GFR June 2023

Government Finance Officers Association | JUNE 2023 

Navigating the 

Talent Shortage 

Funding New 

Approaches to 

Public Safety 

Government Finance Review 

Five Secrets of 

Visionary Thinkers 

Is Web3 worth 

the hype? 

Is there real revenue potential for local 

governments, or too much risk?

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contents JUNE 

2023 | VOLUME 39, NUMBER 3 

14 

SPECIAL SECTION 

Web3 and Blockchain 

Examining the revenue potential 

and potential risks of blockchain and 

cryptocurrencies for local governments 

By Theo Cox and Shayne Kavanagh 

30 

Navigating the Talent Shortage 

In a changing landscape, the role of 

just-in-time-talent and virtual CFOs 

By Charlie Francis, Mike McCann, 

and Adam Stone 

©2023 HARRY CAMPBELL; MICHAEL AUSTIN C/O THEISPOT.COM 

JUNE 2023 | GOVERNMENT FINANCE REVIEW 1

contents 

36 

Funding New Approaches 

to Public Safety 

Alternatives to conventional 

law enforcement in responding 

to mental health crises 

By Shayne Kavanagh and Galen McDonald 

42 

The Secrets of 


5 steps to living in possibility 

By Susan Robertson 

46 

Better Decisions 

in Three Steps 

Using a triage process for 

more efficient problem-solving 

By Shiela Mie Legaspi 

6 Contributors 

8 From the CEO 

10 Rewind: A Look Back at 

GFR in 1963 

11 GFOA Student Chapters: The 

Key to Experiential Learning 

in Government Finance 

By Brianna Merling 

51 Metro, Oregon: Creating 

a Collaborative Culture 

By Katie Ludwig 

56 Subscription Supposition: 

Practical SBITA Examples 

By Michele Mark Levine 

62 Are Tax Incentives Good 

for Cities and States? 

By Katherine Barrett and 

Richard Greene 

64 A New Premium on Discount Rates 

By Justin Marlowe 

66 Embracing Complexity 

and Continuous Improvement: 

An Interview with Tara Baker 

By Jara Kern 

68 Q&A with Samantha Babich 

By Mike Mucha 

72 10 Steps to Better 

Collaboration Between Finance 

Officers and Fire Chiefs 

68 

©2023 JAMES YANG; DAN PAGE C/O THEISPOT.COM 

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Publisher 

Chris Morrill 

Editor in Chief 

Michael J. Mucha 

Managing Editor 

Marcy Boggs 

GOVERNMENT FINANCE REVIEW 

www.gfoa.org/gfr 

EDITORIAL 

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ADVERTISING 

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PERMISSION & REPRINTS 

gfr@gfoa.org 

CHANGE OF ADDRESS 

gfoa.org/update-membership 

SUBSCRIPTIONS 

gfoa.org/gfr 

SUBMISSIONS 

GFOA encourages finance officers, scholars, 

private consultants, and other knowledgeable 

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 


c/o Government Finance Officers Association 

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Phone: 312-977-9700 

Fax: 312-977-4806 

GFOA EXECUTIVE BOARD 

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President 

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Budget and Management, MD 

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Past President 

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President-Elect 

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Development Authority, IL 

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Review Board, NS 

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Commission, CA 

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Employees Supplemental 

Retirement Plans, MD 

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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 2023 by the GFOA. Published by the Government Finance Officers Association, 203 N. LaSalle Street, Suite 2700, Chicago, 

IL 60601-1210. Periodicals postage paid at Chicago, Illinois, and additional mailing office. Postmaster: Please send address changes 

to Government Finance Review, 203 N. LaSalle Street, Suite 2700, Chicago, IL 60601-1210. 

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CONTRIBUTORS 

Theo Cox is head of Life Itself Labs, a multidisciplinary research institute and consultancy that works 

across the fields of economics, governance, strategy, and technology, innovating systemic solutions to 

complex problems in support of a global transition. He is fascinated by what new forms of human society 

and cooperation can look like, and how we can find new ways of meeting humanity’s greatest challenges. 

Particular areas of interest include collective intelligence and distributed governance mechanisms, 

alternative economic systems, and human engagement with transformative technologies. Theo teaches 

Politics, Philosophy, and Economics at the University of Oxford and holds an MSc in Development Studies 

from the London School of Economics. 

Charlie Francis is a local government finance expert with more than 45 years of local government 

financial management experience in both the public and private sectors, including 20 years of experience 

as a CFO. Most recently, he served as the director of administrative services and treasurer for the City of 

Sausalito, California. Francis began his career as an auditor for the State of Illinois Department of Revenue 

and later served as an accountant for the Denver Renewal Authority and a consultant for the Wyoming 

Association of Municipalities. Francis has also consulted with national and international governments. 

Shayne Kavanagh is the senior manager of research for GFOA. He started GFOA’s long-term financial 

planning and policy consulting offering in 2002 and has been working with governments on financial 

planning and policies ever since. Most recently, Shayne has pioneered the use of computer simulation 

to “stress test” the long-term financial position of local governments. He is also the author of a number of 

influential publications on financial planning and budgeting. His work has earned him a fellowship with 

the National Academy of Public Administration, a position on the board of advisors for the University of 

Chicago’s Center for Municipal Finance, and recognition as one of the 100 most influential people in local 

government by Engaging Local Government Leaders. 

Shiela Mie Legaspi is the president of Cyberbacker, a provider of virtual assistant services and 

administrative support worldwide, and a leadership coach. Her mission is to enable ambitious 

business owners to achieve their greatest potential by offering them access to exceptional economic 

leverage. Legaspi is an accomplished career coach dedicated to helping others lead with integrity, 

purpose, and passion. 

6

Mike McCann is a consultant with McCann Consulting, which he developed to help smaller 

agencies achieve their goals. Mike joined OpenGov.com as a founding employee in 2012, after 30 

years in corporate, not-for-profit, and government accounting office leadership roles. He retired 

from OpenGov in 2022 as vice president of government finance and had a leadership role designing 

and developing OpenGov reporting and budgeting software products and services. His teams 

implemented OpenGov software for hundreds of customers and helped them find added value in 

their reporting and budgeting operations with OpenGov. 

Galen McDonald is a policy associate in GFOA’s Federal Liaison Center. Galen supports the FLC 

team in sharing federal funding opportunities, advocating for GFOA membership, and tracking 

legislation and federal policy changes. Galen also serves as staff on GFOA’s Committee on 

Economic Development and Capital Planning. Galen has a BA in Sociology and Human Services & 

Social Justice from George Washington University, and a Master of Public Policy from American 

University. Her MPP concentration is advanced quantitative analysis with a focus on social and 

environmental policy. 

Susan Robertson empowers individuals, teams, and organizations to adapt more nimbly to 

change by transforming thinking from “why we can’t” to “how might we”? She is a creative 

thinking expert with more than 20 years of experience speaking and coaching in Fortune 500 

companies. As an instructor on applied creativity at Harvard, Susan brings a scientific foundation 

to enhancing human creativity. To learn more, please go to SusanRobertsonSpeaker.com. 

Adam Stone, CPA, is an independently registered municipal advisor and principal with Stone 

Municipal Group. He specializes in tax increment finance, capital improvement planning, 

and long-term financial planning for cities and towns. Adam has more than a decade of local 

government financial leadership experience in both the public and private sectors, including as 

CFO, interim controller, and contract budget officer. He currently serves high-growth, small- and 

medium-sized communities that are looking for ways to invest in quality-of-life improvements. 

Recently, he participated in the planning, financing, education, and feasibility analysis of over 

$500 million of public-private partnership and related economic development projects. 


FROM THE CEO 

Christopher P. Morrill 

Executive Director/CEO 

GFOA’s DEI Journey 

Using Values and Ethics as a Guide 

Approximately one 

year ago, I stood on 

stage at GFOA’s annual 

conference and signed 

the CEO’s Pledge, 

joining more than 2,000 other chief 

executive officers who committed their 

organizations to supporting complex and 

sometimes challenging conversations 

about diversity, equity, and inclusion 

(DEI); implementing and expanding 

unconscious bias training; sharing DEI 

programs; and engaging the board in 

the development of DEI strategies. I’m 

proud of the work we’ve accomplished 

over the last year, but GFOA’s DEI journey 

didn’t start in Austin, Texas. GFOA has 

recognized the importance of diversity, 

equity, and inclusion for years, and we 

believe that the work we do to advance 

excellence in government finance is 

interconnected with our commitment 

to those values. Our members shape 

the policies, programs, and resource 

allocations in their communities, and 

their differences make us all stronger. 

GFOA’s DEI Initiative outlines the 

actions being taken to uphold the 

principles of DEI, as stated in GFOA’s 

Code of Ethics. The code defines how 

finance officers can value diversity and 

foster inclusion. 

• “Provide people with opportunities to 

be part of decisions that impact them. 

Public finance decisions often have 

big implications for people outside the 

finance office. If these people are part 

of the decision-making process, they 

are more likely to feel fairly treated and 

thereby regard the people who work in 

the finance office as trustworthy.” 

• “Support equity in service provision. 

Local government services are critical to 

the lives of our citizens. Finance officers, 

because of their resource allocation role, 

can impact the quality of services and 

how and where services are provided. 

I commit to valuing diversity within my 

organization and within my community, 

recognizing my own biases, and calling 

out unfair discrimination of any kind.” 

Last year, GFOA members voted to amend 

the bylaws of the association to promote 

diversity, equity, and inclusion in the 

government finance profession and within 

GFOA. We created a DEI committee of 

the executive board and have also been 

integrating the values identified in the code 

of ethics into resources for our members. 

Our Rethinking Revenue and Rethinking 

Budgeting projects, in partnership with 

several other organizations, have provided 

leadership on reforming unfair financial 

policies related to imposed fees, fines, 

and asset forfeitures, and we reviewed 

the potential for segmented pricing for 

fees and fines. 

GFOA Research has been providing 

practical recommendations on how 

to budget through an equity lens. We 

produced a six-part research series on 

fairness in public finance that looked 

at ways of using behavioral science to 

make better decisions. Issues of fairness 

and justice are central to the work of 

all government officials, as their roles 

and power are granted by the will of 

their constituents, and their work can 

empower or limit the livelihood of those 

same people. As part of this series, 

we looked at opinions about fairness 

as it relates to political polarization, 

equity and equality, group dynamics, 

and distrust. 

We’ve also partnered with 

Constructive Dialogue Institute to bring 

you Perspectives, an online program 

that helps teams create ideas that reach 

across divides to develop public finance 

solutions that are greater than the sum 

of their parts. Political polarization is 

the leading social rift of our time, and it 

won’t be an easy problem to solve—but 

Perspectives provides a science-backed 

method that can help. 

8

©2023 MICHAEL AUSTIN C/O THEISPOT.COM 

GFOA has recognized the 

importance of diversity, 

equity, and inclusion for 

years, and we believe 

that the work we do to 

excellence in government 

finance is interconnected 

with our commitment to 

those values. 

To organize these resources, GFOA 

launched a web page focusing on DEI 

initiatives (gfoa.org/dei). You’ll find 

links to GFOA research, information 

about GFOA’s DEI journey, organizational 

priorities, and next steps. 

We are excited about the future 

and look forward to introducing GFOA 

members to a few of our new initiatives 

in 2023, including: 

• An update of the gender diversity 

dashboard that will include a full 

look at the public finance profession 

at all levels. We also will add a 

diversity dashboard to evaluate 

ethnicity among GFOA members. 

• Enhanced partnership agreements 

with the Local Government 

Hispanic Network (LGHN) and the 

National Forum for Black Public 

Administrators (NFBPA). These 

partnerships will provide expanded 

education offerings, mentorship 

programs, and networking as we align 

the mission of all three organizations 

to support public administrators, 

their governments, and ultimately 

the communities they serve. 

• An LGBTQIA+ Caucus—launched at 

our annual conference in Portland— 

to promote awareness, advise GFOA, 

and support our members and others 

in the profession. 

• Expanded leadership training, 

specifically regarding unconscious 

bias, organizational belonging, and 

building DEI principles into work 

culture. 

• A public finance DEI assessment 

tool to help guide improvement 

efforts in state and provincial and 

local government throughout the 

United States and Canada. 

DEI is not a fad, but a value that guides 

our strategies and actions. There are 

no quick solutions to the challenges 

governments face in recruiting 

and retaining top talent, but all 

organizations can help by focusing 

on building a more inclusive and 

welcoming culture. Communities 

are confronting issues related to 

political extremes and tackling tough 

issues where policy disagreements 

sometimes leave little room for 

compromise. Finance officers are 

positioned to provide leadership, 

promote fairness, live the values 

outlined in the GFOA code of ethics, 

and advocate for diversity, equity, and 

inclusion. We anticipate this journey 

to be a long one, but we’re proud of 

what we have been able to accomplish 

and look forward to working with our 

network of dedicated finance officers 

to meet the challenges of the future. 

Sincerely, 

Learn more 

Read more about GFOA’s DEI 

goals, progress and next steps. 

gfoa.org/dei 


ewind 

Preserving the Tax-Exempt 

Status of Municipal Bonds 

A look back at GFR in February 1963 

This issue of Municipal 

Finance (renamed 


somewhat later) addressed 

intergovernmental tax 

immunity, the legal principle acting as 

a constitutional check on the powers of 

federal and state governments to levy 

taxes on each other. It’s a topic GFOA is 

still working on, although now we tend to 

refer to it as state and local government 

taxing authority, and the preemption 

thereof. (See gfoa.org/pps-tax-exemptfinancing 

for information about GFOA’s 

ongoing defense of the exemption of 

municipal bond interest from federal 

and applicable state income taxation.) 

This historic exemption from 

taxation of interest on state and local 

government bonds reinforces our 

nation’s federal system and provides 

major advantages to communities across 

America, including lower costs to fund 

government infrastructure and services; 

freedom from the uncertainties of the 

annual Congressional appropriations 

process in funding capital needs or 

any portion of their interest costs; and 

efficient access to capital markets 

without delay or interference from 

the federal government. Although the 

primary beneficiaries of a particular 

bond issuance are the citizens of the 

issuing community, the nation has a 

vital interest in maintaining adequate 

and safe public facilities to support 

a dynamic economy. The national 

interest is well-served by keeping state 

and local government borrowing costs 

low, thereby providing an incentive for 

public investment in infrastructure. 

GFOA has opposed efforts that curtail 

the use and attractiveness of taxexempt 

bonds. Congress has enacted 

measures, most notably in the late 

1960s and in 1986, that placed severe 

restrictions on the use of tax-exempt 

bonds, and these laws continue to apply 

today. Additionally, the IRS has adopted 

many regulations that cause enormous, 

costly administrative burdens to 

entities issuing tax-exempt debt. 

But back to 1963 and our Municipal 

Finance article, which estimated 

the additional interest states and 

local governments would have to 

pay if their securities were subject to 

federal taxation. “If there had been 

no intergovernmental tax immunity 

of securities, states and local 

governments would have had to pay an 

additional $827 million in interest on 

their obligations in 1959.” (That would 

be $24.545 billion in today’s money.) 

