Fulfilling the Three Objectives of Fiscal Sustainability

October 11, 2016

Peggy Merriss - City Manager, Decatur

This article appeared in the October 2016 issue of the Georgia's Cities newspaper.
Peggy Merriss
In order to achieve our vision, the city of Deca­tur recognizes sustainability is achieved when four forces intersect in a positive way. The forces are com­munity, environment, economic and organizational/institutional. The featured graphic depicts our phi­losophy:
Economic sustainability provides residents, busi­ness owners, taxpayers and financial markets with confidence in a city’s vitality and financial position. To assure financial sustainability, three objectives should be met:
  • Fiscal integrity: policies that manage municipal finances wisely
  • Planning: assuring services are available today and in the future
  • Accountability: using funds efficiently and effectively in an open and honest manner
Fiscal Integrity provides the framework for how a city’s finances are managed. City charters and/or the code of ordinances may include sections regarding financial management. There are also requirements set by the State of Georgia for financial management. Those requirements plus the operating standards, long-standing principals, traditions and policies of a city organization should be combined into a uni­fied set of financial policies that are adopted by the elected body. The broad purpose of financial policies should be to achieve and maintain a long-term sus­tainable and positive financial position. Financial poli­cies could include how the operating budget is developed and managed, capital budget policies, accounting standards, purchasing, fixed assets management and other financial-re­lated topics. They should be as com­plete as possible while incorporating flexibility and discretion so as not to stifle innovation and creativity.
The vision of the city of Decatur is to assure a high quality of life for its residents, businesses and visitors, both today and in the future.
— Decatur Strategic Plans 2000 and 2010
Planning for a city’s financial fu­ture is an on-going activity that mix­es making sure current obligations and needs are met while maintain­ing reasonable available resources to meet unexpected or emergency con­ditions; or, to endure an economic downturn; or, to fund opportunities to meet the needs of future gen­erations. We have maintained our fiscal sustainabil­ity by using conservative estimates for revenues and expenditures. Our practice is to estimate revenues on the low side and expenditures on the high side so that we do not get overextended. We also estimate personnel costs as if every position was filled every day.
Fund balance is a necessary part of any sustain­able financial plan. The city’s fund balance policy should establish limits for how much should be ac­cumulated and how and when fund balance resourc­es should be used. Our policy calls for maintaining a fund balance between 20 to 30 percent of general fund total expenditures. When we accumulate more than 30 percent, we use fund balance in a judicious way for one-time expenditures that do not result in increased general fund obligations. For example, we have funded one-pay period merit based salary pay­ments; we have used funds as part of a capital con­struction project; or, we have funded community –wide master planning efforts.
Often “debt” is considered a bad four-letter word but it doesn’t have to be. We have found that it is more economically sustainable to set-up regular re­placement schedules for all of our heavy equipment so that we can manage our fleet and avoid the budget­ary peaks and valleys that come with accumulating and spend­ing resources on a periodic ba­sis. Using low-interest financing through GMA’s lease-purchase programs have allowed us to keep our fleet in good operat­ing condition. For large capital improvement projects includ­ing buildings, parks and facili­ties, general bonded debt and other forms of revenue debt spread the cost of construction and renovation over many years so that not only current users, but future users, are responsible for the capital cost. The financial policies referenced earlier should have a whole section on the appropriate use of debt.
Any sustainable system has to provide accountabil­ity. Former President Jimmy Carter has said that, “The most ineffective government agency is inherently the one most interested in concealing its performance from the public.” We provide accountability through the annual budget. It is the primary implementation tool used to make the community’s vision come to life. We call this a Vision Based Budget because it con­nects the necessary resources (personnel, equipment and funding) to the programs, policies and projects identified in the Strategic Plan. At the end of the fis­cal year we also go beyond a basic audit and provide the community and financial institutions with a Com­prehensive Annual Financial Report (CAFR) and each residential address and business license holder re­ceives a corporate Annual Report sent as part of the city’s monthly newsletter.
Economic sustainability is an important part of a community’s overall Sustainability Plan. A city’s financial well-being and fiscal integrity is a corner­stone to insuring the future of a vibrant community which is why it is so important that we do our part today, so that future generations of residents, busi­nesses and taxpayers can be proud to be part of our communities tomorrow.

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