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View from the Cordillera

A Commentary on Achieving Excellence in Local Government
Read by Municipal Leaders on 4 Continents
Published by the Cordillera Institute

Managing Your Finances
Activity-Based Costing (Vol. 1, Issue 16)
ABC (activity-based costing) is a special type of full-cost accounting which a number of municipalities have adopted.  It offers local governments a much clearer picture (than traditional methods) of what it actually costs you to deliver the services you provide.  While not an end in itself, it can serve as the foundation for many of the initiatives which bring us closer to excellence in local government.  These include performance measurement, productivity measurement, itemized tax billing, user fees, activity-based budgeting, and activity-based management.  This issue begins with an all-too-typical situation faced by councils everywhere.  It takes a brief look at why such situations arise, why the old approaches fall short, and why ABC is a better alternative.  There is an overview of how it works, why we need it, and how it can benefit the major stakeholders in your community.  As with almost any solution, though, there are potential drawbacks to be noted.  And, there are some resources for those who wish to pursue it.

Performance Budgeting: The Better Way to Budget (Vol. 1, Issue 18)
For those seeking a better way to prepare your annual budget, there is good news and bad news.  In this issue, we look at what has made the budget process so complex and 1 proven way to simplify it.  If your current budget contains 100s or even 1,000s of line items, imagine reducing that to 50 or even fewer.  This approach offers other benefits as well to those who adopt it.  Making the change to performance budgeting can free up considerable time to devote to your other priorities.  And, not only does it have the potential to significantly streamline your budget process, it will leverage your investment in ABC (activity-based costing).  If your organization has adopted — or has plans to adopt — ABC, performance budgeting is the next logical step.  That's the good news.  The bad news is that most local governments are not ready to make the change.  If your municipality is in that group, there are ideas for dealing with some of the frequently anticipated challenges.  Should you decide to make the change, you'll be taking a major step on the road to excellence — and setting the table for municipal independence.

User Fees: A Better Way to Charge for Local-Government Services (Vol. 1, Issue 20)
Each year, more and more municipalities are adding user fees to their revenue toolbox.  While the concept of user fees is a good one, charging them has often met with resistance from the public.  And, perhaps for that reason, many municipalities are not benefitting from their full potential.  Public resistance usually stems from poor communication or from poor program design.  So, if you can demonstrate to the public the advantages of the new fee over the current method of charging for a service, you will have reduced considerably your potential opposition.  But, before you can communicate the advantages of a new user fee, you must build those advantages into your design.  User fees which are properly designed will improve financial transparency, assist you in building a win-win organization, and offer you the opportunity to subsidize those in your community who can't afford to pay the full cost of municipal services.

Itemized Tax Billing: A Key to Financial Transparency (Vol. 3, Issue 7)
Why is there a growing public skepticism over the workings of government and a growing distrust of public officials?  For many skeptics, it matters not that the problems are most likely to be found in our senior governments.  They tend to tar all governments with the same brush.  And, that presents a real challenge for local governments which are trying to earn community support.  Public skepticism is fuelled by a system which asks taxpayers to pay a lump sum for a lump called government services.  So, even when the majority of municipalities are acting as good stewards of their tax dollars, the lack of transparency tends to make the public suspicious.  This issue offers an alternative system — itemized tax billing — which is designed to address the question of financial transparency.  What should be included in an itemized tax bill?  What is needed to produce the required inputs?  What are the payoffs for adopting such a system?  What's in it for staff?  Is it government first or people first?  This issue provides answers to those questions.  Replacing a lump-sum property-tax levy for all services with a tax bill itemized for each service will increase financial transparency.  That, in turn, will build public trust.  And, the building of public trust is clear evidence of advancing excellence in local government.

A Creative Alternative to Taxation and Subsidies (Vol. 3, Issue 8)
Where's the beef?  What's wrong with our traditional systems of financing local government?  Well, we have only a rough idea of what it costs us to provide our services.  Then, there are subsidies and cross-subsidies.  To begin to unravel this financial tangle, we need to see what makes most current tax systems unfair.  Is it fair for someone to pay the price of a Bentley but receive only a tricycle in return?  Is it fair for someone to receive a Lexus when all they paid was the price of a motor scooter?  Yet, most current tax systems produce these types of results.  In this issue, we examine a creative alternative to taxation and subsidies.  It's designed to give people real value for what they pay.  To begin, we see how to calculate the full cost of the services we offer.  Then, we look at how to charge for those services and what to do if some of our 'customers' want to opt out.  Next, we consider what we can offer to earn the income we need.  This issue concludes with 2 practical examples of how this alternative to taxation and subsidies could be applied.  And, that's just a preview of what's to come in the following parts of this series.

Transforming Tax-Funded Monopolies into Competitive Income-Earners (Vol. 3, Issue 9)
This commentary is part 2 in the series on financing local government.  In part 1, we looked at earning an income — another way to finance local government.  We reviewed its 2 key elements — charging a fair price and giving our customers choices.  And, we saw 2 examples of how this approach could be applied.  In this issue, we examine other examples from the so-called hard services — metered utilities, road maintenance, local road construction, road-allowance utilities, neighborhood utilities, and more.  We see how these local-government services could be transformed from tax-funded monopolies to competitive income-earners — and how this potential might be improved.  When we are able to offer the range of choices our customers want — and offer them at competitive prices, we will have earned not just an income but the trust of our communities.  And, we will significantly reduce our dependence on senior governments.  Oh yes ... and we will have made our case for municipal independence.