GFOA encourages Congress and the 

Department of the Treasury to remove 

or modify restrictions affecting the 

issuance of municipal bonds that are 

overly burdensome and costly such 

as the arbitrage rebate requirement, 

The national interest 

is well-served by 

keeping state and local 

government borrowing 

costs low, thereby 

providing an incentive 

for public investment in 

infrastructure. 

and that do not make changes to the 

Treasury’s State and Local Government 

Securities (SLGS) program that would 

hinder its use and efficiency; recognize 

a new type of public-purpose, taxexempt 

bond or eliminate current law 

restrictions on tax-exempt financing 

to permit and encourage public-private 

partnerships; create incentives for 

individuals and institutional investors 

to purchase municipal bonds; modify 

federal tax policies that impede the 

development and functioning of state 

bond banks and bond pools and other 

state credit assistance programs; ensure 

that federal government enforcement 

actions with respect to tax-exempt bonds 

are conducted fairly and are directed at 

the responsible party; and allow for an 

additional advance refunding of bonds. 

10

In Brief 


GFOA STUDENT CHAPTERS 

The Key to 

Experiential 

Learning in 

Government 

Finance 

BY BRIANNA MERLING 

In September 2022, GFOA published 

a report titled “Meeting Demand 

for State and Local Public Finance 

Jobs” (available at gfoa.org/ 

meeting-demand-public-finance), 

which recommended new ways of 

attracting and retaining talent. Wanting 

to support GFOA’s efforts to attract new 

talent to the public finance profession, 

a group of 16 graduate students from the 

George W. Romney Institute of Public 

Service and Ethics (Romney Institute) 

at Brigham Young University (BYU) 

in Provo, Utah, found a quiet room 

and officially began BYU’s first GFOA 

student chapter on October 21, 2022. 

The group includes an array of diverse 

undergraduate degrees in public policy, 

economics, communication, and more. 

A large majority of the current cohort 

of students are MPA graduate students 

sharpening their government finance 

skills in preparation for careers in public 

service. 

The BYU GFOA student chapter has 

already initiated projects within the 

community to serve and connect while 

gaining applicable experience. “There 

is no better preparation for a career 

in government finance service than 

getting involved in our community 

right here, right now. Our GFOA student 

chapter provides me with opportunities 

to do just that,” Abbie Sanders, a BYU 

GFOA student chapter member, shared. 

Sanders is currently working as a 


IN BRIEF 

TOP: Fall 2022 BYU student chapter (Front 

row, left to right: Erick Bravo, Connor Golden, 

Nathaniel Loo, Abbie Sanders, Ayanda 

Sidzatane, Francisco Ordaz, Andres Galan 

Cajamarca and Vanessa Nakayiki. Back row, 

left to right: Brianna Merling, Cody Cheney, 

Junior Mavambu, Bradley Day, Brittni 

Anderson, Abi Maccabee, Kaylee Hepburn 

and Steve Mutombo. 

BOTTOM: Winter 2023 BYU student chapter 

(Front row, left to right: Ayanda Sidzatane, Abi 

Maccabee, Abbie Sanders, Taylor Nikolaus, 

Brianna Merling and Francisco Ordaz. Back 

row, left to right: David Matkin, Erick Bravo, 

Junior Mavambu, Cody Cheney, Yuber Miranda 

Macias, Connor Golden and Kaylee Hepburn. 

finance associate for Utah County and 

has found that her GFOA membership 

has enhanced her work experience. 

“I was reading a book published by 

the GFOA just this morning to help me 

conduct a cost analysis of a government 

department!” 

The student chapter is guided and 

mentored by two longtime GFOA 

members and BYU faculty, Francisco 

Ordaz and David Matkin. Ordaz is the 

director of MPA career development, 

and Matkin is a professor at the 

Romney Institute. Both contribute 

their expertise from careers rooted in 

finance to student chapter members 

seeking and fulfilling projects. 

With the GFOA student chapter well 

underway, GFOA student members 

are turning their attention to building 

a strong network with other GFOA 

members and fellow student chapters. 

They are planning to invite other 

BYU students to join the chapter and 

contribute their experiences to projects. 

Erick Bravo, a current BYU GFOA 

student member and graduate student, 

said: “I would encourage everyone 

interested in public and nonprofit 

organizations to join GFOA. Whether 

they are dealing with humanitarian 

issues, leading a department, or looking 

at policy initiatives, knowing which 

practices promote financial stability 

is tantamount to ensuring success. 

GFOA has something of value to learn 

for everyone who would like help 

developing their career.” 

Connor Golden, the current president 

of the GFOA student chapter, said: “I see 

the BYU GFOA student chapter having 

a very bright future. With more student 

involvement and resources being made 

available, I believe our chapter will 

“We encourage universities across the United States 

to create GFOA student chapters to support the career 

development of future government finance officers.” 

CONNOR GOLDEN, CURRENT BYU STUDENT CHAPTER PRESIDENT 

continue to provide valuable education 

and networking opportunities for its 

members and community.” Golden 

foresees the chapter expanding its 

reach by engaging more with other 

universities and organizations to foster 

the collaboration of best government 

finance practices. 

“Next fall semester, we look forward 

to participating in GFOA’s fellowship 

program so our student chapter 

members can be matched with local 

governments to help them prepare a 

popular annual financial report for 

GFOA award consideration. We also 

look forward to being matched with 

local governments that are interested 

in aligning their financial policies with 

GFOA best practices. We are grateful 

to GFOA for supporting GFOA student 

chapters and their willingness to 

match our student chapter members with 

GFOA professionals who are interested 

in mentoring them. We encourage 

universities across the United States 

to create GFOA student chapters to 

support the career development of future 

government finance officers,” Ordaz said. 

The BYU GFOA student chapter 

welcomes opportunities to support GFOA 

members in researching issues that are 

important to them, and we look forward 

to contributing to GFOA’s mission of 

advancing excellence in public finance. 

Our GFOA student chapter can be reached 

at mpacareers@byu.edu. 

Brianna Merling is vice president of the 

GFOA Student Chapter and a first-year MPA 

student at the George W. Romney Institute 

of Public Service and Ethics at Brigham 

Young University. 

12

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SPECIAL SECTION | WEB3 AND BLOCKCHAIN 

SPECIAL SECTION 

What’s the Real Deal 

on Web3? 

Examining the revenue potential and potential risks of blockchain and 

cryptocurrencies for local governments 

BY THEO COX AND SHAYNE KAVANAGH 

Cryptocurrency and blockchain are part of the latest iteration of Internet technologies, broadly referred 

to as “Web3.” Web3 includes cryptocurrency but also other technologies that are characterized by 

decentralized, blockchain-based architectures. Non-fungible tokens (NFTs) are another example of a 

Web3 technology that has gotten widespread attention. A brief Internet search on “Bored Ape Yacht 

Club” gives an idea of the fervor NFTs have created. 

Web3 and cryptocurrency have led to much excitement and investment beyond what we see in popular 

culture. Many sectors are experimenting with these technologies, including some local governments. 

Initiatives such as CityCoins have made headlines but are not without controversy. Questions persist 

about the potential of these technologies for public finance. 

This series aims to help local governments think about the revenue potential of Web3, as well as 

potential risks. Web3 technologies are complex, and their implications are not well understood. 

Though we would not expect local governments to invest directly in cryptocurrencies, and GFOA has 

an advisory that recommends governments abstain from using and investing in cryptocurrency, their 

wild swings in value illustrate the uncertainty surrounding Web3 technologies. 

©2023 HARRY CAMPBELL C/O THEISPOT.COM 

In March 2022, GFOA approved an advisory that advises governments to abstain from accepting 

cryptocurrency for receivables, using cryptocurrency for payables, and investing in these products. 

More information is available at gfoa.org/materials/cryptocurrency-advisory. 



Understanding Web3 and 

Blockchain Technology 

T 

he term “Web3” lacks a precise 

definition. It is often used as 

an umbrella term for various 

blockchain-based technologies 

and activities. Most famously 

these include cryptocurrencies 

and non-fungible tokens (NFTs), 

but there are many others. A more detailed 

outline of these is given in section 2. Web3 

also evokes a future version of the Internet 

based on these technologies. A good way to 

begin understanding Web3 is to compare 

it to its predecessors, Web2 and Web1. 

Venture capitalist Marc Andreesen 

formulated a simple typology: 

• Web1 = read. The earliest Internet 

applications published information 

online in formats like blogs for people 

to read. 

• Web2 = read and write. The next iteration 

of the Internet allowed users to publish 

their content much more easily, with 

social media being a prime example. 

• Web3 = read, write, and own. Web3 

allows users to exercise ownership 

rights over Internet content, using 

technology native to the Internet 

rather than relying on external forces 

to enforce ownership rights (such as 

copyright laws). One of the implications 

is that scarcity can be introduced 

to the Internet. A finite supply (of a 

certain cryptocurrency, for example) 

introduces a pricing dynamic that has 

not existed before on the Internet. 

Introducing ownership rights as native 

to the Internet isn’t the only exciting 

aspect of Web3. Proponents also cite 

decentralization and alternative 

economic models, with cryptocurrencies 

being the most famous but far from only 

example. 

This isn’t just a result of technological 

innovation—social narratives fuel 

excitement around Web3. For example, 

trust in institutions has been decreasing 

dramatically for years. By supporting 

decentralization, Web3 promises 

to reduce reliance on institutions. 

The creation of Bitcoin was partially 

inspired by distrust in established 

banking institutions, as the first Bitcoin 

references the 2008 financial crisis in its 

code. 1 Another obvious social narrative 

is that Web3 is a bold new frontier, 

capable of generating fantastic wealth. 

Because “blockchain” technologies 

are the basis for Web3 technologies 

(and the associated social narratives) 

let’s see what this technology is, and 

how it works. 

What is blockchain technology? 

Blockchain technology is an example of 

an “append-only distributed ledger.” The 

“append-only” ledger means that data 

can only be added to it, but not edited 

or removed. “Distributed” ledgers are 

databases where data is stored across 

many different actors in a network 

rather than in a single location. These 

actors are referred to as “nodes” in the 

network. In a blockchain, each node 

stores a full copy of the database. As 

all nodes have equal permissions 

within the network—they all have the 

power to do the same actions—these 

are known as “peer-to-peer” (P2P) 

networks, and it’s this feature that 

leads people to describe blockchains 

as decentralized technologies. The fact 

that all participants have full access 

to the entire database and are equally 

empowered 2 within the network is one 

of the key technical features that fuels 

the excitement around blockchain 

technologies, as this is said to build in 

transparency and more participatory 

dynamics. 

Blockchains can be categorized as 

either public or private. This distinction 

is similar to the differences between 

the Internet and intranets. Public 

blockchains are publicly visible 

and accessible to anyone. They are 


16

“permissionless,” meaning anyone 

can participate in transacting (adding 

data to the ledger) or validating 

transactions. Private blockchains 

are used internally by private actors 

such as businesses to manage their 

data. But almost all discussions 

around Web3 and blockchain in 

popular culture today refer to public, 

permissionless blockchains—although 

much of the excitement exhibited by 

private companies refers to private 

blockchain. Some of the potential 

applications for local government 

might also rely on private blockchains. 

How do blockchains work? 

Exhibit 1 outlines the way in which 

data is added to a blockchain. 

Step 1: Creating a new block. A node 

must create a new block for data to 

be added to a blockchain. Any node 

can create new blocks of data. These 

“blocks” contain the data itself (for 

example, the sender, recipient, and 

amount of a transaction), a unique 

identifier for the block, and a unique 

identifier for the previous block. 

EXHIBIT 1 | MAKING CHANGES ON A BLOCKCHAIN 

How changes get made on a blockchain 

Person A wants to 

make a change to 

the blockchain. 

This change 

will create a 

new “block.” 

Step 2: Broadcast and validation. For the 

new block to be added to the blockchain, 

it must be broadcast to all other nodes on 

the network so that they can validate it. 

The other nodes must approve and add 

it to their local copies of the database. 

This approval requires a “consensus 

mechanism.” 

Consensus mechanisms are 

required as the database has no central 

administrator. Rather than a central 

actor deciding what is added, the 

nodes must “agree” to update their own 

database copies. Subsequently, the newly 

created block is added to all local copies 

of the database and becomes immutably 

part of the blockchain. Consensus 

mechanisms create incentives for nodes 

to validate transactions by rewarding 

validators with the blockchain’s native 

cryptocurrency. 

The most common consensus 

mechanisms in blockchain are “proofof-work” 

(PoW) and “proof-of-stake” 

(PoS). PoW is the mechanism used by 

Bitcoin and is known for its vast energy 

consumption and environmental 

impact. 3 Validating transactions under 

This block is broadcast 

to every computer on 

the distributed network. 

PoW is referred to as “mining,” while 

under PoS it is referred to as “staking.” 

The combination of consensus-based 

validation for new additions to the 

chain and the linking of blocks via their 

unique identifiers in a way that can’t 

be easily tampered with is why people 

are interested in blockchain security. 

Consensus mechanisms support 

security in two related ways. First, since 

the network must agree to a change, it 

can remain secure even if an individual 

node is compromised. In a centralized 

database, the entire database is 

compromised if one part of it is hacked. 

Second, consensus mechanisms defend 

against the network being taken over by 

a malicious actor accumulating many 

economic resources to grant majority 

consensus to itself (known as a 51 

percent attack). This is because the act 

of granting blockchain consensus is 

very costly (either in terms of energy 

in PoW or assets in PoS) and thus not 

feasible for an individual actor. While 

these features have historically made 

the consensus layer of the blockchain 

resistant to hacks, Web3 is far from hackproof 

because secondary infrastructure 

like wallet holders’ keys and middleware 

connecting blockchains with human 

interfaces get compromised quite 

frequently. 

Step 3: The new block is added to the 

chain. Once the consensus mechanism 

has been used to approve the block, 

it is added to the chain. The name 

“blockchain” refers to this structuring 

of the database. When the database 

is updated, a new block is created and 

added to the prior one. The two are linked 

by their unique identifiers, as the new 

block refers to the one before. This way, 

blocks are connected in a referential 

sequence, forming a chain. 

1 

Because the creator of Bitcoin is anonymous, it is 

impossible to know what their motives were, but the 

first block on the Bitcoin blockchain, in early January 

2009, included the text, “The Times 03/Jan/2009 

Chancellor on brink of second bailout for banks.” 

The new block is added to the 

chain. There is a permanent 

record of the change and it 

can’t be undone. 

Those computers 

approve of the change. 

Credit: Business Insider, 2021 

2 

Anyone who wants to send a transaction or mine/ 

validate the next block and is willing to pay a high 

enough fee or set up the required crypto-economic 

infrastructure can send the transaction or mine/validate 

the next block. 

3 

While Bitcoin’s emissions remain extremely high, 

proponents argue that more efficient mining 

hardware, combined with supplementary software 

protocols, mean Bitcoin has the potential to be far less 

environmentally damaging. 



Typology of Web3 

Technologies and Potential 

Applications to Local 

Government Revenues 

T 

here are many concepts 

and technologies under 

the umbrella term of Web3. 

Exhibit 1 breaks down how 

these relate to one another. 

Exhibit 1 breaks down 

Web3 into a series of nested 

concepts, each based on the one above it 

in some way. For example, “blockchain 

technology” sits below “Web3” because 

Web3 is based on blockchain technology. 

Alternatively, “cryptocurrency” sits 

below “crypto asset” because it is a 

subcategory of this general concept. 

