GFR April 2021

Government Finance Officers Association | APRIL 2021
Government
as a Platform
Equitable Recovery
in Practice
Government Finance Review
Strategic Asset
Management
Priority-Based
Budgeting
Working together to align revenue,
expenditures, and community values

contents APRIL
2021 | VOLUME 37, NUMBER 2
18
Prioritizing
Your Values
Avoiding slash
and burn in an
economic downturn
by Jennifer Carlson
and Kimberly Olivares
38
Government
as a Platform
A next-generation
take on coordination
and cooperation
by Shayne Kavanagh
and Chris Fabian
©2021 MICHAEL AUSTIN C/O THEISPOT.COM
50
Equitable Recovery
in Practice
Manage the tension between
current financial shortfalls and
historic underinvestment to
emerge stronger in years ahead
by Matthew Stitt and
Michael Nadol
APRIL 2021 | GOVERNMENT FINANCE REVIEW 1

contents
58
Community
Engagement
Infusing public deliberation
into the budgeting process
by Elizabeth I. Ackley
66
Managing Volatility
Detroit addresses pensionrelated
financial stress with
an IRC Section 115 trust
by James L. Tatum III
70
Strategic Asset
Management
Know what to
address, and when
by Ashay Prabhu
6 Contributors
8 From the CEO
10 Rewind
11 GFOA’s Women’s Public
Finance Network
by Genevieve Carter
12 Treasury and Investment
Management Committee
by Genevieve Carter
13 Accounting, Auditing,
and Financial Reporting
Committee
by Todd Buikema
14 Federal Update: Reconciliation
Will Play a Major Role This Year
by Michael Thomas
75 The Town of Cary Instills a
Culture of Collaboration
by Katie Ludwig
80 Budgetary Accountability:
Why, Why, Why?
by Michele Mark Levine
82 Public-Sector Working
Space May Never Be
the Same
by Katherine Barrett
& Richard Greene
86 Is the Local Muni
Future Global?
by Justin Marlowe
88 Q&A with LaShea Lofton
by Ryan Lawler
92 An Interview with
Marvin Dereef
by Matt Bubness
96 10 Steps (plus 2!) to
Finding Your Exposure
to LIBOR—and What
to Do About It
©2021 DAN PAGE COLLECTION, HARRY CAMPBELL; C/O THEISPOT.COM
2

Publisher
Chris Morrill
Editor in Chief
Michael J. Mucha
Managing Editor
Marcy Boggs
GOVERNMENT FINANCE REVIEW
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individuals to submit manuscripts to GFR. All
manuscripts should conform to the Editorial
Policy and Guidelines for Authors, which are
available online at gfoa.org. Manuscripts should
be submitted electronically to gfr@gfoa.org.
CONTACT
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GFOA EXECUTIVE BOARD
Marion M. Gee
President
Metropolitan St. Louis
Sewer District, MO
Terry Stone
Past President
Hanover County
Public Schools, VA
Michael Bryant
President-Elect
Mecklenburg County
Government, NC
Laura Allen
Town of Berwyn Heights, MD
Laurie M. Brewer
City of Georgetown, TX
Chris Daniel
City of Albuquerque, NM
Cynthia Evangelisti
Chicago Park District, IL
Tanya Garost
District of Lake Country, BC
Dan Huge
Indiana Finance Authority, IN
Rafiu O. Ighile
Howard County
Government, MD
William Jones
City of Mequon, WI
Brandon Kauffman
Kansas Turnpike Authority, KS
Matthew M. Lentz
Upper Moreland
School District, PA
Amelia Clark Merchant
City of Roanoke, VA
Margaret Moggia
West Basin Municipal
Water District, CA
Diane Reichard
City of Plant City, FL
Tina Tapley
City of Fredericton, NB
Terri Velasquez
City of Aurora, CO
Chris Morrill
GFOA
GFR (Government Finance Review) (ISSN 0883-7856) is published bimonthly in February, April, June, August, October, and December.
Subscription price is $35 annually. Opinions expressed herein are the viewpoints of the authors. They may differ from the policies and
recommendations of the Government Finance Officers Association, its committees, and staff. Letters to the editor are welcomed.
Copyright 2021 by the GFOA. Published by the Government Finance Officers Association, 203 N. LaSalle Street, Suite 2700, Chicago,
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4

CONTRIBUTORS
Elizabeth I. Ackley is the Brian
H. Thornhill Associate Professor in
Health and Human Performance at
Roanoke College. She has a particular
interest in studying the interaction
between hypokinetic diseases and
environmental access to resources
supporting healthy living. As the
director of the Center for Community
Health Innovation and the Roanoke
Valley Community Healthy Living Index, Liz works closely with area
residents to leverage youth health outcomes and perceptions of
access to healthy living resources as catalysts for infrastructure and
policy change across the Roanoke Valley. She also serves as project
lead for Roanoke’s Invest Health initiative and the Build Healthy,
Equitable Communities for Children and Families cohort initiative.
Jennifer Carlson is the finance
director for the city of Duluth,
Minnesota. She has been a
government finance manager for
16 years and has been with Duluth
for six years. Before she was
appointed finance director, Jen
served as the city’s budget manager
for five years. Before working for
the City of Duluth, she was the
senior accountant for the Western Lake Superior Sanitary District
and the finance director for Spirit Mountain Recreation Area.
Jen is a certified public accountant and holds an undergraduate
degree in accounting from the University of Wisconsin
Superior, and graduate degrees in business administration and
management from the College of St Scholastica.
Chris Fabian is co-founder of Resource
Exploration (ResourceX) and co-founder
of the Center for Priority Based Budgeting.
Before that, he was an internal business
consultant for Jefferson County, Colorado,
where he incorporated the lessons
learned from budgeting for outcomes
into the development of the budgeting
for priorities process. He has provided
consulting and advisory services to local
governments across the country, focusing on public entities and advising
top municipal managers, department heads, and program directors
at more than 60 organizations about the fundamental business issues
of local government. Chris was a partner of the consulting team
that implemented budgeting for outcomes in the City of Ft. Collins,
Colorado, one of the leading organizations using this approach.
Shayne Kavanagh is the senior
manager of research for GFOA’s
research and consulting center.
He’s been a leader in developing the
practice and technique of long-term
financial planning and policies for
local government. Shayne’s financial
planning experience also drives his
research at GFOA. He’s written a
number of influential publications on
financial planning and a number of articles on long-term financial
planning, financial policies, budget reform, using technology to
improve efficiency, and related topics for magazines including
Government Finance Review, Public Management, School Business
Affairs, and Public CIO. Before joining GFOA, Shayne was the
assistant village manager for the Village of Palos Park, Illinois.
Michael Nadol is a managing
director at PFM and president of PFM
Group Consulting, specializing in
public-sector financial sustainability
and workforce strategies. He provides
strategic, quantitative, and analytical
support for collective bargaining and
human resources reforms on behalf
of many of the nation’s largest public
employers. Before joining PFM, Mike
served the City of Philadelphia in positions including deputy mayor,
director of labor negotiations, and director of finance, working
on management and budget initiatives key to the city’s fiscal
turnaround in the early 1990s and leading contract negotiations
covering more than 22,000 municipal employees.
Kimberly Olivares is the Chief
Performance Officer for the City
of Austin, Texas. She co-directs
the Center of Excellence and
Innovation, which supports the
City’s commitment to instilling
a culture of continuous learning
and improvement throughout
the organization. Previously, she
was the Deputy Budget Officer for
the City, managing the capital improvement program financial
services, Budget Office information technology support team,
and performance measurement program. She also worked for
the City of Southlake, Texas, and the City of Tampa, Florida.
6

Ashay Prabhu is the vice president
of strategic asset management at Dude
Solutions and cofounder of Assetic. Ashay
and co-founder Joel Brakey created the
vision of Assetic—Australia’s leading
strategic asset management company—
in 2005, combining deep subject matter
expertise in infrastructure asset
management and the latest tech software.
In 2020, Assetic became part of U.S.-based
operational asset management leader Dude Solutions. With more than
20 years’ experience in strategic asset management, Ashay is passionate
about applying asset management science to close the global infrastructure
renewal gap. He has a directorship at the Asia Pacific Institute of Asset
Management, is an adjunct professor of strategic asset management at
Bond University, has a Bachelor of Engineering degree, and is a chartered
professional member of the Institution of Engineers Australia.
Matthew Stitt is a director in PFM’s
Management and Budget Consulting
team. He advises public-sector
leaders on structural changes, budget
reforms, and financial planning—
with a particular focus on applying
an equity lens to solving governing
challenges—especially in relation
to the financial and economic crises
caused by COVID-19. Before joining
PFM, Matt was the chief financial officer for the City Council of
Philadelphia. He instructs at the Fels Institute of Government at the
University of Pennsylvania as an adjunct lecturer.
James L. Tatum III is an analyst
in the City of Detroit’s Office of the
Chief Financial Officer, Forecasting,
and Economic Analysis Division.
He earned his B.S. in political
science from Eastern Michigan
University, where he currently
teaches and earned a Master of Public
Administration from the Maxwell
School of Citizenship and Public
Affairs at Syracuse University. He has shared his expertise as both a
consultant and an author, and he has been published in the Harvard
Journal on Legislation, Business & Bankruptcy Law Journal,
The Urban Lawyer, Syracuse Law Review, Emory Bankruptcy
Developments Journal, and Public Finance and Management.
Contribute
GFOA welcomes original content from members
on topics relevant to government finance. If you
are a finance officer, scholar, private consultant,
or subject matter expert, consider sharing your
expertise with us for use in a future issue.
Manuscripts should conform to the Editorial
Policy and Guidelines for Authors, which are
available online at gfoa.org/gfr.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 7

FROM THE CEO
8

Acting on Our Values
©2021 MICHAEL AUSTIN C/O THEISPOT.COM
Christopher P. Morrill
Executive Director/CEO
GFOA’s Code of Ethics calls
for a commitment to
diversity and inclusion,
and this includes calling
out unfair discrimination
of any kind. Recently, we were able to
demonstrate our commitment to our
principles. As you’ve likely heard by now,
GFOA’s Executive Board passed a policy
statement last month that called on all
governments and others in the public
finance community to stop using the
four-letter acronym most often associated
with the comprehensive annual financial
report. While the Governmental
Accounting Standards Board is expected
to take up the issue later this year, we felt
that it was important to act now.
When spoken, the acronym is pronounced
like a racial slur that has historically been
used in other parts of the world—and
like all such derogatory terms, it remains
hurtful and offensive to those it has been
applied to. In South Africa, the word has
deep ties to apartheid. At GFOA, we’ve
stopped using the term in reference
to the annual report, including our
awards program and committee. We’ve
eliminated it from our training materials
and website, and it will no longer be used
in GFR or other publications.
Some have commented that this change
is another example of “cancel culture,”
a loaded term that refers to a knee-jerk
withdrawal of support for something
as a way of expressing disapproval and
exerting social pressure, generally as a
result of being “politically correct.” I can
assure you that is not the case. We feel
strongly that for GFOA to be a leader in
North America and across the rest of the
world, we need to stay true to our own
values of inclusiveness. Understanding
and eliminating behaviors that hurt
and belittle our colleagues is simply the
right thing to do.
In announcing that the City of
Pittsburgh, Pennsylvania, would
support our policy statement, City
Controller Michael Lamb put it well.
“It’s not a big problem,” he said,
referring to eliminating the acronym.
“When we have the opportunity to be
thoughtful and considerate of others, we
ought to take advantage of it and do it.”
We are happy to announce several other
initiatives that demonstrate GFOA’s
commitment to diversity, equity, and
inclusion. GFOA will be much more
intentional about collecting information
related to the diversity of our members,
including those who use volunteer
opportunities to help with career
advancement. We are also committed
to promoting diversity within the
public finance industry to reflect the
communities that we serve. We hope
that including voluntary demographic
questions for members to complete in
applications, member renewals, and
other registration forms will provide
us with better data that will help us to
offer programs that better serve our
members and the profession at large.
GFOA’s Black Caucus, which is
celebrating its 30th anniversary
this year, works to support the
aspirations and achievements of
Black public finance officers by
sponsoring professional development
opportunities and supporting projects
We are committed
to promoting
diversity within
the public finance
industry to reflect
the communities
that we serve.
that help Black professionals who are
seeking careers in public finance. The
Black Caucus recently expanded its
service offerings and now provides
a monthly newsletter, networking
opportunities, and scholarships for our
new Certified Public Finance Officer
program. For more information and
to join GFOA’s Black caucus, please
visit www.gfoa.org/black-caucus. And
please note that membership in the
Black Caucus is open to any active or
associate member of GFOA; everyone is
welcome and encouraged to participate.
GFOA is also proud of our newest student
chapter at the University of North
Carolina at Charlotte, created this year.
Recruiting a talented and diverse group
of future finance officers is important
to maintaining financial sustainability
of our organizations. These students
will play critical roles in promoting
sound financial policies, building trust
in government, and supporting our
communities across the United States
and Canada.
I’m proud to lead an organization that
not only stands for our values today but
also works to promote a better tomorrow.
Sincerely,
Learn more about End the
Acronym at gfoa.org/eta.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 9

REWIND
rewind A
look back at GFR in August 1994
In the August 1994 issue of
Government Finance Review,
GFOA tackled derivatives.
The public sector was starting
to show an interest in these
securities, which are valued
based on an underlying asset
or benchmark. Broker/dealers were
marketing them extensively, and the
federal government was looking into
them, as well—so the association
issued two statements about derivatives
that year.
GFOA’s policy statement pointed out the
complexity of the derivatives market
and the inconsistent regulation of those
who trade in derivatives products.
It recommended that federal action
be taken to improve oversight and
reporting requirements to make sure
that end users would know what they
were getting into when they undertook
a derivatives transaction. This policy
statement lives on as “Regulation of
Derivatives Products,” part of GFOA’s
extensive materials library. It has
been changed very little over the years
because, well, very little has changed.
Here’s a sample: “Recent reports about
losses by some derivatives end-users
have raised numerous issues of concern
to state and local government finance
officers. These include concerns
about the risks incurred with the use
of derivatives, such as legal, credit,
market, settlement, interest rate, and
operating risks, as well as concerns
regarding the appropriate use of
derivative products and the marketing
of these products. Indeed, some public
jurisdictions have already experienced
losses because of their use of derivative
products. GFOA is concerned about
the increasing complexity of new
derivative products used for debt,
cash, and pension management
purposes.”
GFOA has modified this initial Best
Practice, however, providing several
advisories: Use of Derivatives and
Structured Investments by State and
Local Governments for Non-Pension
Fund Investment Portfolios, Using
Variable Rate Debt Instruments,
and Use of Debt-Related Derivatives
Products. This last one is part of
GFOA’s guidance on moving away
from the London Interbank Offered
Rate (LIBOR), the most widely used
benchmark in the capital markets.
(See gfoa.org/libor for more).
In 1994, industry participants
criticized GFOA’s position on
derivatives, saying it overlooked recent
actions and expressions of concern
from federal agencies and ignored the
assurances provided by regulators and
some industry experts that report on
problems in the derivatives market.
At the time, GFOA pointed out that
the industry and many of the same
regulators assured us all that there
was no evidence of sales practice
abuse and that no further regulatory
authority was needed. Soon thereafter,
in the early 1990s, the public learned
about the Salomon Brothers’ Treasury
Bond scandal. Astute followers of
finance will also recall the role of
derivatives in the Great Recession that
started in 2008. History indicates that
GFOA had a point.
GFOA’s policy statement
recommended that federal
action be taken to improve
oversight and reporting
requirements to make sure
that end users would know
what they were getting
into when they undertook
a derivatives transaction.
10

In Brief
GFOA PROGRAMS | GFOA COMMITTEES | FEDERAL UPDATE
GFOA PROGRAMS
A Spotlight
on GFOA’s
Women’s Public
Finance Network
Mentorship
Program
BY GENEVIEVE CARTER
We all look for
personal
connection in
our profession,
more than
ever in the year since the pandemic
struck, as physical distance from
coworkers and colleagues has
made these connections even
more valuable. GFOA’s Women’s
Public Finance Network (WPFN)
Mentorship Program has sought to
foster these relationships, providing
an opportunity for women in public
finance to build and maintain a strong
network of peers across the country.
The program encourages seasoned
professionals and those who are new
to the field to share their experiences,
seek career support and guidance,
and discuss work/life balance.
Eighty mentors and mentees were
matched and supported each other
through a year of uncertainty and
change, both personal and professional.
One such pairing was mentor Margaret
Moggia, executive manager of finance
for the West Basin Municipal Water
District in Carson, California, and
mentee Cassandra Gunther, financial
analyst for WaterOne in the City of
Lenexa, Kansas.
Margaret and Cassandra immediately
found common ground in their
similar workplaces, and Cassandra
felt that they got along right away.
“Margaret and I immediately
clicked, sharing a positive outlook
and enthusiasm for our profession,”
Cassandra shared. “It has been super
APRIL 2021 | GOVERNMENT FINANCE REVIEW 11

IN BRIEF
helpful to explore ideas with
Margaret because she has vast
experience. From something as
simple as finding the right phrasing
for a discussion or dissecting
more complex issues like career
advancement, Margaret has shared
excellent pointers on every topic.”
Margaret also was eager to tell her
career experience as a mentor.
“Mentoring this past year has
been truly rewarding,” she said.
“It has given an opportunity for
our mentorship pairing to build a
friendship while helping my mentee
grow in confidence and build the
tools and resources to help her
navigate through a possible future
promotion.”
Beyond discussions of career
advancement and professional
development, Cassandra and
Margaret were empowered in a
multitude of ways.
Cassandra said, “Margaret has
helped me think about different
sides of many issues and provided
bulleted lists of ways to improve my
skillsets. Did we get to everything?
No! But did I form a lasting
friendship? Definitely!”
“I have also learned that we both
can grow and rely upon each other,”
Margaret said. “I am grateful to
WPFN for this opportunity to meet
new individuals across states and
time zones.”
Genevieve Carter is a senior
consultant in GFOA’s Research
and Consulting Center.
JOIN WPFN: gfoa.org/wpfn
FOLLOW WPFN ON TWITTER:
@WPFNGFOA
GFOA COMMITTEES
Treasury and Investment
Management Committee
BY GENEVIEVE CARTER
GFOA’s Treasury and
Investment Management
(TIM) Committee
focuses its efforts on
the development of best
practices, advisories, and resources
related to cash management, banking
relations, and investment practices
of state and local governments. The
committee most recently worked to
develop additional resources related
to reducing risk from fraud and how to
establish better banking relationships.
Merchant Services. The Committee
approved a new resource: Merchant
Services Selection, which reflects
the key tenets of GFOA’s current
Procurement of Financial Services best
practice. Merchant Services Selection
outlines the steps governments
should consider when securing a
merchant services provider and
the types of questions governments
should ask during this process. A
related item is the Banking Services
RFP Checklist, which governments
should review when determining
their overall banking services needs
and developing an RFP, including
merchant services. The committee is
also expected to soon approve a longer
piece on understanding the processes
and decisions needed for accepting
credit and debit cards as part of a
government’s receivables program.
Fraud Prevention. The committee
also approved a comprehensive
12

document related to fraud in the
treasury office. The Fraud Prevention
in the Treasury Office resource
combines older and updated GFOA
documents, putting them together
in one location. Several fraudrelated
topics are covered, including
general recommendations to prevent
internal and external fraud at your
government. Recommendations are
primarily related to the importance
of having adequate internal controls
to prevent fraud and ensuring that
there are systems in place to keep
the same employee from receiving,
depositing, and reconciling funds.
For payables, the basis for many of
the recommendations rests on the
same foundation as receivables—
making sure the government has
set policies and procedures related
to the authorization, execution, and
reconciliation of payments. Fraud
Prevention in the Treasury Office
also recommends that governments
use services such as positive pay for
checks and ACH payments, know
how many bank accounts exist at
area banks, determine if all the
accounts are needed, and have up-todate
security measures in place when
sharing and receiving information
with their financial institutions.
A separate resource on Preventing
Vendor Fraud was developed as
a companion piece to the general
Fraud Prevention Resource. This
best practice was updated to provide
information that is referenced in the
general payables and receivables best
practices. Preventing Vendor Fraud
focuses on controls needed when
processing vendor information and
invoices. The resource also discusses
the importance of verifying changing
vendor information and emphasizes
that governments should make
verified contact with vendors that
have indicated they would like
to change their banking or other
information.
The banking industry and the
U.S. Secret Service have noted
that since the beginning of the
COVID crisis, electronic and other
types of fraud have increased
substantially in the public sector.
Governments should review these
GFOA resources and determine
what enhancements can be made
to their own fraud prevention
practices in the treasury office.
Looking Ahead. Over the next few
months, the committee will complete
its work on a larger merchant
services resource that walks through
the steps related to accepting credit
and debit cards, and other emerging
payment technologies. This resource
will contain a robust section on
understanding the types of fees that
banks and credit card companies
charge governments (vendors).
The committee will also gather
examples of governments’ RFPs
and treasury policies to help GFOA
members develop or update their
own. A selection of helpful documents
and resources will be available on
GFOA’s website at gfoa.org.
Developing resources related to
payables and receivables functions
are also on the committee’s docket,
along with an update on GFOA’s
(1999) Electronic Signatures Best
Practice. Finally, the committee will
work on creating investing resources
to accompany GFOA’s Best Practices
on Developing and Maintaining
an Investment Policy, Having an
Investment Program, and Risk
Management with Investing. These
resources will provide information
and considerations related to
commonly used investment products
in the public sector.
If you have any questions about
TIM’s work or ideas on the projects
on the committee’s work plan this
year, please contact Gen Carter
at gcarter@gfoa.org.
Genevieve Carter is a senior
consultant in GFOA’s Research
and Consulting Center.
Accounting,
Auditing,
and Financial
Reporting
Committee
BY TODD BUIKEMA
The Accounting, Auditing,
and Financial Reporting
Committee (AAFRC) met
virtually on January 25
and 26, 2021. During the
first day of meetings, AAFRC members
received an update on GFOA’s initiative
to end the use of the acronym for the
comprehensive annual financial report
and discussed GFOA’s support of the
Governmental Accounting Standards
Board (GASB)’s project to rename the
report so that the acronym will naturally
fall out of use.
Also during the first day, AAFRC
members received updates from the
GASB and the American Institute of
Certified Public Accountants (AICPA)
State and Local Government Expert
Panel (SLGEP), and AICPA’s CPA
Evolution project. The GASB updated
members on their current technical
agenda projects, including the three
due process documents on Financial
Reporting Model Improvements,
Revenue and Expense Recognition, and
the Disclosure Framework, which were
released in 2020.
The committee also learned about
upcoming due process documents that
are scheduled to be released later in
2021, GASB staff research activities,
and that post-implementation reviews
of previously issued standards are
underway. The AICPA SLGEP informed
committee members about auditing
issues that impact state and local
governments, including the difficulty
of performing single audits in 2020 as
a result of new federal programs and
APRIL 2021 | GOVERNMENT FINANCE REVIEW 13

IN BRIEF
existing programs that received
additional funding because of
COVID-19.
The AICPA also provided the
committee with an update on the
new CPA Evolution project that is
changing college accounting program
content and the CPA Exam.
On the second day of the meeting,
committee members discussed the
most pressing accounting, auditing,
and financial reporting issues
facing the governments they serve.
Some of the topics that members
mentioned frequently included
that their governments were
dealing with remote work issues
and federal funding for COVID-19.
The committee also reviewed
and finalized its draft responses
to three GASB due process
documents, Financial Reporting
Model Improvements, Revenue and
Expense Recognition, and the 2021
Implementation Guidance Update.
It also reviewed its strategic plan;
revisions will be discussed at the
next meeting in spring 2021. As part
of the strategic plan, the committee
plans to review its best practices and
advisories on a rotating schedule.
Task forces will be formed to review a
list of best practices and provide any
recommended changes to the entire
committee at the spring meeting.
Task forces will also be formed to
review GASB due process documents
that are scheduled to be issued
before the spring meeting.
Todd Buikema is the assistant
director for publications in GFOA’s
Technical Services Center.
FEDERAL UPDATE
Reconciliation Will Play
a Major Role this Year
BY MICHAEL THOMAS
In recent years, a procedure called
reconciliation has become the tool
of choice for passing legislation
in a divided Congress. Its use
has become synonymous with
contested, partisan debate, and it is seen
as a sort of legislative doomsday device
that leaves political fallout in its wake. In
practical terms, the use of reconciliation
allows certain types of legislation to
be passed in the House or Senate with
fewer supporting votes than typically
required. Both chambers are affected
by reconciliation, but the process plays
a more integral role in the Senate.
The 2020 elections gave Democrats
an unexpected but slim majority in
the Senate, unifying control over all
three branches of government. But
because control of Congress is held by
the slimmest of margins, legislative
achievements will not come easily.
By examining reconciliation, we can
set expectations for ourselves and
better understand the news coming
out of Capitol Hill.
An overview
Reconciliation is intended to
expedite the Congressional budget
14

process by prohibiting the use of
the filibuster, allowing the approval
of certain bills through a simple
majority. Since reconciliation was first
used in 1980, Congress has adopted
oversight measures for the process.
Amendments were enacted through
the 1980s and 1990s, eventually laying
today’s framework.
Before drafts from both chambers of
Congress can be finalized together,
provisions considered in the Senate
must survive the scrutiny of the “Byrd
Rule.” The rule provides a multiprong
test for determining whether or not a
provision can be deemed extraneous
or disqualified from reconciliation.
In general, for inclusion in a
reconciliation bill, the legislation must
relate to the federal budget through
expenditures, revenues, or the debt
limit. Additionally, eligible provisions
cannot result in a deficit increase
for fiscal years not covered by the
reconciliation bill, which is typically
10 years from enactment.
This oversight is managed through
“points of order” raised by members
of the Senate over specific proposals
under debate. Once raised, the
Senate parliamentarian is called on
to interpret the Byrd Rule and offer
advice to the presiding officer over the
provision’s eligibility for inclusion.
Once a point of order has been raised
challenging a measure, the presiding
officer of the Senate will make the final
judgment, traditionally at the advice
of the parliamentarian. A 60-vote
supermajority is then required to
overturn the decision. As president
of the Senate, the vice president has
the power to overrule advice from the
parliamentarian, which could prove
interesting for legislation under debate
throughout the 117th Congress.
Reconciliation and the
117th Congress
There are multiple possible outcomes
for legislation working through the
reconciliation process. Democrats
in the Senate may currently hold the
reins, but to take advantage of their
majority, they must cement support
within their ranks before pursuing
legislation with little or no support
from Senate Republicans.
Legislative priorities. An
understanding of reconciliation
is helpful, but it leaves us with
questions. How does the procedure
impact advocacy for individual bill
provisions? How do GFOA policy
priorities fit in, and what is the
timing behind future legislation?
As discussed, policy matters
addressed through reconciliation
may face scrutiny in the Senate.
Because there is a
cap on the number
of reconciliation bills
allowed each year,
lawmakers must
choose wisely which
issues to tackle.
Provisions that stretch interpretations
of the Byrd Rule could be struck from
a final bill as lawmakers determine
which battles are worth fighting. And
because there is a cap on the number of
reconciliation bills allowed each year,
lawmakers must choose wisely which
issues to tackle.
Developing a sense of legislative
timing is essential—but challenging—
in the current climate. Thus far,
aid funding has typically required
distribution within 30 or 60 days
of the authorizing bill’s enactment.
Assuming that Congress sticks to the
mid-March deadline assigned earlier
in the year, funding from the bill
under consideration should be in the
hands of recipients between mid-April
and early June. Looking ahead, the
Biden Administration indicated early
on that multiple relief bills would be
pursued, and the first aid package
would be specific to recovery. To
provide additional relief, a stimulus
bill focused on infrastructure may be
next for reconciliation.
Earlier this year, Chair of the Senate
Committee on the Environment and
Public Works Tom Carper said he wants
an infrastructure bill out of committee
by Memorial Day. This assumes that
the first reconciliation bill of 2021 is
signed into law by mid-March, allowing
Congress to focus on an infrastructure
package. What may be the last available
reconciliation bill for Congress could
be the pathway major infrastructure
legislation has long needed. This
kind of bill could put valuable fiscal
tools back in the hands of state and
local finance officials. There has been
broad consensus over the need for
infrastructure investment, but this
hasn’t loosened gridlock over the issue
in Congress. Infrastructure needs
across the country have continued to
grow, in the form of deteriorating roads,
bridges, schools, and other critical
public facilities, and we’re also facing
emerging needs for more investment
in our public health systems.
A new infrastructure bill would provide
an avenue for multiple legislative
priorities, but earlier legislation
illustrated the potential obstacles.
The House reconciliation bill from late
February highlighted how individual
proposals can be removed from initial
drafts. An earlier draft of the bill
contained a federal mandate to raise
the national minimum wage to $15 an
hour. Before the House bill proceeded to
a floor vote, the Senate parliamentarian
announced that a corresponding Senate
reconciliation bill could not include
the $15 minimum wage provision.
Plenty depends on how Congressional
leaders plan to use reconciliation but
losing the $15 minimum wage statute
APRIL 2021 | GOVERNMENT FINANCE REVIEW 15