More Transformations of Existing Services into Competitive Income-Earners (Vol. 3, Issue 10)
This commentary is part 3 in the series on financing local government.  In part 1, we looked at earning an income — another way to finance local government.  We reviewed its 2 key elements — charging a fair price and giving our customers choices.  And, we saw 2 examples of how this approach could be applied.  In part 2, we examined other examples from the so-called hard services — metered utilities, road maintenance, local road construction, road-allowance utilities, neighborhood utilities, and more.  In this issue, we finish our look at those categories with the examples of arterial roads and community-level utilities.  We then turn our attention to public transit, services to households, and emergency services.  Each of these examples includes ideas for transforming existing services into competitive income-earners.  By offering the public the range of choices that they want — at competitive prices, we will have earned not just an income but the trust of our communities.  By reducing or eliminating subsidies, we will significantly reduce our dependence on senior governments.  And, by making these transformations, we will make our case for municipal independence.

Even More Transformations to Competitive Income-Earners (Vol. 3, Issue 11)
This commentary is part 4 in the series on financing local government.  In part 1, we looked at earning an income — another way to finance local government.  We reviewed its 2 key elements — charging a fair price and giving our customers choices.  And, we saw 2 examples of how this approach could be applied.  In the next 2 issues, we examined other examples from the so-called hard services — metered utilities, road maintenance, local road construction, road-allowance utilities, neighborhood utilities, arterial roads, and community-level utilities.  We then turned our attention to public transit, services to households, and emergency services.  In this issue, we continue our examination with examples from public amenities — parks and other open spaces; recreation areas and facilities; as well as public buildings and grounds.  After examining the use of P3s (public-private partnerships), we conclude this issue with a look at public education and local schools.  Each of these examples includes ideas for transforming existing services into competitive income-earners.  It's all about offering the public the range of choices that they want — at competitive prices, reducing our dependence on senior governments, and making our case for municipal independence.

Financing Local Government: Examples from the Soft Services (Vol. 3, Issue 12)
This commentary is part 5 in the series on financing local government.  In part 1, we looked at earning an income — another way to finance local government.  We reviewed its 2 key elements — charging a fair price and giving our customers choices.  And, we saw 2 examples of how this approach could be applied.  In the next 3 issues, we examined other examples from the so-called hard services — roads, utilities, public transit, services to households, and emergency services.  Next, we reviewed public amenities — parks and other open spaces; recreation areas and facilities; as well as public buildings and grounds — plus public education and local schools.  In this issue, we turn our attention to the so-called soft services — licensing and code enforcement, land-use planning and regulation, economic development, social assistance (welfare and public housing), care facilities (other than health care), and general government.  As in previous issues in this series, each of these examples includes an assessment of existing services together with ideas for transforming them into competitive income-earners.  This is another important chapter in offering the public the range of choices that they want — at competitive prices, reducing our dependence on senior governments, and making our case for municipal independence.

Financing Local Government: Looking to the Future and the Path to Take Us There (Vol. 3, Issue 13)
When we began this excursion into the financing of local government, we identified a number of problems with most of our current tax systems.  Yet, the 2 most controversial features of these systems — the use of a lump-sum levy for most services and the use of real-property value as the basis for calculating how that lump sum will be allocated among taxpayers — remain largely unchanged for the past 100 years or more.  Over this period, our senior-government masters have tinkered with these systems.  And, they have permitted our local governments to tap new sources of tax revenue.  But, there has been no fundamental reform.  In part 1 of this series, we began laying out a blueprint for a very different approach to raising local-government revenue.  This approach is based on a key recommendation from the Osborne and Gaebler classic — Reinventing Government.  That is: to earn income instead of taxing for it.  In the next 4 issues, we looked at ways to transform many local-government activities from monopolies (or near-monopolies), supported by taxation and senior-government subsidies, into competitive income-earners.  In this issue, we examine a number of currently-used revenue sources to see what role they should play in making the transformation.  These include old standards like property taxation, senior-government grants, and licensing fees; middle-aged sources such as user fees and development charges; as well as relative toddlers like linkage fees and value-capture levies.  And, heeding the sage advice of Stephen Covey, we begin this issue with the end in mind.  That means describing the future at the end of this path to reform.

Financing Local Government: Wrapping Up the Package (Vol. 3, Issue 14)
This is the final issue in our series on financing local government.  Continuing from where we left the previous issue, we examine a number of currently-used revenue sources to see what role they should play in making the transformation to competitive income-earners.  These include tax-increment financing, income taxes, consumption taxes, sales taxes, and taxes on fuel.  Next, we address the question of what to do about those who cannot afford to pay the full price for our services.  The recommended solution is designed to be sustainable over the long term.  In previous issues of this series, we have noted the benefits to the public of making the transformations.  But, what about those employed by our local-government organizations?  If we expect any program to succeed, it must be accepted by those involved in its delivery and support.  This issue includes recommendations for addressing the 3 changes most likely to arise.  By anticipating and preparing for the changes, we can be ready to handle them in ways which produce wins for all stakeholders — our employees, our organizations, and the public.

What Can We Learn from: The City of Vallejo Bankruptcy (Vol. 3, Issue 20)
The chickens are coming home to roost.  This San Francisco exurb found itself unable to keep earlier promises made to city employees.  With operating expenses running well ahead of revenue and with substantial unfunded pension liabilities, the municipality has sought protection from its creditors.  The early seeds of this current financial crisis were sown in the 1970s.  And, the seedlings received a big dose of 'fertilizer' in 2000.  Now, what was sown is being reaped.  Sadly, some of these same seeds are growing in many other municipal 'gardens'.  Is your municipality among them?  This issue's purpose is to assist you in identifying the seedlings so that they can be weeded out — before they too become a bitter harvest.

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