Crypto assets appear to be the most 

relevant technologies in the context 

of local government revenue, so this 

section will focus on them for detailed 

explanation. 

Blockchain platform 

A blockchain platform is a particular 

instantiation (creating a real instance 

or realization of an abstraction or 

template) of a blockchain-based 

distributed ledger. There are many 

distinct blockchain platforms, which 

can also be called blockchain networks 

because of their distributed nature. 

Platforms are the base layer on which 

other objects and technologies are built. 

By analogy, blockchain platforms are 

like computer operating systems such 

as MS Windows or Mac OS. Operating 

systems use base technologies (for 

example, programming languages) to 

build environments where programs 

(such as word processors, Internet 

browsers, and more) are run to perform 

different activities. Similarly, blockchain 

platforms act as environments where 

users can undertake activities. 1 The 

difference is that an operating system 

is a piece of software stored on a single 

computer, while a blockchain platform 

is a distributed network of actors (nodes) 

comprising many machines. 

The two largest and best-known 

platforms are Bitcoin and Ethereum. 

Bitcoin was the first blockchain platform. 

Its standalone functionality—the 

things you can do on the platform—has 

historically been limited, and it is now 

primarily associated with its native 

cryptocurrency (bitcoin). 

Ethereum is more advanced as it has a 

built-in, fully fledged, Turing-complete 

programming language, which allows 

the platform to run programs in the same 

way that a computer operating system 

does. This means that Ethereum can run 

“smart contracts,” or computer programs 

that execute actions as programmed 

(for example, when certain predefined 

conditions are met). Smart contracts form 

the basis for a whole host of more complex 

programs, known as “decentralized 

applications” (dapps). These encompass 

everything from decentralized finance 

(DeFi) applications to play-to-earn games. 

While the Bitcoin platform’s scripting 

language has critical limitations, 

particularly the lack of Turingcompleteness, 

some applications have 

since been created on top of it to provide 

additional functions. 

Crypto assets 

Crypto assets are the most prominent 

class of “objects” built on top of blockchain 

platforms. The concept is an umbrella 

for digital representations of value or 

contractual rights built on a blockchain. 

These are analogous to other assets, such 

as financial products or even physical 

assets such as paintings. Crypto assets 

can be broadly split into cryptocurrencies 

and crypto tokens. 

Cryptocurrency 

Cryptocurrencies are the best-known type 

of crypto asset. They are digital assets 

that are “native” to a particular platform. 

For example, the Bitcoin platform has 

bitcoin cryptocurrency, the Ethereum 

platform has ether cryptocurrency, 


18

and so on. All public blockchains have 

native cryptocurrencies. These function 

as rewards for miners/validators to 

create incentives for them to validate 

transactions. 

The first cryptocurrency, and with that 

crypto asset, was bitcoin. Bitcoin was 

initially intended to function as a digital 

currency, designed to act as a medium 

of exchange through a decentralized, 

blockchain-based network—giving 

rise to the term “cryptocurrency.” As 

Bitcoin was the first cryptocurrency, 

it has become a foundational concept 

against which all others are compared. 

Cryptocurrencies today are generally 

divided into bitcoin and the umbrella 

term “altcoins,” which references all 

non-bitcoin cryptocurrencies. Prominent 

altcoins include Ethereum’s ether, 2 

Litecoin, XRP, and Dogecoin. 

Despite their name, cryptocurrencies 

are far from challenging legal tender 

status. In fact, as an asset class, 

cryptocurrencies may not meet the 

criteria for currency at all (for example, 

functioning as a unit of account, a store 

of value, and a medium of exchange). 

Cryptocurrencies are divisible and so can 

be a unit of account, but they seem less 

suited to acting as a store of value due 

to their generally high price volatility. 3 

Finally, even the latest technologies have 

EXHIBIT 1 | THE COMPONENTS OF WEB3 

Web3 

Blockchain technology 

Blockchain platform 

Crypto asset 

yet to show they can reliably process 

transaction volumes at a similar level 

to traditional payment rails, which 

undermines their ability to function as 

an effective medium of exchange. 4 

The conclusions that can be drawn 

from on-the-ground activity regarding 

the adoption of cryptocurrency as a 

medium of exchange are mixed. Let’s 

start with bitcoin as an example. In 

2021 the number of payments 5 on the 

bitcoin network was estimated to have 

peaked at around 770,000 per day. 6 This 

was also the three-year peak across 

2020 to 2022. In the same year, the Visa 

network alone processed 164.7 billion 

transactions, equating to an average 

of 451,232,877 transactions per day. 7 

So, Bitcoin’s share of total financial 

activity still appears incredibly low. It 

is also not the case that daily payments 

have been rising dramatically over 

time. The 2021 peak was approximately 

100,000 daily transactions more 

than the 2019 peak, and just short of 

200,000 transactions more than the 

2018 peak 8 —hardly an exponential 

growth rate. Since a significant drop 

at the end of 2021, daily payments 

also appear to be plateauing. The daily 

transaction data for the Ethereum 

blockchain shows a similar trend of 

moderate growth giving way to plateau. 9 

Cryptocurrency Crypto token DAO 

Smart contract 

DApp 

DeFi 

On the other hand, the number of 

vendors now accepting or intending 

to accept cryptocurrency has 

increased. As we discuss below, some 

US cities and even states are also 

starting to accept cryptocurrencies 

for tax and utility payments, 

albeit via third party conversion 

services. These developments 

persist despite a relatively small 

proportion of Americans—just shy of 

13 percent of the population—owning 

cryptocurrency now. 

Cryptocurrencies and 

local government revenue 

Experiments are underway with 

incorporating cryptocurrencies into 

local government revenue systems. 

At the most basic level, cities 

such as Chandler, Arizona, allow 

residents to pay their utility bills in 

cryptocurrency. The State of Colorado 

also accepts cryptocurrencies for tax 

payments. But this is mainly intended 

as a customer service option, and the 

potential to actually raise additional 

revenue appears limited. In both 

cases, all payments are converted to 

U.S. dollars by a third party before 

the government receives payment, 

shielding the government from the 

significant price volatility of the crypto 

markets. For example, the payment 

service used by Chandler does not 

charge the city extra processing fees 

for accepting cryptocurrency. While 

data on the volume of crypto payments 

made isn’t available, there is anecdotal 

evidence that at least some people are 

using the service. 

Offering the option to pay taxes 

in crypto does not increase revenue 

directly. Nevertheless, officials may 

still hope for indirect benefits, and 

those who believe that cryptocurrency 

has a future in mainstream America 

may seek to get ahead of the curve. 

Such offerings serve a signaling 

function, indicating an openness to 

the Web3 industry that could attract 

Web3 businesses, with implications for 

tax and other revenue streams. Such 

benefits rely on positive assessments 

of Web3’s future coming true, however. 

A more ambitious approach is 

to establish government-owned 

validating infrastructure, which 



would enable municipalities to earn 

cryptocurrency through validating 

transactions on blockchain networks— 

often referred to as “mining” 

cryptocurrency. Mined cryptocurrency 

can then be exchanged for real dollars. 

For example, the City of Fort Worth, 

Texas, has started its own bitcoin 

mining operation. Many blockchain 

platforms, including Bitcoin, use a 

proof-of-work validation mechanism. 

Nodes on the blockchain network race to 

solve complex math problems, and the 

first to complete this “work” validates 

the new transaction. Validators gain 

cryptocurrency as a reward. More 

computing power to solve these 

problems means greater potential gains. 

There are many potential drawbacks 

to local governments engaging in 

cryptocurrency mining. Most obvious 

is the vast price volatility in crypto 

markets, which has implications for 

the U.S. dollar value of any earnings. 

Securing validations is also not 

guaranteed, even using high levels of 

computing power. These factors mean 

returns are likely to be inconsistent and 

difficult to predict. 

Cryptocurrency mining is also 

infamously energy intensive. For 

example, the energy spent globally on 

bitcoin mining has been estimated to 

exceed Argentina’s total energy use over 

a year. 10 Further, mining carries high 

upfront investment costs because of the 

computing power required. Given these 

factors, cryptocurrency mining could 

result in a net loss. Finally, it is notable 

that the most popular cryptocurrency, 

bitcoin, is deflationary. Only 21 million 

bitcoins can ever be mined, with no 

more produced when this limit is 

reached. The Bitcoin platform also has 

an algorithm built in that halves the 

number of bitcoins yielded by mining 

every four years, on average. Combined 

with (1) persistently high energy prices 

in the short-to medium-term and high 

price uncertainty in the long term 11 and 

(2) long-term stagnation in the value 

of cryptocurrency caused by the recent 

popping of the speculative bubble and 

the ensuing “crypto winter,” as even the 

most ardent crypto currency supporters 

have started calling it, mining 

cryptocurrency does not appear to have 

a lot of potential for local governments. 

OUR USE OF THE TERM “ASSET” 

We refer to tokens as digital assets because they are intended to represent 

some ownership right that has economic value. We are not suggesting that this 

intention will come to fruition in real life or that tokens are sound investments. 

Crypto token 

Crypto tokens are the other major form of 

crypto asset. Both cryptocurrency and 

tokens are derived from a blockchain. 

Cryptocurrencies are intended as stores 

of economic value and can be earned 

by participating in the validation 

of a blockchain (for example, proof 

of work). Tokens are created by 

software developers, using blockchain 

technology, and are intended to 

represent ownership of some asset, with 

creative art assets being a particularly 

high-profile use. Tokens cannot be 

“earned,” like cryptocurrencies; instead, 

they are bought and sold, more akin to 

traditional financial securities. Much of 

the excitement around tokens is because 

they can represent ownership of assets 

that don’t have firm physical form. This 

can include digital images but might also 

include other examples such as decisionrights 

in an organization, where each 

token represents a “vote.” 

NFT 

NFT stands for “non-fungible token.” 

These are unique digital assets stored on 

the blockchain. Most tokens are fungible, 

meaning one token is the same as the 

next. They’re interchangeable. NFTs, 

however, have a unique digital signature 

cryptographically encoded into them— 

so even two qualitatively identical NFTs 

will not be numerically identical. Two 

identical images can become distinct 

digital assets, for example. 

NFTs are best known for their use in 

creating tradeable digital artwork. For 

example, digital artist Beeple famously 

sold an NFT called “Everydays” for 

more than $69 million. They have also 

seen applications in other areas like 

event tickets. 12 These use cases focus 

on areas where uniqueness is good. For 

example, art is an area in which owning 

the original means something; originals 

are worth more than copies, even if they 

can’t be told apart by the naked eye. The 

same is true of tickets to a concert. 

There are two primary potential 

use cases for NFTs in the context of 

government revenue-raising. The first 

and most apparent is that municipalities 

can sell them to earn money. The City of 

Miami, Florida, for example, had plans to 

sell 5,000 digital art NFTs to raise funds 

for the city. 13 Similarly, the City of Reno, 

Nevada, intended to offer NFTs of a piece 

of public art. 14 The idea of creating NFTs 

of well-known public landmarks and 

other features has also been raised. 15 

The crashes that have occurred in 

the NFT market in the first half of 2023 

should make anyone pause for thought 

here. Many purchasers of municipal 

NFTs may not be trying to invest to get a 

return. They may simply wish to support 

their community or feel ownership 

of a part of it. This may mean market 

volatility is less of a concern—but we 

should note that this rationale is largely 

hypothetical, and in practice, most 

investors do seek to profit when buying 

NFTs. Whether price volatility is a 

problem unto itself or not, it does speak 

to deeper worries about what exactly 

people are buying when they buy an NFT. 

NFTs are in fact lines of code on a 

blockchain, linked to a digital asset 

such as an image or animation. It is 

this code that creates their uniqueness, 

not the assets themselves. The media 

comprising a typical NFT can be copied 

and distributed endlessly, for free. The 

addition of blockchain-based code is 

thus an imposition of artificial scarcity. 

It builds scarcity (the non-fungible 

token) into a fundamentally non-scarce 

resource (digital artwork). Municipal 

NFTs that imply the opportunity to own 

a piece of a public artwork or landmark 

carry the risk of reputational harm. The 

rise of NFTs may turn out to be a bubble, 

leading to a shift in public perception 

against them. NFTs could be confused 

for actual ownership of physical artwork 

itself, rather than ownership of an image 

of the artwork. Either way, purchasers 

may be left dissatisfied if they feel they 

20

Despite their name, cryptocurrencies are far from 

challenging legal tender status. In fact, as an asset 

class, cryptocurrencies may not meet the criteria for 

currency at all (for example, functioning as a unit of 

account, a store of value, and a medium of exchange). 

have been short-changed. If NFTs start 

to be viewed as more akin to gift shop 

trinkets, buyers may feel cheated by 

having been sold them as “real” art. 

NFTs do have potential outside of 

speculation, though. For example, they 

could help increase the efficiency of 

tax systems and reduce tax evasion. 

Goods such as cigarettes and alcohol 

still use physical stamps to track excise 

tax, a system that carries significant 

administration costs. There are 

also security risks from the theft or 

counterfeiting of stamps. Blockchainbased 

solutions to this problem are 

already being explored, involving a 

“digital twin” of a physical good being 

stored on the blockchain. This twin 

would be directly linked to its physical 

counterpart via packaging, potentially 

reducing both administration costs of 

tax systems and tax leakage. 16 While 

this system could take many forms, the 

uniqueness of NFTs makes them well 

suited to acting as digital twins. (Such 

a system would likely also rely on smart 

contracts, which we will discuss later.) 

An interesting feature of such a system 

is that it could be enacted on either a 

public or private blockchain. Whether 

governments develop their own 

blockchain networks or use existing 

ones will depend on various factors 

including costs—as public chains will 

carry far fewer development costs—and 

desired levels of publicity. 

Security token 

NFTs aren’t the only kind of crypto 

token. The other form of token most 

relevant to government revenue are 

security tokens, which are simply 

tokens that are also financial securities. 

The criteria for securities is laid out 

in the Howey Test. 17 Tokens meeting 

these criteria are subject to the same 

regulation as other securities. But the 

crypto industry is still in its infancy, so 

the law will lag behind it. The recent U.S. 

Securities and Exchange Commission 

(SEC) probe of CoinBase, one of the 

world’s largest crypto exchanges, 

provides an example. CoinBase is 

alleged to have listed unregulated 

securities on its platform. 18 We should 

define security tokens as all tokens 

meeting the criteria for a security, even 

if they’re not (yet) regulated as such. 

A potential use case for securities 

tokens is the sale of government debt. 

Municipal bonds are a potentially 

fruitful source of revenue for local 

governments, but they can be relatively 

costly to issue, particularly on smaller 

scales. 19 High- and low-denomination 

bonds often cost almost the same 

amount to issue because of regulatory 

and administration costs. This makes 

the latter relatively unattractive, 

and the market is dominated by large 

institutional investors. Citizens 

may not be able to afford to invest in 

their own cities, even if they would 

like to—meaning there is apparently 

inefficiency in the traditional 

municipal bond market. 

This is where tokens come in. 

Token-based experiments with debt 

issuance may hold potential for 

local governments by reducing their 

administrative burden. 20 Governments 

can simply mint and issue tokens 

themselves without going through the 

complex process of registering and 

issuing other forms of bonds, making 

it more affordable to issue smaller 

denomination bonds—although relying 

on Web3’s lack of regulation for this 

benefit is likely an unsound strategy. 

