Best practices can help state cities and towns relieve fiscal pressure

Insert graphic here:
width: 175px
height: 64px

Most top executives of Connecticut’s cities and towns say they are being squeezed by rising costs and slow revenue growth. But greater adherence to municipal best practices could relieve some of the pressure, according to the Connecticut Municipal Best Practices Survey released in early September by CBIA, Shipman & Goodwin LLP and Northeast Utilities.

The survey, conducted from February through April 2005, examined whether municipalities follow key practices recommended by the Government Finance Officers Association (GFOA) as set forth by the National Advisory Council on State and Local Budgeting (NACSLB).

The survey focused on local governments’ strengths and weaknesses in terms of fiscal planning. It identified opportunities for improvement in three specific areas of government operations: general management, capital assets, and stakeholder/taxpayer needs and concerns.

“It is clear that many municipalities lack the financial resources they need to maintain the level of services their taxpayers demand,” says Peter Gioia, CBIA economist. “But it’s also clear that continuing to raise state or local taxes to provide more revenue is not a sustainable solution. That’s where best practices come in — they can help managers manage more efficiently.”

Nearly all (97%) of the municipal executives surveyed said it is extremely important to expand their communities’ grand lists to produce more revenue and keep up with growing budget demands.

But the survey found several barriers to grand-list growth. Twenty-seven percent of respondents said the lack of land in their community is the greatest factor inhibiting grand-list growth, followed by citizens not wanting more commercial property (14%), a restrictive transportation infrastructure system (9%), and competition with other towns (7%).

“As an attorney representing Connecticut municipalities and as chairman of the Farmington Town Council, I know firsthand that local budgets can oftentimes be emotional issues with the voting public,” says Bruce Chudwick, a partner in Shipman & Goodwin. “This survey provides best practices and information that will help balance some of that emotion with facts about municipal budgets and finances.”

Nearly a third of the municipal executives surveyed (32%) said a lack of financial resources is the greatest impediment to achieving their goals as community leaders. Respondents noted two other barriers to achieving their town’s goals: unfunded mandates (16%) and the lack of state and federal funds (14%).

More than three-quarters of municipal executives said their constituents are aware of local budget conditions and issues. But many of the respondents (41%) do not gather information from residents regarding their communities’ taxing and spending practices.

“As many business leaders have found, the best source of ideas on how to do things better and faster for the same or less money comes from employees and customers, or, in this case, town residents,” says Douglas Fisher, director of economic and business development for Northeast Utilities. “Today’s low-cost Internet tools make it relatively easy for city and town officials to engage in a formal process to gauge citizens’ taxing and spending preferences.”

Other findings:

Nearly all (96%) of the respondents said their municipalities participate in an employee pension plan, but of those, 39% do not have a code of ethics in place governing the plans. And 77% do not have any local laws or statutes in place limiting the asset types that their public pension systems may own.

While most respondents (75%) conduct annual actuarial reviews of their pension plan, more than a third do not have investment policies guiding decisions about their town’s pension plan.

Most municipalities (81%) have Web sites enabling their residents to perform online searches for town information, but less than a third of these sites allow transactions of business online.

Only 43% of respondents said their municipalities use software updated to Windows XP, but more than half (57%) of respondents said their municipalities are using older operating systems introduced prior to 2000.

Nearly all responding municipalities (92%) have stand-alone human resources management software that is not linked to software used by other departments. And just 14% benchmark their IT infrastructure with similar towns’ or cities’.

“There is much that many municipalities could do to shore up internal systems, and there are some noticeable gaps in key fiscal areas,” says Gioia. “Addressing the issues highlighted in this survey could help Connecticut’s towns and cities alleviate current fiscal pressures and reduce the potential for future budgetary crises.”