A City Budget Is Too Important to Be Left to the Professionals
Towns and cities everywhere are—we hope—reexamining, in the unforgiving light of the COVID-19 crisis, budget projections that seemed reasonable even three months ago but are now suddenly, shockingly obsolete.
We also hope that every town and city has at least a few passionate residents supporting, encouraging, or challenging local officials to chart a path forward that leads to real financial resilience and true prosperity.
We recently came across an excellent example of this from Santa Monica, California. Frank Gruber, a lawyer, and Juan Matute, Deputy Director of the UCLA Institute for Transportation Studies, co-authored a blog post on the “unprecedented financial crisis” facing Santa Monica, where revenues are now predicted to miss targets by $200 million over the next two years.
“[We] could easily be at a major historical inflection point, the end of the post-War era of worldwide economic expansion,” they wrote on Gruber’s blog, The Healthy City Local. “Neither one of us is an economist (not that economists are particularly good at predicting), but it is plain that 2020 is just as likely to be another 1930 as it is to be another 2008. If not more likely.”
(That we’re at the end of an economic era is something we’ve written about at Strong Towns as well.)
Yet Santa Monica is in a better position than many communities because it has “substantial assets” that Gruber and Matute urge the City to use wisely to “cushion the impact of the crisis.” The analysis is worth reading as a whole, but here are a couple key takeaways:
1. They connect long-term resilience to smart decisions that need to be made now.
“Even if we are facing another Depression,” they write, “it makes sense to use the City’s assets to cushion the impact over a finite term (say, three to five years), because that would give the council and staff enough time to restructure the City’s finances to accommodate a changed world.”
This is something Chuck Marohn wrote about in his recent ebook, The Local Leader’s Toolkit: A Strong Towns Response to the Pandemic:
Nobody knows what is coming next, so preserve cash by delaying non-critical projects and hires. It is almost certain that the community’s priorities will be different in twelve months and, in that case, you will be grateful you have the flexibility that the extra resources will provide.
Santa Monica Civic Auditorium. Image source.
2. They connect the hard decisions facing the City to its deepest mission.
Gruber and Matute say the city needs to “consider what services and ‘enterprises’ are, or should be, part of the City’s mission.” “Restructuring government is not only a matter of cutting jobs; it should also involve a discussion about the purpose and goals of local government.” They take a hard look at city-owned parking lots and parking structures, its development initiatives, and its commercial real estate. They also discuss the Santa Monica Civic Auditorium, built in 1958, but now closed to the public out of safety concerns:
Meanwhile, the staff report for Tuesday night’s City Council meeting calls for another $228,000 to be spent to maintain the Civic. Is owning a Civic Auditorium integral to the City’s mission in 2020? We don’t think so. We’d rather see $228,000 used for more productive purposes.
At $200 per square foot, a conservative valuation in Santa Monica, the four acres containing the Civic would be worth $35 million. Perhaps it is time to sell the property?
We really do encourage you to read the whole post. Frank Gruber and Juan Matute did a masterful job, and their analysis could be a model for residents working to change their own local conversations around recovery and resilience.
Smart people like Gruber and Matute exist in our towns and cities. The smartest towns and cities listen to them.
Have you, your city, or someone you know done a similar analysis on your community’s COVID-era budget? If so, share them with us over at our community site, where we have a whole section dedicated to municipal finance.
For a city, being in good financial condition isn't just about having good reporting practices and not defaulting on debt payments. It's about fulfilling responsibilities and providing a good quality of life to residents.