• Seek Temporary Salary, Benefit
Concessions. This action starts
with two-way communication
between management and labor.
There has been plenty of national
coverage regarding the economic
downturn, so the problem should
be understood by employees. Any
such agreement ultimately hinges
on the parties trusting each other.
• Institute Layoffs. Before beginning
to make layoffs, an adequately
documented callback plan must
be in place for if or when the labor
force is increased in the future.
• Develop Plans for Permanent
Salary, Benefit Reductions. Furlough
days and reduced compensation
levels are examples of how such
plans can be implemented.
• Consider Tax, Fee Increases.
Revenue increases should not be
considered until all expenditure
reductions have been considered
and communicated to stakeholders.
By the time a municipality has
implemented all of these steps, it has
probably abandoned all of its previously
adopted financial and budgetary policies.
This should not be viewed in a negative
manner, however. Going forward,
cities must revisit all organizational
policies and rewrite them to work
within the new normal environment.
sustainability during these new
economic times. Examples of
financial and budgetary policies
include articulating positions on
debt, revenue, cash management,
fund balances, capital projects,
use of technology, and other
major organizational initiatives.
• Revamp Capital Replacement,
Improvement Plans. There is no
doubt that the economic downturn
has impacted deferred maintenance
and its impact on funding capital
improvement programs. Program
costs must be updated, and
funding plans must be reinstated.
• Evaluate New Service Levels. It
would be appropriate to analyze
how new services are working
in connection with the annual
strategic planning process.
• Prioritize Service Reinstatement.
With city council oversight, which
service cuts to be reinstated first
should be prioritized. For a previously
curtailed program identified for
reinstatement, a revenue source
or other logical reason also should
be identified and communicated
in support of this decision.
• Contain Personnel Costs. Wage
increases should be modest at best,
and muncipalities should avoid
enhancing benefits as finances
improve. As previously mentioned,
public sector salary and benefit
levels are still viewed as overly
generous by private sector citizens.
Many public employee unions
have worked cooperatively with
city councils to minimize salary
increases over the past four years,
but that appears to be changing
now that the economy is improving.
City leaders, however, should keep
in mind that health insurance costs
are still rising faster than inflation
and most public pensions remain
underfunded, issues that will carry
significant cost consequences
for at least the next five years.
• Watch for Unfunded Mandates
and Redirected Revenues. Keep
an eye on the state legislature for
unfunded mandates and redirecting
revenues—the finances of state
governments are reeling with no
quick fix in sight. States may be
continued on page 17
Facing the Future
It appears that the U.S. economy has
stabilized and is starting to rebound.
Signs of a turnaround include an
increase in new housing starts,
continued low interest rates, low inflation
rates, and a resilient stock market.
However, plenty of concerns remain as
well, including U.S. and European debt
levels; political gridlock in Washington,
D.C., and many state capitals; and
poor pension funding levels.
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When the time arrives for cities to start
thinking long-term again, the following
steps can be helpful in achieving a
future sound financial position:
• Reassess Budgetary and Financial
Policies. It makes sense for city
councils to undertake an annual
strategic planning process in both
good times and bad. Not only will
the community revisit its mission
and vision, it will also review,
evaluate, and modify its financial
and budgetary policies to ensure
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