IN BRIEF
raising a point of order that directly
violates existing statute. For example,
former Majority Leader Harry Reid
used this tactic when he removed the
three-fifths vote requirement to confirm
executive nominations during the
Obama administration. In practice, the
maneuver is remarkably simple: The
majority leader raises a point of order
waiving the supermajority requirement
of 60 votes for a provision, and should
the motion be rejected, only 51 votes
are required to overturn the presiding
officer’s ruling. Lawmakers could seek
to apply this exception to legislation in
the 117th Congress.
The elimination of the $15 minimum wage
provision from the House reconciliation
bill in late February showed that even
significant, highly visible policy initiatives
can be put at risk.
shows that even significant, highly
visible policy initiatives can be put at
risk. GFOA priorities, including the
reinstatement of advance refunding
bonds and expanding the use of bank
qualified debt, can effectively stimulate
infrastructure. These critical
provisions and more could be included
in a stimulus bill this year. The
coalition of state and local advocates
that GFOA works with has already
mobilized to ensure that smart public
finance policy is part of the discussion.
Getting it all done
To achieve lock-step unity in the
Senate, and thus more options and
less resistance for Democrats, party
leaders may have to negotiate with
members of their own party before
attempting to find support from the
GOP. Senators like Joe Manchin of
West Virginia, a moderate Democrat,
stand to wield significant influence
over policy goals. This could lead to
greater focus on issues that Manchin
supports. Other moderate Democrats
in the Senate include Kyrsten
Sinema from Arizona or Jon Tester
of Montana. Should any moderate
Democrat (or any Democrat, for that
matter) take a hard line against the
party leadership’s legislative
goals, the brakes could be slammed
in Congress.
Assuming unified party support,
Senate Democrats may have multiple
pathways to legislate through a
51-to-50 majority. Provided that
the parliamentarian does not judge
a measure extraneous, the simple
majority is enough to protect
legislation from the 60-vote threshold
normally required to pass a bill.
Simple Majority Rule. Points of order
are raised to address all matter of
issues in the Senate. One possible
method a simple majority could
deploy involves the majority leader
President of the Senate. The scenario
above is most relevant when the
opposition party occupies the White
House. Democrats in the 117th Congress
have party support from the White
House, making Vice-President Kamala
Harris president of the Senate and the
tie-breaking vote. Further, the president
of the senate plays the role of final
adjudicator when interpreting the Byrd
Rule. Vice-President Harris may be put
in a position of enormous consequence,
should the Senate parliamentarian render
advice that jeopardizes her party’s agenda.
Conclusion
As the case of the $15 minimum wage
illustrated, advocating for provisions
within a reconciliation bill is different
from drafting legislation through the
usual processes. Time for advocates
to make their case will be short, and
Congress may be tight-lipped over issues
involving reconciliation. Advocates
will have to shield policies from being
labeled as extraneous while working
against a time-constrained process.
Champions of public finance will have
to make their case to protect against
the removal of provisions that are
critical to recovery efforts nationwide.
One unconventional year follows
another in Washington, D.C. Leaders
and political observers will have to
wait a little longer for “business as
usual” to return to Capitol Hill.
Michael Thomas is a federal policy
associate in GFOA’s Federal Liaison Center.
PHOTO BY CHIP SOMODEVILLA/GETTY IMAGES
16

APRIL 2021 | GOVERNMENT FINANCE REVIEW 17

Prioritizing
Your Values
Avoiding Slash and Burn in an Economic Downturn
BY JENNIFER CARLSON AND KIMBERLY OLIVARES
Budgeting is just as much about values and priorities as
it is about dollars. In times of fiscal distress, however, we
often ignore those principles in favor of just getting the
budget balanced. But in times of fiscal stress, it’s even
more important for governments to communicate their
priorities and values to improve budget transparency,
demonstrate fairness, and help justify difficult decisions.
In this section, we will look at practical strategies to
help you prioritize your organization’s values and
develop a framework to make those tough decisions and
communicate them to those who are most affected.
18

PRIORITIZING YOUR VALUES
Priority Based Budgeting
Creates Community
Alignment in Duluth
BY JENNIFER CARLSON
The City of Duluth, Minnesota, is a beautiful,
long city built narrowly on a hillside next
to the world’s largest freshwater lake,
Lake Superior. Because of its dramatic
landscape and geographic location, Duluth
experiences a lot of weather extremes from heavy
snowfalls to powerful storms. Duluth’s scenic location
and 23-mile length make it challenging to provide
core government services (public safety) and operate
utilities (water, natural gas, stormwater, sewer, and
steam), and to manage other community assets (two
public golf courses and one public ski hill).
Exhibit 1, which shows Duluth’s eight fire stations,
makes the logistical challenge clear. The hurdle this
creates for staffing is obvious. Similarly, the extreme
weather often dictates the city’s activities and
services such as snow removal and street repair, as
well as golfing and skiing, two very weather-dependent
activities with revenue uncertainty. Finally, in
addition to the geography and weather extremes, the
city also operates within a union environment with
six collective bargaining units and an expensive
employee benefit program.
EXHIBIT 1
A LONG CITY NEEDS A LOT OF FIRE STATIONS
©2021 MICHAEL AUSTIN C/O THEISPOT.COM
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PRIORITIZING YOUR VALUES
EXHIBIT 2
2020 PROPOSED GENERAL FUND EXPENDITURES BY SOURCE ($ IN MILLIONS)
Salaries and Overtime
$49.25
Benefits
$21.59
Retiree Insurance
Services and Charges
$7.35
$10.38
Over 84% of general
fund expenditures are
for salaries, benefits,
and retiree insurance
Supplies $3.05
Utilities $1.29
$0 $10 $20 $30 $40 $50 $60
The City of Duluth, MN
faced structural challenges
in its budget, given some of
the city’s particular needs
and obligations. Priority
based budgeting helped
the city align its revenues,
expenditures, and values.
20

The city’s 2020 budget was approximately
$330 million, and the general fund budget was
approximately $92.9 million. Exhibit 2 shows the
city’s general fund budgeted expenditures, which
are probably similar to those of most entities in
that more than 84% of the expenditures are peoplerelated:
salaries, benefits, and retiree insurance.
One of the largest and fastest-growing personnel
expenditures is the city’s health plan. Exhibit 3
shows that if the general fund grows at the rate of
inflation—2.5%—and the health plan continues to
grow at 10% a year (as it has for four consecutive
years), in 2036, the cost for employee and retiree
health care will exceed costs for all other general
fund expenditures. This obviously creates a
financial challenge, and Duluth has been working
with its medical provider and bargaining units to
find solutions.
More than 70% of the city’s general fund revenues
comes from three sources, the largest of which is
local government aid from the State of Minnesota—
approximately a third of the city’s budget. The
While 70% of Duluth’s revenues
don’t grow with inflation, over
84% of the city’s expenditures
do, creating a structural
imbalance and a budget gap.
formula for local government aid is determined by the
state, and it compares the city’s spending needs to its
ability to fund services. The amount of local government
aid is relatively fixed, with no growth factor built in.
Property tax is the city’s second-largest revenue source,
followed by sales tax. These three sources make up 70%
of general fund revenues, and costs of services have a
higher rate of appreciation than their revenue increases.
The only revenue source Duluth can control is property
tax, which we tr y to keep as low as possible. The challenge
is that while 70% of its revenues aren’t projected to keep
pace with inflation, over 84% of Duluth’s expenditures
are, creating a structural imbalance and a budget gap.
EXHIBIT 3
GROWTH OF HEALTH PLAN VERSUS GENERAL FUND ($ IN MILLIONS)
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039
General Fund Projected Budget
Health Plan Projected Budget
APRIL 2021 | GOVERNMENT FINANCE REVIEW 21

PRIORITIZING YOUR VALUES
The city works to close the budget gap (see Exhibit 4)
every year, especially during budget time. For many
years, Duluth had a status quo, line-item budget with
no new initiatives and no additional staff; in short,
it was built on continuing to do things the way they
had always been done. When the city had a deficit, it
would hold positions vacant, ask for volunteer cuts, or
make cuts across the board.
Duluth’s 2018 budget was an example of this
strategy in action. It was titled “Shared Sacrifice,”
and we needed to cut $1.7 million out of the general
fund budget. We cut across the board and most of
the departments had to come up with reductions.
Amounts were assigned to each department, and they
decided what they would cut. These reductions were
not tied to the city’s priorities. Duluth used line-item
budgeting at that time, so there was a limited amount
of information available about the programs that
would be affected or how the programs aligned with
the city’s priorities. We looked at line items, whether
it was salaries or FTEs, office supplies, or technology,
and decided which line items to reduce.
As we were working to solve the 2018 budget deficit,
we had recently adopted a land use plan called
Imagine Duluth 2035: Forward Together. Imagine
Duluth 2035 was a very community-oriented
process. The community’s priorities outlined in
the land use plan included economic development,
energy and conservation, housing, open space, and
transportation. While we had a land use plan, we
didn’t have a way to align the budget and resources
to the plan. We had two options: shelve the Imagine
Duluth 2035 plan or start putting it into action. But
what would putting it into action look like with the
city’s level of financial structural imbalance?
During the formation of the Imagine Duluth 2035
plan, we asked community members about their
visions and priorities for the city. We made a real
effort to engage all areas of Duluth, and over the
two years of the program, thousands of people
from all neighborhoods in the city participated.
Our staff used many forms of media to reach out to
community members. A webpage developed for the
Imagine Duluth plan had 33,000 views. A Facebook
page was also developed, and it had 1,000 followers.
If people weren’t able to get to any of the community
engagement and planning sessions, the city tried to
reach them via social media. We created an online
community survey, which ran for four months and
had more than 3,500 respondents. We held more
EXHIBIT 4
REVENUES NOT PROJECTED TO KEEP PACE WITH INFLATION ($ IN MILLIONS)
$115
$110
$105
$100
$95
$90
$85
$80
$75
$70
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 P 2022 P 2023 P 2024 P 2025 P
Budget Budget
Annual Revenues
Annual Expenditures
22

We worked hard to engage
all community members
and make sure the city’s
priorities reflected the
priorities of the entire city
and not just certain groups.
than 50 public events and reached out to more than
70 area businesses and nonprofits. We tracked the
ages and gender of respondents. We worked hard to
engage all community members and make sure the
city’s priorities reflected the priorities of the entire
city and not just certain groups.
We learned that people lived, worked, and visited
Duluth because of the city’s proximity to Lake
Superior, the natural scenery and great views, the
parks and open space, and the trails. When asked
what the City of Duluth’s highest priorities over the
next 20 years should be, the three most common
responses were: attract new employers, improve the
road network (we are known as the City of Potholes
thanks to our extreme weather), and preserve the
city’s natural resources and open spaces.
Duluth had a line-item budget and a land use plan
that clearly listed the community’s priorities. But
how were we going to be able to point the city’s
resources toward those priorities? We didn’t have a
tool or a mechanism to get us where we needed to be.
A new compass
The city decided that the answer was to implement
Priority Based Budgeting (PBB). A large part of PBB
is determining a community’s priorities. We had
already done that work, having just spent two years
asking residents what they envisioned the City of
Duluth looking like over the next 20 years. We knew
that our focus should be on culture and recreation,
infrastructure, the economy, livable neighborhoods
and affordable housing, and green space and energy
conservation. The city also added building a safe
and secure community as an important priority.
We knew that implementing PBB was going to take
time (see Exhibit 5 for the city’s implementation
timeline). There was an understandable concern
among staff when they were told the city would
be taking the next eight months to start forming a
priority-based budget when staff was already being
pulled in so many directions. It wasn’t that they
were unhappy with the concept; they just didn’t
have any time to spare.
On top of this, we had just gone through reductions,
so there were also fewer employees, and this was
going to be an all-hands-on-deck, organizationwide
effort. But we weren’t going to achieve
the community’s priorities with our status quo
line-item budget, so we kicked off the process in
December 2017. We created programs, allocated
costs to the programs, and scored the programs
in accordance with the program’s alignment with
the city’s priorities. We also had a peer review
process, and finally, in August, we were able to look
at opportunities and decide how we were going to
move forward with this information.
EXHIBIT 5
IMPLEMENTATION TIMELINE
2017 2018 Annually 2018-present
December January Feb/March May June August Nov/Dec
PBB Boot
Camp
Program
Creation
Cost and
Revenue
Allocations
Departmental
Scoring
Process
Peer
Review
Scoring
Departmental
Opportunities
Internal
Program
Mapping
Clean Up
Programs
and Costs
Use PBB for
Declsion-
Making
APRIL 2021 | GOVERNMENT FINANCE REVIEW 23

PRIORITIZING YOUR VALUES
A closer look at the process
How were we able to complete this demanding
project? The road to success started with a strong
tone at the top. We found that a third of the people
involved were on board from the beginning and
knew this is what we needed to do, a third were
neutral, and a third were resistant.
Duluth’s mayor was absolutely foundational
in pushing PBB through. She made it clear that
this was the direction the city was going in. She
understood the process was going to take time
and effort, but it needed to happen. We had just
spent two years on a land use plan that we now
needed to implement. Failing to act on the plan
would mean shelving years of hard work. The
city’s chief administrative officer and finance
director joined the mayor in supporting the
effort. PBB was implemented for all city funds,
and it took a significant amount of time.
The city’s line-item, status-quo budgeting
process made it difficult for departments to
understand the programs and services that were
being provided by other areas of the organization.
For PBB to be successful, we needed to bring
staff together to learn about programs and
services provided by departments throughout
The more we started looking
at what we were spending time
on, the more ideas we generated
for making improvements.
the city. Because staff are passionate about their
work, it can be difficult to objectively evaluate other
departments’ work.
Departments worked together and formulated
programs that expressed the services they provide
to the community. We identified 497 programs.
Some of the programs serve internal customers, like
payroll and budget office programs. Other programs
are community-facing, like investigations, pothole
patching, and election administration.
The next step was allocating costs and revenues
to the 497 programs. We allocated both personnel
and non-personnel costs from the line-item budgets
to the department programs based on how much
time and resources are spent on the programs. To
assist with allocating personnel costs, we created
A COMMUNITY-ORIENTED PROCESS
The Imagine Duluth 2035 plan engaged community members from all areas of Duluth to determine their budget priorities.
24

EXHIBIT 6
EVALUATING DULUTH’S POLICE DEPARTMENT BUDGET AFTER IMPLEMENTING PBB
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Directed Patrol Response
Reporting
Administrative Support
Non-Directed Patrol Response
General Investigations
Records Support/Management
Training and Eduction
Drug Investigations
Community Policing
Community Outreach and Relations
Sex Crimes Investigations
Property & Evidence Management
templates with the department’s programs and
asked every staff member to write the percentage of
time they spend working on each of the programs.
This was a sizable undertaking (the city has 868
FTEs) and required the involvement of a lot of
people. The process was enlightening for a lot of
managers and directors because they didn’t realize
how much time was being spent on programs. This
marked the beginning of management starting to
look at how things could be done differently and
how they wanted people spending their time.
Exhibit 6 shows how the city’s decision-making
tool changed after implementing PBB. Before, we
would make decisions by reducing lines. The new
method provided a tool that clearly showed exactly
what our departments were working on and how
much our programs cost. We could look at police
department spending, for example, and see that
nearly 14% of its time was spent on reporting. We
could then ask whether there were opportunities
for more automation. The more we started looking
at what we were spending time on, the more ideas
we generated for making improvements.
Property/Financial Investigations
School Resource Office Program
Professional Standards
Extra Duty Employment
Special Events
Juvenile Investigations
Traffic Enforcement
Crime Scene Investigations
Domestic Violence Investigations
Budget & Grant Operations
Crime Analysis
Grandma’s Marathon
Community Service Officer Park Ranger Programs
Animal Care & Shelter
Animal Control
Crash Investigations
Tactical Response Team
K-9
Boards, Commissions, Committees
With all the programs determined and priorities
identified, it was time to start scoring the programs
based on their alignment with city priorities. Part
of the scoring process involved scoring programs
based on basic program attributes, which included
mandate, cost recovery, reliance, demand, and
population served. Scoring programs using basic
program attributes was valuable in showing:
• How much of our programs’ costs are recovered
• The degree to which the program is mandated
(federal or state level, local level, best practice)
• How much of the population is being served
by the program
• Change in demand for the program and
Bike Patrol
Licensing
Wellness Programs
Police Records Management System
Volunteer Police Programs
• The reliance of the community on the program.
Every program in the city received a score for each of
the basic program attributes. Then, programs were
scored based on their alignment with internal or
external priorities. The external-facing community
priorities are infrastructure, dynamic and diverse
economy, green space and energy conservation,
APRIL 2021 | GOVERNMENT FINANCE REVIEW 25

PRIORITIZING YOUR VALUES
livable neighborhoods and affordable housing,
culture and recreation, and safe and secure
community. The internal governance priorities
(for instance, payroll and budget office) are
high-performing organization, customer
service, trust and engagement, long-range
planning, workforce, fiscal responsibility, and
compliance. The departments scored each
of their 497 programs on a scale from one to
four, with four indicating that the program was
highly aligned with the city’s priorities and one
indicating that the program had a relatively low
alignment with priorities.
We created peer review teams to provide
objectivity to the departments’ scores. Because
every department is passionate about its
programs, we needed another level of scoring
review to look at the scores the departments
had assigned to their programs. The peer review
teams were voluntary; people were asked to
participate if they felt inclined to do so.
Fifty people volunteered, demonstrating a great
deal of staff engagement in this process. There
were groups for each of the priorities and each of
the basic program attributes. We formed the peer
review teams to include one expert in the priority,
Discussions of the city’s
capital plan no longer just
talk through what will be
purchased or replaced;
they now center on why.
and staff members with less experience with the
priority. For example, on the peer review team for
the culture and recreation priority, we included
the fire chief and the police chief to expose them
to the importance of culture and recreation
programs and to learn about programs that other
city departments were providing. Based on the
score the programs received, they fell into one of
four quartiles, forming a bell curve (see Exhibit 7).
The programs in quartile one were most aligned
with the city’s priorities, and the programs in
quartile four were least aligned with the city’s
priorities. Instead of referring to quartiles three
and four as low-alignment quartiles, we called
them our opportunity quartiles.
EXHIBIT 7
SCORING QUARTILES
Standard
Deviation
Average
Least Aligned
programs
are Quartile 4
QUARTILE 4 QUARTILE 3 QUARTILE 2 QUARTILE 1
Most Aligned
programs
are Quartile 1
0 Score 100
26

With an average snowfall
of 70 inches a year, the
Duluth’s snow removal
program is highly aligned
with the city’s priorities.
ALEX KORMANN/STAR TRIBUNE VIA GETTY IMAGES
It made sense to start analyzing programs in the
opportunity quartiles. Each department was asked
to identify opportunities for up to five programs.
Opportunities they could identify included onetime
technology investments, internal partnerships
to reduce redundancy, external partnerships, cost
recovery through grants, increasing fees, and so on.
Staff started thinking about ways we could work
together to either start reducing service levels of the
least-aligned programs or looking at different ways
to fund programs.
To assist with the analysis of opportunities with city
programs, we asked policy questions, including: Are
we over-providing mandated services? Should we
be reexamining what we consider to be a mandate?
Are there public-private partnership opportunities?
What is the impact of the program?
The city also stressed that we weren’t just going
through the motions of this process; we were
going to implement PBB in everything we do.
We were going to start looking at things through
the PBB lens. One example of this is in hiring.
In the past, a manager or director would replace
a position simply because that position was
already part of their department, regardless of the
programs the position works on and the programs’
alignment with city priorities. Now, instead of
automatically replacing the present position, they
look at ways to transition to a different position
that can work on programs with high alignment.
Performance measurements were also redone to
better reflect the city’s priorities. Exhibit 8 shows
the planning and development team’s objectives,
strategies, and measurements to achieve high
APRIL 2021 | GOVERNMENT FINANCE REVIEW 27

PRIORITIZING YOUR VALUES
EXHIBIT 8
REVISED PERFORMANCE MEASURES
PLANNING & DEVELOPMENT
City Priority: Livable Neighborhoods and Affordable Housing
Objective
Strategy/Measure
2017
Actual
2018
Actual
2019
Estimated
2020
Projected
Development/Redevelopment:
Encourage and support
strategically planned, well-designed
and uniformly regulated mixed-use
development and redevelopment,
enhancing its desirability as a great
place to live and work
Number of plan reviews performed,
including shoreland permits
Number of land use applications
processed by Planning Commission
or Heritage Preservation
Commission
173 225 257 280
195 161 195 205
Community Involvement:
Instill a sense of community pride
through proactive communication,
engagement, outreach,
participation, and volunteerism.
Total number of community
development applications
evaluated for funding
28 34 33 35
City Priority: Safe and Secure Community
Objective
Strategy/Measure
2017
Actual
2018
Actual
2019
Estimated
2020
Projected
Livable Community:
Ensure regulatory compliance
in order to provide clean and
well-maintained neighborhoods,
to protect property. the
environment, and the lives and
health of residents and visitors
Number of predevelopment
meetings facilitated
Number of formal compliance
actions
256 243 164 175
31 62 37 45
alignment with the city’s priorities of livable
neighborhoods and affordable housing, and safe
and secure community.
Discussions of the city’s capital plan no longer just
talk through what will be purchased or replaced;
they now center on why. We consider what priorities
the purchase helps to achieve. Plow trucks are a
good example. Duluth gets a lot of snow, and these
trucks haul approximately 20 million cubic feet of
snow every year. Snow removal is a city program
that highly aligns with the safe and secure priority
of the city.
Changes in action
The city used PBB for its 2020 budget. We were able
to capitalize on a partnership with AmeriCorps for
city-wide, year-round recreation staff (culture and
recreation priority programs), a partnership with
the Duluth Library Foundation for an early literacy
initiative (culture and recreation priority programs),
a partnership with the Housing and Redevelopment
Authority to fund a full-time housing developer
(livable neighborhoods and affordable housing
priority programs), and a full-time sustainability
officer to leverage internal and external cost
and energy savings (green space and energy
conservation priority programs).
The city is also addressing COVID-19. If the
pandemic had hit before Duluth adopted PBB, we
would have cut line items regardless of the services
affected. Instead, we have reduced service levels
of programs that we are unable to safely provide.
Instead of reducing positions based on vacancies,
regardless of the program impact, we restructured
staff based on program alignment. For example,
because the city is unable to safely resume all library
28