Further, tokenization can cut out 

brokers by enabling the government 

to sell directly to individuals, which 

can also increase bond affordability. 

Supporters argue that tokenization 

can thus democratize municipal 

financing. 21 Smaller investors may 

like the idea of investing in their cities, 

and tokenized debt may be a means of 

doing so. This opening of the market 

has the potential to increase demand 

for government debt. Further, tokens 

are more easily divisible into smaller 

units than traditional financial assets. 

This may support growing secondary 

markets for tokenized debt, further 

increasing demand. Tokenization 

could hold the potential to increase 

municipal borrowing potential. 

Like all potential Web3 applications, 

there are many practical issues 

to consider. For example, wealthy 

investors traditionally favor municipal 

debt because of its tax advantages. 

These investors are unlikely to struggle 

to access the existing municipal debt 

market. Civic pride or responsibility 

may still attract less-wealthy investors 

who would not enjoy these tax 

advantages. But it is unclear whether or 

not civic mindedness would be enough 

to have an impact on the $4 trillion 

municipal debt market, so tokenization 

may be of limited material financial 

benefit. These limits will be more 

pronounced if municipal debt has to 

compete against other securities that 

offer superior returns. 



Hailed as a potential game-changer since making its debut in 2021, MiamiCoin has lost more than 95% of 

its value from its peak price. 

CityCoins’ crucial vulnerability is the system’s detachment 

from traditional, productive economic activity. The 

value of the tokens is not tied to anything in the outside 

economy. This feature is shared by the vast majority of 

other crypto token projects. 

Another relevant case study in security 

tokens is CityCoins. The CityCoin project, 

and MiamiCoin in particular, is one of 

the best-known examples of municipal 

adoption of crypto tokens. We should 

start by making the point that MiamiCoin 

has already attracted controversy for 

skirting securities regulation, 22 so this 

discussion should not be interpreted as 

an endorsement of CityCoins or a position 

on their status as regulated securities. We 

aim only to describe a prominent, actual 

local government use of security tokens. 

CityCoins, including MiamiCoin, 

are presented as a “community-driven 

revenue stream” for cities. CityCoins are 

programmable crypto tokens. They are 

built on top of the Bitcoin network using a 

third-party protocol called Stacks, which 

carries its own tokens called Stacks 

(STX). CityCoins’ creators intend for 

their programmability to lead to a variety 

of future uses, although their launch 

functionality is limited to producing 

more CityCoins or earning STX. 

Mining CityCoins uses a “proof-oftransfer” 

(PoX) mechanism to validate 

the blockchain. PoX is a much less 

common validation method than proofof-work 

(PoW) or proof-of-stake (PoS). In 

essence, the CityCoins PoX is a lottery 

system where miners exchange STX for a 

chance to win a newly minted CityCoin. 

STX can be purchased via exchanges 

like CoinBase, like other crypto tokens 

and cryptocurrencies. They can also be 

earned by participating in the CityCoin 

platform in other ways. Most of the STX 

transferred by miners are eventually 

paid back out to these other CityCoins 

users. Some—30 percent—are distributed 

to the city government. Cities can cash 

out their STX into U.S. dollars or use 

them to earn bitcoin. In essence, the 

revenue-raising mechanism for local 

government is like a local lottery, where 

the government keeps some portion of 

the currency that participants paid to 

enter the lottery. 

CityCoin Inc. has stressed that 

CityCoins are simply an experiment 

rather than a complete financial 

solution. 23 Still, the results so far cast 

doubt on their viability as a source of 

government revenue. Since MiamiCoin’s 

launch, the token has lost more than 

95 percent of its value from its peak 

price. This has led to investor losses and 

potential regulatory scrutiny. 24 

CityCoins’ crucial vulnerability is the 

system’s detachment from traditional, 

productive economic activity. The value 

of the tokens is not tied to anything in 

the outside economy. This feature is 

shared by the vast majority of other 

crypto token projects. It contrasts with 

financial products such as stocks, 

which derive their value from the 

issuing company’s performance. As 

a result, the value of such tokens is 

purely a matter of consumer perception. 

People buy tokens because they believe 

they are valuable. This belief is based 

on the activity of other buyers, in a 

way that can be subject to bandwagon 

bias. 25 For this reason crypto assets 

have been accused of being speculative 

assets, 26 subject to Greater Fool 

Theory. 27 Whatever one makes of these 

accusations, it is evident that the crypto 

economy is particularly vulnerable to 

shifts in the Keynesian “animal spirits” 

of investors. 28 Changes in outlook or 

other psychological factors can lead to 

huge swings in prices. 

Whether projects like CityCoin hold 

potential as a sustainable, long-term 

source of municipal revenue remains to 

be seen; significant changes will have to 

be made if they are to show real promise. 

The programmability of such tokens 

may play a role here. They may become 

promising investments if they can 

be embedded into the wider economy 

through new uses. This potential does 

depend on practical applications of 

the technology being developed, to 

underpin the value of related tokens. 

Finding such applications is by no 

means an easy task. 

22


Smart contract 

A smart contract is a program stored on 

the blockchain which runs when some set 

of predefined conditions are met. They 

can automate agreements without the 

need for third parties. This automation is 

the primary source of excitement around 

smart contracts. Proponents argue that 

they can increase speed and efficiency 

in areas such as conveyancing. More 

radically, some see them as holding the 

potential to transform governance. They 

argue that immutable and automated 

rules reduce the potential for dispute, 

corruption, or abuses of power. 

Smart contracts may play a role in 

tracing tax liability. The use of smart 

contracts could potentially increase 

government revenue by reducing the 

administrative costs of tax systems and 

by reducing tax leakage. Smart contracts 

have been proposed as a means of 

automating the collection of sales taxes 

when products change hands, 29 allowing 

governments to collect taxes in real time 

and removing the need for intermediaries. 

This quality has the potential to strip 

costly steps from the taxation process and 

limit the opportunities for tax evasion and 

avoidance between the time of sale and 

tax declaration. 

It should be noted that smart contractbased 

systems come with their own 

difficulties. First and foremost, obviously, 

is that they are highly complex to design 

and implement effectively, carrying 

significant upfront investment costs. 

Real world use cases remain limited and 

are predominantly being considered 

at national rather than local scales. 30 

Second, smart contract-based payments 

can present other tax difficulties. 

Regulators are already guarded about the 

prospect of automated and anonymized 

smart contract-based transactions 

happening at larger scales for private 

transactions; transactions of this kind 

make it hard to identify the parties that 

have tax obligations and the jurisdictions 

they fall under. 31 

If state and local governments 

accelerate the use of smart contracts for 

some purposes, they may run the risk 

of accelerating adoption in other areas, 

which in fact make revenue collection 

harder. For example, if digital asset 

transfers, assisted by smart contracts, 

become a more common means of 

securing payment for freelance work, this 

might make income taxation difficult. 

Customer and contractor could make 

direct, automated, peer-to-peer payments 

through anonymized crypto wallets. 

There are ways for regulators to catch up, 

but these will take time to develop and 

implement. 

The key will be to ensure that private 

use of such methods does not outrun the 

government’s ability to regulate them. 

While it is uncertain that government 

adoption in one area would accelerate 

their spread in this way, the risk is 

not trivial. As with all emerging 

technologies, smart contracts can act 

as a double-edged sword, and the law 

of unintended consequences should 

give pause to those rushing to adopt 

them without fully understanding their 

complexities. 

1 

The most basic of these activities for most public 

blockchains is transacting cryptocurrencies; however, 

increasing numbers of alternative applications also 

feature on many platforms. 

2 

Given Etherum’s scale, some people now refer to 

Altcoins as all non-bitcoin and ether cryptocurrencies. 

For simplicity, we are using the original definition here. 

3 

It should be noted, however, that this level of volatility is 

in some sense circumstantial and could at least in theory 

change. 

4 

Daren Fonda, “Solana Could Be the Visa of Crypto 

Networks. Not So Fast, Says Visa,” Barrons. January 

2022. 

5 

We use payments per day as a more accurate measure 

of activity than transactions per day. This is because a 

single transaction can contain a number of payments. 

6 

“Confirmed Payments per Day,” Blockchain.com. 

7 

“Reports Fiscal Fourth Quarter and Full-Year 2021 

Results”. Visa Inc., October 2021. 

8 

“Confirmed Payments Per Day,” Blockchain.com. 

9 

“Ethereum Daily Transactions Chart,” Etherscan. 

10 

Jeremy Hinsdale “Cryptocurrency’s Dirty Secret: Energy 

Consumption,” Columbia Climate School, May 2022. 

11 

“Global Energy Perspective 2022,” McKinsey & 

Company, April 2022. 14 For example, see: “NFT 

Tickets—Create, Mint and Sell Online,” Oveit.com. 

12 

For example, see: “NFT Tickets—Create, Mint and Sell 

Online,” Oveit.com. 

13 

Ornella Hernandez, “Miami Collabs With TIME, 

Mastercard, Salesforce to Sell 5K NFTs,” Blockworks, 

July 2022. 

14 

The Biggest Little City in the World series, “The Space 

Whale, CityKey, citykey.art/. 

15 

Mahesh Singarap, “NFTs offer means for governments 

to find solutions,” Mint, September 2021. 

16 

Fernard Rutten, et al., “Leveraging Blockchain for excise 

duties in the tobacco and alcohol industry,” Deloitte, 

deloitte.com. 

17 

“What Is the Howey Test?” FindLaw, May 2018. 

18 

Lily Yang, “Coinbase shares tumble 21% after report that 

it’s facing SEC probe,” CNBC, July 2022. 

19 

Marc Joffe, “Doubly Bound: The Cost of Issuing 

Municipal Bonds,” Haas Institute for a Fair and Inclusive 

Society, 2015. 

20 

Marco Scheltz, et al., “Blockchain and Tokenized 

Securities: The Potential for Green Finance,” Asian 

Development Bank, February 2020. 

21 

Alex Kostura, “It’s Time to Re-Democratize Our Local 

Communities’ Funding,” Consensys, February 2020. 

22 

Scott Nover, “Miami’s mayor backed MiamiCoin crypto— 

then its price dropped 95%,” Quartz, May 2022. 

23 

“CityCoins Community Officially Launches with 

MiamiCoin, Its First City-Based Token,” GlobeNewswire, 

August 2021 

24 

Scott Nover, “Miami’s mayor backed MiamiCoin crypto— 

then its price dropped 95%,” Quartz, May 2022. 

25 

“Why do we support opinions as they become more 

popular? Bandwagon Effect, explained,” the Decision 

Lab. 

26 

Kevin Matthews II, “What to know about speculation: 

When investors buy high-risk assets with the 

expectation of significant returns,” Business Insider, July 

2021. 

27 

Vicki Bogan, “The Greater Fool Theory: What Is It?” 

Hartford Funds, July 2022. 

28 

Carla Tardi, “Animal Spirits,” Investopedia, May 2021. 

29 

Fernand Rutten, et al, “Leveraging Blockchain for excise 

duties in the tobacco and alcohol industry,” Deloitte. 

30 

Ibid. 

31 

Allison Christians, “Taxation in the Age of Smart 

Contracts: The CryptoKitty Conundrum,” Ohio State 

Tech Law Journal, April 2020. 



Assessing the Viability of 

Web3 Applications 

W 

hile we have explored 

many potential 

applications of Web3 

technologies to municipal 

revenue-raising, the 

utility of most existing 

Web3 applications 

remains unclear, 1 and the application of 

Web3 to local government revenue thus 

remains largely speculative. Present 

contributions should therefore focus on 

ways of evaluating such applications. 

The questions below can help assess 

the viability of potential Web3 revenue 

applications. 

To what extent does the application 

rely on speculative bubble dynamics 

versus real-world value? 

Bubble dynamics mean that asset prices 

exceed real-world value. Speculation 

drives bubble growth, as investors 

assume that prices will continue to 

increase. Speculation is fundamental 

to the current value attached to Web3 

“digital goods,” demonstrated by the 

2022 crypto asset crash. 2 Potential local 

government applications should therefore 

have their reliance on speculative value 

questioned. Mining cryptocurrency relies 

heavily on speculative valuations. The 

value of mined cryptocurrency depends 

on investor perceptions, and the same 

seems true of CityCoins and selling NFTs 

of public art. 

When considering any Web3 revenueraising 

proposal, a local government 

should make sure it understands what 

it is that grounds a Web3 application’s 

earning potential. If the answer seems 

to come down to the value perceived by 

others rather than solid underlying social 

or economic value, the application may 

rely on bubble dynamics. 

What real-world problem 

does Web3 solve that existing 

technology cannot? 

Specifically, the question should be, 

“What problem does Web3 solve that 

more established technologies can’t?” 

To start, we may consider the efficacy 

of existing “analogues” to a Web3 

innovation. The closest analogue in 

our CityCoins example appears to be a 

lottery. In general, lotteries work well 

enough as they are—which should call 

the need for technological innovation 

around them into question. 

In many areas, innovative technology 

can add significant value. The next 

step should interrogate the merit of 

blockchain technology, specifically, 

over other possibilities. Many 

technologists have observed that 

existing technologies are often already 

perfectly capable of delivering some 

of the same benefits that blockchain 

is purported to provide. For example, 

leading computer scientist Professor 

Jorge Stolfi has commented: 3 “It 

[blockchain] promises a decentralized 

ledger where multiple organizations can 

contribute input data and supposedly 

it will be tamper-proof in the sense that 

you can’t delete or change the data, 

only add to it. But this has been used 

forever. Any large bank or a critical 

system has to have such a log for several 

reasons: if the system crashes, you 

have to go back and see what happened 

and rebuild the databases. So, this is 

nothing new, people have known how 

to do distributed databases in a reliable 

manner for years.” 

Governments considering blockchain 

solutions should clarify the unique 

added value of this particular 

technology. Blockchain’s standout 

feature is that it removes the need for 

a central, managing authority. This 

may be valuable in certain contexts. 

For example, it may hold symbolic 

value where there is low trust in 

certain authorities. It may also enable 

secondary markets to emerge more 

easily. In the municipal debt example, 

the initial sale of tokenized bonds is 

only the beginning. These assets could 

then be traded peer-to-peer without the 


24

need for third parties like brokers. Such 

secondary markets may help drive demand 

for municipal debt in a unique way. 

Considering a Web3 application then 

requires three steps: 1) asking what problem 

the application is supposed to solve; 2) 

asking whether the application will be 

able to solve it; and 3) asking why, or if, 

the Web3 solution will work better than 

more established technologies. Engaging 

qualified experts who work with other, 

related technologies can help clarify this. 

Is the mechanism something I can 

explain to the public? 

Local governments should have a clear 

general understanding of how prospective 

Web3 applications generate social and 

economic value. Technological complexity 

should not justify neglecting this 

comprehension. A practical test here is to 

imagine explaining the mechanism of an 

application to a citizen who is informed 

but not an expert. This test is realistic, 

given the growing regulatory scrutiny, as 

government officials may be on the spot to 

explain Web3 innovations to a skeptical 

public or media. CityCoins, the most 

complex use case described in this series, 

may offer a cautionary tale. Perhaps not 

coincidentally, it is the one that also 

appears set to run afoul of regulatory 

scrutiny. 4 So, for any Web3 application, 

if a simple explanation cannot be given, 

this should be a matter of concern. The 

same goes for descriptions that must 

be carefully framed to avoid regulatory 

attention. 


rely on value as a “collectable”? 

