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With rising inflation, supply disruption, and other disruptions, many experts are starting to drop the “R” word. In 2008-2009, the revenue impact on local units of government lagged economic data. But the impact came, and it took years to recover.
Here are tips offered as a gift from our younger selves: 1. Model scenarios What is the impact of a 10-percent revenue drop, 20 percent, 30 percent? Look at the drop you experienced a decade ago and look at the budget impact. This provides helpful context for discussions with staff, community groups, and governing bodies. 2. Avoid operational hair cuts Not all programs and services are equal. While cutting all departments 10 percent seems fair and straightforward, it produces poor results. Which are the vital services that must be preserved? Which are differentiators that boost quality of life and business attraction/retention? What are the programs that can be eliminated? According to 2018 Nobel Memorial Prize in Economic Sciences winner Paul Romer, “A crisis is a terrible thing to waste.” Difficult financial times give leaders permission to revisit long-time practices that detract from core services. 3. Consider new revenue sources There are things residents and businesses want and they are willing to pay for. Common examples are enhanced and integrated walking and biking trails, street repaving, and community WIFI. While it is very, very unlikely a new income tax or general millage will have the support to pass, a specific millage or fee structure for these types of offerings creates opportunity. There also is opportunity for special millages to maintain or improve public safety, which can free funds for other areas. 4. Change public policy For local units of government that participate in public retirement plans, there is opportunity to work together to influence how those plans are funded. Currently, there is massive pressure on retirement plans to rapidly reduce unfunded liability. They have done this in part by reducing the amortization period, which is the time over which a liability is paid. In addition, “normal retirement age” for many systems is age 60 despite lengthening life expectancies. Both of these translate into higher annual contribution rates. Working with other communities and associations to extend the amortization period and normal retirement age can provide cash-flow relief while still ensuring promised benefits are paid. 5. Close your data gap While your eloquence, intelligence, and charming good looks help you implement difficult decisions, having quality, credible data is incredibly helpful. What is your local employment rate, and in which industries? What are residents spending money on? What is happening in the housing/rental market? What is the statistically-valid level of support for various budget options, and which demographic groups support those cuts or potential new revenue sources? What are the most effective messages to reach these various groups, and with which modes of communication? What are the demographics of people in each section of town, of new residents, and of visitors? (Hint, Cobalt offers several non-profit programs that provide this in a high-quality, affordable way.) Conclusion Together, these five tips can strengthen decision credibility and drive productive action before local revenue begins a rapid drop. In addition, thoughtful application of these tips can help position your community for a more prosperous future. |
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For more information on how Cobalt can help you adapt and thrive in the changing demographic, economic and social environment, visit the Cobalt website or reach out to us by email. Let us know if you need anything at all for benchmarking or research data; we are here for you.
Cobalt Community Research is a national 501c3 nonprofit, non-partisan coalition that helps local governments, schools and membership organizations measure, benchmark, and affordably engage communities through high-quality metrics, mobile geofencing data, surveys, and dynamic population segmentation. Cobalt combines big data with local insights to help organizations thrive as changes emerge in the economic, demographic and social landscape. Explore how we can help.
Cobalt Community Research is a national 501c3 nonprofit, non-partisan coalition that helps local governments, schools and membership organizations measure, benchmark, and affordably engage communities through high-quality metrics, mobile geofencing data, surveys, and dynamic population segmentation. Cobalt combines big data with local insights to help organizations thrive as changes emerge in the economic, demographic and social landscape. Explore how we can help.