Performance Management
and Lean Keep the City
of Austin on the Road to
Continuous Improvement
BY KIMBERLY OLIVARES
STEVE SKJOLD / ALAMY STOCK PHOTO
PBB has aided the city in
introducing new initiatives,
like a partnership with the
Duluth Library Foundation
to promote early literary.
programs, some library staff were moved to the Parks
division to assist with high-priority programs there.
When we used line-item budgeting, we struggled to
provide new initiatives. Now, the city introduces new
initiatives every year and throughout the year, using
existing funds, cost recovery, and partnerships. In
the past, we did things the same way we’d always
done them, and now we are continually pointing and
restructuring our programs and services to align
with the priorities of the city.
Conclusion
All of this has taken a lot of work, and there was
some resistance at the beginning. The city had just
reduced personnel and spending, and it seemed
overzealous to jump with both feet into such a long
and complicated process. But now that PBB has been
integrated into city planning and spending, all the
city’s departments have started to see why this is so
important. It has been an excellent tool to provide
agility and to better align resources to get the city
where the community wants to see it by 2035.
Jennifer Carlson is the finance director for the
city of Duluth, Minnesota.
One of the most exciting
changes the City of Austin,
Texas, has made over time has
been instilling a performance
management approach
throughout the organization as we strive for
continuous improvement. It has put the city in
a much better position now and for the future.
Among the core components of performance
management is making sure that the city
has clearly defined strategic goals for the
organization overall and that departments
and teams align their programs and services
accordingly. To assess achievement of the goals,
performance measurement shows what is being
done well and what isn’t, and those data are
used in performance and process improvement
strategies, along with other data sources, to
create objectives that the organization can
rally around. Performance management can
also provide focus and objectivity for making
difficult decisions, so leaders aren’t simply
facing a huge list of questions.
Research conducted within the City of Austin
organization in 2017 found four areas that
needed to be addressed. There was a lack of
clear, shared, citywide priorities; a shared sense
that the city wasn’t dealing with critical issues
that would determine its future; a challenge in
providing effective governance; and inadequate
feedback and learning loops. To address these
concerns and create a single playbook for the
entire organization, the city created Strategic
Direction 2023 (SD23).
Adopted in 2018, this plan lays out six strategic
outcomes for the next five years. It uses an
outcome-based approach to setting priorities
and budgeting that enables the City to address
multiple time horizons, assess performance more
thoughtfully, and improve community outcomes.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 29

PRIORITIZING YOUR VALUES
Structure and focus
To support its strategic plan and related
initiatives, Austin’s Performance Management
team, which is within the Center of Excellence
and Innovation, includes three main work units:
Administration and Change Management,
Performance ATX, and Operational Excellence
(OpEx). (This team was previously known as
the Office of Performance Management, but it
recently formed a partnership with the Office
of Innovation to create the newly formed Center
of Excellence and Innovation.)
1. Administration and Change Management
focuses on organizational culture related
to the city’s strategic plan, change
management, and strategic professional
development. It ensures employees
throughout the organization understand
what the strategic plan means and how each
individual contributes to it.
2. Performance ATX is responsible for strategic
plan implementation and organizational
alignment. It manages the city’s performance
measurement program and leads large-scale
data analytics and reporting efforts.
3. Operational Excellence is the city’s
Lean consulting team. It is in charge of
collaborative partnerships, building the
organization’s improvement capabilities,
and coaching. When the city takes on
an improvement project, it also teaches
everyone involved the why behind it.
The Strategic Direction 2023 plan was created
as a framework for executive leadership to use
in making operational and budgeting decisions
in support of achieving the vision established
in the Imagine Austin Comprehensive Plan. The
city hadn’t had an organization-wide strategic
plan since the early 2000s. Austin had also
experienced some fairly significant changes in
leadership as the structure of the city council
shifted from seven elected at-large members to
11 members, 10 of whom are elected by district,
and the mayor, who is elected at large.
When that first council was elected, only
one member had served on the previous
council. Soon after, the city manager left the
organization, which led to a long period of interim
and acting roles at different leadership levels.
We needed something to bring the organization
together and provide more direction as we dealt
with all the changes.
To develop SD23, Austin started with the vision
statement included in its Imagine Austin
Comprehensive Plan, that Austin be a “beacon
of sustainability, social equity, and economic
opportunity…” This had to be the driving force
behind the strategic plan. Then, through two
workshops, the city council and executive team
jointly agreed on six strategic outcomes: Economic
Opportunity and Affordability; Mobility; Safety;
Health and Environment; Culture and Lifelong
Learning; and Government that Works for All.
They also selected a series of indicator categories
to guide development of related performance
measures. Following these two workshops, teams
of city employees were established to carry out the
complete development of each outcome, under the
leadership of an executive-level sponsor. It was
important that employees play such an important
role, as it has greatly supported buy-in by the rest
of the organization.
To begin their work, each of the outcome teams
reviewed in detail the city’s extensive catalog
of master plans and program-specific strategic
plans to gain insights into community needs
and to ultimately integrate that information
into cohesive result-driven strategies. They also
did field research to better understand the lived
experience of our community members. Using the
information learned from these efforts and various
other resources, the teams completed a series of
milestones for each outcome, including developing
challenge statements (a diagnosis of problems
and challenges in the community), performance
measures, and strategies. Throughout the
process, the teams took part in department
director summits to serve as touchpoints with
city executives and department leadership.
Ultimately, they presented and received feedback
on each deliverable through strategy workshops
with council and executive leadership.
Because the council had been included
throughout the entire process, there were minimal
amendments by the time we reached adoption day.
30

Established in 2018, Austin’s
Strategic Direction 2023 plan
lays out six strategic outcomes.
They had played a critical role at each stage of
the plan’s development and were given numerous
opportunities to ensure their priorities were
clearly present in the document.
After adopting Strategic Direction 2023, the
organization quickly put it into action. First,
the city council prioritized its top 10 indicators
from the plan to provide clear direction on where
they wanted staff to concentrate resources in the
upcoming budget. In addition, the then-newly
appointed city manager completely reorganized
his leadership team so all of his assistant city
managers would be directly aligned with the
outcomes laid out in the plan. The Performance
Management team also quickly went to work in
developing a foundation for strategic alignment
that would support the council and executive
leadership in their decision-making.
Putting plans into action
The city had long used an annual business
planning process to develop department
missions, goals, and performance measures.
The performance measure program had been
in place since the late 1990s and it, along
with the business planning process, had
become stagnant. After SD23 was adopted, we
recognized the need to refresh and rebrand the
process to more closely align with the strategic
plan and address current needs. We developed
the Department Compass, which not only
establishes department missions and goals but
also a complete catalog of work and ensures
clear alignment with SD23. The combination of
strategic alignment and performance measures
allows the city to make decisions about what it
will and won’t do in a more objective manner.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 31

PRIORITIZING YOUR VALUES
EXHIBIT 1
COA STRUCTURE OF PERFORMANCE MEASURES
CORE
MEASURES
Strategic Direction
As an organization, how is the city
performing at what has a measurable
impact on the community
Strategic
Influence Policy
Department
How a department is tracking
toward reaching goals –measured
as results, effectiveness, satisfaction
Key
Performance
Indicator
(KPI)
Influence Operations
Frontline
Foundational, team or
division level contributions
measured as outputs/counts
Operational
Influence Processes
Measures that support at every level
• Mission: A statement that articulates the
desired impact/benefit on residents (or the
primary customer of your department’s
services) and why we exist as a department.
• Goals: A definable, desired result that drives
both department direction and budget
planning. Goals align to internal performance
measures as well as elements of SD23—
outcomes, strategies, strategic measures—and
other city policy.
• Catalog of Work: An inventory of all programs
and services the department offers to different
audiences; also aligned to department goals,
SD23, and other city policy.
The refresh of the performance measure program
allowed us to more clearly show departments
how our measurement types are structured and
how they relate to each other. Exhibit 1 shows
the pyramid of Austin’s performance measures.
At the top are the strategic measures from SD23,
which directly influence policy decisions. The
next layer is department-level key performance
indicators that track progress toward reaching
their goals, as described above. Finally, at the
base of the pyramid are the more detailed,
process-oriented measures that can drive frontline
continuous improvement efforts. These types of
measures are incredibly useful for engagements
facilitated by our Operational Excellence team as
they initiate process improvement engagements
with departments. Exhibit 2 illustrates the city’s
Compass Dashboard. The entire organization
is able to view each department’s mission and
goals, all directly aligned with the strategies in
the city’s overall strategic plan. Each department
also provides a goal owner (or more than one) and
responsible divisions for each as a way to improve
accountability and how often it is measured, as
well as a statement of how each goal affects the
Austin community. This takes the goals beyond
a checklist of important items and establishes a
stronger connection to how our work matters.
As previously noted, the catalog of work is an
inventory of all the programs and services
across the organization. The first iteration
resulted in nearly 5,000 entries, ranging from
accounts payable, to community policing, to the
activities associated with managing water and
wastewater plants. By collecting this information,
departments are able to see and understand their
programs and services in relation to the SD23
32

outcomes and strategies, legal requirements,
audience served, and more. They are also able to
see the catalogs of every department, which can
drive opportunities for partnerships and more
effective allocation of resources throughout the
organization. While our budget structure has long
had a certain level of detail in terms of programs,
it did not have such a comprehensive listing of all
the things the city does internally and externally.
In times of financial challenge, having this
information available to our leadership allows for
more objective and comprehensive conversations
around the services we provide to the community.
To further support these conversations, our team
is improving the information collected for each
catalog entry to include which funding lines in the
budget specifically support them.
The dashboard shows the audience for each
service, whether that’s another city department
or the community. It also shows how each service
aligns with SD23, along with a number of other
factors such as whether something is a legal
The combination of
strategic alignment and
performance measures
allows the city to make
decisions about what it
will and won’t do in a
more objective manner.
requirement and if there are partners—and if
so, if the service is conducted in partnership
with another department or with an external
entity. This information can be used to inform
conversations about whether a given service
should be done by the department currently
performing it, or if it’s something that might be
better shifted to another department or to an
external organization.
EXHIBIT 2
FY21 COMPASS DASHBOARD – CATALOG OF WORK
APRIL 2021 | GOVERNMENT FINANCE REVIEW 33

PRIORITIZING YOUR VALUES
EXHIBIT 3
FY21 COMPASS DASHBOARD – GOALS
Finally, we have done extensive work throughout
the organization to build our strategic
performance dashboard, where all the measures
from SD23 are tracked (see Exhibit 3). Previously,
performance measures were reported on through
a simple list of the measure name, prior year
actuals, and the target for the upcoming fiscal
year. There was no room for details about the
measures to allow a better understanding of what
they mean and how they relate to programs and
services. Now, through this dashboard, measures
are given extensive context—what they mean,
how they’re trending, whether that’s good or bad,
and what’s being done to address this. Further,
the ability to visualize these data leads to more
productive conversations about what directly
relates back to the city’s strategic priorities.
A massive amount of work has gone into
establishing a strong performance managementfocused
foundation for the organization in
support of continuous improvement. This work
literally comes to life through the efforts of
our Operational Excellence team, which is the
organization’s Lean team. It focuses on making
service delivery easier, better, faster, and less
costly. (See Exhibit 4.) But at the core of all of this
work is the customer. The Operational Excellence
team is driven by partnerships, working with
teams to implement systems and practices that
help ignite and sustain a culture of continuous
improvement. Staff wants to collaboratively solve
challenging problems by helping departments
identify and better understand the challenges
faced in achieving their goals and facilitating
problem-solving and sustainable solutions. Their
work also revolves largely around process design
partnerships, where the team helps improve
the experience of both community and staff in
defining how outcomes can best be delivered
through process design. Governments tend to focus
on the experience of residents, and rightly so;
34

A cross-departmental team
worked for six months to develop
recommendations to reduce
Austin’s site plan review process
from twelve months to four.
but it is also important to address the experience
of the staff member who is implementing that
program or service. Not doing so misses out on an
important component of that overall service.
Among the many Operational Excellence team
engagements is improving the site plan review
process. Austin’s site plan review process
involves 14 departments, and it was averaging
approximately one year from beginning to end;
before that, it had taken four months. This
difference has a huge impact on the development
community, which translates into additional
costs for developers that get passed down to
their residential or commercial customer.
The city’s goal is to get back to that four-month
timeframe. A cross-departmental team worked
together for six months to come up with a slate of
recommendations to address site plan review.
The recommendations the team made are around
issues that are very time sensitive. They’re
completely redesigning the completeness check
process for when a developer brings in its site plan,
for example, making sure that a much higherquality
product is submitted initially, which cuts
down significantly on the back and forth. They
also looked at ways in which the applicant can
more closely monitor the progress of the site
plan review and the comments being made so
they can address issues more quickly. The team
also incorporates continuous improvement
with things like daily management tools to help
everyone involved see their progress on a daily
basis, which keeps both sides from looking at
the project six or 12 months down the line and
realizing things had slowed down unexpectedly.
Then there’s the city’s animal services intake.
Austin operates a no-kill shelter that takes
in approximately 17,000 animals a year. The
department asked for the Operational Excellence
team’s help to rethink the intake procedure, so
the team did a complete process mapping to
not only redesign the procedure but also rework
the way the space is set up to better support
the process used to bring these animals in.
It resulted in a complete transformation of the
space and the process, ultimately saving so
much time it became possible to transfer one
of the intake employees to another team that
needed assistance within the Animal Services
Department.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 35

PRIORITIZING YOUR VALUES
EXHIBIT 4
PARTNERSHIP PROGRAMS
CONTINUOUS
IMPROVEMENT
PARTNERSHIP
Equipping DIY
continuous improvement
• Working with teams to
implement systems and
practices that help ignite
and sustain a culture of
continuous improvement.
• Providing guidance from
experienced continuous
improvement coaches
to strengthen learning
through practice.
PROBLEM-SOLVING
PARTNERSHIP
Collaboratively solving
challenging problems
• Helping teams identify
and better understand
the challenges faced in
achieving their goals,
facilitating problem-solving
and sustainable solutions.
PROCESS DESIGN
PARTNERSHIP
Designing processes to
improve the experience
of community and staff
• Supports teams in
understanding the
community outcomes
they provide, and in
defining how they can
best be delivered
through process design.
EXHIBIT 5
LIBRARY BOOK RETURNS WERE STACKING UP
36

SD23 BY THE NUMBERS
1
VISION
6
OUTCOMES
35
INDICATOR
CATEGORIES
34
CHALLENGES
71
STRATEGIES
200+
STRATEGIC
MEASURES
A final example is one the Operational Excellence
team finished recently to improve the process
of library re-shelving. With the city’s libraries
closed because of COVID, we took this time
to work with the department and complete a
root cause analysis of the problems around
circulation at one of the highest-volume
branches. As you can see in Exhibit 5, the books
are just constantly stacking up as employees try
to get them re-shelved and sent back to where
they’re supposed to go. This analysis led to the
library building a data management system that
aligns its objectives and creates a better way for
staff to measure and monitor their performance.
It also makes it possible for them to easily
determine the effectiveness of any experimental
changes they make to the circulation process.
The Operational Excellence team is also
working on a citywide continuous improvement
initiative in response to the State of Texas
reducing the rollback tax rate from 8 percent to
3.5 percent. It has two overarching objectives:
making improvements to policies and processes
between corporate groups and departmental
counterparts that have equivalent business
functions; and implementing best practices
and innovative methods. The initiative is
focusing on the Human Resources Department,
Communications and Technology Management,
Communications and Public Information Office,
Financial Services Department, Building Services
Department, and Fleet Services. The city hopes
the corporate groups emerge as functional Centers
of Excellence through this effort. For example,
the city has thousands of vehicles used by public
safety departments and other department field
operations, and we hope to apply new methods
of fleet portfolio management that will improve
lifecycle costing models and result in significant
cost savings.
Conclusion
The performance management functions and
tools the City of Austin has put into action are
not rocket science. Any organization can adopt
them. The challenge is taking that first step to
dedicate resources to this work when there are so
many competing and important needs. To ensure
long-term sustainability of operations, regardless
of fiscal conditions, a dedication to continuous
improvement is imperative. Devoting a team to
overseeing these efforts makes a clear statement
to the organization and the community that the
city is committed to ensuring it achieves the best
possible outcomes for all.
Kimberly Olivares is the Chief Performance
Officer for the City of Austin, Texas.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 37

38

Government
as a
Platform
A Next-Generation
Take on Coordination
and Cooperation
BY SHAYNE C. KAVANAGH AND CHRIS FABIAN
Local governments are commonly
fragmented, broken into many,
often overlapping jurisdictions.
Because local governments spend
a great deal of money in aggregate,
it is reasonable to ask if the public
interest might be better served
by enhanced coordination of
government at the local level.
©2021 MICHAEL AUSTIN C/O THEISPOT.COM
In this article, we examine this idea
through an approach born of the
information age era: government as
a platform. It’s an approach that can
advance innovation while offering
financial and operational advantages
for the typical, day-to-day services
that local governments operate.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 39

GOVERNMENT AS A PLATFORM
We’ll use the following
criteria to evaluate the
financial potential of
government as a platform:
Economization: Less money
is spent in total (assuming
that too much was being
spent before).
Efficiency: The “per unit” cost
of public services declines.
Value: The benefit created
by each dollar of public
money spent goes up.
We’ll conduct our examination
through the lens of GFOA’s
Financial Foundations for
Thriving Communities. This
framework is based on the
Nobel Prize-winning body of
work about how to solve shared
resource problems, like local
government budgets. 1 One of
the insights from this work
is that local communities are
most likely to thrive when
they engage in cooperative
relationships with others.
In a traditional governmental model, the departments of
the government are the service provider. Government as a
platform is about working with the community to determine
the service objectives of government and then “plugging in”
the most effective service provider, regardless of whether
it is the local government itself, a private, non-profit, or
another public organization, or if it is an activity performed
directly by the citizens themselves. This model is like the
ubiquitous smart phone. A company like Google or Apple provides
the platform and the best apps can be plugged in to accomplish the
objectives of the end user. 2 Similarly, local government provides
the authority to provide public services, and the best providers
can do the hands-on work of delivering that service.
To take two examples, the City of Englewood, Colorado and
Washington County, Wisconsin have both considered the
potential to operate as a platform, rather than a traditional
bureaucracy. This led Englewood to merge its fire protection
services with the City of Denver. The new shared service saved
Englewood about $3 million annually or 33% of its original budget
for the fire department. This is because Englewood was able to
close one of its three fire stations as one of Denver’s stations
was sufficiently close to provide acceptable response times.
Washington County formed a joint public health department
with its neighbor, Ozaukee County. The shared public health
department saved the counties a combined $300,000 in annual
operating costs in the first year. 3
However, many local governments have already done things like
form agreements with other governments to provide a service
or contract out a service to a private firm. Two features make
government as a platform distinct:
• Government as a platform is a systematic approach to
public service provision. It aims to look comprehensively
across the entire government and find the best service
providers. This contrasts the more ad hoc approach local
governments traditionally have taken to looking beyond their
traditional way of providing services.
• Government at a platform is agnostic on who the service
provider is—it only matters if they can do the job. For
example, in the 1980s and ‘90s the idea of “privatization” and
the “contract city” gained notoriety. These ideas were rooted
in the assumption that private sector service providers were
inherently preferable to public sector service providers.
Government as a platform does not care if a service provider is
from the public sector, private sector, or non-profit sector.
Our research suggests a three-step process that local governments
can use to become a platform: 1) program inventory; 2) opportunity
identification; 3) implementation. Let’s examine each.
40

Program inventory. A program is distinct service offered
by the government, like police patrol or tree services. This
contrasts with the traditional approach of organizing by
departments, like police and public works. Programs are
directly relevant to how people experience public services.
Therefore, they are far more useful in a discussion about
how to provide services, compared to departments and line
items. A program inventory should include all programs in
the government that provide a discrete service that leads
to an identifiable result or benefit for public. An inventory
clarifies exactly what the government does. Hundreds
of governments have developed program inventories.
Below is an excerpt of a program inventory from the police
department of a mid-sized city.
Local communities are
most likely to thrive when
they engage in cooperative
relationships with others.
EXCERPT OF A PROGRAM INVENTORY FROM A POLICE DEPARTMENT
POLICE COST FTE DESCRIPTION
Accreditation 296,499 2.4
Arson Investigations 198,394 2.0
Develops and implements the department’s plan to maintain
accreditation through Commission on Accreditation for Law
Enforcement Agencies (CALEA).
Investigates all arson cases and is the liaison between the police
and fire departments.
Asset, Bulk Cash and Property
Forfeiture Management
241,171 2.0
Responsible for seizing all currency, real property, vehicles, and
assets proven to be the property of facilitators of criminal activity/
proceeds of criminal activity.
Auto Theft Investigations 204,801 2.0 Investigates stolen vehicle cases.
“Brains and Body”
Summer Program
5,343 —
Summer fitness program and program to enhance math skills for
Grades 3–10.
Burglary Investigations 2,396,563 11.0 Investigates all burglaries to residences and businesses.
Camera Enforcement
Program
25,318 — Camera enforcement for speed and red light violations.
Canine 1,151,513 10.0
Supplements field operations with dual-purpose canines. Assists
in narcotics and explosives locations, tracking, and missing person
searches.
©2021 MICHAEL AUSTIN C/O THEISPOT.COM
Cold Case Investigations 151,692 1.0 Investigates unsolved homicide and other major felony cases.
Communications Liaison 185,261 1.2
Community Services 1,181,853 11.0
Liaison between the police department and the fire department
communications bureau.
Interact with citizens, businesses, and neighborhoods to improve
home/neighborhood safety, business safety, and quality of life
issues. Also organizes speakers and events that are relevant to the
community’s needs.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 41

GOVERNMENT AS A PLATFORM
A program inventory leads to the next step of opportunity
identification.
Opportunity identification. Identifying opportunities
may be as simple as convening participants from
local agencies around a table and comparing program
inventories. For instance, Moffat County, in rural
Montana convened a meeting with Moffat County
School District, the City of Craig, and Memorial Regional
hospital. The County found that over half its budget
was comprised of programs where at least one of the
other organizations around the table had a comparable
program. Other local governments that have undertaken
this exercise have found even higher proportions. This
is not to say that these are all duplicative services, but
rather that there is a large area of opportunity to explore
for partnerships, mergers, or insourcing/outsourcing.
The City of Toledo, Ohio, undertook as similar process
as Moffat County, but worked with the local chamber of
commerce to look for opportunities to partner with other
organizations, including the private sector. However,
because government-as-a-platform isn’t dogmatic about
what sector the partners come from, the following steps
were taken to review the City’s programs:
• Proposals come to the City for how a given service can
be provided by a provider from outside traditional city
government, be it outsourcing to the private sector,
sharing the service with another government, or
something else.
• City staff review the proposal and determine if they
can create a “counter offer” that would outperform
the proposal.
• If the City cannot outperform the proposal, then the
proposal can be accepted and service is reconfigured
accordingly.
Some of the services that were reconfigured in this way
include street sweeping and impound lots. One of the
best examples was “Leaf Collection” a city run program
where staff provided a high level of service: as long as
residents raked their leaves to the edge of their lawn,
city staff would collect, bag, and dispose of the leaves.
Toledo, Ohio potentially saved
millions of dollars by identifying a
private sector alternative for their
annual leaf collection program.
42

The City’s chamber of commerce identified a private
sector alternative which has the potential to produce
multi-million dollars in savings.
While Toledo’s approach is a good model, research can
also provide guidance on where to look for opportunities
and how to evaluate them. First, we worked with
ResourceX, a firm that helps local governments develop
program inventories, to gather data from 200 cities
and counties on their program inventories. 4 The cities
ranged in size from 4,768 to 849,576 in population, with
an average of 94,034. The counties ranged in size from
9,031 in population to 619,968, with an average of 125,827.
We looked to see which programs were most commonly
judged, by the local governments themselves, as having
potential for partnership.
The table below shows the results for city governments.
The first column shows the percent of the department’s
budget taken up by each program. The next column shows
the percent of the entire city’s budget, and the last column
shows the percent of cities who judged the program to
have potential for sharing. The programs within each
department are ordered by how sharable the programs
where thought to be. The reader may notice that many
of the most sharable programs are quite small as a
percent of a department’s budget. First, it is worth
noting the departments often have many programs the
comprise their total spending, so any single program
is likely to only constitute a small percent of total.
Even so, the numbers in the table are still not large.
For example, a “large” program might be around 15%
of the department budget or even more. Police patrol,
for example, is over 30% of the department budget for
many cities. This tells us that cities are more likely to
start with smaller programs. This is understandable
given municipal government’s reputation for risk
aversion. We also see maintenance programs come
up often (be it vehicle, facilities, etc.). This tells us
that cities most readily recognize the opportunity for
sharing basic maintenance functions.
In the next table, we see the most sharable services for
counties. Interestingly, counties identify programs
that are a larger share the department budget as being
potentially sharable. We see a number of maintenance
services identified, but also many non-maintenance
services. That said, the maintenance services tend to
be seen as sharable by a higher portion of the counties.
% OF
DEPARTMENT
BUDGET
% OF
CITYWIDE
BUDGET
% OF CITIES WHO
ID PROGRAM AS
SHAREABLE
POLICE
Animal Control 0.4% 0.2% 72%
Police Vehicle Cleaning, Repair, Maintenance 2.0% 1.1% 48%
911, Dispatch 2.3% 1.3% 42%
PUBLIC WORKS
Fleet Vehicle and Equipment Replacement 3.6% 1.9% 74%
Custodial 0.6% 0.3% 62%
Facility Maintenance 5.4% 2.7% 52%
UTILITIES
Utility Billing 0.5% 0.1% 34%
Line Inspection, Repair and Replacement 4.8% 1.3% 17%
PARKS AND RECREATION
Athletic Field Maintenance 3.2% 0.5% 72%
Grounds Management 8.4% 1.3% 63%
Playground Equipment Repair and Maintenance 0.5% 0.1% 44%
APRIL 2021 | GOVERNMENT FINANCE REVIEW 43

GOVERNMENT AS A PLATFORM
% OF
DEPARTMENT
BUDGET
% OF
CITYWIDE
BUDGET
% OF CITIES WHO
ID PROGRAM AS
SHAREABLE
HEALTH & HUMAN SERVICES
Family Services 9.7% 1.9% 32%
Child Care 1.4% 0.3% 18%
Senior, Adult Day Care (include Nursing Home) 7.8% 1.5% 10%
FIRE AND EMS
Vehicle and Equipment Maintenance 1.8% 0.3% 69%
Calls for service (non-emergency) 7.9% 1.5% 17%
ENGINEERING
Data management (GIS) 2.6% 0.2% 56%
Inspection, code enforcement 12.1% 1.0% 28%
Plan Review 20.2% 1.7% 19%
SHERIFF
Dispatch 4.9% 3.5% 64%
Vehicle Maintenance 1.2% 0.9% 41%
Patrol, Calls for Service 11.8% 8.4% 33%
PUBLIC WORKS
Roadway Operations and Maintenance 43.3% 10.5% 84%
Vehicle and Equipment Replacement 22.2% 5.4% 71%
Building, Custodial Services 1.8% 0.4% 45%
There are a few lessons we can take from the tables above:
• Smaller programs may be seen as less risky to share, so
might be a good place to start.
• Maintenance services appear to have wide support,
generally, for sharing.
• A more speculative lesson might be that the more distinct
a program is to the identity of the community, the less
likely it is to be shared. For example, maintenance would
probably not be seen as a distinctive capability by most
local governments. On the other side, police patrol might be
seen as distinctive (e.g., the officers are very visible to the
public, the cars have the name of the city written on them).
We see that 33% of county sheriffs thought this service
was sharable, but police patrol didn’t even make the list
for cities (it was 17%). Because “sharing” this service often
means having the county take over local patrol and calls
for service from cities, it is probably not surprising that
cities didn’t see the same opportunity that counties did.
It is also informative to consider the largest programs.
The tables on the following page show some of the
largest programs typically found in cities and counties.
We see there are some cases of overlap between
the largest programs and most sharable programs
(particularly in county human services). However,
there are cases where some larger programs were not
rated as particularly sharable. For example, city police
patrol is the largest service in many cities but was rated
as sharable by only 17% of cities. Yet, many smaller
cities throughout the US have essentially “outsourced”
their police patrol to the overlapping county sheriff
department. This is not to say that this the right path
for every city, but it does suggest that there may be
more potential for sharing services than many local
governments might think. Another example might
include regionalization of at least some aspects of
utility services (e.g., highly capital-intensive functions
like purification and processing).
44