Because of their technical novelty 

and the powerful social narratives 

surrounding Web3, much of the 

economic value of early crypto assets 

might be due to the “collector’s value” of 

owning the earliest ones. For example, 

Twitter founder Jack Dorsey sold an 

NFT of his first tweet for almost $3 

million to a Web3 entrepreneur. 5 

Local governments must ask if any 

potential Web3 revenue application 

relies on novelty and collection value 

to raise revenue. For example, if we 

understand NFTs of public art in this 

way, we might expect diminishing 

returns from NFT sales. The first city 

to do so may well find success because 

of its first-mover status. The first NFTs 

of public artworks or landmarks will 

A local government 

should make sure it 

understands what it is 

that grounds a Web3 

application’s earning 

potential. If the answer 

seems to come down 

to the value perceived 

by others rather than 

solid underlying social 

or economic value, the 

application may rely on 

bubble dynamics. 

hold historic significance through 

being the first of something. This 

significance is lessened in later 

issuances by other cities joining 

the trend. Our initial example also 

shows that even the first movers 

may not be immune—the very same 

tweet NFT that sold for $2.9 million 

was recently valued at a little more 

than $100. 6 

WHY NOT SPECULATE? 

Economic theory shows that it is possible to make money even in a 

speculative bubble. And many people have become vastly wealthy 

through Web3 activities. So, what is wrong with government officials 

engaging in speculation? The answer is that the benefits of speculation 

generally accrue only to a small number of market participants. 

Governments will probably not end up on the winning side. A traditional 

goal of government investment has been to protect investment 

principal, which is composed of taxpayer money accumulated over 

multiple generations of taxpayers for the long-term benefit of the 

community. For a single generation of officials to essentially “bet” 

this principle on a high-risk/high-reward proposition will probably 

not be consistent with the long-term interests of a majority of citizens. 



Consider the actual benefit of a blockchain application as a 

remainder. Once we have subtracted the benefits of regulatory 

arbitrage, what is left? This should give a more realistic 

picture of the value Web3 can generate in the longer term. 


rely on “regulatory arbitrage”? 

“Regulatory arbitrage” means using 

the lack of regulation around Web3 to do 

things that are difficult or impossible to 

do through more established channels. 

The sale of unregulated security tokens 

is one example of regulatory arbitrage. 

Blockchain is still an emerging and 

poorly understood technology, contributing 

to the current lack of regulation—but this 

context will not last forever. The future 

will bring increased regulation, evidence 

of which is already mounting. 7 

Local governments should consider 

how much a Web3 application relies 

on regulatory arbitrage. If this is one of 

the significant benefits of a blockchain 

solution, it is at risk from regulatory 

expansion. 

Take the example of tokenized municipal 

debt. Officials should question where 

the efficiency and accessibility gains 

from tokenization come from. How much 

derives from technological benefits versus 

bypassing costly regulatory bureaucracy? 

The regulatory scrutiny that CityCoins 

attracted should spark a similar question. 

Consider the actual benefit of a blockchain 

application as a remainder. Once we have 

subtracted the benefits of regulatory 

arbitrage, what is left? This should give a 

more realistic picture of the value Web3 

can generate in the longer term. 

What unintended consequences or 

real-world problems might a Web3 

application run into, or even create? 

Even if a local government application 

passes the tests above, it may not be 

viable because of real-world problems and 

unintended consequences that can still 

stand in the way. Take our municipal debt 

example. Even tokenized bonds will 

carry a price disadvantage relative to 

many other securities. This is because 

its tax advantages have no value to 

investors below a certain level of 

wealth. This problem can prove fatal to 

an innovation like this. Another 

real-world problem may be found in 

potential tax applications of Web3. 

A foundational premise of many Web3 

applications is that participants in 

the application are given a financial 

incentive to participate (for example, 

they can earn cryptocurrency). But 

imagine a Web3 application that 

attempts to use a blockchain to assign 

tax liability. In this case, participants 

face a financial disincentive to be part 

of the blockchain! This attempt may 

give rise to resistance and attempted 

circumvention, making implementation 

difficult. 

Uses of Web3 may also create an 

unexpected issue—Web3 applications 

risk technological acceleration that 

undermines the utility of existing 

regulation. 

Another example is the potential 

for worsening existing economic and 

social inequalities. Web3 is sometimes 

positioned as a great leveler that will 

democratize access to power, but the 

reality has not matched the promise. 

Not only does a small portion of people 

participate in Web3 currently, but 

among those who do, the actual power 

is held by a small subset of those 

people. For example, as of the end of 

2021, fewer than 1 percent of bitcoin 

holders held more than 90 percent of 

total bitcoin wealth. 8 So it seems that 

Web3 economies may be subject to 

many of the same wealth-concentrating 

features of other economies. It is 

reasonable to question whether local 

government support for some kinds of 

Web3 applications might exacerbate 

these forces. For example, let’s imagine 

NFTs of public art were to experience 

the popularity their proponents hope 

for. There would likely be a secondary 

market where NFTs would be bought 

and sold at high prices. High-price art 

markets are generally not known for 

their wealth-distributing features! This 

same concern would apply to any Web3 

application where participants stand to 

benefit financially from participation in 

the application, and financial incentives 

are a fundamental feature of many Web3 

applications. 

Even if all the other questions above are 

addressed, there is still cause for caution. 

Municipalities are complex social 

systems, meaning they can respond 

unpredictably to new interventions, with 

consequences and failure modes that 

may not be immediately apparent. This 

reality should temper optimism about the 

potential of new technologies and leave 

officials with a degree of skepticism. 

1 

Avivah Litan, “Gartner Hype Cycle for Blockchain and 

Web3,” Gartner, July 2022 

2 

“Post FTX Collapse Reflections on Crypto | Making Sense of 

Crypto and Web3” (web3.lifeitself.org). 

3 

Jordi Colomé, “Jorge Stolfi: ‘Technologically, bitcoin and 

blockchain technology is garbage,” El Pais, July 2022. 

4 

Robert Kim, “ANALYSIS: City Crypto Coins Are Becoming 

the Mayor’s New Clothes,” Bloomberg Law, December 

2021. 

5 

Taylor Locke, “Jack Dorsey Sells His First Tweet Ever as an 

NFT for over $2.9 Million,” CNBC, March 22, 2021. 

6 

Gabrielle Bienasz, “Once Worth $2.9 Million, NFT of First 

Ever Tweet Is Now $132,” Entrepreneur, October 17, 2022. 

7 

Gary Gensler, “Prepared Remarks of Gary Gensler on 

Crypto Markets,” Penn Law Capital Markets Association 

Annual Conference,” Securities and Exchange Commission, 

April 2022. 

8 

Ashish Sai, et al., “Characterizing Wealth Inequality in 

Cryptocurrencies,” Frontiers in Blockchain, December 2021. 


26

Cutting through the hype 

Like many new 

technologies, Web3 

has generated a 

lot of excitement— 

but it’s difficult to 

tell how much of 

that excitement is 

justified. Following 

are a few more points 

to further demystify 

Web3 technology, 

help you evaluate 

potential use cases 

and pose questions 

that can help local 

officials assess other 

potential use cases. 

Governments are not tech 

companies, so they don’t 

face the same incentives. 

Tech companies often face a 

phenomenon known as “first 

mover” advantage—meaning 

the first company to offer a 

particular service or product 

will dominate the market. 

Amazon.com is a leading 

example of a firm that was 

one of the first in its category 

(online retail) and has gone 

on to dominate that category. 

Information technologies have 

features that tend to result in 

monopolistic or oligopolistic 

markets. “Metcalfe’s Law” 

describes the most important 

of these features. The 

implication is that there are 

often very high stakes for 

taking a leading position in a 

market. Local governments 

are not subject to these same 

incentives because no local 

government will “dominate” 

Web3 revenue, just like local 

governments in Silicon Valley 

don’t “dominate” the benefits 

that have accrued to local 

governments from Web 2.0. 

(These local governments 

have enjoyed more property 

and sales taxes from 

economic activity of the firms 

within their boundaries, but 

this pales in comparison with 

the total revenue generated 

by online sales taxes generally, 

for example.) 

There is a second-mover 

advantage. 

Second mover advantage is 

when a firm benefits by learning 

from the mistakes of the first 

mover and offering a product 

or service that capitalizes on 

those mistakes. This concept is 

more akin to the situation local 

governments are in. It will be a 

better use of the government’s 

(and hence taxpayers’) time 

and energy to let private 

entrepreneurs work out the 

most practical applications of 

Web3. Government can then 

apply those lessons. 

That said, the first governments 

to commit to Web3 may be more 

successful in attracting new 

Web3 firms to their communities 

(a common justification for 

government forays into Web3). 

Tech firms’ employment and 

physical footprints are usually 

much smaller than traditional 

firms of comparable annual 

revenue, though. For example, 

in 2021, Google (Alphabet)’s 

revenue was $256 billion, with 

about 150,000 employees, and 

Facebook (Meta) had revenues 

of $115 billion, with about 45,000 

employees. General Motors 

had revenues of $127 billion, 

with 157,000 employees, 

and General Electric had 

168,000 employees, with $74 

billion in revenue. For local 

governments that derive 

most of their income from 

property and sales taxes, the 

actual revenue benefit from 

attracting Web3 firms may be 

relatively modest. 

There are opportunity 

costs to spending time 

and energy on Web3 

innovation. 

Finally, local governments 

have limited time and 

energy. If the goal is to find 

new sources of revenue, 

Web3 is just one option. 

GFOA’s Rethinking Revenue 

program (gfoa.org/rethinkingrevenue) 

has identified many 

opportunities for new local 

revenues that are far less 

speculative than Web3 at its 

current stage of development. 

Most local governments 

would be better off spending 

their time and energy on these 

more promising avenues. 



What Happened to FTX 

(and why government finance officers should care) 

F 

TX was one of the world’s largest 

cryptocurrency exchanges. 

Such exchanges are the 

locations where users can 

trade crypto assets such as 

cryptocurrencies and crypto 

tokens, either for other crypto 

assets or fiat money. They form the 

financial backbone of the mainstream 

Web3 ecosystem. 

FTX had a partner company, Alameda 

Research, which operated as a crypto 

hedge fund. Reports surfaced that 

Alameda’s main holding was FTT, the 

native token issued by the FTX exchange. 1 

Given these were meant to be two 

separate entities, the value of Alameda 

being propped up by a token created 

by FTX caused significant concern. In 

response, Binance, the world’s largest 

crypto exchange, liquidated its holdings 

of the FTT token. What ensued was akin 

to a bank run—investors scrambled to 

withdraw their holdings, leaving FTX in a 

liquidity crunch, without the necessary 

funds to fulfill all the withdrawal 

requests. Binance briefly announced that 

it would buy out FTX to ease this liquidity 

crunch, but it pulled out after completing 

due diligence checks. FTX filed for 

bankruptcy soon after. 

The implications of the collapse 

Government finance officials can 

learn a lot from the collapse of FTX, 

along with anyone who is interested in 

the future of Web3. Most apparently, 

the days of lax regulation that have 

characterized the Web3 boom appear 

to be coming to an end, and rightly so. 

Alameda was accused of using FTX 

customer deposits without consent to 

make highly risky investments, to an 

extent that its activities were described 

as “old-fashioned embezzlement.” 2 

The CEO brought in to oversee FTX’s 

bankruptcy described it as suffering a 

“complete failure of corporate controls” 

to a degree that he had never before 

seen in his career. 3 Coming from the 

man who managed the fallout from the 

collapse of Enron, this statement speaks 

volumes. A litany of severe crises 

swept the Web3 ecosystem in 2022, 4 

with huge numbers of everyday retail 

investors losing everything because of 

gross misconduct that often resulted in 

serious criminal allegations. 5 

Not only should this make any 

reasonable public official pause before 

considering engaging with Web3 

projects in any capacity, but it also has 

implications for what is often the main 

attraction of the ecosystem. The so-called 

“regulatory arbitrage” opportunities 

of Web3 are the source of many of its 

purported speed, efficiency, and costsaving 

benefits—and this window of 

opportunity appears to be closing. 

Second, the collapse is a damning 

reality check to one of the most 

significant and alluring narratives of 

Web3, that of decentralization. The 

decentralized nature of the Web3 

ecosystem is a source of great excitement, 

lauded as the central feature that sets 

it apart from, and above, Web 2.0. 6 But 

FTX shows that the technical potential 

for decentralization does not amount to 

decentralization in practice. 

The reason that FTX was able to 

allegedly conduct such nefarious mixing 

of funds with Alameda, and why so many 

investors were locked out from their 

funds when FTX froze withdrawals, was 

because it was a centralized exchange. 

Users deposited funds in accounts owned 

by FTX to conduct trades and often kept 

their assets stored in these centrally 

owned accounts. In other words, FTX 

operated just like a centralized private 

bank. The fact that this crisis took the 

shape and reached the scale it did was 

due to centralization, the feature Web3 

is purported to bypass. That much 

of the Web3 ecosystem is in fact not 

very decentralized at all has been a 

longstanding critique, subject to rigorous 

supporting analysis from academia. 7 

There are many critics of centralized 

exchanges even within the Web3 

community. 8 Critics argue that such 

centralization contravenes the core 

principles of Web3 and that the only 

valuable path forward lies with 

decentralized finance (DeFi), which 

facilitates peer-to-peer transactions 

between those holding their own, private 

cryptocurrency wallets. This critique 

rings true on one level, but the continuing 

hope that “true” decentralization is 

possible overlooks two things. First, 

human beings generally don’t like effort. 

Second, marketplaces are subject to 

network effects. 

28

On the first point, all of us regularly 

settle for suboptimal but easier 

options in all realms of our lives. 

Consider password security. Despite 

an awareness of its importance, recent 

data shows the five most common 

passwords globally are still 123456, 

Password, 12345678, qwerty, and 

123456789, and a staggering 59 

percent of Americans still use their 

name or birthdate in their passwords. 9 

Similarly, while it is possible to hold 

all of one’s crypto assets in an entirely 

private wallet and participate in the 

Web3 ecosystem in a significantly 

more decentralized way, this is a lot 

more work. The height of good practice 

even goes so far as engraving one’s key 

identifying information into metal and 

then hiding it for safekeeping. 10 

It is not just effort that makes 

the world of DeFi unattractive to 

many. Using these services requires 

significant technical expertise and 

leaves users at risk of losing the 

entirety of their assets at the click of a 

button through scams, bugs, and user 

errors. 11 DeFi systems can also carry 

prohibitively high transaction costs, 

particularly at higher levels of use. This 

is because of the inbuilt dynamics of 

the Ethereum cryptocurrency network 

where most DeFi platforms exist, 

which increases transaction costs 

(known as “gas fees”) at times of high 

demand. This has further led to doubts 

as to the scalability of DeFi. 12 Finally, 

the need for centralized governance 

structures for DeFi platforms have led to 

accusations that the ecosystem is not in 

fact as decentralized as it claims, 13 and 

it has been identified as carrying severe 

and systemic financial vulnerability to 

boot. Inconvenience aside, none of this 

bodes well for DeFi’s status as a serious 

contender to centralized exchanges. 

