ICMA: Fiscal and organizational strategies for pandemic recovery
A free webinar from the International City/County Management Association discusses various strategies for fiscal resilience, both during the pandemic and beyond
Local governments are facing a sobering fiscal reality right now: As the pandemic requires cities, counties and states to divert more of their already limited resources to protect the health of their communities, governments are in turn having to make tough decisions just to stay afloat.
But while stories of agencies resorting to layoffs and furloughs are grabbing most of the headlines right now, these short-term solutions are only one piece of the ongoing strategic puzzle. This was the central message of one of a series of free webinars hosted by the International City/County Management Association last week, geared toward helping localities successfully navigate the crisis.
Entitled "Fiscal and Organizational Strategies During a Pandemic," the presentation featured speakers from the local government space with extensive experience in planning and enacting both immediate and long-term — and hence sustainable — solutions for when fiscal emergencies strike.
Key Takeways for maintaining essential services now, resilience later
#1 Have a clear understanding of your short- and long-term solutions
According to Pueblo West, Colorado's Nina Vetter, it is essential for governments to view recovery as an incremental process.
"Here we talk about a transition plan," she said. "That's the term my organization is using, but whether you call it a transition plan or a reopening plan, I know many of us are focused on what do the next three months look like? What do the next six months look like?"
And while she sees communities across the country rushing to pull the trigger on solutions like departmental budget cuts, service reductions, maintenance deferment and hiring freezes, Vetter cautions against viewing these short-term cuts as the only necessary fix.
"When it comes to the budget situation and the financial struggles that a lot of our communities are facing right now ... these are just some things that I think we tend to jump to first," she said. "I wouldn't necessarily say they're easy, because they're challenging for an organization and they certainly do hurt to implement, but these are some of the common things we think about."
But while they may "realistically, maybe solve our problems for the short-term," Vetter continued, these common strategies won't be enough to overcome what "isn't going to just be a short-term situation." We can't simply go back to "normal" operations after a handful of months.
What communities should really be focusing on, she said, are more outside-the-box solutions to long-term fiscal health. In Pueblo West, for example, this began with a long, hard look at what the organization "had always done" versus the reality of what's possible in a world where social distancing isn't going away any time soon — a process that led to a lucrative realization.
While the district had been planning to build a new administration building later this year, the expense no longer seemed reasonable after so many organizational roles had been successfully managed remotely. So, that got them thinking: What else could be accomplished without face-to-face interaction? Could they transition even more positions so that the current building would suffice?
It also became clear early on that cutbacks could be made in programming that involved group interactions, but what about economic development projects? Should any and all spending be curtailed in the wake of so much uncertainty about the future?
For Pueblo West, the answer was a resounding no, though Vetter admits that this way of thinking wasn't immediately top of mind for most of her staff. Salvaging budget dollars is important, she said, but thinking about how to stimulate an eventual economic recovery is just as — if not more — critical.
Again, it all comes down to working with available resources. "How can you leverage the fact that construction, [for example], really hasn't stopped? We have private developers that we've been working with on economic development projects that we've been meeting with in the last few weeks, and they want to work with us," she said.
This sentiment was echoed by another speaker, Jim Mann of Ehlers Public Finance Advisors. "Your reserves are there for a reason," he explained during the Q&A session after the presentation. "Now is not the time to be shy with your capital."
#2 Cash flow is king, but you can still make smart investments
Another critical element of the recovery process is knowing how to manage your money, both now and into a particularly uncertain future, said Ehlers' Jim Mann.
With local tax revenues taking a major hit, and volatile financial markets making short-term returns on investments practically non-existent, having "a good handle on your cash flow" is a must.
What creating this cash flow forecast allows you to do, Mann explained, is to determine "whether you have funds that you can invest for a longer period of time that you're not necessarily going to need for cash flow purposes," like payroll. By going "longer out on the yield curve," he continued, this will "preserve some of that investment revenue that's coming into your municipality."
But this isn't the only financial tool cities have at their disposal, especially if your ability to make debt payments has been compromised.
"If you're going to miss a debt payment," Mann said, "you have options to look at with where interest rates are to refund or restructure your debt," including taxable advance refunding and Cinderella Bonds.
"Obviously you never want to be in a position where you're looking to restructure your debt if you don't need to," he said. "If you don't need to push payments out into the future, that's the better solution. The key is that when you start looking at these options, ... you need to know what the benefits are today vs. what the benefits might be in the future."
And when in doubt about which financial management strategies are right for your municipality, consulting with a professional advisor is wise.
#3 Save your small businesses, and their tax revenue
It's no secret that small businesses across the country have been struggling during the pandemic; it's also no secret that these businesses — and the tax revenues they generate — play an integral role in the fiscal health of local governments.
That's why the City of Baraboo, Wisconsin, put together an emergency assistance fund to make sure their small businesses were able to survive the public health shutdowns.
As a "fairly small" community with a "large, thriving downtown square with lots of restaurants, retail shops, and an historic theater," said City Administrator Kennie Downing, "tourism dollars and sales tax is very important. ... If these businesses do not come back when this pandemic is over, we expect our revenues would remain stagnant or be reduced for a much longer period of time than if they were able to stay open."
So, Baraboo put "the city's capital to work," Downing continued, pulling funds from other sources, not currently earmarked, to create the $250,000 small business loan program for the community:
While Baraboo was able to tap into existing economic development funds, Downing said, there are other options that municipalities can consider if they want to fund similar programs.
"What about forgoing capital projects for a year and redirecting that money to a small business program? Maybe a street improvement could be pushed back," she said, or another non mission-critical project. Utilizing room/bed tax revenue is another option the city considered.
The city has also created a similar program for non-profit organizations in the community.
#4 don't forget about your people
As Lone Tree, Colorado's Austin Good explained, financial resilience during a pandemic is not just about the money; reallocating your staff to work on priority projects, and giving them the room to creatively meet the community's needs, is just as essential.
"For example, we have an art center in our town that's currently shut down," Good said, so "we're able to repurpose that talent, repurpose those people into helping out with what our city really needs right now."
And because staff were encouraged to think outside the box to come up with solutions within their assigned challenge areas — for example, public health, public safety, community health and wellbeing — some truly innovative programs were born:
While staff creativity is key, it ultimately comes down to leadership.
"When you let your staff loose to come up with great ideas, sometimes what you get back isn't workable," Good said. "Instead of just shutting down ideas and moving on, [though], it really helps to redirect passions so that enthusiasm isn't lost."