Utility services like water purification and processing offer potential for sharing. The towns of Elkin, Jonesville and Ronda in North Carolina
effectively reduced their risk of sewer system overflows after agreeing to consolidate their wastewater treatment facilities (pictured above) in 2006.
CITIES
% OF
DEPARTMENT
BUDGET
% OF
CITYWIDE
BUDGET
COUNTIES
% OF
DEPARTMENT
BUDGET
% OF
CITYWIDE
BUDGET
POLICE
HUMAN SERVICES
FACEBOOK.COM/YADKINVALLEYSEWERAUTHORITY
Patrol 39.7% 7.6%
Investigations 11.3% 2.2%
Dispatch 9.4% 1.8%
PUBLIC WORKS
Utilities 20.5% 3.9%
Development Review,
Permitting, Inspections
Asphalt Paving,
Street Maintenance
11.7% 2.2%
9.0% 1.7%
Family Services 9.7% 1.9%
Senior, Adult Day Care
(including Nursing Home)
7.8% 1.5%
Out-of Home Care 6.0% 0.3%
SHERIFF
Incarceration (Adult,
Juvenile) and Work Release
33.0% 6.3%
Investigations 19.0% 3.6%
Patrol 11.8% 2.3%
APRIL 2021 | GOVERNMENT FINANCE REVIEW 45

GOVERNMENT AS A PLATFORM
The data presented on the preceding pages shows us
that there are many opportunities for local governments
to partner with other organizations to provide public
services. Our case study research provides guidance on
how to select between opportunities.
• The first lesson from the experiences of our case studies
is that sharing services needs to be motivated by a clear
goal. In many cases, this goal will be to reduce costs. For
cost reduction to be a compelling goal, there must be
an obvious need for it. For example, Englewood’s aging
fire department was experiencing rapidly increasing
workers’ compensation, overtime, and unfunded asset
maintenance costs. In Washington County, it was clear
that the cost to provide public health services was
outpacing available revenue, inspiring the county to
adopt an explicit goal of providing the same public
health services at a lower cost. The goal will help define
which opportunities to select. For instance, if cost
savings are a primary goal, then opportunities with the
larger or most certain cost savings should be pursued.
• The second lesson is to make sure economies of
scale are truly available by sharing a service. This
is critical for evaluating opportunities, especially
when cost savings are an important goal. Many of the
benefits accrued from sharing a service will come from
spreading certain fixed costs over a larger population of
taxpayers. For example, Denver had one of its own fire
stations close to the border with Englewood. This meant
that it was able to close one of Englewood’s three fire
stations and still maintain acceptable response times.
If the location of the stations were such that Denver had
to continue operating all three Englewood stations, the
deal would not have been as cost-effective. Because
many government services are labor intensive, costs go
up proportionately with the number of people served.
Economies of scale may be less certain for more laborintensive
services. 5
• The third lesson is to look for opportunities to share
services with organizations that are also highly
motivated to share and where the interests of both
parties are compatible. This will make it easier to
overcome the inevitable hurdles of restructuring the
service. The City of Denver was already providing
fire services on behalf of three other cities adjacent
to Denver. Thus, Denver was willing to add one more
city, and Englewood had evidence that Denver was
a capable provider for other cities. Also, Englewood
and Denver already had mutual aid agreements in
place, so there was a history of cooperation to build on.
Ozaukee County was facing the same cost pressures as
Washington County, and their respective populations
were fairly similar in their needs for public health
The City of Englewood, Colorado considered competing proposals
before merging their fire protection services with the City of Denver.
services. It might have been much more difficult
to come to an agreement if the two counties had
populations with very different needs.
• The fourth and final lesson is to be mindful of the role
of competition. 6 For example, Englewood entertained
competing proposals to provide fire services from
different potential qualified partners. Competition
is especially important, though, if the local
government is considering outsourcing to a private
firm. Competition constrains the profit-maximizing
imperative of private enterprise. Features of a
competitive market include a large number of potential
suppliers and low barriers to entry into the market for
potential new suppliers. We saw how Toledo essentially
allowed City staff to “bid” against outside proposals as
a way of bringing competitive pressure to the process.
The competitive pressure present after contract signing
must also be considered, with vendor “lock-in” being the
most pressing problem. In other words, is the nature of
HELEN H. RICHARDSON/ THE DENVER POST
46

the arrangement such that the cost of switching providers
is prohibitive? Lock-in can arise when the contractor
has certain assets that make replacement difficult (e.g.,
camaraderie, machines, land, expertise). Lock-in might also
arise if the market is such that a pool of available vendors
cannot be sustained after contract signing. This concern is
of most relevance to larger governments looking to outsource
larger programs, in which case only a few firms might be able
to put forth a responsible bid, much less maintain ongoing
capacity to provide the service if they are not selected.
The City of Toronto addressed the “lock-in” problem by
dividing the city into service districts and allowing private
firms to bid on refuse hauling in the districts against the
city’s own department (similar to Toledo), but Toronto
would always maintain at least one district for the City
department. The intent was to avoid losing the ability to
provide the service altogether, which would have left the
City more vulnerable to the lock-in problem.
If cost savings is a goal of the local government, there are a
number of other conditions, besides competition, that must
be present in order for contracting out to a private firm to
work. Since “contracting out” is just a subset of government
as a platform, we have put these conditions in Appendix 1.
After the best opportunities have been identified (regardless
whether the partner comes from the private, public or
nonprofit sector), government must act on them.
Competition is especially
important if the local
government is considering
outsourcing to a private firm.
Implementation. We saw how Englewood partnered with
Denver to provide fire protection services. Fire services
might be a big a first step for many local governments. Moffat
County started with an easy opportunity. It was discovered
that both the hospital and county jail had large laundry
operations. The hospital found that its approach to laundry
appeared to be far less cost-effective than the County’s, so
it began shipping its laundry to the County, providing new
revenue to the County.
Whether the service that is the subject of the partnership is
big or small, it is important define the scope of services and
the desired cost. Englewood received formal proposals from
three potential providers of fire protection services, and it
worked with the providers to refine the scope. Washington
County worked with Ozaukee to define service quality and
price, using standards for public health services set forth
by the State of Wisconsin.
The shared service should also have a governance
mechanism that allows the participating governments to
influence how the service is provided. Englewood has formal
definitions of the services that will be provided and the level
of quality. It also has a special point of contact within the
Denver Fire Department with whom the city can address
concerns. Washington and Ozaukee developed a joint board
of public health for their shared public health department.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 47

GOVERNMENT AS A PLATFORM
Finally, delivering services through a partnership requires
different management skills than delivering a service
using people employed directly by the government. For
example, partnerships usually require a better definition
of the desired goals, timelines, and outcomes for the parties
involved than for a service administered by the government
itself. This is because the government has less ability to
control the day-to-day actions of its partner(s) than its
own employees. Therefore, it can’t easily direct partners
to change direction. This means that everyone needs to be
aligned toward the same goal from the beginning.
If the implementation goes well, it can bolster the
government’s reputation as a good partner. Other public,
private, and nonprofit organizations will be more willing
to work with a government with a solid reputation for
maintaining mutually beneficial partnerships.
What We Can Say About the Effect
of Government-as-a-Platform on
Public Finance
Moving on from the three steps to becoming a platform,
here is what our research found about government as a
platform as a model for positively influencing efficiency,
economies, and value in local government.
Government as a platform can positively impact
economization. Developing a program inventory helps a
government decide what services it should or should not
be in the business of providing. For those services that
local government should provide, the program inventory
provides a basis for working with others to provide the
service. Sharing services pools scarce resources and
guards against wasteful duplication. In a number of our
case studies, the program inventory helped governments
identify services that should no longer be provided at all,
in addition to services that could be sourced differently.
Government as a platform can positively impact
efficiency. Government as a platform helps local
governments find more cost-effective ways to provide
service, as our examples have described. It can help
governments access economies of scale or take advantage
of other cost differentials that can be provided by other
service providers.
Government as a platform can positively impact
value. Government as a platform can help local
governments realize economics of scale and other cost
advantages without consolidation. We saw earlier that
consolidation has a number of drawbacks that often
outweigh the benefits, including the extreme complexity
of making it happen and fierce resistance from the
community due to concerns about losing their identity.
Government as a platform avoids these problems. First,
it doesn’t attempt to merge or differently source services
where there is no value in doing so. Consolidation, in
contrast, merges all services regardless of value. Second,
government as a platform allows governments to move
at a pace they can accommodate. Englewood merged its
fire operations because it was ready to. Moffat County
started with a smaller scale change. Third, governments
can avoid merging services that are core to its identity.
For example, the City Manager of Littleton, Colorado,
observed that utility billing could be good service to
share with surrounding communities because there is no
unique community character associated with
what is essentially a commoditized, back-office service.
Government as a platform requires some new
capabilities. Government as a platform requires
governments to create some new capacities, such as:
• Develop a program inventory. Most governments
have only identified departments and line-items.
• Define goals and standards for services.
Governments have often operated without clearly
defined goals and standards for services. Though this is
suboptimal in a traditional bureaucratic arrangement,
it is virtually unworkable in government as a platform.
This is because government as a platform requires
giving up some control over how, exactly, a service is
provided and, instead, focusing on whether or not goals
and standards are being met.
• Manage by contracts. Traditional governments
manage employees. While there are still employees
in government as a platform, service contracts take
on much greater importance.
State governments might be able to help local
governments develop these capabilities. For example,
Iowa requires local governments to file copies of
internal local service agreements with the state.
This creates a central repository of agreements that
can be used as models elsewhere. States might also
create processes for local governments to more easily
seek waivers for state requirements that would
otherwise prevent service sharing. For instance,
Washington County had to seek waivers from the state
on requirements for each county to operate a health
department in order to form a joint department with its
neighboring county.
Shayne Kavanagh is the Senior Manager of Research in
GFOA’s Research and Consulting Center. Chris Fabian is
co-founder of Resource Exploration (ResourceX) and
co-founder of the Center for Priority Based Budgeting.
48

Conditions for Outsourcing
for Cost Savings
Studies have shown that outsourcing for cost reduction is generally only
successful when a number of criteria are met. 7 Below are crucial tests a given
service should meet in order for it to be outsourced in order to save costs. 8
Are Competitive Forces Available? Public officials must also be capable
of sustaining competition. The government must have the wherewithal to take
necessary action to sustain competitive forces, including switching providers
when necessary.
Can the Results be Measured? Outsourcing is more successful when the
government has a clear vision for the results it desires from the contractor
and when those results can be unambiguously measured. This allows clear
performance specifications to be developed as part of the contract and for the
agency to more readily modulate service levels to available resources. Further,
clear performance specifications allow for more effective monitoring of the
service and provide a basis for replacement of an unsuccessful contractor.
Does the Agency Want Just Results? Many times in the public services, it is
not just the results that matter, but the process by which a service is provided
is also important. For example, in law enforcement it is very important that the
processes safeguard civil rights and follow proper safety protocols. In cases
where the government requires close control over the means by which a service
is performed, outsourcing for cost reductions will generally be less successful
because process constraints would limit the ability of private sector firms to
use their inherent advantages (e.g., personnel flexibility, creative incentive
structures) to deliver cost savings.
Can the Agency Contract Successfully? Fundamentally, using outsourcing
for cost savings is a matter of trading lower production costs (i.e., private firm)
for higher coordination costs (i.e., contract management). Thus, successful
outsourcing requires that the government be able to minimize coordination costs
by creating a contract that provides mechanisms for effective monitoring such
as vendor self-reporting of verifiable results, a single point of contact for vendor
relations, and that the government have the skill sets on staff to administer the
contract (which differ from those required for management of employees).
Do the Economics Make Sense? Outsourcers can deliver cost savings based
on economies of scale in service provision (i.e., spreading fixed costs over
multiple customers), lower employee costs (e.g., fringe benefits are often not
as good for private employees), and through employing more efficient work
processes, owing to their expertise in the service provided. Hence, for service
areas in which the agency does not have critical mass sufficient for economies of
scale, has high labor costs, and/or has not optimized work processes can deliver
the greatest potential savings.
Also, the agency must compare the proposed cost from the private firm to its
“avoidable costs”. These are the costs the agency can eliminate by outsourcing.
For example, if the public employees who used to provide the service will be
moved to new roles within the local government, rather than terminated, then the
outsourcing will probably not make financial sense.
End notes
1
Shayne Kavanagh and Vincent Reitano.
Financial Foundations for Thriving
Communities. Government Finance
Officers Association: Chicago, Illinois. 2019.
2
The general concept of government as a
platform was originated by: Tim O’Reilly.
What’s the Future and Why It’s Up to Us.
Harper Collins. 2017. Though the details
of our definition different significantly
from O’Reilly, he is credited with the
underlying idea of government serving
as a platform into which “applications”
can be plugged into.
3
Based on personal interviews with the
CEOs of these organizations.
4
All data on city and county programs
provided to GFOA by ResourceX, from
ResourceX’s client database.
5
Economies of scale in public services
were discussed extensively in Part 1 of our
four-part report series.
6
The necessary role of competition in
public service outsourcing is discussed
extensively in: Elliott D. Sclar. You Don’t
Always Get What You Pay for: The
Economics of Privatization. Cornell
University Press: Ithaca, New York.
2001. Also see: John D. Donahue.
The Privatization Decision: Public Ends,
Private Means. (New York, New York:
Basic Books). 1989.
7
John D. Donahue reviews a number
of studies on the ability of outsourcing
to reduce the cost of government in:
John D. Donahue. The Privatization
Decision: Public Ends, Private Means.
(New York, New York: Basic Books). 1989.
8
Outsourcing can have other goals
besides cost reduction. Hence, the list of
test criteria would need to be expanded
in order to address these other goals.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 49

50

EQUITABLE RECOVERY IN PRACTICE
Equitable Recovery
in Practice
BY MATTHEW STITT AND MICHAEL NADOL
©2021 MICHAEL AUSTIN C/O THEISPOT.COM
Manage the tension
between current
financial shortfalls
and historic
underinvestment
to emerge stronger
for the years ahead.
Today, almost every city
and county in America
is facing a once-in-ageneration
financial,
public health, and
economic crisis. Revenue
losses from the COVID-19 recession have
opened severe gaps in local government
budgets, and ongoing pressures on
key sectors of the economy raise the
fundamental question of whether some
cities and counties can fully recover
and thrive. In the face of these fiscal
challenges, many local governments are
also working to address longstanding
issues related to health care, poverty,
access, policing, and criminal justice
that disproportionately burden
communities of color—including the
disparate impact of the pandemic itself.
These challenges are compounded
by the tension among many fiscal
recovery initiatives, which often
involve service reductions, increases
in user charges, or the risk of
additional shifts in tax burden on
communities already experiencing
underinvestment. For example,
many governments cut summer
recreational and youth employment
programs deemed unsafe during the
pandemic, achieving needed budget
savings through health-conscious
steps to reduce exposure to COVID-19.
While these actions were prudent
and reasonable, they also had the
unavoidable side effect of eliminating
positive youth opportunities in many
disadvantaged communities and
reducing supplemental income for
seasonal staff, who are often part of
middle-income working families.
In other communities, millage rates and
imposed fees or fines have been increased
to help offset revenue shortfalls. Again,
these are pragmatic budget actions. But
higher fees to access public services can
be particularly challenging for lessaffluent
residents, especially in places
hit hard by job cuts to the retail sector and
other lower-wage occupations during the
pandemic and its “K-shaped” recovery.
Similarly, many local governments have
curtailed or even frozen new capital
spending, seeking to manage scarce
near-term resources by deferring costs
wherever they can. However, such
deferred investment can translate to
declining conditions for neighborhood
roads, parks, and facilities in lowerincome
communities already battling
underinvestment.
There are no easy resolutions, and
economic and fiscal conditions will
likely remain strained for at least the
next few years. Nonetheless, as state
and local governments manage these
tensions, it is critical to make equity
central to the recovery process. Not only
can such an approach help to better
share the short-term burdens required
to weather the storm, but it can also help
position governments for long-term, more
sustainable progress as communities
emerge from this crisis.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 51

EQUITABLE RECOVERY IN PRACTICE
First Do No Harm:
8 Steps for Building an Equity
Perspective into Recovery
Strategies that stabilize the crisis while preserving equity
THE FIRST STAGE in equitable
recovery is to “stop the bleeding” by
stabilizing the crisis while preserving
as many equitable priorities as possible.
Historically, cost-cutting exercises
have been focused largely on achieving
fiscal balance without a strong
equity perspective. This pandemic,
however, has only exacerbated existing
disparities in critical areas such as
healthcare, economic opportunity, and
education. While local governments
focus on continuity of services and
investment in economic recovery, they
also need to minimize the negative (and
too often disproportionate) impacts on
vulnerable populations. This priority
extends to populations at risk of
becoming vulnerable in the absence of
intervening measures.
The following steps will help local
governments and public agencies
prioritize equity in their current
recovery efforts.
1
Commit to an equitable
recovery with urgency.
Leadership must first declare equity a
priority. Executive orders, ordinances,
resolutions, and public hearings can all
be used to set a strong tone. In addition,
equity principles, goals, and guidelines
should be codified, thereby increasing
transparency and accountability. The
city council in Alexandria, Virginia,
for example, recently adopted the ALL
Alexandria resolution, which requires
all forthcoming planning, including
the upcoming FY22-27 strategic plan,
to be centered on race and social equity.
The resolution also includes the use of
a budget equity tool to guide resource
allocation and commitments to develop
new partnerships, formal plans, and
metrics for accountability.
2
Align equitable priorities
with overall strategies.
Leadership should next reevaluate
and reset existing government-wide
strategies to incorporate outcomes
for recovery, including updates
and amendments to reflect their
community’s evolving needs. For
example, funding digital infrastructure
may now be an even higher equity
priority so all children can continue
to learn, and all adults can continue
to access information and build skills
necessary for the new economy.
Conduct equity analysis
3
of new spending and
revenue-generation ideas.
Local governments should incorporate
and codify equity guidelines into budget
analyses, including revenue impact,
racial equity impact, and fiscal and
economic assessments. Consider recent
action in the District of Columbia, which
now mandates that all proposed
new legislation include racial equity
impact statements. 1
4
Create an equity
budgeting team.
Identifying equity concerns and
opportunities requires diverse
perspectives—not only in terms of
the individual life experiences of the
people involved in decision-making but
also with regard to roles and functions.
Finance and budget officers should
form and empower broader working
groups, including human resources,
procurement, operational, and/or equity
office professionals. These groups are
then tasked to develop equity guidelines
and metrics and to inform the review of
impact analyses, including minority,
women, and disadvantaged business
enterprise (MBE/WBE/DBE), and
diverse workforce capacity-building.
Larger governments should consider
subcommittees for major departments
to ensure budget review at a more
granular level. As part of establishing
these teams, providing training on
equity considerations and approaches
can also support an effective approach.
5
Engage the community.
Perspectives from outside of
government can also inform equitable
budget decisions. The City of Danville,
©2021 MICHAEL AUSTIN C/O THEISPOT.COM
52

Case Study: Philadelphia
IN IMMEDIATE RESPONSE to the
pandemic crisis, the City of Philadelphia,
Pennsylvania formed the COVID-19
Recovery Office Steering Committee to
help manage its state and federal relief
funding, according to the city’s COVID-19
Recovery Office. The Committee
comprised a diverse group of internal,
intergovernmental stakeholders whose
main purpose was to ensure that relief
funds and resources were being used
effectively to drive maximum equitable
impact while coordinating with internal
and external stakeholders on reopening
and recovery plans.
When it came to establishing a process to
best allocate relief dollars, the city chose
to maximize the utility of all funds by
undertaking a replace-and-replenish-like
methodology. This first replaced general
fund dollars with COVID relief dollars
where eligible to stop the bleeding
and maintain current service levels at
the extent possible—with the goal of
reinvesting in prioritized areas once
essential services are adequately funded.
Once baseline essential funding levels
were achieved, unallocated general fund
dollars would then be reallocated to areas
that reflect equitable priorities, such as
increased emergency housing relief.
City leadership also made use of existing
partnerships by creating a nonprofit fund
called the Philadelphia Poverty Action
Fund to administer their Poverty Action
Plan with the goal of dedicating millions
of dollars to fund anti-poverty efforts.
The fund will be administered by the
United Way of Greater Philadelphia and
Southern New Jersey under a shared
governance model. This should reduce
costs and increase impact, as the fund
will seek to leverage millions of private
and philanthropic dollars, effectively
driving more equity into communities. 1
1
Christian Hetrick, “Philadelphia City Council
votes to create a nonprofit fund aimed at pulling
100,000 out of poverty,” The Philadelphia
Enquirer, November 12, 2020.
Virginia, for example, used a mix of
virtual town halls, a communitywide
survey, and guidance from
a resident advisory committee to
help develop a plan for using the
revenues from a newly approved
casino. Supported by equity
mapping of city neighborhoods, the
plan’s recommendations included
specific investments in home repair
programs, parks and playgrounds,
and food access in prioritized
geographic areas.
6
Maximize tactics with
minimal impacts.
Not every budget action directly
involves equity, and local
governments should maximize
all available approaches to reduce
costs or increase revenues without
major equity impacts. Success with
such initiatives can mitigate the
need for more difficult choices. For
example, can debt be refinanced costeffectively?
Can vendor contracts be
rebid for savings (without adversely
affecting small, MBE/WBE/DBE
firms)? Is it possible to reduce utility
costs through conservation and
increased energy efficiency? Are
there philanthropic partners who can
meet a specific need, thus reducing
the need for public funding?
Beyond such comparatively lesspainful
approaches, there may also
be actions that make long-term
sense—and have minimal impact
on equity—but have previously
stalled due to political stakeholder
concerns. In some communities,
for example, opportunities may
exist to consolidate programs
with duplicative or overlapping
functions that have not advanced
in more normal times because of
organizational inertia. With the
pandemic downturn driving new
fiscal pressures, now is the time to
revisit whether the range of what is
possible might have expanded.
7
Be prepared to make
tough choices.
In most communities, difficult
choices will still be needed. This
is where the strategic guidelines,
equity impact analyses and
mapping, and input from a range of
internal and external perspectives
will all need to be brought together
to drive thoughtful prioritization.
While not every need can be met,
this will preserve a higher degree
of equity and maintain a stronger
foundation for eventual rebuilding.
8
Measure, monitor,
and revise.
In addition to undertaking sound
analysis before making budget
decisions, governments also need
to establish good metrics and to
monitor impacts throughout the year.
Given the uncertain public health,
economic, and fiscal trajectory
of a virus-driven recession, the
likelihood of needing mid-course
corrections is high. To set more
targeted goals and track progress,
local governments should also focus
on better ways to disaggregate data
by demographic categories.
All of the above steps should be
undertaken in an effort to not only
survive the fiscal year but also
to adequately fund essential and
prioritized services. Because many
core government services should
have existing high-equity priorities,
this is where governments can
start to ensure they are on a path to
recovering equitably.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 53