Centralized exchanges fill a gap in the 

market and meet consumer needs. They 

make the exchange process easier and 

protect users from risks by overseeing 

their transactions, although the value 

proposition around risk reduction is not 

without irony in the present moment. 

Given the choice, it’s likely that many 

everyday users of Web3 technology will 

gravitate to centralized solutions if they 

require less effort and expertise. 

The second compounding factor for 

this tendency toward centralization 

is the economic concept of network 

effects, 14 the phenomena whereby the 

value of certain goods or services is 

affected by the number of actors using 

them. They’re often positively correlated, 

with more existing users making the 

network more valuable. The hegemonic 

dominance of many of today’s tech giants 

is a result of these effects. Facebook, for 

example, dominates because everyone 

else using its products makes them 

more attractive to other users. Nobody 

wants to use a social network that 

others aren’t also using. Marketplaces 

are one of the prototypical examples of 

network effects; there is a reason there 

was a single, central Agora in ancient 

Greek societies. Marketplaces are most 

valuable if others are also using them, 

otherwise I might have to look elsewhere 

to buy what I want or find a seller for my 

product or service. Being able to go to 

one place alone provides massive gains. 

Crypto exchanges will also be subject 

to network effects, meaning they will 

likely tend toward a few major players 

dominating the market. 

Combining the attractive convenience 

of centralized exchanges with the 

phenomenon of network effects 

creates an incredibly strong tendency 

toward centralization within the Web3 

ecosystem. This tendency has visibly 

borne out, with the evidence showing 

both that the five largest cryptocurrency 

exchanges, by trading volume, are 

all centralized, 15 and the centralized 

finance portion of crypto holding a 

market capitalization that is estimated 

at more than 20 times the size of the DeFi 

ecosystem. 16 

Conclusions 

Regulation can remove some of the more 

severe risks from using centralized 

exchanges and stop a disaster like FTX 

happening again. But then if the majority 

of the crypto ecosystem becomes people 

using large, regulated, centralized 

institutions to trade financial products, 

there seems to be very little to set this 

apart from the world of traditional 

finance. The major difference appears 

to be a larger role for speculation and 

greater detachment from productive 

If the majority of the crypto 

ecosystem becomes people 

using large, regulated, 

centralized institutions to 

trade financial products, 

there seems to be very little 

to set this apart from the 

world of traditional finance. 

economic activity in the real economy 

than trading traditional assets such as 

stocks and bonds. 17 Such a vision of the 

future should pose questions as to where 

the value of blockchain technology 

really lies. 

Theo Cox is head of Life Itself Labs, a 

multidisciplinary research institute and 

consultancy. Shayne Kavanagh is the 

senior manager for research in GFOA’s 

Research and Consulting Center. 

1 

Ian Allison, “Divisions in Sam Bankman-Fried’s Crypto 

Empire Blur on His Trading Titan Alameda’s Balance Sheet,” 

coindesk.com, November 2, 2022. 

2 

Brian Goswami and Rohan Schwartz, “FTX Committed 

‘Old-Fashioned Embezzlement,’ CEO Tells Lawmakers in 

Blistering Hearing,” CNBC, December 13, 2022 

3 

“’Complete Failure of Corporate Controls’ at FTX, Says New 

CEO,” Al Jazeera, November 17, 2022. 

4 

“Post FTX Collapse Reflections on Crypto | Making Sense 

of Crypto and Web3,” Life Itself (web3.lifeitself.org/notes/ 

post-ftx-collapse). 

5 

Danny Park, “Terra Cryptocurrency Fugitive Do Kwon Flew 

to Serbia Last Month, South Korean Prosecutor Says,” 

Yahoo Finance, December 11, 2022 

6 

Dilip Kumar Patairya, “How Web3 Resolves Fundamental 

Problems in Web2, cointelegraph.com, November 28, 2022. 

7 

Angela Walch, “Deconstructing ‘Decentralization’: Exploring 

the Core Claim of Crypto System,”. C. Brummer (Ed.), 

Crypto Assets: Legal and Monetary Perspectives (Oxford 

Academic, November 2019). 

8 

Amanda Cassatt, “FTX Showed the Problems of 

Centralized Finance, and Proved the Need for DeFi,” 

coindesk.com, November 11, 2022. 

9 

Aimee O’Driscoll, “25+ Password Statistics That May 

Change Your Password Habits,” Comparitech blog, August 

28, 2020. 

10 

Daniel Phillips, “The Best Crypto Metal Wallets You Can Buy 

Now (UPDATED),” Decrypt, May 21, 2020. 

11 

“DeFi Investment Risks,” Coinbase Help (help.coinbase. 

com). 

12 

“The DeFi Dilemma: How High Fees Are Crippling DeFi 

Growth,” Financial and Business News | Finance Magnates, 

February 15, 2021. 

13 

Sirio Aramonte, Wenqian Huang, and Andreas Schrimpf, 

“DeFi Risks and the Decentralization Illusion,” BIS Quarterly 

Review, December 2021. 

14 

“What Are Network Effects?” Business Insights Blog, HBS 

Online, November 12, 2020. 

15 

Top Cryptocurrency Exchanges Ranked By Volume, 

CoinMarketCap, accessed December 16, 2022 

(coinmarketcap.com/rankings/exchanges/). 

16 

Akash Takyar, “DeFi vs CeFi | Centralized and Decentralized 

Finance Comparison,” LeewayHertz Software 

Development Company, November 17, 2020. 

17 

“Crypto: Can These Financial Perpetual Motion Machines 

Work? Making Sense of Crypto and Web3,” Life Itself 

(web3.lifeitself.org). 


30

NAVIGATING THE TALENT SHORTAGE 

Navigating the 

Talent Shortage 

The role of just-in-time-talent and virtual CFOs 

BY CHARLIE FRANCIS, MIKE MCCANN, AND ADAM STONE 


As demand for local 

government public 

finance officers grows, 

local governments are 

facing challenges in 

recruiting and retaining 

top talent in this field. A report from 

GFOA and Lightcast, “Meeting Demand 

for State and Local Government Finance 

Jobs” (available at gfoa.org/meetingdemand-public-finance), 

demonstrates 

that demand for state and local public 

finance officers is outstripping the 

current supply of workers in the sector 

and that increasing the pace of hiring 

and the breadth of recruitment will be 

necessary to reverse the growing gap 

between supply and demand. Local 

governments are also facing the prospect 

of a wave of retirements, which is 

expected to exacerbate the shortage of 

public finance officers. 

As local governments struggle to 

find and hire skilled finance directors 

and key finance staff, the use of virtual 

CFOs and just-in-time talent is becoming 

an increasingly popular option. A 

virtual CFO is a remote professional 

who provides high-level CFO services 

to organizations either full-time or 

on a part-time or project basis, while 

just-in-time talent refers to the use of 

highly skilled contract workers who can 

be brought into an organization remotely 

or onsite—on a project or part-time basis— 

to provide specialized expertise and 

support. These approaches can help local 

governments access specialized financial 

expertise and support when they need it. 

In this article we will explore the 

evolving role of local government finance 

directors and the benefits and challenges 

of using virtual CFOs and just-in-time 

talent in local government, as well as 

provide insights and best practices for 

local governments considering these 

approaches to support their financial 

operations. 

THE ROLE IS CHANGING 

The role of the local government finance 

director is evolving in response to changes 

in the political, sociological, and economic 

landscapes, along with the increasing 

complexity of financial operations. As 

local governments face new challenges 

and opportunities, finance directors 

must adapt and develop new skills and 

expertise to meet these changing needs. 

One of the key changes in the role of 

the local government finance director is 

the increasing focus on analytics. With 

the proliferation of data in the digital age, 

finance directors are expected to be able to 

collect, analyze, and interpret financial 

data to inform decision-making and 

strategy. This may require expertise in 

data analysis and visualization tools, 

and an understanding of how to use 

data to drive financial performance 

and growth. 

There is also an increasing focus on 

external-facing goals such as customer 

satisfaction and forward planning. 

Finance directors are expected to be 

more in tune with the local community 

and to have a broader perspective on 

the financial needs and goals of the 

local government—meaning that CFOs 

need to have effective communication 

and collaboration skills, as well as 

an understanding of how to build 

relationships with stakeholders and 

partners. They also need to know how to 

deploy social media tools to monitor the 

needs of the local community. 

Local governments have also been 

moving toward more decentralized 

and distributed models of work, 

which means finance directors are 

expected to have the ability to manage 

horizontally, working in more direct 

collaboration with other business units 

beyond the traditional boundaries 

of the finance department. This may 

require finance directors to have strong 



leadership and management skills, as 

well as an understanding of how to work 

effectively in a distributed and hybrid 

work environment. Finance directors 

should be able to implement and use 

customer-centric community platforms 

that connect the front, middle, and back 

offices, allowing local governments to 

provide more seamless, secure, and 

reliable customer-centered services 

that meet the evolving expectations of 

their customers, enhance the customer 

experience, and improve the overall 

quality of local government services. 

The role of the CFO in local 

government is evolving, and the current 

labor supply shortage is only increasing 

demand for next-generation CFOs who 

possess the skills and traits necessary 

to navigate these changes. 

BENEFITS AND CHALLENGES 

One key benefit of using virtual 

CFOs and just-in-time talent in local 

government is the ability to access 

specialized financial expertise and 

support on an as-needed basis. Local 

governments can bring in temporary 

employees who have specific financial 

skills or experience to support specific 

projects or initiatives, without the 

need for a traditional CFO. This can 

help local governments save on costs 

and resources and can be particularly 

useful for small local governments or 

those with limited financial resources. 

Finance automation and data 

analysis are areas in which the use 

of virtual and just-in-time talent is 

becoming increasingly prevalent. 

Automating routine tasks such as 

invoice processing, bank reconciliations 

and other data entry work can increase 

efficiency, enhance accuracy, improve 

decision-making, reduce costs, and 

improve compliance—which can free up 

a government’s resources for the kind 

of data analysis that provides insights 

into the organization’s financial and 

performance health. 

Using analytics to support policymaking 

provides its own benefits—the 

first of which is that policies will be 

based on sound, reliable, and accurate 

information, which can also help 

improve the effectiveness of policies 

Local governments 

can bring in temporary 

employees who have 

specific financial skills 

or experience to support 

specific projects or 

initiatives, without the 

need for a traditional CFO. 

and reduce the risk of unintended 

consequences. Using data can also help to 

increase transparency and accountability 

in policymaking, as decision-makers 

can be held accountable for the data and 

evidence underpinning their policies. It 

can also help identify patterns and trends 

that may not be immediately apparent, 

which can be used to inform and improve 

policy decisions. Other uses for this kind 

of data include predictive analytics, 

which help the government create longterm 

and sustainable policy changes. 

There are also some challenges to 

consider when using virtual CFOs and 

just-in-time talent in local government. 

One of these is the potential for 

communication and collaboration issues, 

as virtual CFOs and just-in-time talent 

may not be working onsite. Local 

governments must find effective ways to 

handle this issue. 

Just-in-time professionals have the 

experience and expertise to hit the 

ground running, but onboarding and 

integrating them can be challenging. 

Local governments will need processes and 

systems to optimize this step, along with 

training and support. Just-in-time talent 

can bring a fresh perspective to government 

leaders, as well as specialized expertise, 

but integrating them seamlessly into 

the organization is crucial to realizing 

the full potential of their contributions. 

CASE STUDY #1 

Here’s an example of how one county 

recently used a virtual budget director 

as just-in-time talent to address two 

challenges: the immediate need to 

get someone into the position, and the 

transition to a new budgeting software 

system. 

The county’s budget director had recently 

resigned while the county was in the middle 

of moving to a new budgeting software 

system. This was a major problem because 

the budget preparation had stalled and there 

wasn’t a key leader in the financial planning 

process, nor was there the ability to prepare, 

present, amend, and adopt a new budget. 

A virtual CFO is a professional who provides financial guidance and support to 

a local government, much like a traditional CFO does for a larger organization. 

The main difference is that a virtual CFO provides these services remotely, 

usually through telecommuting or online communication, rather than working 

on site at the local government. Virtual CFOs can be individual professionals 

or part of a third-party firm that provides virtual CFO services to multiple 

clients. They may have a wide range of financial expertise and experience, 

they and can provide services such as financial planning and analysis, 

budgeting and forecasting, financial reporting, and risk management. 

Just-in-time talent refers to the use of highly skilled remote or onsite contract 

workers who can be brought into a local government on a project or part-time 

basis to provide specialized expertise and support. These workers may have 

expertise in a specific area of finance such as budgeting or financial analysis, 

or they may have a broad range of financial skills and experience. Just-in-time 

talent can be used to scale up a local government's financial team during key 

moments in the budget planning cycle or financial planning cycle and can be 

phased in and out as needed to support the local government's financial goals. 

32

So, the county brought in a highly 

skilled contract budget director with 

experience in both budgeting and 

budgeting software implementation, who 

worked remotely. The budget process was 

reinvigorated to stay on track, transition 

to the new software system, and get the 

new budget adopted within their state’s 

legal deadlines. The county’s chair of the 

board of commissioners commented, 

“He is everything you want in a 

consultant, and someone you rarely 

find—available, helpful, and thoughtful, 

he provides solutions tailored to 

meet our unique needs. His expertise 

in local government finance and 

budgeting is evident and unmatched. 

He has been a tremendous guide.” 

Using just-in-time talent in this way 

allowed the county to bring in specialized 

expertise at a key moment when they 

needed it most. It provided a level of 

flexibility, and it ensured that the budget 

process and transition to a new budgeting 

software system were successful. 

three months behind, bulk postings 

were made into account numbers 

without the proper allocation, currentyear 

budget-to-actual reports were 

inaccurate, and considerable time was 

spent looking for data to respond to 

requests for information. Bank account 

reconciliations were months in arrears. 

Outsourcing financial management 

provided with the city the following 

benefits: immediate access to better 

talent, which instantly addressed the 

staffing issues and labor shortages; 

access to better technology, which 

improved processes and productivity; 

and reduced risks associated with 

ineffective in-house processes. 

Outsourcing the city’s financial 

management further resulted in 

providing management capability that 

supported the city’s strategic objectives, 

direction, and plans; professionally 

directed staff in procedures that 

ensured timely and accurate financial 

reporting; provided continuous 

business process improvement; 

leveraged technology into efficiencies; 

and identified new innovative financial 

management best practices. 

Within the first six months, staff 

had not only fully reconciled the bank 

accounts but also all the general ledger 

accounts. The budget was produced 

and adopted on time, using new 


CASE STUDY #2 

Another example of using a virtual 

CFO in combination with just-in-time 

talent was when the CFO for a small 

city resigned not only at the start of 

the budget preparation process but 

also left behind an understaffed and 

dysfunctional finance department. 

Internally and up until the resignation, 

staff had been painstakingly populating 

legacy worksheets with updated 

calculations for the next fiscal year’s 

budget. Many of these worksheets had 

broken links and arcane formulas 

that staff had difficulty repairing. 

The budget work had been also 

severely slowed down because of the 

overall state of the Finance Department. 

