super user”. He has also served as a finance manager for the Town of Colma, CA and as CFO and acting City Manager for the Cities of Indian Wells, CA and Tracy, CA.
Questions or comments? Email Charlie at firstname.lastname@example.org.
Category: Government Finance