Creating a Digital Bridge for Municipal Fiscal Health

Creating a Digital Bridge for Municipal Fiscal Health

Recently, I was privileged to listen to Mayor Libby Schaaf, from the City of Oakland, California, deliver one of the most poignant speeches that I have ever heard. As she held up the city’s 600 page budget, Mayor Schaaf proclaimed, “this is the city budget – it’s the most important thing we do every year in government.” She described her multi-year effort to convert those 600 pages into “one elegant visualization” that communicated the city’s story of fiscal stewardship. Mayor Schaaf credits the significance of this moment for inspiring a new level of awareness within her team. By creating this digital bridge, both city leadership and citizens were now able to interact with government fiscal data in a more meaningful way. All involved were now able to see and identify challenges, red flags, and potential opportunities for positive growth with greater clarity.

Mayor Schaaf’s remarks left me with questions. What happens to the community that wants to transform its approach to fiscal discipline, but lacks the capacity and resources? How do you unlock the power of data to inform the leadership of a community on the brink of fiscal decline and reverse that trajectory? How do you bridge the gap between peers in government, making information accessible from one community to another so leaders can see how they stand in the delivery of public services, managing revenues, and infrastructure investments? Can data teach a leader to open a new dialogue on municipal fiscal health and sustainability?

I’m addressing these questions by developing an electronic Municipal Fiscal Health Dashboard for 150 cities across America, scheduled for public release in early 2016. The tool, and policy paper that will accompany it, are being produced for the Lincoln Institute of Land Policy in my role as a resident fellow of the Institute, to advance the Institute’s new campaign to promote municipal fiscal health. The project promotes the notion that a new ethos of transparency and governance can be created by empowering leaders of municipalities at every level to engage in data-driven decision-making in the critically important realm of municipal fiscal health.

Why is municipal fiscal health important?

Everyone in the world is the citizen of a municipality. Thus, municipal fiscal health is a strategic priority of ongoing concern on a global scale. The serious social, political, and economic impacts of fiscal distress are evident in Greece, Detroit, and Puerto Rico’s public declarations of impending insolvency: when a government cannot pay its debt or fund its operations, the consequences extend far beyond the bankruptcy filing. The costs of insolvency are often humanitarian, resulting from the failure of government to deliver lifeline services and underinvestment in infrastructure, ending with the gradual erosion of trust between citizens and their leader.

At any given time, countless municipalities across the world struggle with initial phases of fiscal decline that is not immediately obvious. Just as an assortment of puzzle pieces does not reflect the full picture until it is assembled, the fiscal narrative of a municipality at times makes it difficult to identify all the attendant factors leading to a crisis. Municipalities experiencing early stages of fiscal stress could be grappling with any number of structural factors that, absent identification and intervention, can result in a crisis. Examples can include:

  • Cash flow that barely covers the costs required to fund basic operations and services of government, as liquidity narrows on a consistent and recurring basis.
  • Eroding strength and diversity of the tax base, occasioning an over-reliance on unpredictable and unsustainable fees to meet expenditures.
  • An inability to make annual required contributions that are necessary to honor multi-year promises made to vulnerable populations of retirees.
  • Debt that is incurred at unsustainable levels to pay for roads, schools, bridges and other brick-and-mortar projects that are the heart of the community.

Transparency, knowledge sharing and a proactive stance of local leaders lie at the core of strong municipal fiscal health. Adding resources that enhance the capacity of leaders to identify, evaluate, and understand key data points that impact fiscal health improves the chances of achieving this goal.

The Components of the Municipal Fiscal Health Dashboard

The Municipal Fiscal Health Dashboard is an electronic tool that will help the leader of a municipality answer the following question: is my community fiscally strong enough?

The tool presents data for a cross section of all 50 states, featuring 150 U. S. cities, and was developed using the Fiscally Standardized Cities database (FiSC) of the Lincoln Institute of Land Policy. The tool visualizes local government data across more than 120 categories of revenues, expenditures, debt, and assets, for a 35 year time horizon for each FiSC city. Additionally, I supplemented the FiSC data with Comprehensive Annual Financial Report data gathered for all 150 FiSC cities, and selected demographic and fiscal data for all 50 states nationally, in order to provide meaningful reference points for comparison in key areas.

At present, it is virtually impossible to make meaningful fiscal comparisons among the nation’s cities due to major differences in how cities deliver public services, with some city governments providing a full array of public services, while others share that responsibility with a variety of overlapping independent governments. The unique methodology of the FiSC data accounts for these differences in local government structure, and supports the development of visualizations that allow governments to identify and reliably compare fiscal data across a sample of their peer municipalities.

The tool will provide leaders with several diagnostic options. By clicking a few buttons they can change how data is visualized, either as a stand-alone analysis for their municipality, or in comparative views against other cities, and the nation. Leaders will now be able to answer questions, such as:

  • What is the measure of per capita spending on public services over time in my municipality?
  • What is our most important source of tax revenue, and is it sufficient in view of our overall revenue profile as a municipality?
  • Have levels of federal and state intergovernmental aid changed over time in view of the ebbs and flows of our expenditure needs and liabilities?

A liquidity calculator within the tool visualizes derived ratios, and facilitates fiscal and demographic trend analyses, using Comprehensive Annual Financial Report data and other Census data. A municipal leader can also import any of their own data into the tool. This makes the tool useful for leaders of any municipality (even those outside of the FiSC cities) who want to measure, track, and assess data to gain a daily snapshot of the changing social indicators and core strength of the central funding source for all municipal activities: the general fund.

To facilitate ease of adoption and use, I am designing and building the tool with the technology resources of the Microsoft business intelligence platform. Any user familiar with basic Excel spreadsheets will be able to easily use the tool. It is also compatible with virtually any operating system, has mobile capabilities, and will be offered to municipalities at no cost.

Introducing a New Ethos of Transparency

The Municipal Fiscal Health Dashboard is more than just a tool developed as a service for government – it is an experiential research instrument that will demonstrate the power of one resource to shape a leader’s experience and vision for fiscal data transparency.

This project is unfolding at the center of vigorous national public policy initiatives, as well as conversations about the future of government fiscal transparency by key federal leaders, and countless local leaders. It speaks directly to a pressing regulatory priority, and presents a unique opportunity to advance this important conversation by doing something that has never been attempted: demonstrating the power of a tangible resource that makes transparency a daily part of fiscal governance and transforms the foundation of civic decision-making that impacts citizens across America.

The author acknowledges Jenna DeAngelo and Adam Langley of the Lincoln Institute of Land Policy for their contributions to the data collection process that has been integral to the development of the Municipal Fiscal Health Dashboard.

Lourdes German
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Lourdes German currently serves as a Fellow at the Lincoln Institute of Land Policy where she is advancing the Institute’s municipal fiscal health campaign. Lourdes also serves as founder and director of the Civic Innovation Project. Outside of work, Lourdes advises the Governor of the Commonwealth of Massachusetts as a gubernatorial appointee to the State Finance and Governance Board, and is an appointee of the Mayor of Boston to the committee focused on the City of Boston’s audit and finance matters

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