Payroll, Accounts Receivable, 

Accounts Payable, and general ledger 

processes in the Finance Department 

were not functioning in a manner 

that provided timely and accurate 

financial reports. Bottlenecks existed 

in each of these functions stemming 

from faulty software, unnecessary 

business processes, staff turnover, 

staff vacancies, and work overload. 

As a result, bulk processing of entries 

into the general ledger was often 



budget preparation technologies. The 

annual audit produced a financial 

report, and there was a successful 

ERP cloud-migration project. 

This project combined using a virtual 

CFO with just-in-time talent financial 

management and analysts. These 

specialized experts were brought in at 

the crucial moment before a potential 

collapse of the financial system. 

CASE STUDY #3 

A fast-growing community had 

an elected fiscal officer position, 

a role that is separately elected 

from the community’s council 

and administration. The newly 

elected fiscal officer found that the 

department was short-staffed and 

had its hands full maintaining daily 

accounting functions. Council and 

other community leaders were very 

active and demanded a lot of financial 

information from the department. 

While long-term plans were in place 

to grow staffing over time, the daily 

staffing wasn’t able to keep up. Rather 

than risk burnout, the community 

adopted the just-in-time talent 

concept to help augment staff for 

high-level and more complex tasks. 

Within a few months after retaining 

a just-in-time talent firm to act as 

the virtual CFO, the community had 

implemented new procedures that 

enabled more informed financial 

decisions. This resulted in improved 

financial reports that provided timely 

and accurate data and evidence for 

policymakers. Faster delivery of ad 

hoc reports combined with tailored 

communications were the key 

differences in helping this community 

address emerging issues. This also 

helped elected and appointed decisionmakers 

keep residents and businesses 

more informed and ultimately helped 

the community make tough decisions. 

The combination of just-in-time talent 

for day-to-day operations with a trusted 

virtual CFO role has empowered a 

fast-growing community to compete 

and to navigate growth challenges 

without having to take on the longterm 

fixed costs associated with 

hiring an equivalently skilled CFO. 

Ultimately, being able to divide the 

duties, personalities, and competing 

political interests of the elected 

officials from financial management 

and oversight has been the major 

benefit of this arrangement. Getting the 

assistance of an independent advisor 

has provided safe space, outlets, and 

improved discussion quality. The key 

to this community and the benefits 

it has realized was the elected fiscal 

officer’s openness to change and 

willingness to trust an outsider’s input, 

along with the will to consistently 

implement business process 

improvement recommendations. 

RECOMMENDATIONS FOR 

LOCAL GOVERNMENTS 

To make the most effective use of 

just-in-time talent to support their 

financial operations and achieve 

their long-term financial goals, 

local governments should consider 

the following recommendations: 

Completely describe the role. The 

first step is to completely describe the 

role, which will help local governments 

determine their specific needs. 

Clearly define the financial 

expertise and support needed. 

After defining the project, carefully 

define the specific financial skills 

and support that is required to meet 

these needs. This will help ensure 

that just-in-time talent is brought 

in to address specific areas of need 

rather than being used as a general 

solution for all financial challenges. 

Carefully vet just-in-time talent. 

Make sure these professionals have 

the necessary skills, expertise, and 

experience to meet the government’s 

financial needs and goals. This 

may involve reviewing resumes, 

conducting interviews, and seeking 

references and recommendations 

from other local governments 

or financial professionals. 

Establish clear communication 

and collaboration channels. 

Effective communication and 

collaboration are essential for the 

success of any financial project or 

initiative, particularly when working 

with just-in-time talent and virtual 

CFOs. Local governments should 

establish clear communication and 

collaboration channels, including 

regular meetings, updates, and 

progress reports, to ensure that 

all team members are aligned and 

working towards common goals. 

Monitor progress and adjust course 

as needed. Local governments should 

regularly monitor progress on financial 

projects and initiatives involving 

just-in-time talent and virtual CFOs 

and be prepared to adjust course as 

needed. This may involve adjusting 

project scope, timeline, or resources, 

or bringing in additional just-in-time 

talent or virtual CFOs as needed. 

CONCLUSIONS 

Virtual CFOs and just-in-time talent 

can provide local governments with 

the financial expertise and support 

they need to achieve their longterm 

financial goals. By accessing 

specialized financial expertise on an 

as-needed basis, local governments 

can save on costs and resources, and 

can scale up financial support during 

key moments in the budget or financial 

planning cycle. However, there are also 

challenges to consider when using these 

approaches, including communication 

and collaboration issues and difficulties 

in onboarding and integrating just-intime 

talent. Local governments will 

need to carefully consider the benefits 

and challenges of using virtual CFOs 

and just-in-time talent to ensure that 

they are able to effectively support the 

financial needs of the organization. 

Charlie Francis is a local government 

finance expert with more than 45 years of 

local government financial management 

experience in both the public and private 

sectors, including 20 years of experience 

as a CFO. Mike McCann is a consultant 

with McCann Consulting, which he 

developed to help smaller agencies 

achieve their goals. He was a co-founder 

of OpenGov.org. Adam Stone, CPA, is 

an independently registered municipal 

advisor and principal with Stone 

Municipal Group. 

34

“A must-have publicaaon 

for every local government.” 

Accounnng for Capital Assets: A Guide for State and Local Governments 

(2nd ediion) offers clear and straight-forward guidance to public-sector 

accounnng professionals who must confront the pracccal challenges of 

accounnng for capital assets and similar items on a daily basis. 

Chapter-in-Brief Summaries | Quiz Questions | Sample Journal Entries 

Purchase your copy at 

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36

FUNDING NEW APPROACHES TO PUBLIC SAFETY 

Funding New Approaches 

to Public Safety 

Alternatives to conventional law enforcement in responding to mental health crises 

BY SHAYNE KAVANAGH AND GALEN MCDONALD 

Local governments across the United States 

are considering how they might better 

respond to emergency mental health crises. 

Conventionally trained law enforcement 

officers (LEO) respond to most calls for 

service, but standard LEO training is often 

insufficient for calls that involve behavioral 

and mental health issues. For this reason, “alternative 

response”—a municipality’s capability for responding 

to these calls with a better-matched skill set—is 

garnering interest among many local governments. 

One of the critical questions about alternative 

response is how to fund it. To begin finding an answer, 

we interviewed jurisdictions of varying sizes and 

locations and at different points in their journey of 

implementing alternative response and investigated 

publicly available records for a number of other 

governments. This article describes what we found. 

INTERVIEW PARTICIPANTS 

City and County of Denver, Colorado 

City of Eugene, Oregon 

County of Fairfax, Virginia 

City of Providence, Rhode Island 

City of Redmond, Washington 

City of Rochester, New York 

City of Rockford, Illinois 

City of Scottsdale, Arizona 

ABOUT “REIMAGINING PUBLIC SAFETY” AND GFOA 

This article came out of GFOA’s work with Reimagining Public Safety (RPS), an initiative of the New York University School of Law’s Policing 

Project. Through research, design, and innovation, the Policing Project is helping governments understand how to respond to community 

needs when individuals call for help, primarily through 911. RPS works locally in the cities of Chicago, Illinois; Denver, Colorado; Tucson, 

Arizona; San Francisco, California; and Minneapolis, Minnesota, to reimagine policing from a one-size-fits-all answer to most community 

problems to a vision of first response that fosters real community health and safety. RPS engages with and learns from communities, 

conducting much-needed research on dispatch and response, and designing a community-informed, data-driven framework to create 

response systems that work. 

Learn more about the Reimagining Public Safety initiative: safetyreimagined.org | policingproject.org 



Out of more than 5,000 calls for alternative response since their civilian-staffed response program 

was initiated, the City of Denver hasn’t once had to send police backup to a scene where civilian-led 

alternative response was sent first. 

What does alternative primary 

response look like? 

A popular alternative primary response 

program is co-response, in which a 

trained clinician rides along as part of 

a regular patrol shift with a specially 

trained LEO (such as training in mental 

health crisis intervention). The patrol 

car with the clinician is directed to 

mental health crisis calls whenever 

possible. 

Another approach is a 100 percent 

non-LEO-staffed program that responds 

to less dangerous calls, where scene 

safety isn’t a concern. This approach 

is not necessarily a replacement for coresponse 

with an LEO. The City of Denver, 

Colorado, for example, has both types of 

programs. Out of more than 5,000 calls 

for alternative response, Denver hasn’t 

once had to send an LEO to a scene where 

civilian-led alternative response was sent 

first. In about 17 percent of calls, an LEO 

arrived on the scene first and then asked 

for an alternative responder to take over. 

Obviously, dispatch capabilities 

are very important here, especially 

for a civilian-led program. Different 

staffing models and improved dispatch 

capabilities require a funding strategy, 

which we’ll explore next. 

How is alternative response funded? 

There is no single funding model for 

alternative response, but we found some 

general themes. 

Local taxes are often the primary 

funding source. The local governments 

we interviewed rely largely on local tax 

dollars to fund alternative response. 

Often, this is the local government’s 

general fund, as in the City of Scottsdale, 

Arizona. The City of Providence, Rhode 

Island, uses its general fund for partial 

funding. Denver and the City of Rockford, 

Illinois, are both funded by another 

common source, a dedicated local tax— 

in this case, a special sales tax dedicated 

to public safety (but not dedicated 

solely to alternative response). The City 

of Redmond, Washington, is planning 

a special property tax levy to fund its 

alternative response. Up until recently, 

the City of Eugene, Oregon, funded its 

entire program from the general fund, 

but more recently, part of its program is 

funded through a dedicated payroll tax, 

with the rest coming from the general 

fund budget. 

GFOA’s research report, “New Taxes 

that Work” provides guidance on how to 

best approach raising a new local tax. 

Here are some useful findings from that 

report, along with examples of how those 

findings apply to the governments we 

interviewed: 

• Associate the tax with a concrete 

service. In Denver, voters approved 

a 0.25 percent increase in sales and 

use taxes in 2018 specifically to fund 

behavioral health services for Denver 

residents. At least 10 percent of the 

revenue generated by the tax on retail 

sales comes back to Denver for funding 

alternatives to jail, including Denver’s 

co-responder program. 

• Engage citizens to help define the need 

for new revenues and build a network 

of supporters for new revenue. Denver 

does both through the Caring for Denver 

Foundation, a nonprofit that helps 

administer the special tax revenue. 

Its board members are drawn from 

branches of Denver government and from 

community organizations. Caring for 

Denver uses tax dollars to make grants 

that support behavioral health services. 

• Demonstrate that the tax produces 

value for the public. In Rockford, the 

special tax is collected by the county and 

distributed to the city as a “grant” that’s 

made available to local agencies (like 

the city), which must apply and make 

their case for co-response as a worthwhile 

use of funds. Similarly, in Denver, the 

city also must apply to receive revenue 

from the special tax. The funding of 

alternative response is not automatic 

but predicated on the city government 

making the case that the services 

provide adequate value. 

Read the full report at gfoa.org/ 

materials/new-taxes-that-work 

38

Governments are making limited use of 

American Rescue Plan Act (ARPA) funds. 

Although our interviewees had access to 

ARPA funds, few of them seem to be using 

the money for alternative response. 1 

But some are. Providence budgeted 

approximately $700,000 of its FY 2023 

general fund money for city staff and 

contractors in its alternative response 

program, and it identified an additional 

$1.75 million in ARPA funding to expand 

the program. 

Limited use of ARPA funds may be 

a sensible decision—ARPA funding 

is a non-recurring revenue, whereas 

alternative response is intended to be an 

ongoing program. So, ARPA is only useful 

as a temporary funding source. To keep 

alternative response going, governments 

will need a sustainable funding strategy 

reaching into the future. That is why, 

consistent with GFOA guidance on the 

use of ARPA funds, local governments 

seem to be using ARPA funding for nonrecurring 

expenditures to protect their 

long-term financial health. (See the 

guidance at gfoa.org/american-rescueplan-spending-guiding-principles). 

That said, there are reports of some 

local governments using ARPA funding to 

support alternative response, including 

the cities of Houston, Texas, and Detroit, 

Michigan. Publicly available records 

are not clear about the extent to which 

these cities are spending ARPA funds on 

recurring or non-recurring expenditures, 

however, nor do they describe the precise 

nature of the program being funded. 2 

Medicaid reimbursement does not play 

a consistent role in funding alternative 

response. Medicaid could, in theory, 

support co-response. Among the 

governments GFOA spoke with, the use of 

Medicaid was uneven. Denver appeared 

to be the government making the most 

use of Medicaid reimbursement. Denver 

covers approximately half the costs of 

its co-response program with Medicaid, 

and the program has benefited from a 

Medicaid “carve out” 3 because it diverts 

clients from more expensive medical 

interventions. The 100 percent civilianled 

program had a similar experience— 

about half the costs were billable to 

Medicaid after the program finished 

the pilot stage and was more widely 

implemented. As for the other cities we 

spoke with, only Rockford enjoyed any 

Medicaid reimbursement, exclusively for 

their fire department’s role in responding 

to people in crisis. 

Although Medicaid can be an important 

source of alternative response funding, 

there are a couple of cautions. 

To make Medicaid work, program 

partners must be able to do the billing. 

Colorado has expanded Medicaid coverage 

and has certain Medicaid policies in 

place that may play a role in Denver’s 

ability to get Medicaid coverage for these 

programs. In addition, the nonprofit 

that Denver partners with to provide 

clinicians has the institutional capability 

to bill Medicaid. But if local governments 

don’t have the administrative capacity 

to go through the steps necessary to get 

Medicaid reimbursement, they might 

miss an opportunity for support through 

Medicaid. 

If the geographic area targeted for 

alternative response has a high proportion 

of people who use Medicaid, the percentage 

of reimbursement may be higher that 

it would be if the alternative response 

program covers other parts of the city. 

For example, Denver experienced a much 

higher rate of Medicaid reimbursement 

for the pilot of its 100 percent civilian-led 

program because of the geographic area 

where the pilot took place. 

The federal government is encouraging 

greater use of Medicaid to support 

mobile crisis intervention units staffed 

with mental health professionals. The 

American Rescue Plan included $1.2 

billion to support this service. 

911 CALLS | BY THE NUMBERS 

What are the lessons we can learn? 

Our interviews produced several 

potential lessons for local government to 

draw upon. 

Be mindful of the long-term financial 

sustainability of the co-response model. 

Temporary funds, like ARPA and certain 

kinds of grants, can be helpful for getting a 

program started, but a long-term funding 

strategy is also needed. Temporary 

revenues are useful for limited-time costs 

like new equipment and vehicles but are 

not a good option for supporting a program 

over the long-term. 

Consider a dedicated tax. Some of the 

local governments we spoke with have a 

dedicated local tax. The aforementioned 

GFOA report “New Taxes that Work” 

describes the features of successful new 

taxes. 

Consider the design of the program 

itself. For example, Fairfax County 

initially considered various co-response 

models that included additional public 

safety staff. The county ultimately 

selected the police/clinician model 

to fill the biggest gap in their crisis 

response system, with long-term cost as a 

consideration in their decision-making. 

Consider contracting. There may be 

advantages for contracting out for 

significant parts of the alternative 

response model, making it easier to adjust 

the level of service up or down. The salary 

and benefit cost of public employees often 

becomes, effectively, fixed costs in local 

Below, the reasons for 911 calls by percentage in a large American city (population 500,000–1,000,000) 

from 1/1/2018–8/1/2022. The Reimagining Public Safety initiative is helping governments understand 

how to best respond to 911 calls, particularly when a conventional law enforcement response isn’t 

required, or could potentially make the situation worse. 