EQUITABLE RECOVERY IN PRACTICE
approximately 55 percent since FY 2010.
As a result, the Department of Prisons
budget in FY 2021 is approximately $20
million less than it was a decade earlier,
even without adjusting for inflation—
and with potential to go even further.
Dual Impact
Opportunities to jointly improve
budgets and equity
WHILE RECOVERY recovery
will require tough choices in most
communities—supported by the
type of evaluation and prioritization
process outlined above—budget
decisions don’t need to be viewed as
a zero-sum game. Some approaches
provide an opportunity to advance
both budget recovery and improved
equity, jointly. Following are ideas and
some existing examples to consider.
Reviewing tax incentives
Economic development incentives
and abatement programs often
expand and accrete over many years
and may no longer be achieving their
original policy goals (if they ever did).
At both the state and local level, a
comprehensive policy evaluation can
ensure that such programs are welldesigned
for the current economy
and still delivering a positive return
on investment. In turn, eliminating
or restructuring underperforming
incentives can improve net revenues
in future years and yield a more
equitable revenue structure by
sharing tax burdens more broadly.
In the City of St. Louis, Missouri, for
example, tax abatement policies have
been revised to focus on incentives
based on the housing market in which
the project is located. Using market
indicators such as median home
prices, mortgage activity, and resident
income, the city defines seven market
types and matches an abatement
term and maximum abated value to
each. Terms range from five years at
50 percent of market value in strong
markets to 10 years at 100 percent
of market value, or 15 years at 50
percent of market value in the weakest
markets—with no abatements at all in
the strongest markets. These policies
both reduce the overall revenue loss
due to abatements and ensure that the
city’s tax expenditures reflect a more
equitable approach.
Reforming the criminal
justice system
Excessive incarceration is not only
damaging to communities but also
expensive. Changes to criminal justice
policies have clearly demonstrated
the potential for financial benefits
from social change. Take the City of
Philadelphia, Pennsylvania, where
improvements to case processing,
pretrial detention and probation
practices, and other reforms helped
reduce the jail population by
Reviewing bail requirements, juvenile
justice approaches, and criminal court
fees and fines can all yield both fiscal
and equity benefits. Acknowledging
the high cost and low return of fine
and fee revenue collections, officials
in Ramsey County, Minnesota, passed
a comprehensive reform package in
April 2020, eliminating nearly a dozen
fines levied that had a disproportionate
impact on low-income families and
people of color.
Rethinking public safety
Following the 2020 police killing of
George Floyd, longstanding calls to
rethink the allocation of resources for
law enforcement have gained new and
much-needed momentum. While these
are complex issues, and the approach
for each community should address
localized safety and justice needs, goals
and priorities, local governments can
and should undertake comprehensive
examinations of the cost of policing to
identify opportunities to both spend
less and to reinvest in prevention-first
strategies. The City of Providence,
Rhode Island is taking such an
approach, currently working to create
a data-driven plan to evaluate how
public resources can best be applied
to increase justice and safety without
regard to whether those dollars are spent
on housing, health, schools, or police.
Recognizing that a prevention-first
approach may be a better investment,
many local governments have expanded
partnerships between sworn police
and well-trained civilians who have
complementary skills and expertise.
In some areas of law enforcement
operations, “civilianization” can be
©2021 MICHAEL AUSTIN C/O THEISPOT.COM
54

largely a budget-savings opportunity
that relies more on lower-cost civilians
for back office and support functions
such as records management or traffic
control. In other service areas, however,
partnerships between sworn officers and
civilians may also bring new skills and
perspectives into emergency response
that can help achieve better outcomes.
For example, the City of Los Angeles
Police Department and Los Angeles
County Department of Mental Health
have a well-established co-responder
and triage desk program for handling
mental-health related calls for service.
Delivering services online
while closing the digital divide
One of the silver linings of social
distancing restrictions in the COVID-19
era has been a significant acceleration
of online service delivery across
the public sector. Applications have
been widespread, including business
licensing and permitting; small claims
and traffic dispute resolution; tax sales;
development plan reviews; processing
wills and marriage licenses; vendor
bidding; and human services and
benefits casework.
In many cases, these changes have
increased access and convenience for
the public, while reducing costs for
government agencies and ensuring
that government employees can also
work remotely in safety. At the same
time, however, technology access can
be a barrier for some communities and
individuals. Cost-effective steps to
address the digital divide can include:
• Ensuring that public libraries have
sufficient Internet access, hours of
operation, and confidential spaces.
• Developing cell phone-friendly
access for services.
• Providing free or low-cost Internet
or subsidies (potentially in
partnership with private-sector
providers and philanthropy.
Building for the Future
Recommendations for long-term positioning
FULL RECOVERY from a systemic
economic and financial shock like
COVID-19 requires more than just a
single-year effort. It will take a multiyear,
sustained commitment—again, with midcourse
adjustments still ahead for most
governments as uncertainty persists.
Likewise, achieving equity requires
sustained commitment, with some gains
made only across generations. Although
short-term progress is imperative for
equitable recovery, many of the most
meaningful actions will be those with
longer-term horizons. Following are
some ideas to consider.
Strategic capital investment
While capital budget allocations often
receive less public attention than
operating budget decisions, the dollars
invested in roads, facilities, parks, and
other infrastructure and development
initiatives are large in scale and can have
long-lasting impacts on equity within
a community. Accordingly, structured,
equity-focused budgeting approaches
are just as important for capital programs
as they are for operations. For example,
Harris County, Texas historically
prioritized flood control projects based on
the dollar value of the property protected.
While this approach made good economic
sense for the tax base, it also meant that
City officials in Austin, Texas included
$300 million within their $7 billion transit
expansion plan for anti-displacement
efforts to prevent low-income residents
from being forced out of their homes.
many lower-income communities with
lower property values fell to the bottom
of the list. Through a new equity-focused
approach, a broader range of Harris
County neighborhoods are now receiving
this investment. Along with ensuring
that equity is a factor within project
prioritization frameworks, individual
proposed investments can also be
evaluated under a “triple bottom line”
approach that, along with economics,
takes environmental and social impacts
into account.
Dedicated funding for
equity investment
Some communities are carving out
dedicated resources or sometimes
creating new revenue streams
focused specifically on equity goals.
For example, the City of Baltimore,
Maryland, established a beverage
container tax in 2010, with proceeds
dedicated to renovating aging publicschool
facilities—many in economically
challenged neighborhoods.
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EQUITABLE RECOVERY IN PRACTICE
Along with dedicated new revenue
streams, local governments can
consider linking investments in growth
to additional investment in equitybased
projects. Already, many have a “1
Percent for Art” requirement associated
with larger public construction projects.
In parallel, a specific “X Percent
for Equity” commitment might be
considered. Consider efforts in Austin,
Texas, where city officials included
$300 million within their $7 billion
transit expansion plan dedicated
toward anti-displacement efforts like
building affordable housing and land
banking on transit corridors for future
affordable housing production.
Linking capital programs
and workforce development
Capital programs can promote equity by
investing in historically disadvantaged
communities, along with providing
significant business and career
opportunities. Where major capital
investments are advancing, local
governments can look for opportunities
to connect the dots to workforce
development programs, making sure
that trade apprenticeships and other
opportunities for local and diverse
residents are included in project plans.
Public employment
as a strategy
While state and local governments
have a responsibility to deliver
services efficiently—without
excessive payrolls—many public
agencies carry unwanted vacancies
in hard-to-fill jobs such as the skilled
trades, fleet maintenance, information
technology support, and public safety.
In turn, these vacancies can lead to
service challenges, overtime, and
outside contracting that may not
always be cost-effective. Further,
many of these jobs do not require a
four-year degree and would provide
good-paying careers for many publicschool
graduates within those same
communities.
School-to-work programs, targeted
community college programs, and
other career-training initiatives can
all provide pathways into familysustaining
public service jobs for
local students and other residents.
These programs can potentially
be developed in partnerships
across public-sector agencies. For
example, Philadelphia’s Office of
Fleet Management has conducted an
automotive apprenticeship program
in tandem with the School District of
Philadelphia for more than 25 years,
training more than 125 students,
many of whom have moved into
civil service careers.
Intentional tax policy
Many local government tax portfolios
are substantially influenced by the
type(s) of taxes their state allows
and what taxing measures have
historically been feasible to adopt.
Given the impact of the COVID-19
recession, governments will need to
rethink whether their current mix
of tax and revenue sources is both
sustainable and equitable over the
long term. For instance, jurisdictions
that rely heavily on income or sales tax
revenues have seen greater disruption
because of work-from-home practices,
some of which may continue for
certain urban hubs. When determining
how to make up for lower revenues
from a diminishing base, governments
should think with intention about the
direction any changes may take them,
as far as becoming less volatile and
more equitable.
As one example, a greater shift toward
property taxes is likely to improve
revenue stability (even with threats
to commercial property values in
some communities) but may require
“circuit breakers” or other buffers to
protect homeowners with fixed and/
or lower incomes. Similarly, when
thinking about potential new taxes,
it is important to consider which
options are most likely to remain
stable, not further erode the local tax
Fast Facts
The Disparate Impact of COVID-19
The COVID-19 death rate for
Black, Hispanic, and Native
Americans is nearly three
times the death rate for white
Americans, according to the CDC.
9.9% of Black workers and 9.3%
of Latinx workers nationwide
were unemployed at year-end
2020, compared to 6% of white
workers, according to the Center
of Budget and Policy Priorities.
During the first months of
the pandemic, Black-owned
businesses shuttered at a
much higher rate than Whiteowned
businesses—41% versus
17%—according to the National
Bureau of Economic Research.
During the early weeks of
the vaccine rollout, White
residents were vaccinated
at significantly higher rates
than Black residents—two to
three times higher, in many
states, according to the
Kaiser Family Foundation.
56

©2021 MICHAEL AUSTIN C/O THEISPOT.COM
base, and allocate new tax burdens
as equitably as possible. For instance,
emerging “sharing economy” taxes (for
example, for rideshares and Airbnb)
will generally address growing
sectors of the new economy without
strong regressive effects on lowerand
middle-income taxpayers.
Small business recovery
and regeneration
The COVID-19 recession has
highlighted the importance of small
businesses and the opportunities
they generate—driving neighborhood
economies, creating jobs, and building
wealth across diverse communities.
In turn, state and local economic
development programs can incorporate
an equity dimension in their programs
to support small businesses. Strategies
might include greater access to
capital and expanded purchasing
from minority-owned enterprises.
In addition, increased training and
technical support for small business
development and entrepreneurship
is particularly important to spark and
cultivate a broader and deeper pool of
qualified diverse businesses that can
strengthen the overall local economy,
rather than remaining bounded solely
by percentage-based “set asides.”
Overall, economic growth and social
justice are not either/or budget choices.
Achieving equity and growth requires
a both/and mindset. Economic
opportunity to move out of poverty
requires having good schools; strong
and expanding employers; more
diverse, locally owned businesses;
and more family-sustaining jobs.
Neighborhood stability means that
cities, counties, and towns must be
places of choice to live and raise a
family, and to grow a successful small
business. Shared prosperity, more
opportunity for start-up enterprise, and
stronger labor markets and pathways
into them are important for all—and
a common pro-jobs and pro-inclusion
agenda makes them more achievable.
Changing
Processes,
Changing
Values
The importance of
collaboration, coordination,
and communication
DURING TIMES OF CRISIS,
an organization’s capacity is often
stretched thin. Implementing any
new process will add yet another layer
of difficulty in an already stressful
environment, particularly with the
volatility of the pandemic economy
and shifting responses from other,
overlapping levels of government.
Therefore, it is essential to build
equitable recovery frameworks around
coordination, collaboration, and
communication. This includes the type
of committee structures and reporting
on budget, service, and equity metrics
outlined earlier in this article, but
it also extends to more general
communication across the enterprise.
Effective action requires frequent
and inclusive communication and
coordination inside and outside of the
government, especially as conditions
remain volatile and uncertain.
Further, while heightened
communication, collaboration, and
coordination are crucial for recovery
today, they should not have an
expiration date. Long-term changes
in mindset and culture that prioritize
equity will require that collaboration,
coordination, and communication are
incorporated and included throughout
local government, even after the crisis
has passed. Changing these processes
can result in a long-overdue change in
the values of an organization. At the
end of the day, equitable budgeting
can and should become the norm in
local government. Starting now—with
equitable recovery—is the best way
to emerge out of the COVID-19 crisis
with stronger, more resilient, and
increasingly connected communities
to call home.
Matthew Stitt is director and national
lead for equitable recovery and strategic
financial initiatives in PFM’s Management
and Budget Consulting team. Michael
Nadol is a managing director at PFM and
president of PFM Group Consulting. Both
Matt and Mike are part of a team, along
with GFOA’s Research and Consulting
Center, supporting the “City Budgeting
for Equity and Recovery” program,
which is led by the What Works Cities
philanthropic initiative. The program
assists 29 cities around the country in
advancing equitable recovery.
1
Martin Austermuhle, “All Legislation in D.C. Will Now Be Assessed for Racial Equity,” DCist, January 27, 2021.
2
See, for example, The Pew Charitable Trusts report “How States Are Improving Tax Incentives for Jobs and
Growth” (May 2017).
3
Shannon Prather, “Ramsey County eliminates nearly $700,000 in criminal fines and fees,” Minneapolis Star
Tribune, April 14, 2020.
4
See “The Debate Over Defunding the Police” by Seth A. Williams and David R. Eichenthal in the October 2020
issue of Government Finance Review for a more comprehensive review of these issues and opportunities.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 57

BY ELIZABETH I. ACKLEY
Community
Engagement
Infusing Public Deliberation
into the Budgeting Process
58

COMMUNITY ENGAGEMENT
©2021 DAN PAGE COLLECTION C/O THEISPOT.COM
We are living through an unprecedented
impasse in the United States, where
participation in the democratic process
has recently reached an historic high.
At the same time, Americans are also
reporting more disillusionment over their
role in the democratic process than ever
before. Short-term solutions aren’t likely
to alter widespread public perceptions
about the role of citizen engagement in
local and national governance, but we
should think of this remarkable time in
history as an opportunity to educate and
guide the path forward.
This shift we’ve seen in public sentiment is multifaceted—and
far from surprising. Traditional
strategies for engaging the public in local and
national decision-making processes have lacked the
critical ingredients needed to demonstrate value and
meaning for citizen participants: transparency of
process, sufficient background information to form
an educated opinion, and a genuine role in decisionmaking.
Anyone who has engaged in a public hearing,
focus group, or information-gathering session at the
local government level has likely left wondering
if their input was listened to, valued, or in any way
affected the final decision.
Public disillusionment is partly caused by the systems
and processes used to engage the public, which means
that local governments need to collaborate with
their citizens in more innovative ways. In particular,
planners and finance officers may be uniquely
positioned to create a more inclusive and meaningful
democratic process. Whereas a comprehensive plan
serves as a community’s guiding roadmap, grounded
in residents’ values and priorities, the budget offers
an opportunity for government leaders to actualize
citizens’ values by monetizing the community’s
priorities. If local governments can allow space in
the budgeting process, shifting away from economic
efficiency and return-on-investment strategies
entirely, authentic community engagement has the
potential to help align the priorities of the public (as
outlined in a comprehensive plan) and the financial
roadmap that funds it.
Establishing precedent
Citizen engagement in the budgeting process has
been evolving worldwide since its inception in
Porto Alegre, Brazil, in the early 1990s. Innovative
forms of public engagement within the budgeting
process has succeed in utilizing citizens in:
1. Convening a diverse and representative group
of citizens.
2. Providing the background information citizens
need to make informed decisions.
3. Creating debate and dialogue among citizens and
government staff.
4. Implementing final decisions made by citizens.
This last tenant, inarguably the most challenging
for local governments to fulfill, is fundamental to
restoring trust among citizens in the democratic
process. GFOA’s Foundations for Thriving
Communities presents case studies of innovative
participatory budgeting techniques that have
succeeded in re-engaging citizens in meaningful
ways through a variety of financial planning
processes. This article introduces the process of
public deliberation as an additional tool financial
planners and budget officers can use to create
authentic community engagement. It also presents
a case study outlining the role of public deliberation
in re-envisioning U.S. Department of Housing and
Urban Development (HUD) funding allocations in
the City of Roanoke, Virginia.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 59

COMMUNITY ENGAGEMENT
Reducing challenges and
maximizing benefits
Like traditional citizen-focused budgeting practices,
public deliberation is grounded in a four-step process.
After convening a small, representative sample of
the public (for instance, 20 to 25 people), participants
engage in a series of educational and reflective
conversations led by a neutral facilitator and
supported by content experts (including government
officials, public health experts, finance officers, and
individuals with relevant lived experiences), guiding
citizen participants to make a decision that can be
acted on immediately. As a final step, a summary
of the deliberation processes and decisions made is
generated and shared with the public. (See Exhibit 1.)
Public deliberation encourages critical aspects of
authentic community engagement (like creating
an engaging experience and providing credible
facts and information to encourage productive and
open dialogue) while also overcoming a number of
significant shortfalls of public hearings and focus
groups (such as emotion-driven or reactionary
decision-making, dominating personalities, a
lack of clarity, or public input as a “box checking”
exercise with inconsequential outcomes). The
process of learning and deliberating sets the stage
for innovative decision-making that is grounded in
evidence. Moving from small-group (three to four
people) to large-group discussion invites criticism,
which is an inherent component of deliberation.
We want to decrease the likelihood of “groupthink” by
inviting participants to consider multiple viewpoints
before generating a consensus and by encouraging
participants to move beyond their personal opinions
and attitudes. This is done by fostering perspectives
that are grounded in shared values and beliefs that
represent the broader community more holistically.
Moreover, positioning city government officials
and staff members as panelists or content experts
(rather than conversation facilitators) subverts the
hierarchical influence inherent to public hearing and
focus groups. This encourages residents to share their
viewpoints more openly, which keeps leaders in tune
with community values and beliefs.
Despite the many benefits of public deliberation
as a community engagement tool, the process is
considerably more labor-intensive than traditional
approaches to gathering public input. Public
deliberation requires organizers to develop
meaningful facilitation materials with a neutral
facilitator. Thought needs to go into who will be
recruited as content experts, and those experts will
need instruction on how to develop educational
materials that are meaningful, bias-free, and
easily understood by citizens with varying levels
of education and numeric literacy. Local leaders
who participate as content experts or small-group
facilitators must be trained to allow the deliberative
process to play out without intervening, and they must
be willing to implement the group’s final decision.
Lastly, given the duration of typical public deliberation
sessions, which last one to two full days, local
governments must consider ways to nurture public
engagement by reimbursing participants for their time
and removing barriers to participation (for example,
proving transportation, meals, and childcare).
EXHIBIT 1: THE PROCESS OF PUBLIC DELIBERATION
Convene Learn Deliberate Report
Individuals
representing a
broad range
of perspectives
gather
Overview
of issues,
processes,
options
presented
Participants
exchange
perspectives,
values, ideas
Summary of
deliberation
accompanies
decision
SOURCE: Kristen L. Carmen, et al., “Effectiveness of Public Deliberation Methods for Gathering Input on Issues in Healthcare: Results from a Randomized
Trial,” Social Science & Medicine, 2015.
60

Traditional strategies for engaging the public in local and national
decision-making processes have lacked the critical ingredients
needed to demonstrate value and meaning for citizen participants:
transparency of process, sufficient background information to form
an educated opinion, and a genuine role in decision-making.
Case Study: Positioning “Status Quo” Criteria in HUD Allocations
To promote equity across city neighborhoods, Roanoke
designates 65.4 percent of annual entitlement funds
from HUD to a single neighborhood, designated as
the city’s target area, for five years. The intent is to
fund projects related to housing development and
rehabilitation, and new infrastructure and economic
development, and to sustain public services such as
mental health and food services—while encouraging
concurrent investment by private partners. The
planning department has traditionally used need and
opportunity metrics to establish the city’s target areas,
but the selection criteria wasn’t calibrated against the
community’s values and priorities. The city decided to
use public deliberation as a way to review and revise
the HUD allocation decision-making criteria, letting
residents make a very expensive decision—where to
allocate roughly $10 million over the next five years.
As part of Roanoke’s engagement in the Build Healthy
Communities for Children and Families cohort initiative
(led by ChangeLab Solutions), the city’s Invest
Health team 1 —made up of representatives from city
government, community development finance, higher
education, and the public-health sector—received
training on new ways to encourage authentic citizen
engagement in decision-making processes. Public
deliberation experts from the New York Academy of
Medicine (NYAM) guided Roanoke’s team through
each phase of public deliberation.
In reviewing and revising the city’s HUD Target
Area criteria, the city used public deliberation to
determine how HUD allocation decisions should be
made—specifically, what criteria should be used and
prioritized to select neighborhoods for consideration.
Once identified, criteria were used to determine which
neighborhoods should be eligible for consideration as
the next Target Area.
Roanoke, Virginia used public deliberation to
determine what criteria should be used to select the
neighborhood to receive roughly $10 million in HUD
annual entitlement funds over a five year period.
Step 1: Convene
Information sessions with resident participants—
who were recruited during community engagement
sessions for Roanoke’s 2040 Comprehensive Plan—were
held in each neighborhood library branch. The sessions
were also advertised across all major news outlets
and on social media. These residents provided contact
information and completed a brief demographic survey,
developed to ensure that the participants represented
the diversity of Roanoke’s population. The participants
responded to prompts about age, sex, race, ethnicity,
education level, and neighborhood of residence. Of
42 residents, 23 were selected to participate in the
1
Invest Health is an initiative of Reinvestment Fund and the Robert Wood Johnson Foundation. The program works with mid-sized cities to reduce health
inequities through innovative, citizen-guided investment strategies and infrastructure projects. To learn more about Invest Heath, visit investhealth.org.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 61

COMMUNITY ENGAGEMENT
EXHIBIT 2: GIS MAPS ILLUSTRATING NEIGHBORHOOD BOUNDARIES AND METRICS
Previous and Potential Target Areas Education (College) Median Household Income
Previous Target Areas
Education Bachelor’s+ (Age 25+)
Potential Target Areas

Childhood Overweight/Obesity Access to Parks Access to Food
School Zone Data (Overweight and Obese)
School Zone Data (Access to Parks %)
School Zone Data (Food Access %)

COMMUNITY ENGAGEMENT
It’s increasingly clear that
organizations need to incorporate
authentic citizen engagement.
Summary
As local governments seek to both restore public
perceptions of their role in the democratic process
and respond to increasing public pressure to prioritize
equity in decision-making, it’s increasingly clear that
organizations need to incorporate authentic citizen
engagement. Armed with the tools needed to engage
citizens authentically, planners and finance officers
may be uniquely positioned to lead a shift toward a
more inclusive and meaningful democratic process,
given their ability to “monetize” community values.
When viewed against GFOA’s Foundations for Thriving
Communities, public deliberation offers opportunities
for quick wins related to multiple pillars of the
Financial Foundations Framework.
Participant perspectives from Roanoke’s case study
suggest that public deliberation is a promising tool
for building trust in local government decisionmaking
because it creates opportunities for residents
to make informed, values-based decisions that
local governments can put into action. In addition,
residents and employees from community anchor
institutions can act as content experts, which both
generates opportunities for relationship-building and
demonstrates trust in the community.
The heavy reliance on evidence in the deliberation
process presents opportunities for local governments
to learn from and enhance their capacity through
engagement with community anchor institutions.
In the case study presented, innovative datasets
from the Center for Community Health Innovation at
Roanoke College and the Center for Society and Health
at Virginia Commonwealth University allowed a deep
dive at the neighborhood level that typical government
databases simply wouldn’t allow. In communities
across the country, data-sharing capacity could be
enhanced by working with a diverse array of nonprofit
partners, and (as a result of the Affordable Care Act
mandate to conduct community health assessments)
nonprofit hospital systems and health departments.
Despite these strengths, the deliberative process in
Roanoke was limited by the inability of content experts
to adequately portray neighborhood opportunities (for
example, potential private investment) during learning
sessions. Opportunities for private investment within
neighborhoods that were eligible for consideration
could not be discussed with citizen participants, like
they are in closed-door sessions among collaborating
organizations in local government (such as economic
development, planning, and management). This
may have weighed heavily on the shift in participant
perspectives toward HUD allocation criteria in
the Roanoke case study. As such, when developing
opportunities for public deliberation, facilitators need
to consider data availability representing each side of
the decision-making process to put participants in the
best position possible for making a decision that the
government can act on.
Elizabeth I. Ackley is the Brian H. Thornhill
Associate Professor of Health and Human
Performance at Roanoke College.
©2021 DAN PAGE COLLECTION C/O THEISPOT.COM
64

JUST RELEASED!
GOVERNING FOR
EQUITY: Implementing
an Equity Lens in Local
Governments
BENOY JACOB, PhD
ICMA Research Fellow
Director of the Community
Development Institute, Division of
Extension, and Affiliated Faculty at
the LaFollette School of Public Affairs,
University of Wisconsin-Madison
What’s Inside
• A framework for local governments
to address social and racial inequity
in their communities through
policies, practices, and learning.
• Perspectives from cities and
counties that excel in increasing
diversity and fostering inclusiveness.
• Insights into the challenges and
opportunities faced by public
administrators when adopting
an equity lens in their day-to-day
operations.
DOWNLOAD THE REPORT AT
icma.org/governing-for-equity
ICMA Local Government Research Fellowship
This report was supported through ICMA’s Local Government Research Fellowship program. ICMA Research
Fellows are practitioners and academics that conduct action-oriented research addressing important trends,
drivers, and issues facing local governments. Their work advances ICMA’s strategic priority to provide thought
leadership and resources that support members and other local government stakeholders in creating and sustaining
thriving communities throughout the world. Learn more about ICMA’s Local Government Research Fellowship
program at icma.org/icma-local-government-research-fellows.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 65

Managing
Volatility
Detroit Addresses
Pension-Related
Financial Stress
with an IRC
Section 115 Trust
BY JAMES L. TATUM III
In bankruptcy, the City of Detroit, Michigan,
cut retiree benefits and closed its two pension
funds, but it retained a substantial net pension
liability. To address the net pension liability that
remained, the city created an irrevocable trust
fund as authorized under Internal Revenue Code (IRC)
Section 115. Detroit’s Section 115 trust, the Retiree
Protection Trust Fund (RPTF), will help the city
smooth out spikes in annual required contributions
(ARCs) in the years ahead.
The city filed for bankruptcy on July 18, 2013, after
decades of population loss and industrial decline.
Over 16 months, it battled with creditors to restructure
$18 billion in liabilities. Of the $18 billion, $3.5 billion
was owed to city pension funds. In a deal labeled the
“Grand Bargain,” the city broke contracts, shorted
bondholders, and cut pensions. Ultimately, the city
was able to reduce its liabilities by approximately
$7 billion. Still, Detroit retained a substantial net
pension liability post-bankruptcy.
The RPTF has allowed the city to commit additional
resources beyond those required by the settlement
reached in bankruptcy, or “Plan of Adjustment.”
Contributions to the RPTF do not represent contributions
to its public pension plans. Rather, the RPTF provided
a useful mechanism for addressing the city’s pensionrelated
financial stress.
Bankruptcy and remaining liabilities
No major American city had filed for bankruptcy before
Detroit. No previously filed Chapter 9 case measured
liabilities in the amount of Detroit’s case (see Exhibit 1).
The city’s net pension liability was $3.5 billion—19%
of its total liabilities. The $1.4 billion in certificates of
participation were also, indirectly, liabilities related to its
pension funds. Between 2003 and 2004, the city issued
bond-like securities called certificates of participation
and used the proceeds to make pension contributions.
EXHIBIT 1: DETROIT’S TOTAL LIABILITIES IN
BANKRUPTCY (IN MILLIONS)
Special obligation bonds $6,400
Other post-employment benefits 5,700
Pension benefits 3,500
Certificates of participation 1,430
General obligation bonds 651
Swap contracts 347
Other 300
Grand total $18,328
©2021 HARRY CAMPBELL C/O THEISPOT.COM
66

MANAGING VOLATILITY
EXHIBIT 2: CITY OF DETROIT’S PLAN OF ADJUSTMENT, FY 2015–24 REQUIRED PENSION CONTRIBUTIONS
(IN MILLIONS)
General Retirement
System and Police and
Fire Retirement System
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24
City (Water and Sewer Funds) $65.4 $45.4 $45.4 $45.4 $45.4 $45.4 $45.4 $45.4 $45.4 $-
Detroit Public Library 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.9
Special assessment tax 4.4 4.0 4.0 3.9 3.7 3.7 3.6 2.3 2.0 1.6
State of Michigan 194.8 – – – – – – – – –
Philanthropies 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3
Detroit Institute of Arts (DIA) 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
City (General Fund) 12.1 20.0 20.0 20.0 20.0 – – – – 111.0
GRAND TOTAL $302.5 $95.2 $95.2 $95.1 $94.9 $74.9 $74.8 $73.5 73.2 138.8
Another $5.7 billion was owed to retirees related to other
post-employment benefits, namely the city’s promise
to pay for retiree healthcare costs. In total, the city had
$10.6 billion in liabilities related to employee benefits.
There were two pension funds: General Retirement
System (GRS) and Police and Fire Retirement System
(PFRS). GRS was 63% funded (FY 2014). PFRS was 83%
funded (FY 2014). To reduce the net pension liability, the
city broke its promises to plan members and amended
the contracts among the three parties. GRS members
had their pension income cut by 26%. PFRS members
had their pension income cut by 4%.
In addition to cuts in benefits, GRS and PFRS were
closed. No further benefits were accrued by current
employees, and current and new employees were shifted
into new pension plans with skimpier benefits. The Plan
of Adjustment—the bankruptcy settlement that dictated
who would be paid and how much—resulted in four
pension plans: GRS II and PFRS II (the two plans that
were closed in bankruptcy) and GRS I and PFRS I, which
were opened in FY 2015. (Unless otherwise specified,
GRS and PFRS are the two plans closed in bankruptcy).
Like General Motors and Chrysler, which filed for
bankruptcy in 2009 and reinvented themselves
afterward, the city’s Plan of Adjustment adjusted debt
but also provisioned for recovery. The plan lists many
reinvestment initiatives, including demolition of vacant
structures, computer system modernization, and park
refurbishment. To ensure the city’s ability to pay for
these reinvestment initiatives, the Plan of Adjustment
allowed Detroit to take on new debt but also allowed for
a “holiday” from actuarially required contributions
(ARC) between FY 2020 and FY 2023.
Forecasts included in the Plan of Adjustment (see
Exhibit 2) projected the city’s (general fund) pension
contribution to be $111 million once payments resumed
in FY 2024. (Exhibit 2 also details the “Grand Bargain,”
a settlement scheme in which city-owned art in the
Detroit Institute of Arts was transferred to nonprofit
ownership; the State of Michigan and philanthropic
community provided money for the city’s pension
funds; and pensioners had their benefits reduced.)
Retiree Protection Trust Fund
Forecasts of city pension contributions in FY 2024 and
thereafter almost immediately became obsolete. In
2015, the plans’ actuary, Gabriel, Roeder, Smith, revised
estimates produced under the Plan of Adjustment and
as a result the net pension liability increased. The
required pension contribution for FY 2024 rose by 75
percent to $194.4 million. Further, while the initial
increase in the projected city pension contribution was
due to updated data on mortality, subsequent failures
by the pension funds to earn the plans’ set rate of return
of 6.75% has meant the cost has fallen onto the city.
(Because GRS and PFRS are closed plans, the pension
funds do not receive employee contributions.)
APRIL 2021 | GOVERNMENT FINANCE REVIEW 67

MANAGING VOLATILITY
EXHIBIT 3: DETROIT’S FY 2017 CONTRIBUTION AND WITHDRAWAL PLAN (IN MILLIONS)
$200
$150
$79
$74
$69
$59
$49
$39
$29
$19
$10
$5
$100
$50
$20
$50
$92
$97
$102
$112
$122
$132
$142
$154
$160
$166
$10
$10
$15
$20
$45
$50
$55
$60
$–
$12
$20 $20 $20 $20
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33
Pension contribution (General Fund) RPTF deposit (recurring) RPTF deposit (non-recurring) Pension contribution (RPTF withdrawal)
In response, the city created a Section 115 trust in FY
2017 and named it the Retiree Protection Trust Fund.
Instead of the intended reprieve from ARCs, the city
volunteered to set aside money between FY 2017 and FY
2023 to make the ARCs that would resume in FY 2024.
For tax purposes, Section 115 excludes the income
earned from money set aside by a municipality when
that money is used for the “exercise of any essential
governmental function,” according to the IRS code.
Exhibit 3 is a forecast of RPTF contributions and
withdrawals; it illustrates the city’s plan (as of FY 2017)
to use the RPTF to pay its ARCs.
In its first iteration, the RPTF contribution and
withdrawal plan projected that the city would
contribute $335 million in total between FY 2017 and
FY 2023, annually earn 4% in investment income, and
withdraw a total of $427.7 million across fiscal years
until the fund was exhausted in FY 2033. The city’s
first iteration of the plan was predicated on a projected
city pension contribution of $173.5 million in FY 2017.
Much like what occurred post-bankruptcy, this number
became obsolete in subsequent years.
Based on the FY 2019 data (the latest data included
in the city’s basic financial statements), GRS is 63%
funded and PFRS is 70% funded. Combined, the net
pension liability is $2.2 billion. Once ARCs resume in
FY 2024, the cost to the city’s general fund is projected
to be $177.9 million. The amount is less than the $194.4
million projected immediately post-bankruptcy, but it
is still $66.9 million more than anticipated by the Plan
of Adjustment.
The COVID-19 pandemic and the economic fallout
caused not only by the virus but by public health
measures to stop its spread have led to reduced tax
receipts and sustained losses in state and local pension
funds. In the February 2020 Revenue Estimating
Conference held by Detroit, the city projected general
fund revenue of $1.1 billion in FY 2021 (pre-COVID-19
pandemic). In the September 2020 Revenue Estimating
Conference, the city projected general fund revenue of
$840.7 million, a loss of $244.1 million, or 23%.
The city initiated cutbacks to account for lower
revenues; notably, it canceled a $20 million deposit
to the RPTF planned for FY 2021. Still, the city has
committed enormous resources to the RPTF, and based
on the latest iteration of the plan (see Exhibit 3), found
in a 10-year financial forecast report published on
July 31, 2020, the city plans to contribute even more.
68

Detroit has found that Section 115
trusts can be used to smooth out
volatility in ARCs when paired
with prudent policy.
To date, Detroit plans to contribute $335 million
to the RPTF. The current balance, as of FY 2020, is
$184.7 million. RPTF assets are held in cash, cash
equivalents, and short-term marketable securities,
and so the Federal Reserve’s decision to lower interest
rates in response to the COVID-19 pandemic has likely
lowered RPTF investment income for the foreseeable
future. Under the most recent iteration of the RPTF
contribution and withdrawal plan, the RPTF will be
exhausted in FY 2031.
Conclusion
Detroit has found that Section 115 trusts can be
used to smooth out volatility in ARCs when paired
with prudent policy. The plan sponsor could, for
example, estimate a mean or median required
pension contribution and base its contributions to and
withdrawals from a Section 115 trust on this estimated
amount. In times when the required pension
contribution is less than the estimated mean or
median, the plan sponsor can contribute the amount
of the incremental difference to the Section 115 trust.
In times when the required pension contribution is
above the estimated mean or median, the plan sponsor
can withdraw that money from the Section 115 trust.
Section 115 trusts may be an appropriate response to
pension-related financial stress for some plan sponsors
because they are irrevocable and allow plan sponsors
to set aside additional resources for their pension
plans. Furthermore, the fact that a plan sponsor has
set aside reserves to handle spikes in ARCs is likely
to lead to favorable views of creditworthiness when
those municipalities issue bonds, as ample reserves
are indicative of financial health.
James L. Tatum III is an analyst in the City of Detroit’s
Office of the Chief Financial Officer, Forecasting,
and Economic Analysis Division. Note: The views
represented in the article are the author’s and do not
represent those of his employer.
1
The Police and Fire Retirement System and General
Retirement System of the City of Detroit, 2019, Annual Actuarial
Valuation of Component II (GRS and PFRS separate reports).
2
Mary Williams Walsh, “Coronavirus Is Making the Public
Pension Crisis Even Worse,” The New York Times, April 2, 2020.
3
Changes to the FY 2021–FY 2024 Four-Year Financial Plan
(Revised), City of Detroit, Office of the Chief Financial Officer,
2020.
4
Jeanna Smialek, “Fed Pledges Low Rates for Years, and Until
Inflation Picks Up,” The New York Times, September 16, 2020.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 69

70

WHY STRATEGIC ASSET MANAGEMENT MATTERS
Why Strategic Asset
Management Matters
BY ASHAY PRABHU
©2021 HARRY CAMPBELL C/O THEISPOT.COM
Think of a bustling town
along the bank of a river,
a hub of local tourism
and industry. All day,
every day, locals and
visitors rely on the bridge that spans
the river to get to work, take their kids
to school, visit family and friends,
and get about the business of daily
life. One day a citizen reads a news
report about aging infrastructure—
specifically, that 45,000 bridges in
the United States are structurally
deficient. They’re a little worried, but
they think this can’t apply to their
bridge, since the town is so dependent
on it. But the citizen keeps thinking
about that article, so they finally ask
the city when the bridge is due to be
replaced.
The City’s accountant in charge of
reporting on the City’s assets may
respond that the bridge should be
replaced when it reaches the end of
its useful life – in this case 12 more
years calculated on an original
useful life of 50 years for city
infrastructure assets.
The accountant is referring to the
city’s capital asset registry, which
is based on historical data and use
for financial reporting. The public
works director sees it differently,
saying the city’s engineers have
done a health assessment on the
bridge and it only has five years left.
The town will need $380,000 in the
next five years to fix it.
Why would there be two answers
to one simple question? The
reasoning differs by source: the CFO
is referring to the financial register
based on historical data and the
public works director is referring to
the current health assessment.
And it’s very likely that the work
crew responsible for maintenance
has an entirely different view based
on day-to-day experience.
What to address, and when
Finance officers are now
increasingly asking important
questions about long-term
financial planning and how it
relates to asset management.
Australia mandates planning for
infrastructure provision beyond
the 10-year horizon for all local
governments. Canada has followed
suit. And regardless of legislative
and industry pressures, public
agency professionals already know
that they need to justify why and
where money is spent in order to
ensure that their communities’
essential infrastructure assets are
optimized and protected.
The public sector is the custodian
of billions of dollars in essential
assets: utility infrastructure,
highways, hospitals, schools, ports,
and more. These assets inevitably
deteriorate, requiring maintenance
and eventually replacement. For
example, a government managing
facilities and infrastructure with
a value of $1 billion is consuming
these assets (or the assets are being
degraded) at a rate of two to three
percent a year. This amounts to $20
to $30 million in needed investment
—every year. However, it must be
allocated correctly and spent on
projects that provide the most value
in the long-term.
Governments can use strategic asset
management—a future-focused
modeling methodology that is specific
to long-life facilities and infrastructure
assets—to figure out what to address
and when. Financial officers can
use it to balance funds against the
community’s real needs and the
condition of its assets to make sure the
services it delivers are sustainable and
safe. With strategic asset management,
forecasting and data analysis provide
options and scenarios for what the
future may hold if certain levers in
decision-making were pushed or pulled
in different directions. (See Exhibit 1.)
In the United States, public sector and
asset management professionals are—
understandably—focusing on fixing
the assets with an “E” rating or worse,
based on the American Society of Civil
Engineers ratings. (See Exhibit 2.)
These assets are potentially dangerous,
and governments need to keep their
residents safe. The focus on immediate
safety is easy to understand, but it’s
also worth questioning.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 71

WHY STRATEGIC ASSET MANAGEMENT MATTERS
Strategic asset management looks
at infrastructure management a bit
differently, encouraging an objective
assessment of which asset requires
which treatment at which time in order
to achieve a community’s defined
service goals. Sometimes it makes
sense to just fix an “E+” asset, making it
safe and serviceable without otherwise
improving it. And sometimes it’s more
cost-efficient, effective, and faster to
do some work on a “C” or “D” asset than
to ignore it. In these cases, intervention
can prevent the asset from entering
the dreaded penultimate phase of life,
where it costs potentially up to five
times more to revive it.
EXHIBIT 1: OPTIONS AND SCENARIOS PROVIDED BY STRATEGIC
ASSET MANAGEMENT
Playspace_Opt1a yr10
Playspace_Opt1b yr10
Costs and maintenance
Maintaining assets according
to strategic asset management
methodology reduces asset
degradation rates significantly—by
up to 50 percent a year. Applied to
that $1 billion facilities portfolio,
the annual savings would come to
$10 million to $15 million.
First, let’s explore this economic
rationale. If a government has ten
buildings in its portfolio, the decision
to treat an E-graded asset instead of
a C-rated one is simple. But for our
hypothetical $1 billion portfolio,
which contains significantly more
than 10 buildings, a government
would look at the components rather
than at the overall building asset
condition in order to make accurate
treatment decisions. Let’s say that
portfolio is made up of 100 buildings;
the potential size suddenly exceeds
10,000 unique and competing
components. Extrapolate this over 10+
years to ensure funding is allocated
optimally—to the right asset, to the
required components, and at the
optimal time to best extend the
lifespan of the asset—and strategic
asset management presents a great
opportunity to unlock significant
hidden dollars. For an organization
with 300 or more buildings, or 600
miles or more of roads or pipes, or
scores of bridges, solving this problem
Playspace_Opt2a yr10
becomes increasingly relevant and
could lead to huge potential savings
and reduced risk—for example, a rating
far higher than a D.
Secondly, consider the service-level
rationale, that assets do not exist
for their own sake. They exist only
to serve communities’ and users’
needs, which shift and change—as
2020 highlighted perhaps more
than ever before in recent history.
Strategic asset management is the
data-driven approach that empowers
the professionals responsible for
these assets with the systems and
framework to manage change in service
needs transparently, confidently, and
efficiently, and to ensure that those
services are delivered.
Playspace_Opt3a yr10
Strategy in action
Strategic asset management gives the
organization one voice, answering
important questions like how much
funding is needed, where the money will
be spent, and which assets are likely
to fail. And if a government has 5,000
competing assets (or 1,000, or 500), this
strategy ensures that scarce funding is
allocated in a way that delivers the best
result over 10+ years, not just the next
one to three years. There are three steps
to putting this strategy into action:
• Understand the assets. Identify
exactly which assets the organization
has responsibility for and compile
relevant information such as age,
location, and condition through data
72

The City of Topeka, Kansas, used
strategic asset management to
establish the necessity of one of
their transport taxes to protect
roads condition and maintenance.
collection activities. This helps
identify where each asset is in its
lifecycle, based on condition data.
• Set up a framework. Tap into
internal and external experts to
create a framework for evaluation
options and determining when to
intervene for each asset. Identify
the points where investment
might be appropriate, along with
the cost of treatment and its
impact on asset condition and
portfolio-maintenance costs.
• Make better decisions. Apply
the framework to provide clarity
about available options. At this
point, financial optimization
models are used to determine the
best combination of investments
across the portfolio. Modeling
software can be used to determine
the type, timing, and level of
investment that will produce the
lowest renewal and maintenance
costs and deliver the best service.
EXHIBIT 2: RENEWAL AND MAINTENANCE COSTS INCREASE AS THEY DEGRADE
FROM “A” TO “F” ON THE AMERICAN SOCIETY OF CIVIL ENGINEERS RATING SCALE
The City of Topeka, Kansas, provides
an example. The city government
asked, “If we remove one of our
transport taxes, what will the
impact be in the future?” Staff
used strategic asset management
to answer this question based on
data-driven forward prediction
rather than historical assumptions.
Staff were able to present evidence
showing that reduced funding
would have unacceptable effects on
pavement condition and subsequent
service goals. It was also able to
provide data showing how the city
would achieve outlined service
goals with the current funding
transparently and objectively.
As a result, the tax remained in
place, and everyone understood why.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 73

WHY STRATEGIC ASSET MANAGEMENT MATTERS
In Australia, the Department of
Education for Tasmania faced a
classic challenge: how to manage
cost and mitigate risk to essential
school facilities that were reaching
a critical aging point. Department
staff knew this was the case but
lacked evidence-based data to prove
it. The department used simple data
collection to provide senior decisionmakers
with meaningful insights and
was, as a result, effectively stimulusready
with compelling, data-driven
strategies to present when funding
submissions were requested in
the early days of Australia’s 2020
COVID-19 recovery packages.
The City of Wichita, Kansas,
demonstrated prudent fiscal
planning by giving their finance
managers and engineers a common
goal of preserving the city’s
buildings. Using objective condition
data and return-on-investmentmetrics,
they were able to present
scenarios about the future of these
assets to their leadership team and
council, resetting proposed strategies
and altering funding allocation
based on data-driven modeling.
Ready for change
If 2020 brought anything into sharp
focus, it is the need to be prepared
for change. The year brought
unprecedented changes in our
fundamental way of life and the
nature of work, and it certainly had a
major impact on already-constrained
budgets. But we can manage the
uncertainty of change when we
understand our options and have solid,
data-driven plans to support them.
Using strategic asset management
helps governments unite behind a
common purpose. It puts the CFO
and public works director on the
same page and makes staff and
residents confident that the
community’s infrastructure is being
managed effectively. This allows
teams to focus on the outcomes that
ultimately matter.
Strategic asset management also
prepares organizations for the
unexpected. Whether that’s a
pandemic, a natural disaster, or an
unplanned budget expenditure,
governments will understand both
Wichita, Kansas, used datadriven
modeling and return-oninvestment
metrics to reallocate
funding and reset strategies to
preserve the city’s buildings.
asset condition and community
service needs, and they can confidently
show proof of wise spending to
secure essential stimulus funding
and reassure residents.
Having a strategic asset management
approach means that future generations
won’t be left with infrastructure costs
that eat into their ability to innovate
and solve even bigger problems, like
health services, space travel, vaccines,
robotics, and things not yet even
imaginable. Embracing strategic asset
management makes it possible for
public agency professionals to plan for
and answer these important questions,
knowing they have the systems
and tools in place to make decisions
based on data and evidence.
Ashay Prabhu is the vice president
of strategic asset management at
Dude Solutions and cofounder of Assetic.
74

In Practice
FINANCE | ACCOUNTING | PERSPECTIVES | INTERVIEWS | DEBATE
FINANCE
The Town of
Cary Instills
a Culture of
Collaboration
BY KATIE LUDWIG
Over the past four years,
the Town of Cary, North
Carolina, has developed
a collaborative
organizational culture
so it can achieve its purpose and fulfill
its values. The town serves a population
of approximately 166,000 people
and has roughly 1,300 employees,
including about 47 employees in the
Finance Department. Leadership
within the Finance Department believe
collaboration is the key to achieving
the best outcomes—not just for the
department, or for the organization,
but for the overall community.
“Collaboration is really essential to
getting our work done, and certainly
essential to getting our best work
done,” said Karen Mills, the town’s chief
financial officer. “Our citizens don’t
interact with just Finance or just Public
Works or just Utilities. They interact
with the organization, and we want to
serve them in a collaborative way.”
Karen acknowledged that
collaboration is not always easy.
“Sometimes collaboration slows
things down and takes more time,
but it’s never failed to result in a
better outcome,” she said.
Gregory Jenkins, revenue manager,
agreed. “I think the biggest challenge
of collaboration is time, because you’ve
got to be committed to meeting, to
doing homework in between meetings,
to being willing to share your ideas,”
he said. He pointed out that leaders
who don’t take the time to collaborate
APRIL 2021 | GOVERNMENT FINANCE REVIEW 75

IN PRACTICE | FINANCE
risk making mistakes that will cost more
time and effort in the future. “Either
you’re going to have time on the front
end, or you’re going to have to make time
on the back end; and the time on the
back end is going to be more reactive,
where you could have been more
proactive with it,” he explained.
Kimberly Branch, assistant finance
director, echoed this philosophy.
Kimberly is responsible for managing
and facilitating the operations of
the Finance Department, including
reporting, procurement, and
accounting. “We collaborate on
everything, and sometimes, it takes
longer to do things. I would love to just
be able to make a decision and keep it
moving, but to get the best output, we
collaborate,” she explained. “We’re in
the very, very early stages of a transition
to a new ERP (enterprise resource
planning) system, so we’re trying to
start those collaboration processes early
on in the project. We have committees
working on the project now from
different departments, so we can make
sure we’re getting people what they want
out of a new system. We hope that’s going
to lead to a better system at the end.”
Gregory recently transitioned into a
more strategic role within the Finance
Department, working on special
projects and initiatives that cut across
departments. He explained that much
of his current role is focused on building
relationships, not just within the
Finance Department, but also with other
departments. “I get to dibble and dabble
in everything across the department and
really across the town,” he said.
“I think collaboration is the key to
unlocking the door to potential. I
always have been one of those types of
people that will walk over to a colleague
within the department or outside
of the department and sit down and
have a conversation,” he said. These
conversations are key to exploring the
possibilities and figuring out how to
knock down barriers to success.
Gregory pointed out that collaboration
is not the same as consensus. “I think
that’s a big difference for me because
collaboration doesn’t mean that we are
always going to agree,” he said. For him,
though, disagreement underscores
how important collaboration is because
“it lets us know that there’s a different
perspective out there.”
Similarly, Michelle Brooks, who was
recently promoted to controller, pointed
out that to be effective, collaboration
often requires some initial discussions
to establish a common understanding.
“I think collaboration
is the key to
unlocking the
door to potential.”
Gregory Jenkins,
Town of Cary Revenue Manager
“We spend a lot of time educating people
on complex financial processes, trying to
connect the pieces that involve multiple
departments and multiple areas of the
Finance Department to help people
understand how they all fit together,”
she said.
“We kind of use collaboration selfishly
too, as a set of fresh eyes because we’re
used to dealing with the technical
aspects of our jobs,” Kimberly further
explained. “We’re open to others
coming in to look at a process or a
procedure and giving us their input.
That’s very helpful to us.”
Stacey Teachey is the town’s financial
strategy manager, its new term for
“budget manager.” She explained that
the town recently recruited a Financial
Foundations Team to strengthen
its collaborative efforts related to
financial matters. The team is a subset
of directors from departments across
Cary. “The goal is that over time we
will involve them in lots of different
financial-related matters, whether
it’s policy development or process
review,” she said.
The first process the Financial
Foundations Team has been reviewing
is the town’s capital improvement
budgeting. The group has met five
times so far. “I’ve found it really
rewarding to see this whole concept
that Kim was talking about with
fresh eyes, to bring in people who
aren’t normally a part of the process
and get their views and opinions and
thoughts,” she said. The plan is to use
the team during the development of
the operating budget as well.
Karen credited Town Manager Sean
Stegall with instilling a culture
of collaboration throughout the
organization. She explained that when
Sean joined the town about four and a
half years ago, he focused on adaptive
leadership, which Karen believes goes
hand in hand with GFOA’s Financial
Foundations Framework. “It spells out
exactly the steps. It’s all about good
human behavior,” she said.
Karen further explained that the
ultimate goal of the team is to
“support our council and help them
feel comfortable and empowered and
responsible to make good financial
decisions.”
Working together
on the budget
To illustrate how the town’s
collaborative culture has evolved over
the years, Stacey shared a story about
the budget process. When Sean came
on board, he wanted to transition away
from the town’s hierarchical budget
process. At the time, the departments
would submit their requests to the
76

The Finance Department took the
budget process back during the
COVID-19 pandemic, and is taking
a more collaborative approach
with the departments.
Budget Office, which was part of the
Manager’s Office. The decisions about
what to fund and what to cut would be
made behind closed doors and then
get pushed out to the departments.
Stacey said Sean’s goal was to open up
that process and have the departments
take a more active role in owning and
understanding their budgets.
“In the early years, when we were
trying to get our feet under us, we’d
have meetings with 20 department
directors and literally be going line by
line through the budget,” she said. “We
knew we couldn’t do that forever, but
they learned how the process works.
They learned more about the revenues.
They learned more about how that
meets with the expenses, both on
operating and capital, and they saw
how a budget is really made outside of
their normal purview as a department.
And they began to see how they really
all do functionally come together.”
She went on to explain that the budget
development process evolved a bit more
in 2020. “During COVID, we made the
decision to take the budget process back
this last year. We created the budget
between finance and the manager’s
office, just because we were getting our
feet under us with working from home,”
she explained. After the budget was
finalized, they asked the department
representatives what they thought of
the process this year and floated the
idea of using a smaller rotating team,
like the Financial Foundations Team, to
develop the budget in future years. The
reception to this idea was very positive;
department representatives like being
involved but have realized that they
don’t necessarily need to be reviewing
each and every line item. Through
this process, Stacey believes the town
has found a good middle ground for
moving forward, in terms of how much
involvement departments should have in
budget development. “We’ve definitely
swung from one extreme to the other,
and now I think the pendulum is back in
the middle, and we’re hopefully finding
our footing for a good future,” she said.
Mary Beth Huber, deputy treasurer,
manages all the debt, investment, and
treasury functions, including accounts
payable and payroll. As another
example of collaboration, Mary Beth
described an effort to improve the
accounts payable function throughout
the town. “We have developed what we
call advocates. It started being p-card
[purchasing card] advocates because
getting people to reconcile their p-cards
is such a problem,” she said. The p-card
advocate’s role in each department is
to review processes, make suggestions
for streamlining, and then work with
their colleagues to make sure things are
working. “Now we’ve expanded it, and
we’re using them as advocates, as we’re
moving toward an invoice automation
process.”
Mary Beth expressed how important
it is to have these individuals in the
departments, people who are willing
to partner with Finance and provide
feedback and input on how to do things
better. She emphasized how valuable
they were when the town shifted
to remote operations toward the
beginning of the COVID-19 pandemic.
“Having those individuals out in the
departments that we collaborate with
was really key to being successful being
remote,” she said.
Kimberly added that the town also
values collaboration on a regional
level. She mentioned that Gregory
attends a regular regional meeting to
discuss utility revenue and the impacts
of the COVID-19 pandemic on utility
operations and revenue. Similarly, she
APRIL 2021 | GOVERNMENT FINANCE REVIEW 77

IN PRACTICE | FINANCE
said that sometimes she will simply
pick up the phone and call colleagues at
other municipalities in the area to see
“how they’re doing things that could
help us over here as well.” For example,
she said Cary is currently talking with
the City of Raleigh, Wake County,
and a few other jurisdictions about
conducting a regional disparity study.
Working through
pandemic challenges
The COVID-19 pandemic has presented
some challenges to collaboration, as
most of the Finance staff members
have been working remotely since
March 2020.
The Town of Cary’s Credo
OUR PURPOSE
Cary challenges the standard for how local
governments should operate. We embody
excellence and professionalism in local government
by demonstrating leading practices and partnering
effectively with our community. We build on our
legacy of excellence and recognize that we always
have room to grow. This continued excellence requires that we challenge
convention and dare to think differently, always learning along the way.
When we are successful, Cary’s citizens know that their local government
is a committed partner and trusted steward of their resources.
OUR VALUES
• People First—We exist to build community and take care of people.
• Evolution—We seize opportunities to experiment, learn, and adapt to
create a better future.
• Working Smart—We prioritize work on the most important things.
• Anyone Can Lead—We differentiate leadership from authority and
believe that everyone can find ways to make our community better.
Jessica Rhem serves as the town’s
financial reporting manager. Her
responsibilities include preparing the
town’s comprehensive annual financial
report and overseeing the annual
audit. Jessica found the audit to be a
challenge this year, largely because
staff members were adjusting to
working remotely. She said that in the
past if questions came up during the
audit, staff could just walk over to their
colleague’s office and discuss them. But
with everyone working remotely, she
and her staff had to be very intentional
about their communication.
“We had planned weekly check-in
meetings just to make sure that if there
were any questions anybody had or any
issues that came up, we could talk to
them,” she explained.
Michelle agreed that collaboration
has to be much more intentional in
a remote environment because you
can’t just stop by someone’s office or
pull a few people together for a quick
meeting. The value the organization
places on collaboration helps in this
regard. “Everyone wants to be that
collaborative partner,” she said.
“We’ve got the buy-in. Dealing with the
logistical challenges is far, far easier
than trying to convince people that it’s
the right thing to do.”
78

Kimberly agreed that in a remote
work environment, communication
and collaboration need to be more
intentional. She explained that the
leadership team in the Finance
Department has a standing meeting
three times a week at 4 p.m. If there
is no business to discuss, they will
cancel it, but if there is something
to discuss, the entire team has that
time blocked out and is available. She
believes these regular meetings help
to prevent any intra-departmental
silos from popping up. “It’s just a
way for us to reconnect, and it’s more
important now, probably, than when
we were in our offices,” she said.
Gregory pointed out the tension
between intentional communication
and organic conversations in a remote
work environment. In a remote
environment, you can’t just drop by
a colleague’s office to chat. Instead,
you have to schedule a time for a call
or virtual meeting, and you need to
be specific about the length of time
and the agenda. And this level of
specificity is not always practical or
possible. “Sometimes, I’m just having
a conversation about your kids, and
then all of a sudden, a thought pops
out, and then boom, we’re in this great
organic conversation that has now
blossomed into a draft of a plan,” he
explained.
Jessica mentioned one thing that does
help make collaboration in a remote
environment a bit easier, which is
when people have their cameras on
during virtual meetings. It’s helpful
to be able to pick up visual cues to
ensure that a colleague understands
what you are communicating. Plus,
she said, even though she hasn’t seen
her colleagues in person for months,
she doesn’t feel like she’s lost a
connection with them, because she is
seeing their faces every day.
Mary Beth agreed and acknowledged
that staff did have to overcome a remote
work learning curve. “I think we
struggled through it in the beginning.
It was just a whole new world for us
because we were always in the office,”
she said. Initially, some staff members
did not turn their cameras on. When
these people expressed frustration
that they were not being heard or
understood in meetings, she suggested
that turning on their camera might
help them gain more credibility with
their audience. “Once I said that to
my staff, they all started putting their
cameras on,” she said.
“I’ve found it really
rewarding...to bring
in people who
aren’t normally a
part of the process.”
Stacey Teachey, Town of Cary
Financial Strategy Manager
Kimberly lamented that the COVID-19
pandemic has made it harder to
socialize and de-stress as a group. “You
can ask anybody else around Cary,
‘who’s the party department?’ and it
would have been us, the accountants,
the Finance people,” she said. “We’re
the biggest partiers. We want to
celebrate everything, and our current
situation has made that difficult.”
She said they have tried a few things,
including setting aside some time
to play a game, that have been fairly
successful.
Mary Beth echoed this sentiment,
noting that the Finance Department
has had a few retirements during
the COVID-19 pandemic. “We
were always big on going all-out on
people’s retirement parties,” she
said. “Everybody looked forward to
coming to them. But we’ve been doing
them virtually, just within the
Finance Department, during the
pandemic.” For one employee’s
virtual retirement celebration,
the employee’s family members,
many of whom did not live nearby,
were able to join, which made it a
bit more special. “We were able to
see children and grandchildren,
and they spoke and shared some
stories,” she said.
Even though these virtual
celebrations aren’t quite the same
as being in person, Jessica said, it’s
still important to hold them. She
said that her division got together
around the Christmas holiday and
had a long lunch break together.
“We made sure we didn’t talk
about anything work-related,”
she said. “It’s not as fun as being
in person, but we are trying, and
I feel like the staff is appreciating
our attempts.”
Gregory said he believes the
most important component
of maintaining positive work
relationships during the COVID-19
pandemic is simple. “We push
the idea of having grace for each
other because you never know
what somebody is going through.
You don’t know if a parent is sick,
you don’t know if a child is sick,
or a spouse, or if they feel isolated
from the world,” he said. “That’s
something that we can all do all
the time.”
For more information
on GFOA’s Financial
Foundations Framework
and to learn how you
can use collective
decision making in
your organization,
visit gfoa.org/fff
APRIL 2021 | GOVERNMENT FINANCE REVIEW 79

IN PRACTICE | ACCOUNTING
Budgetary Accountability: Why, Why, Why?
BY MICHELE MARK LEVINE
“No taxation without representation!”
is a rallying cry upon which the United
States of America was founded. The
U.S. Constitution and the equivalent
for each state delegate the power of
taxation to the legislative branch of
government, 1 notably the branch that
most directly represents citizens
as constituents. “Management by
committee” not being the most efficient,
however, the day-to-day operation is
largely controlled by the executive
branch of governments at all levels.
How, then, to make that representation
of the people meaningful and effective
in determining what government does
with tax money? This is accomplished
by means of legally adopted budgets.
By law, budget appropriations both
permit and constrain the spending
of public dollars. And how do
legislators and citizens alike know that
government managers abide by these
laws? By virtue of governments issuing
reports demonstrating compliance,
upon which users know they can rely.
The centrality of the need for budgetary
accountability has had a profound effect
on government accounting, and it helps
explain the high value GFOA places on
budgetary compliance reporting.
So, this is why government accounting
is “different.”
The objective of government
accounting and external financial
reporting is to provide accountability
for the use of public resources.
Budgetary reporting in government’s
basic financial statements (or
required supplementary information
[RSI], discussed later), and in other
information included in comprehensive
annual financial reports, is the epitome
of taxation with representation.
For governments, accountability to
taxpayers as resource providers, and
legislators as their representatives,
is of paramount importance.
Fund and encumbrance accounting
are widely associated with government
financial reporting. These, and the use
of a second measurement focus and
basis of accounting, are all born of the
need to facilitate and demonstrate
compliance with legally adopted
budgets, and with other constraints
imposed on spending by constitutions
and charters, enabling legislation,
higher levels of government, lenders,
and grantors. In these essential ways,
accounting and financial reporting
for governments is substantively
unlike accounting and financial
reporting for any other kind of
organization. While not-for-profit
enterprises may have some similarity
in terms of their service-provision
missions, governments are the only
institutions funded by compulsory
taxes, regulatory fines and fees, and
charges for crucial public services for
which there are often no alternative
providers.
Also, this is why the criteria in
GFOA’s Certificate of Achievement for
Excellence in Financial Reporting
award program emphasizes
demonstrating budgetary compliance.
©2021 MICHAEL AUSTIN C/O THEISPOT.COM
80

For the nearly 4,400 governments
that participate in GFOA’s Certificate
of Achievement for Excellence in
Financial Reporting award program
(COA), the award criteria are presented
in the COA checklists, with the most
important requirements indicated
by an asterisk. 2 Of the nine criteria
for the basic financial statement
titled “Governmental Fund Financial
Statement of Revenues, Expenditures,
and Changes in Fund Balances –
Budget and Actual – General Fund
and Major Special Revenue Funds,”
six are asterisk items. As these basic
financial statements (or their RSIschedule
substitutes) are generally
not presented at a government’s
legal level of budgetary control, 3 they
must be supported by supplementary
budgetary reporting with such
detail, within the financial section
of a comprehensive annual financial
report. 4 This requirement is also an
asterisk item.
Admittedly, reporting down at the
legal level of budgetary control can
be voluminous. “In extreme cases,”
generally accepted accounting principles
(GAAP) permit governments to provide
that detail in a separate report. 5 For
participants in the COA, the criteria
in such cases require governments to
do the following, in order to be certain
that they are, in fact, demonstrating
budgetary accountability, as they would
be if the details were included in their
comprehensive annual financial reports:
1. Make the separate report (“budgetary
compliance report”) available to the
public (for example, on their website).
2. Include a reference to the budgetary
compliance report and explain how
it may be obtained (for example,
web address with an active link) in
the notes to their basic financial
statements.
3. Ensure that the amounts stated in the
budgetary compliance report are easily
traced to the budgetary comparisons
presented in the comprehensive
annual financial report.
4. If necessary, make additional
schedules available to the
public in order to demonstrate
agreement between the amounts
in the comprehensive annual
financial report and the budgetary
compliance report.
This is why GFOA supports the inclusion
of budgetary-compliance reporting
as part of basic financial statements
prepared in accordance with GAAP.
The centrality of the
need for budgetary
accountability has had
a profound effect on
government accounting,
and it helps explain
the high value GFOA
places on budgetary
compliance reporting.
More than 20 years ago, with the
promulgation of GASB Statement
No. 34, Basic Financial Statements—
and Management’s Discussion
and Analysis—for State and Local
Governments (GASB 34), governmental
financial reporting was greatly altered
by the introduction of governmentwide
financial statements. These
provide a valuable holistic and
long-term perspective, adding a
way for users to assess whether the
government’s current operations are
consuming greater or fewer resources
than they are taking in, thereby
shifting either costs or benefits into the
future or drawing or building on those
accumulated in the past. At the same
time, however, GASB began a dangerous
retreat from budgetary accountability,
which GASB is now proposing—in its
Exposure Draft Financial Reporting
Model Improvements standard (ED) —
to unconditionally surrender.
GASB 34 gave governments the
option to move budgetary reporting
out of basic financial statements,
the prominence of which reflects
their essentiality and where they are
subject to audit. Instead, governments
were given the option to include those
reports only in RSI and were even
encouraged to do so. 7 Notwithstanding
GFOA’s recommendation to the
contrary, 8 this relegation to unaudited
schedules that appear separate from,
and after, basic financial statements
and note disclosures, has become
more common as governments are
persuaded by auditors charging more
to perform the additional procedures
and assume greater responsibility to
assure budgetary accountability. In
the ED, GASB is proposing to make
this demotion mandatory. 9 In theory,
governments could nonetheless
specifically engage their auditors to
provide an opinion on their budgetary
reports, but in practice, the change
will drive such assurance of budgetary
accountability to extinction.
Michele Mark Levine is the director
of GFOA’s Technical Services Center.
1
Alternatively, some taxation decisions may be
made by direct approval of voters.
2
The checklist for all governments other than
postemployment benefit plans and investment
pools can be found on GFOA’s website at
gfoa.org/comprehensive-general-purposechecklist.
3
The legal level of budgetary control is the detail
level, such as a program or object, for which
legislative approval is required to exceed
budget appropriations, often with flexibility
within specific parameters.
4
In accordance with COA criteria, this
supplementary information must be subject to
an “in relation to” auditor’s opinion, providing
some level of assurance regarding their fair
presentation, albeit at a lower level than that
provided for basic financial statements.
5
GASB Codification of Governmental Accounting
and Financial Reporting Standards, 2020-
2021 (Cod.), Section (Sec.) 2400, “Budgetary
Reporting,” paragraph .104.
6
Exposure Draft Financial Reporting
Model Improvements, gfoa.org/
GASBFinancialReportingModelImprovements.
7
GASB Cod. Sec. 2400, paragraph .102 and
footnote 1.
8
See GFOA Best Practice Budgetary
Comparisons as Part of the Basic Financial
Statements, gfoa.org/materials/budgetarycomparisons-part-basic-financial.
9
GASB Exposure Draft Financial Reporting
Model Improvements, paragraph 34.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 81

IN PRACTICE | PERSPECTIVE
Public-Sector Working Space May Never Be the Same
Katherine Barrett & Richard Greene
One way the pandemic has
changed the way state
and local governments
do business is that many
are reconsidering past capital plans
and strategizing for future changes in
facility and office needs. “In my world,
this is the topic of 2021,” Brian DeForest,
the chief administrative officer for
the State of Oregon, said. “We’re now
putting together a basic framework and
rubric as to what our buildings need to
look like and how many we need.”
“People are starting to question—do
I really need this space? Everyone is
trying to figure this out,” said Keith
Fentress, president of Fentress Inc.,
which has performed facility planning
and office pre-design services for 1,500
local, state, and federal government
facilities for more than 33 years.
Though concrete action has yet to
materialize in most places, many
governments are currently studying
these issues and surveying managers
and employees to see how the future
of remote work will change real estate
needs. There are clear incentives: the
significant savings that can flow from
reducing necessary maintenance;
cutting the size of custodial and upkeep
staff; whittling down energy costs;
and—where buildings are not owned by
states or localities—eliminating rent.
Some initial signs of change are
coming in cancelled building or
expansion projects.
Pine County is a small county in
Minnesota. Tight budgets and a revised
review of telework led leaders there
to abandon $3 million in courthouse
expansion plans last year. Before
the pandemic, the county planned
to add office space in its 12-yearold
courthouse to accommodate
approximately 60 human service
©2021 NEIL WEBB C/O THEISPOT.COM
82

workers who were being moved out
of a 100-year-old former courthouse
building.
The expansion plan was ditched
following the county’s experiences in
2020, which led to a greater acceptance
of telework and newly revised state
rules that reduced the need for inperson
meetings. Now, only 20 of those
human service workers have assigned
space in the new courthouse, and the
rest will work remotely and come into
the office when needed.
The decision has not only helped the
county avoid costs but also improve
recruitment and retention through the
increased flexibility offered by remote
work, according to David J. Minke, Pine
County administrator
Similarly, a little more than a month
after stay-at-home orders went into
effect in March, plans to build a new
$39 million parking garage in Salem,
Oregon, were cancelled. Even in
its early stages, the pandemic had
provided a “proof of concept” that not
all workers needed to drive into their
office jobs every day. “If we don’t have to
commute everyone down to Salem on a
daily basis, a new parking garage is not
necessary,” DeForest said.
The drive to cut down on office space is
not new. Many companies in the private
sector have embraced the idea, giving
up individual employee offices and
setting up “hoteling” space—providing
workstations, lounge areas, and
conference rooms that can be used by
teleworking employees when needed.
The State of Tennessee has long
been the best-known proponent
of this new approach to work life
in the public sector. The state
undertook its “Alternative Workplace
Solutions” initiative in 2016, with
select departments agreeing to
allow employees to work from home
or in the field. Central offices were
transformed to eliminate most
individual personalized office spaces,
and lockers were provided for the
personal possessions and employees
who were coming into central offices
only when needed.
Before the coronavirus pandemic, the
state had eliminated approximately
375,000 square feet and saved $5
million in real estate costs. Even
so, many Tennessee agencies were
reluctant to jump in, preferring to keep
their teams operating full-time from a
central office location.
This reluctance has now ebbed away, as
it has in many organizations that were
leery of having employees who could
only be supervised from a distance. Early
in the pandemic, a gubernatorial order
required all Tennessee departments to
cut their budgets by 12 percent. Faced
with the directive, previously reluctant
department directors began to see this
new way of operating in a different light.
“No one wants to reduce their staffing
or their programs,” Christi Branscom,
commissioner of the Department of
General Services in Tennessee, said.
“Many agencies saw real estate as an
opportunity. They realized that they
could reduce their facility footprints,
and this would help them get to their
budget cuts, as well.”
Reducing the number of employees who
spend 40 hours in an office setting has
advantages other than aid in balancing
budgets. These include a reduction
in a government’s carbon footprint
and the appeal to employees—and
new recruits—of a more flexible,
autonomous work environment and
better work/life balance.
For Wake County, North Carolina, the
seeds of change were planted before
the pandemic. The fast-growing county
was dealing with office overcrowding,
especially in its downtown office spaces.
For this reason, the county manager’s
office began to focus on relocating some
administrative staff members out of
downtown, and a study was budgeted
and planned to begin in 2020.
Though concrete
action has yet
to materialize in
most places, many
governments are
currently studying
these issues and
surveying managers
and employees to
see how the future
of remote work
will change real
estate needs.
After the experiences of 2020, the
county began to consider a bigger
transformation, under an initiative
dubbed “Wake 2.0.” “With the pandemic,
Wake County has, by necessity, had
to work remotely, and everybody has
learned how to do that,” Mark Forestieri,
director of the Facilities Design and
Construction Department, said.
Currently, multiple Wake County
departments are being surveyed to
find out how managers and employees
envision their post-pandemic work
life—who can work purely remotely,
who would do best in a hybrid
environment, and who needs to be in an
office setting full-time. “Our goal is to
develop an organizational framework
that encourages departments to
reimagine future work,” Forestieri said.
Changes in office design don’t just apply
to public sector workers, according to
Keith Reester, the public works director
in the City of Littleton, Colorado.
During the pandemic, city residents
have become far more accustomed to
interacting with government digitally.
This means there is less need for large
waiting areas and the kind of counter
space where residents have previously
APRIL 2021 | GOVERNMENT FINANCE REVIEW 83

IN PRACTICE | PERSPECTIVE
recognition that there will be
a need to adapt and change in
remodeling office space. “We’ll
need to plan to have a little more
of the budget that is unallocated—
some capital improvement or
maintenance dollars that are not
assigned,” he said.
Despite all the benefits, as
might be expected, the path to
a new future in public-sector
work environments isn’t
without challenges. Dealing
with the problems that come
from a decentralized and more
autonomous work environment is
high on the list of issues that must
be confronted, as are questions
of the best way to use technology.
How many virtual meetings can
one person fit in a day without
experiencing a syndrome that has
come to be called Zoom Burnout?
Dealing with the
problems that come
from a decentralized
and more autonomous
work environment
is high on the list of
issues that must be
confronted, as are
questions of the best
way to use technology.
applied for permits or come in to pay
utility bills. Now, older residents are
joining younger ones in either logging
in to government websites or seeing
government staffers by appointment.
“Will we have as much public traffic in
the building? Probably not,” Reester
said. Part of the remodeling that’s
taking place in Littleton involves a
shift in location for the permit center
and a reduction of counter space by
about half.
Reester emphasizes the need for
flexibility lasting long beyond
the exigencies of the days of the
pandemic. “We’re going to try stuff
and see what happens, and then
we’ll try something else.” He noted
that modular furniture creates
more ease in changing the interior
of government office environments
as times change. Larger contingency
budgets will also be needed in
There are more unresolved
questions: How much should
governments pay for office
furnishings or technology in the
home? Will lower-paid employees
be equally able to work from less
well-equipped houses? Will office
culture be damaged when watercooler
conversations and shared
lunch hours are a thing of the past?
As Reester said, “People miss
the interpersonal action with
their peers in the office. People
want that human interaction.
No matter how we do it, there
will be a craving for that physical
space-sharing during the week,
and as facility planners, we need to
inherently keep that in mind.”
Katherine Barrett and Richard
Greene are principals of Barrett
and Greene, Inc (greenebarrett.com).
and are co-authors of the recently
released Making Government
Work: The Promises and Pitfalls of
Performance-Informed Management.
©2021 MICHAEL AUSTIN C/O THEISPOT.COM
84

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How do we lead beyond them? Join GFOA for its 2021 Virtual Conference, July 12‒23, to hear
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prioritize the current needs of your community and prepare for any future challenges.
Register today at gfoa.org!
• Access to fifty+ sessions including networking group events, which will be streamed live July 12-23. Visit gfoa.org to
view session topics, speakers, and a schedule.
• Tune in July 12 for GFOA’s annual business meeting, which is complimentary to GFOA members. At the meeting,
GFOA’s active government members select new members of the Executive Board and vote on any policy statements that
have been prepared by GFOA standing committees and recommended for approval by GFOA’s Executive Board.
• Earn a maximum of thirty-eight CPE credits. (session length varies from fifty minutes, seventy-five minutes, or one
hundred minutes • 1, 1.5, or 2 CPE credits available per session).
• Connect by asking questions, answering live polls, and chatting with presenters and other participants. You’re also
invited to engage with your peers on GFOA’s Member Communities (coming soon!), and social media.
• All attendees will receive access to session recordings to view at a later date. At this time, viewing recorded sessions would
not be eligible for CPE credits.
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For health and safety reasons, GFOA’s 115th Annual Conference, June 27–30, 2021, in Chicago, Illinois, has been canceled. We look forward
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in Austin, Texas. Keep watch for registration updates in the fall.
203 North LaSalle Street, Suite 2700 | Chicago, Illinois 60601-1210 | fax 312.284.1224 | gfoa.org

IN PRACTICE | PERSPECTIVE
Is the Local Muni Future Global?
A
quarter
Justin Marlowe
century ago,
Jonathan Walters, a
great observer of state and
local government, said,
“…counties have become the backstop
of American government. In fact, a
huge amount of responsibility for
some of society’s toughest, costliest,
most thankless jobs has either been
handed or simply devolved to county
governments, and the results can be
overwhelming.”
Not long ago, a CFO from a mediumsized
city in the Midwest told me an
intriguing story. She was getting ready
to close on a general obligation bond
sale. Toward the end of the process,
her municipal advisor suggested she
spend a few thousand extra dollars to
have the bond prospectus translated
into French and Japanese. When she
asked why, the muni advisor said,
“You’ll save a lot of money if buyers in
Brussels and Tokyo can learn about
you quickly.” This answer tells us a lot
about today’s municipal bond market.
Bonds sold by U.S. states and localities
are special for a few reasons. For one,
they trade in a market unlike any
other. Few other countries in the world
have devolved as much autonomy to
sub-sovereign entities as the United
States. This autonomy allows states
and localities to levy taxes and borrow
money in ways that governors and
mayors in other countries can only
imagine. Another, of course, is the
tax exemption. Investors don’t pay
federal or (usually) state income taxes
on the interest earned from holding
municipal bonds (munis).
These two features make the muni
market highly localized. These bonds
make perfect sense for individuals
who want a safe way to save for
retirement and want the additional
tax benefits, on top of a chance to
invest in projects in their community.
This is especially true for high-networth
individuals in high-income tax
states like California and New York, so
it’s no surprise that mutual funds and
other money managers have developed
a variety of state-specific investment
funds. Munis also make sense for
insurance companies looking to match
their long-term liability exposures
with local assets. In fact, it’s often said
there is no “municipal bond market,”
but rather 50 local muni markets.
Given that, it seems odd that munis
would attract any attention from
©2021 CURTIS PARKER C/O THEISPOT.COM
86

international investors. After all, they
can’t realize the tax benefits if they
don’t have U.S. income tax liability. And
if they don’t know the local community,
why would they care to invest in it?
But it turns out that international
investors are a growing share of the
muni market. In fact, according to the
Federal Reserve, they’ve grown from
less than 0.01 percent of muni bond
holders at the end of 2010 to more
than three percent at the end of 2020.
That’s about $100 billion of munis in
foreign hands. What’s driving this
trend, and why should state and local
bond issuers care? Three interrelated
reasons come to mind.
One big reason is today’s ultra-low
interest rate environment. Yields on
U.S. Treasury bonds and corporate
bonds have sat at record low levels for
several years now, with no indication
that they’ll increase any time soon.
This has motivated many investors
who don’t normally benefit from
the tax exemption, including many
international buyers, to poke around
in the muni market for high yields with
minimal additional credit risk. This
has contributed to lower interest rates
across the muni market generally.
This unique interest rate environment
has also created a unique borrowing
opportunity. With rates and credit
spreads so low, state and localities can
offer up taxable munis that appeal to
these taxable buyers. If this appeal is
strong enough, yields on those taxable
bonds might be as low or even lower
than yields on an equivalent taxexempt
offering.
This is especially true for issuers that
pay off old bonds ahead of schedule
at lower interest rates, a practice
known as advanced refunding. The
federal Tax Cuts and Jobs Act of 2017
outlawed tax-exempt refundings,
mostly as a way to capture some
additional federal revenue to fund
the tax cuts it included. But it did not
outlaw taxable advanced refundings.
Moreover, low taxable rates open the
door to projects that don’t always
qualify for the tax exemption
because they benefit private
interests as well as taxpayers, like
airport upgrades and convention
center expansions. All this said,
it’s no surprise that taxable muni
issuance in some sectors was up
more than 60 percent in 2020, and
we expect to see even more in 2021.
International investors are in the
center of that action.
International investors are also
shaping the muni market because
they’ve helped establish munis as
an alternative to Treasury bonds.
As debt-financed COVID-related
spending continues to weaken
the federal government’s balance
International investors
are a growing share
of the muni market.
What’s driving this
trend, and why should
state and local bond
issuers care?
sheet, investors will look to munis
as an alternative safe fixed-income
asset. As spending needs grow but
willingness to pay taxes stays flat,
Americans will have to choose
between a federal government that
mostly takes care of the elderly and
pays interest on bonds from 30
years ago, or a local government that
gives them clean water, electricity,
and working toilets. Many foreign
investors are betting they’ll choose
the latter. If this is true, then yield
spreads between Treasury bonds
and munis will remain low for the
foreseeable future.
A third emerging trend is munis as
green bonds. The Climate Bonds
Initiative (CBI) defines green bonds
as infrastructure investment that
supports the transition to a carbonneutral
economy. This includes
everything from clean energy
production capacity like solar and
wind, to public transit systems,
to new seawalls and stormwater
management systems, to LEEDcertified
public buildings, and many
other projects. The connection
to the muni market is obvious. In
fact, some say that munis are the
“original green bond.”
CBI estimates that about $45 trillion
is controlled by asset managers
who have pledged to allocate some
portion of their portfolios to green
bonds. This suggests the market for
green bonds is immense. Perhaps
not surprisingly, much of that
pledge is from national and subnational
public pension funds like
Canada’s Ontario Teachers’ Pension
Plan and Japan’s Government
Pension Investment Fund.
It’s not surprising, then, that
everyone from the State of
California to the Washington, D.C.,
water system has sold green bonds.
While not all green bonds represent
new investment activity, some may
represent existing opportunities
repackaged as green bonds. It’s also
worth noting that a recent paper by
David Larcker and Edward Watts
shows that the demand for green
bonds has yet to translate into lower
borrowing costs for governments
that issue them. But that demand
will continue to grow, and much of
it will come from foreign investors.
With these trends in mind, an
official statement in French or
Japanese makes some sense.
Going forward, state and local
issuers should keep in mind that
the future of local munis may, in
fact, be global.
Justin Marlowe is a research
professor at the University of Chicago,
Harris School of Public Policy, and
a fellow of the National Academy
of Public Administration.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 87

IN PRACTICE | INTERVIEW
Q & A
with LaShea Lofton
Deputy City Manager and Acting Finance
Director for the City of Dayton, Ohio
Decision-makers have to
think about what leadership
means to them, and to their
organizations. LaShea Lofton,
the deputy city manager
and acting finance director
for the City of Dayton, Ohio,
has extensive experience in
bringing a team together.
GFOA’s Ryan Lawler talked to
LaShea about her strategies
for handling unexpected
challenges, most recently the
COVID-19 pandemic.
How have you as an individual
and your staff adapted during
the pandemic?
When the pandemic started in early
2020, Dayton was already in the
mindset of responding collaboratively
to community-wide crisis. We became
the unfortunate experts in managing
multiple back-to-back crises, like
simultaneous tornadoes, a KKK rally,
and a tragic mass shooting in 2019.
Initially, as the finance director, my
first priority was to provide accurate
information to city leadership so the
administration and elected officials
could make sound decisions quickly,
accurately, and early. But I also manage
a department of 65 people, and they
all became my overarching concern
throughout the pandemic. I quickly
realized that I had to slow down enough
to hear and appreciate the anxiety and
uncertainty that my staff was operating
in and allow us to come together as
a team—as a department—and talk
through the change and upheaval
brought on by this unforeseen and
prolonged crisis. I am very tactical; if
there is a problem, I want to go right at
it and get into solving it. But managing
in this pandemic amplified that amid
all of the systems, budgets, finances,
and decisions that needed to be made,
there were people at the heart of all this
work who also needed attention and
support. It’s been very good for me to
keep this in mind, as it allowed me to
operate in a more compassionate way—
which was necessary for us to sustain
quality performance effectively in this
environment.
Besides the team adapting to work
differently, the department’s
operations and services also had to
adapt. Like all other departments,
the city manager instructed Finance
to develop a continuity of operations
plan. Police, Fire, Water—all of these
large operational departments—had
continuity of operation plans, but
we didn’t have anything like it. I had
to do some research and homework
to determine what a continuity of
operations plan would look like for
a public finance department. This
investigation and the subsequent
process of developing an ops plan for our
staff and services were really useful for
us. It helped us identify which services
and processes were critical in a crisis,
and how a crisis would affect those
systems’ operability. It forced us to think
through questions like: How would we
access systems if we had to work from
home? What if key people who had
access to the bank and to passwords
to critical systems, like payroll, got
sick? Who was their back-up? Did these
back-up staff have the knowledge and
authority to get into those systems?
Completing the finance operations plan
was the biggest exercise that helped
us prepare for when the governor
issued shutdown orders, and when
services were halted, or when the water
shut-off moratoriums issued by the
Environmental Protection Agency went
into effect. Inevitably, these actions,
along with the city’s own directive to
88

“
Developing a continuity of operation
plan helped us identify which services
and processes were critical in a crisis.
”
©2021 CELIA JOHNSON C/O THEISPOT.COM
socially distance and ensure that only
essential employees were at work,
affected who we could have in the office
and who would work from home—and
how. When all of these measures were
enacted, we had a plan that we could
follow as a staff for making sure that
no matter what was happening, we had
a base of operations, and none of our
systems, data, or operations would be
compromised. For Dayton’s Finance
department, the ops planning process
and the subsequent plan was one of
the most significant works that we
accomplished together, and it helped us
manage and maneuver.
Another big adjustment the Finance
team and I had to make was managing
all of the regular Finance work plus
the added monitoring and analysis of
our financial health remotely. This has
been very challenging. We all had to
learn how to work in an environment
altered by social distancing, emergency
shut-down orders, and sanitizing
protocols. We had to get creative about
serving both the public and our internal
departments effectively and safely,
like setting up an online appointment
scheduler for tax customers or revising
our payment plan policies for Dayton
water customers, or automating forms
and submission procedures for invoice
processing, and tracking employee
timesheets electronically. It was pretty
challenging, but we rose to it. Working in
such a new environment actually reveals
how effective your leadership has been as
a director. If staff can continue to work
effectively and be productive without
being able to interact and collaborate as
usual, and without normal access to the
other resources they usually have, then
you know you’ve built a great team.
Is there anything that surprised
you over the last few months as
your work evolved?
I was really impressed by how much
our citizens supported our business
community, and how they in turn
supported each other, especially after
they gave of themselves so much during
the 2019 tragedies. Businesses were
so innovative in trying to alter their
business operations to survive, and the
city and its citizens adapted and found
ways to help keep as many as we could
afloat. The other phenomenal feat that
impressed me was how well the city
maintained essential services while
managing revenue losses. While we
didn’t experience the level of revenue
loss that we anticipated early on, it’s been
interesting to watch the things that
city leadership has done creatively as a
service provider and a community to be
safe, but also maintain quality services
for our customers.
The pandemic has had a serious
effect on municipal finances.
How has it impacted the City
of Dayton’s budget?
Dayton’s 2020 budget had already been
prepared with a projected two percent
decline in revenue for our general fund.
We were anticipating the much-talkedabout
recession hitting at some point
in 2020 primarily affecting our income
tax collections, which make up about 70
percent of the city general fund revenue.
However, as the pandemic raged on, its
impact on the community also caused
significant declines in other revenue
sources. By the end of 2020, our general
fund revenues took quite a hit, mostly
in the areas of fines, permits, and fees
for services. Most of these categories
experienced double-digit decreases in
revenue. We now believe that income
tax revenue was artificially held at
bay from the level of decline originally
projected, primarily because of the
CARES Paycheck Protection Program
and other one-time revenue. The city
APRIL 2021 | GOVERNMENT FINANCE REVIEW 89

IN PRACTICE | INTERVIEW
also received $17.5M in Federal CARES
(Coronavirus Aid, Relief, and Economic
Security) funding, which was distributed
in three different disbursements from
the State of Ohio, through the county.
Other funds were not immune from the
impact of COVID. Aviation experienced
deep declines in revenue from the nearly
halted air travel, and Water and Sewer
enterprise operations, which were
impacted by some consumption decline
from business closures, also had to make
budget adjustments and control spending.
The city also received increased money
through Community Development
Block Grant programs and some direct
grants from departments like the
Department of Justice. Our Aviation
Department received about $14 million
to help it offset revenue losses. While we
appreciated and needed the funds that we
received through CARES, the restrictions
that came with some of the money and
the compressed timeline for spending
really challenged us to think about how
to act and how this would actually fill any
revenue gaps that we had. I think Dayton
has been very strategic in allocating these
funds. Before the deadline was extended,
Dayton had encumbered its funding and
spent most of the $17 million, but It took
an enormous lift in terms of mind capital
and staffing to think through and plan on
getting that done, especially considering
how supply chains broke down across
industries providing goods and services
needed during the pandemic.
By year’s end, the city had weathered the
storm of COVID and its assault on the
city’s finances because of the early and
decisive action taken by the city manager
and supported by our elected officials.
These actions included a hiring freeze
throughout the organization, abolishing
all vacant positions, offering a onetime
voluntary separation plan (VSP),
implementing stringent cost reductions
and spending controls to keep in line
with projected revenue loss, and weekly
financial updates from the policy team
that included Finance, Procurement,
Management and Budget, Human
Resources, Law, and the Deputy City
Managers. All of these measures have
long-term impacts. The mass exodus of
experience that left through the VSP, the
deferred maintenance or replacement
of aging infrastructure and equipment,
“
A crisis reveals
so much about
who and what
you are as a
leader and as
an organization.
My advice is
to not be afraid
to take on a
challenge.
”
the loss of businesses, and the cost of
reconfiguring operations to manage a new
demand for service delivery will certainly
challenge the city’s ability to provide the
level of service that we are expected to
deliver every day.
We ended the year, because we have to,
with a balanced budget, primarily due
to CARES funding, several one-time
funding sources, and excellent planning,
monitoring, and management of expenses.
What are you expecting moving
forward? What are the major
initiatives for the city in 2021?
In 2021, our budget priorities are
to maintain quality city services
and continue to reinvest in our
neighborhoods, particularly those
that have experienced years of
disinvestment, while we also keep
our workforce and citizens healthy.
We are also certain that we will need
to make investments in technology
differently and at an increased level to
serve our citizens and our customers
and businesses the way they’re going to
need to be served. Further, in the last
two to three years, there has been an
incredible amount of reinvestment in
downtown and our neighborhoods by
businesses that have not participated
in our economy in a while. I believe that
this commitment and investment will
continue in 2021, and the city is excited
to partner in that.
Improving community and police
relations, and confronting systemic
racial and social injustice, are also
2021 priorities. In 2019, we often
spoke of dealing with two pandemics
in our city—the natural health
pandemic of COVID, and the pandemic
of social and racial injustice. The
community’s response to national
events led our mayor to bring together
community and business members,
city administration, and police to
discuss the change needed to improve
the community and police relations
in Dayton. The city has been engaged
in a comprehensive community-led
effort in police reform and ensuring
equity and inclusion are visibly valued
since the late summer of 2019. The
recommendations coming out of the
police reform initiative will require
some investment to create change.
The additional funding from the
new 2021 stimulus package will
be a significant boost to our local
economy and help us recover from the
90

setbacks our communities endured
in 2019. True to Dayton’s leadership
character, we have already begun
planning collaboratively to ensure
the judicious expenditure of this
one-time allocation. Every city and
every county operate differently; their
economic bases are different, and
their challenges and opportunities are
different. We need to have the ability
to make local decisions about the use
of federal monies, and I am glad that
the federal government recognized
that local governments required its
financial support to pull out of the
mire that 2020 left so many of us in.
Congratulations on your
recent promotion to deputy
city manager! How have
your responsibilities shifted
as you’ve moved to the city
management office? How has
your finance background
helped in the transition?
Nearly eight months in as deputy
city manager, I am also serving as
the finance director until we hire
a new one. My new responsibilities
of providing leadership to the
departments of Aviation, Public
Works, and Information and
Technology actually complement
the work I do in Finance. I can see
opportunities for greater collaboration
among all of these departments,
and Finance in policy development,
customer service, and integrating
technologies. Once the director
position is filled, Finance will still
work with me, so I’m glad that I will
still get to be a part of its continued
success.
As a finance director who has worked
in and managed other city operations,
I understood how Finance intersected
with other city agencies. I wanted to
develop a new relationship with other
department directors, so they viewed
Finance as a partner in their success,
not a roadblock or just an agency they
had to go through to get their work
done. This approach reoriented my
perspective, and I began to lead our
staff in viewing the other departments
as our customers, not just another
city department that had to comply
with our policies and procedures.
This perspective, and more than 30
years serving in various financial
management and leadership positions
in the organization, now serves me well
as I transition to the City Manager’s
Office, where I can continue to lead
strategically and serve effectively.
You were recently recognized
as a GFOA Hero for your ability
to go the extra mile. Are there
any examples you might want
to share? You have mentioned
several examples: tornadoes,
KKK rallies, a mass shooting,
and now a pandemic.
Over the past two years, I have
challenged my team and tried to
inspire them to challenge the status
quo of how we operate. Not that
anything we were doing is wrong or
not working, but there is so much
more that we should do as a finance
department—not just for our own
sake, but for those who depend on
our products and services. Every
year, I pull our entire department
away from the office on a Saturday
so we can celebrate our prior year’s
accomplishments and then focus on
what we are going to do together in the
coming year to build, evolve, produce,
and provide a better experience for
our customers. Many would say this
type of work is not necessary to get an
audit done, or to make wise investment
decisions, or to ensure businesses
are tax compliant. But I believe that
this type of corporate planning and
refocusing on our mission is what
causes the team to perform these
activities at a higher level.
You’ve had a long career at the
City of Dayton, but are there
things that you have learned
within the last year and a half
that you feel has made you
a better leader? And what
lessons are you going to hold
on to through the rest of your
career?
Of course, a crisis reveals so much
about who and what you are as a leader
and as an organization. My advice is
to not be afraid to take on a challenge.
How you manage a challenge can
define the depth and quality of your
leadership, so do not run from it—
embrace it. In addition, the investment
that you make as a leader in your
team pays dividends when you are in
a crisis. Make sure that your staff is
well trained, that they are supported,
that they feel valued, and that they are
working toward a common mission
and a common goal. When you get into
a situation or crisis is when you really
begin to see that the investment was
worth it. Investing in people, not just
processes or procedures, has certainly
proven worth the time and investment
I’ve given it over the several years.
The finance team has risen to the
challenge; they come ready to solve
issues creatively, and they are excited
about some of the changes that we are
making internally that allow them to
maximize their skills and professional
interests. There is no way that I could
serve as deputy city manager and
finance director right now if I were
not confident that my finance team
could maintain their level of excellence
as I manage dual responsibilities.
The value of team-building and
promoting that value at all levels of the
organization is certainly one lesson
that I am going to continue investing in
as I go forward.
Ryan Lawler is a senior manager in
GFOA’s Research and Consulting Center.
APRIL 2021 | GOVERNMENT FINANCE REVIEW 91

IN PRACTICE | INTERVIEW
THE KEYS TO COLLABORATION:
An Interview with
Marvin Dereef
Marvin Dereef is chief financial officer of Fulton County Schools in suburban Atlanta, Georgia. Fulton
County Schools is one of the largest school districts in the United States, serving more than 90,000
people with approximately 14,000 employees at more than 100 school sites. GFOA’s Matt Bubness
talked to Dereef about working remotely and collaborating throughout an organization.
Marvin Dereef has worked at Fulton
County Schools for nearly 12
years as budget director, deputy
chief financial officer, and now
as chief financial officer (CFO).
Before coming to Fulton County Schools, he worked
for another school district in Georgia, and he was also
the CFO for a rural school district in North Carolina. In
recent years, Dereef has worked with GFOA’s Alliance for
Excellence in School Budgeting to make budget process
improvements, and he has also served on the executive
board of the Association for School Business Officials
International (ASBO). GFOA and ASBO have helped him
improve his skills, he said, by “following standards that
are well recognized, well respected, tried and true, and
have been tested across the country.”
Dereef is proud of the recognition he’s received for the
district’s work (from GFOA and ASBO, among others)
for its budgeting and accounting reporting, and its AAA
credit rating, which he views as “really signifying our
efforts and our work over the years to execute sound
financial management.”
As CFO, Dereef oversees the district’s Financial Services
Division, which includes accounting, budgeting,
retirement services, contracting/procurement, payroll
and benefits, and risk management. He noted that one
of his challenges has been getting his team comfortable
with expressing and sharing their opinions—regardless
of title, experience, or role. He stresses to his staff how
important it is for everyone to share their views and ideas,
as this brings options to the table that decision-makers
might not have considered. He also prefers to share
differences of opinions openly rather than to find out
about them after the fact from hallway and water cooler
discussions, emphasizing his point with the line from the
musical Hamilton about needing to be “in the room where
it happens.” Dereef also underscores how important it
is for the team to come to a consensus about solutions,
and to ensure that everyone is on the same page once the
decision is made.
Dereef recalls that when he first started at the district as
budget director, staff members found this free expression
of views awkward. At one of those early meetings, an
employee received reproachful looks for opening up and
giving an honest opinion about the functioning and work
of the budget department. Dereef had to interject and tell
the rest of his staff that that was exactly what he wanted.
“I wanted someone to be able to give me that (honest
opinion) because I just came to the district and they had
more insights into the budget, the budget department,
and everything else in the district than I did,” he
explained. It takes time for people to get comfortable with
this approach and be willing to share more openly, he
cautioned, but it’s worth the time and effort.
92

“
The key to collaboration
is: Everyone has to
understand what the
end game is.”
©2021 MICHAEL AUSTIN C/O THEISPOT.COM
COLLABORATION AND COMMUNICATION
This emphasis on communication applies to the
government as a whole. Dereef illustrates with an
anecdote. An employee in the Facilities Department
has a question about their paycheck and calls Payroll
about it. This person has to be transferred to Human
Resources instead. Dereef stresses that the employee
doesn’t know and probably doesn’t care that the
issue with their paycheck originated with Human
Resources—they are just looking for a resolution.
The paycheck reads “Fulton County Schools,” not
Human Resources. Customer service is a district-wide
issue, not a department-by-department issue. It’s like
passing the baton in a relay race, Dereef explained.
Financial Services has a piece of the process, but it
has to be in sync with the other departments involved
in the process to ensure a smooth handoff and make
sure the baton is not dropped. The approach has to be
organization-wide, as opposed to a more siloed mindset.
Another example of why collaboration and
communication are so important comes from the
district’s response to the COVID-19 pandemic. Better
communication brings with it a greater sense of trust,
Dereef pointed out. Each staff member or department
needs to understand their role from beginning to end.
Consider the process of acquiring personal protective
equipment. The types of materials must be researched
and ordered. Someone has to make sure they arrive at
the district’s warehouse, are delivered to the school
sites, and are used once they get there. “It takes a chain
of people, and each one of us has to be well-informed
about what’s going on in order to make that happen.
And it takes a level of trust,” he said. “Sometimes we
can stumble over each other because we are trying to
do everybody’s job. Have trust in your partners, your
teammates, that they’re going to do what they need to
do.” To accomplish the task at hand, “collaboration is
very important, because what’s the point of developing
a process if it can’t be executed?”
“I don’t think there’s anything that we do by ourselves—
even though people will continually think that they
can,” Dereef said. “You can achieve more with the help of
others; and that is as simply put as it can be.” As a support
function, Finance needs to find ways to collaborate and
to support the mission and goals of the organization.
Supporting the organization and supporting it well
requires a deep understanding of what the players
throughout the organization do and how Finance can best
support their needs. Dereef brings up two of the greatest
National Basketball Association dynasties in recent
memory, the Chicago Bulls and the L.A. Lakers. Michael
Jordan and LeBron James wouldn’t have been able to be
who they were without the support of Scottie Pippen and
Anthony Davis, respectively, and their other teammates.
Collaboration isn’t just about working together—it’s also
about creating a shared vision and understanding about
where the organization is going and why. Communication
ensures that employees across the organization understand
each other. “The key to collaboration is: Everyone has to
understand what the end game is. Or, as one of my fellow
leadership team members says all the time, ‘What are we
solving for?’ We all have to be in agreement about what we
are solving for—basically, where is the finish line? You can’t
have good collaboration without knowing that.” Dereef
further emphasized the need for a shared understanding of
what the organization is trying to achieve and accomplish:
“Lack of good collaboration is like a three-legged race where
APRIL 2021 | GOVERNMENT FINANCE REVIEW 93

IN PRACTICE | INTERVIEW
no one has agreed on where the finish line is. If one person
thinks the finish line is in one place, and another person
thinks the finish line is somewhere else, you aren’t going
to make it—neither one of you.”
The district superintendent’s leadership has also helped
Dereef improve communication and collaboration,
stressing its importance to the leadership team and
throughout the district, along with the necessity for
shared governance. In the past, Finance staff was
brought to the table very late in conversations, after
the majority of decisions had been made, when “they’re
just ready to ask for money.” He said: “If there’s a 20-day
problem, it has to be resolved in 20 days, right? But if
you wait until the 18th day to include me, I’m stuck
with only two days to think about it with my team. Give
me more time to give you more options. The less time
I have, the fewer options will be available. Give me more
time and I can figure out some ways to get it done.”
PAYING ATTENTION
Dereef works to stay connected to the overall work
of the district and its importance to his team. This
includes simple things like including student artwork
in the district’s accounting and budgeting financial
reports, which help to maintain that connection with
the broader work of the district. As part of this effort,
staff members are encouraged to go out to the district’s
school sites, including taking time to volunteer in
schools. He is also part of the leadership staff who go
out to school sites at the beginning of the school year to
welcome students and help in any way possible, and to
help “make sure we understand why we are here and to
have that continuous connection.”
Dereef also stressed how important it is to not overlook
the broader issues that staff members face outside of
the office, such as the pandemic and systemic racism.
“I think people hate when we ignore problems as if they
aren’t happening—pretend this isn’t going on and just
focus on work,” he said. “We need to acknowledge that
people are coming into the office with things that they’re
dealing with outside of the office, acknowledge that,
understand that. They know then that you connect with
them, and they know you don’t think of them as robots,
but as people.” Recently, Dereef opened a division all-staff
meeting with a discussion about how broader issues are
affecting him and his staff, “what we’re dealing with and
how we must continue to move forward and progress, be
productive, and be a great example to one another, and be
there for each other as we go through this process.”
To help support staff and their needs, the district
stresses employee wellness. It has a committee
specifically focused on this, which Dereef is a part of,
“
You can achieve more
with the help of others;
and that is as simply
put as it can be.”
with activities and information sessions to ensure a
balanced work-life experience. Dereef also encourages
his own departmental leaders to help alleviate stress
with simple things. At the entrance to their building,
the division has a whiteboard where staff members
write riddles, jokes, or positive messages. This can be
a conversation starter and way for staff to interact on
topics that aren’t related to work, which helps build
connections. These messages also have a wider audience,
as people—Dereef included—frequently share them
with family and friends.
MAKING THE BEST OF A BAD TIME
It’s been a hard year for all of us, but the difficulties have
given Dereef the opportunity to do things differently
and to make improvements. Remote work and social
distancing have necessitated changes in the way
documents are signed and meetings are conducted. The
district didn’t use e-signatures much before but quickly
started making use of the technology. This change
remains important now that district staff are back in the
office as it avoids the routing of paper within and between
departments and helps promote social distancing.
Financial Services staff weren’t readily given the option
to work remotely before COVID-19 hit, but it is something
that will be considered once the pandemic is over, as
Dereef has seen that it works—even better than working
in the office, in some situations, because there are often
fewer distractions at home for some than there are in
the office. And virtual meetings, whether staff members
are working at home or in the office (to promote social
distancing), have created the added benefit of allowing
Dereef to get his entire staff together without having to
find a big enough space to accommodate everyone.
Matt Bubness is a Senior Manager with GFOA’s Research
and Consulting Center.
94

10 STEPS
10 Steps
(plus 2!) to
Finding Your
Exposure
to LIBOR—
and What to
Do about It
The London Interbank
Offered Rate (LIBOR) is a
global benchmark interest
rate calculated daily, and
it is the most widely used
benchmark in the capital
markets. State and local
governments often see this
rate in swaps/derivatives
products intertwined with
municipal debt, and in
floating rate notes, lease
contracts, bank loans,
direct placements, and
other types of financings
and credit enhancements.
Make a list of all your
exposure and track this
list throughout 2021.
Check off the exposure
that has been eliminated.
And remember—always
call your bond counsel!
Go to www.gfoa.org/
libor for more information,
including “The Transition
Out of LIBOR: What State
and Local Governments
Should Be Discussing with
their Financing Teams.”
1
Swaps and derivatives. Find your
exposure in your swap confirmation
document: terms of the swap,
floating amounts. Who should you
call? Your municipal/swap advisor
and/or bond/swap counsel.
2
Bank loans. Find your exposure
in your loan agreement document,
where payment and reference rate are
discussed. Who should you call?
Your municipal advisor, bond counsel,
and/or bank relationship manager.
3
Floating rate notes. For publicly
offered notes, find your exposure in
the official statement, inside the over
page. For privately placed notes, look
in the placement or loan agreement.
Who should you call? Your municipal
advisor and/or bond counsel.
4
Direct placements. Find your
exposure in the placement or loan
agreement, where payment and
reference rate are discussed, in
the pricing notice. Who should you
call? Your municipal advisor, bond
counsel, and/or bank relationship
manager/broker-dealer.
5
Letters of credit. Find your exposure in
the letter of credit and reimbursement
agreement. Who should you call? Your
municipal advisor, bond counsel, and/or
bank relationship manager.
6
Purchasing cards. Find your exposure
in the purchasing card contract or
purchasing card section of your bank
services contract. Who should you call?
Your internal/general counsel.
7
Intergovernmental fund. Find your
exposure in your intergovernmental
agreement. Who should you call?
Your municipal advisor and/or
general/internal counsel.
8
Lines of credit/revolving credit
agreements. Find your exposure in
your revolving credit agreement.
Who should you call? Your municipal
advisor, bond counsel, and/or bank
relationship manager.
9
Lease contracts. If the contract is held
by a vendor, your exposure can be found
in the vendor agreement where payment
is discussed. If it’s held by bank, look in
the bank contract where payment is
discussed. Who should you call? Your
bank relationship manager/vendor, bond
counsel, and/or general/internal counsel.
10
Variable rate demand bonds/
obligations. Find your exposure in
the standby bond purchase agreement.
Who should you call? Your municipal
advisor and/or bond counsel.
11
Conduit loans where the government
is the lender (such as bond banks).
Find your exposure in the conduit
loan or bond agreements, where pricing
is discussed. Who should you call?
Your municipal advisor, bond counsel,
and/or general/internal counsel.
12
Investment products including
guaranteed investment products (GICs).
Find your exposure in the investment
agreement where LIBOR is referenced.
Who should you call? Your investment
adviser and/or your GIC provider.
96

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Nominate a GFOA Hero
Amidst the challenges and chaos of 2020, finance officers
quickly pivoted their operations to lead employees and rally
their communities together. GFOA would like to publicly
recognize these influencers through its third annual “GFOA
Hero” award. We seek nominations of such champions who
have impacted their community in a time of health, financial,
natural, or human-made crisis. Applications are due April 30.
gfoa.org/hero-award
Government Finance Officers Association