Disturbances and Suspicious Persons 

Administrative and Investigative 

Property 

Domestic/Family, Threats, Fights, and Weapons 

Traffic 

Medical and Mental Health 

Social and Substance Issues 

Alarms 

Emergency 

Violent Crime 

Source: Reimagining Public Safety, safetyreimagined.org 

4.2% 

3.2% 

6.7% 

6.7% 

6.3% 

10.3% 

14.6% 

14.3% 

13% 

20.5% 



EXHIBIT 1 | OPPORTUNITIES FOR FINANCIAL ASSISTANCE FOR ALTERNATIVE RESPONSE FROM THE FEDERAL GOVERNMENT 

OPPORTUNITY TIMELINE AND FUNDING FOCUS AND REQUIREMENTS 

Accelerating Justice 

System Reform 

Grant Program 

(under the Safer 

America Plan) 

• Funding is not confirmed 

• Request: $15 billion over 10 years 

• Part of President Joe Biden’s FY 23 budget 

request 

Funds can be used to prevent violent crime and/or ease the burden on police officers 

so they don’t have to respond to non-violent situations that don’t require police 

intervention. 

Can be used to expand co-responder or alternate responder programs so calls that 

should be answered by mental health or substance use disorder providers or social 

workers – alone or in partnership with police – are not solely the responsibility of 

law enforcement. 

To qualify, jurisdictions must repeal mandatory minimums for non-violent crimes and 

change other laws that contribute to increased incarceration rates without making 

our communities safer. 

American Rescue 

Plan Act funds 

• $1.2 billion: Medicaid Mobile Crisis Intervention 

Services 

• Funds appropriated each year over 5 years 

(look out for funding each year) 

• Funding timeline in unclear 

ARPA (Section 9813): “Amends Title XIX of the SSA to add a new section 1947. Section 

1947 authorizes a state option to provide qualifying community-based mobile crisis 

intervention services for a period of up to five years, during the period starting April 

1, 2022, and ending March 31, 2027.” 1 

Community-based mobile crisis intervention services with 85% federal matching 

funds for the first 3 years 1 

U.S. Department of 

Justice Office of 

Justice Programs 

All currently closed: 

• Edward Byrne Memorial Justice Assistance 

Grant 

• Project Safe Neighborhoods (PSN) 

• Byrne Criminal Justice Innovation Program 

(BCJI) 

• Smart Prosecution – Innovative Prosecution 

Solutions 

Edward Byrne Memorial Justice Assistance Grant Program: Includes funding support 

for mental health programs and related law enforcement and corrections programs 

such as behavioral programs and crisis intervention teams:1 

• Applications are solicited every spring/summer 

• Awards of $25,000 or more are for 4 years 

• Awards of less than $25,000 are for 2 years 

Bipartisan Safer 

Communities 

Act: Expanding 

community-based 

behavioral 

health services 

Includes $40 million for the U.S. Department 

of Health and Human Services to support the 

Certified Community Behavioral Health Clinic 

Medicaid Demonstration Program; includes 

support for new planning grants to states 

CCBHCs provide comprehensive, coordinated, person-and family-centered services 

and 24/7 crisis intervention services. 

The Bipartisan Safer Communities Act has expanded to all states the opportunity to 

participate in the CCBHC model demonstration and made it permanent. 

Could supplement funding for crisis intervention 

government. By contracting, staffing 

costs could more readily remain variable 

costs. For example, the City of Eugene, 

Oregon, has a five-year contract with its 

provider and can change scope, service 

hours, and so on at the end of a term. The 

city recently negotiated for an additional 

five hours of daily coverage, for a total of 

36 coverage hours available in a day (for 

example, during high-demand periods 

there are two teams available, instead 

of just one). Also, outside organizations 

may have special skills or competencies 

that a government doesn’t. 

Consider telehealth tools, authorized by 

Medicaid, to provide care in behavioral 

health emergencies. States like South 

Carolina, South Dakota, Montana, and 

Oklahoma supply the police or emergency 

medical technicians with tablets that 

allow them to connect patients directly 

with behavioral health clinicians. 

Consider Medicaid billing capability. 

A local government’s administrative 

capacity may be a barrier to taking 

advantage of opportunities to secure 

reimbursement from Medicaid. Denver 

partnered with a nonprofit to provide 

clinician staffing for its alternative 

response; the nonprofit already had 

Medicaid billing capacity. Federal policy 

to encourage alternative response could 

result in expanded opportunities for 

Medicaid reimbursement. In fact, the 

ARPA has established new funding 

through Medicaid for community mobile 

crisis intervention services. See Exhibit 

1 for more information on this and other 

opportunities for federal support. 

Consider grant opportunities. The City 

of Rochester, New York, makes extensive 

use of grants to fund its alternative 

response program, including external 

grants from the U.S. Department of Justice, 

New York Office of Victims Services and 

Department of Criminal Justice Services, 

and Monroe County (with local taxes 

covering the rest). The city has been able 

to revamp longstanding grant budgets and 

secure modest increases in grant support 

to create new positions for alternative 

response. 

As national and state governments look 

for ways to encourage alternative response, 

more grant funding may become available. 

That said, governments must keep in mind 

the difference between one-time grants 

and ongoing grants. Some of the local 

governments we spoke with were accessing 

ongoing grant programs that provide the 

prospect of longer-term funding (these 

include Rochester and Rockford). Some 

grant opportunities may provide a one-time 

infusion of money, and these would be 

appropriate for startup costs like vehicles 

40

The advantage of a 

regional approach is 

that it makes it easier 

to access economies of 

scale, spreading fixed 

costs of public service 

across a larger tax base. 

and equipment, but not appropriate for 

ongoing costs like staff salaries—unless 

a plan is in place to cover those costs with 

other sources of funds in subsequent 

years. There may also be a variety of 

federal grant opportunities in the next 

few years, as summarized in Exhibit 1. 

Consider regional approaches. Regional 

approaches may have the potential to 

reduce the cost of alternative response 

to participating jurisdictions. The City of 

Eugene’s alternative response program 

shares a contract with the neighboring 

City of Springfield, Oregon. Each city 

funds its own participation in the 

program and handles calls for service 

on its own, but the program relies on the 

same local nonprofit (White Bird Clinic) 

to provide the core service. 

The advantage of a regional approach 

is that it makes it easier to access 

economies of scale, spreading the fixed 

costs of public service across a larger 

tax base. Sources of economies of scale 

might include: 

• To the extent that the potential 

workload for alternative responders in 

one community is not enough to justify 

coverage, multiple communities could 

share the responders. 

• Administrative support services like 

payroll, accounting, legal, and so on. 

• After the immediate crisis is over, 

the person who was in crisis is often 

in need of specialized mental health 

attention. Multiple communities could 

collaborate to start or fund a mental 

health clinic for this kind of treatment. 

• Regional approaches to 911 systems 

have benefited many governments 

because of capital costs and 

the specialized labor required. 

Regionalized dispatch might also be 

able to build specialized capabilities 

more easily for alternative response. 

Hear More About Regionalism and Alternative Response on the Public Money Pod 

The December 19, 2022, episode of the Public Money Pod features Beth Goldberg 

from the City of Kirkland, Washington, explaining how five communities in greater 

Seattle collaborated to fund and launch an alternative response service. The Public 

Money Pod can be found on all major podcasting platforms. It is produced by the Center 

for Municipal Finance at the Harris School of Public Policy and is sponsored by GFOA. 

There may be limits, however, on how 

much can be achieved with economies 

of scale. The greatest cost of municipal 

services (including alternative 

response) is labor. After a certain size 

of program, the cost of labor will scale 

up with the workload. In fact, research 

on economies of scale for other kinds 

of municipal services have found that 

the potential for economies of scale is 

largely realized at populations as low as 

20,000 to 40,000. 4 

Conclusions 

As local governments look to new ways 

to provide services to meet the changing 

needs of their communities, they 

will also need new funding models. 

Alternative response for mental health 

crises is an example of a service change 

that many local governments are 

exploring. This article has presented 

findings that can be helpful both for (1) 

designing a viable long-term funding 

strategy for alternative response; and 

(2) identifying principles for funding 

strategies for service innovations 

other than alternative response. 

Shayne Kavanagh is the senior manager 

of research in GFOA’s Research and 

Consulting Center. Galen McDonald is 

a policy associate in GFOA’s Federal 

Liaison Center. 

1 

Among the other local governments GFOA consulted, 

very little use is being made of ARPA funds. Denver, 

Rockford, Scottsdale, and Redmond are not using ARPA 

funds at all. Fairfax County had anticipated using ARPA to 

help fund its pilots but decided to rely mostly on its own 

funding sources because the schedule for implementing/ 

expanding co-response did not match the schedule of 

ARPA funding availability. 

2 

We consulted academic researchers who are examining 

publicly available ARPA data and they confirmed that 

the records don’t differentiate between recurring and 

non-recurring expenditures, and that the categorizations 

of spending are often not well defined. 

3 

A carve-out is a Medicaid-managed care financing model 

where some portion of Medicaid benefits are separately 

managed and/or financed. 

4 

Read more about the research on economies of scale in 

local government services in: Shayne Kavanagh, Clarence 

Wardell III, and Jennifer Park, “Does Consolidating Local 

Governments Work? Part 1 in a Four-Part Series About 

Improving Local Government Coordination and Reducing 

Waste from Local Government Fragmentation,” GFOA 

research report, December 2020. 


42

THE SECRETS OF VISIONARY THINKERS 

The Secrets of 


5 Steps to Living in Possibility 

BY SUSAN ROBERTSON 


We tend to believe that 

famous innovators 

or other “creative” 

people have some 

inherent quality 

that the rest of us 

don't have. But the 

truth is—they don’t. 

They've simply cracked the code on 

how to consistently live in possibility 

instead of living in obstacle. 

Visionary thinkers see possibilities. 

Always. Most of us mostly see obstacles, 

most of the time. We move through work, 

and life, by addressing whatever the 

next obstacle is that falls into our path. 

We problem-solve the next issue on a 

project, we deal with the next customer 

complaint, we address the next 

challenge with our kids. But too rarely do 

we look up, survey the world, and make 

a conscious choice to shape our world to 

make it the way we want it to be. 

Visionary thinkers make that daily 

choice—to imagine the possibility of a 

different world, to hold on to that vision, 

and to refuse to let the obstacles limit 

their thinking. They live in possibility. 

Visionary thinkers are open-minded, 

innovative, imaginative, willing to take 

risks, optimistic, and collaborative—all 

skills related to creative thinking. They 

regularly imagine, consider, and pursue 

new ideas and solutions. 

The good news is that all these creative 

thinking skills are learnable! Anyone 

can become a more visionary thinker by 

learning to leverage the creative genius 

that’s already hidden inside. 

One of the primary barriers to living 

in possibility is the negativity bias, a 

cognitive bias, or mental shortcut, that 

all humans share. It’s the phenomenon 

that negative experiences have a greater 

impact on our thoughts, feelings, and 

behaviors than positive experiences 

do. That seems counterintuitive, but a 

wealth of research shows that negative 

affects us more than positive. As a result, 

we are much more motivated to avoid 

negative than to seek positive. 

Our brains have evolved to excel at 

identifying potential negative so we can 

avoid them. It’s a survival mechanism, 

and it happens in the most primitive 

part of our brain, the amygdala. The 

amygdala is responsible for detecting 

threats and triggering the fight-orflight 

response. It’s laser-focused and 

lightning fast at identifying potential 

problems. This instant identification 

of negatives is what can trap us into 

living in obstacle. 

Living in possibility requires 

refusing to let the negativity bias rule 

our thinking. There are a few steps 

that can make a significant impact, 

helping us manage around this pitfall 

and transform the way we think. 

#1 Pinpoint the problem. 

First, we must be able to spot when 

the negativity bias is at work. 

The easiest way to do that is by 

monitoring one simple phrase: “Yes, 

but….” On the surface, these words 

seem innocuous. And because we say 

them and hear them so frequently, 

they don’t seem like a problem. 

But this short phrase is a massive 

blockade to creative and visionary 

thinking. It dismisses any potential 

positives in an idea or concept before 


THE SECRETS OF VISIONARY THINKERS 

#4 Teach the team. 

When working with others, ask them 

to do the same. Help them understand 

that letting our natural negativity bias 

dominate the conversation has the 

potential to immediately kill any idea. 

Let everyone know that, of course, there 

will be a time to solve the problems, but 

the first task is to identify the potential 

the idea holds. If there aren’t enough 

potential positives, then it’s time to 

move to a new idea. 

But if the idea is visionary and can 

make a real difference, it’s imperative 

to hold off on the negativity bias 

momentarily and allow the brilliance 

of the idea to shine through. 

Visionary thinkers make that daily choice—to 

imagine the possibility of a different world, to hold 

on to that vision, and to refuse to let the obstacles 

limit their thinking. They live in possibility. 

even identifying what those positives 

might be. Instead, it focuses the energy 

and attention of both the speaker 

and the listeners on all the possible 

negatives. This can easily overwhelm 

any idea and immediately kill it. 

#2 Manage your mind. 

Once you’ve determined the negativity 

bias is at work (someone said “yes, 

but…”), the next step is to make a 

conscious choice to change your 

thinking. The key is to first identify 

the potential positives in any idea 

before focusing on the negatives. 

This sounds easy, but it’s actually 

quite hard. It’s counter to a basic 

instinct, so it really does require a 

conscious choice to think this way, 

plus very real discipline to put it 

into practice regularly. 

#3 Nix the negatives. 

The next critical step is to refrain 

from saying the negatives out 

loud—not yet anyway. The truth is, 

regardless that you’ve consciously 

chosen to identify the positives 

first, your brain will subconsciously 

identify the negatives anyway. 

It’s instinctive and instant. Even 

while you’re enumerating positives, 

your brain will be busy identifying 

negatives, too. But the simple trick 

of not saying those negatives out 

loud will help dramatically. Force 

yourself to speak out loud—and 

write down—the positives first. 

#5 Transform the 

troublesome term 

Once the above steps have led you to 

a potentially winning idea, it’s time 

to address the problems with it. To 

continue to remain in possibility, you 

must change the conversation; you 

cannot return to “yes, but…” language. 

Instead, articulate the challenges 

as a “how might we…?” question. So, 

instead of saying “Yes, but it’s too 

expensive,” say, “How might we do it 

more affordably?” This trick of flipping 

a problem statement into a problemsolving 

question is a neuroscience 

brain hack that will revolutionize your 

thinking and problem-solving. 

This process of identifying positive 

potential first is the only way to find big 

ideas. Every successful innovation, in 

any industry or endeavor, is the result 

of someone, or a team, choosing to live 

in possibility in this way. 

Visionary thinking requires making 

space for ideas that, at first, seem scary 

or difficult. It takes some real courage 

to push past our immediate “yes, 

but…” response and instead focus the 

conversation on “what if…?” If we don’t 

hold ourselves accountable to looking 

for the positives, we’ll never consider 

or implement any truly new ideas. 

Visionary thinkers must master this 

skill and learn to live in possibility. 

Susan Robertson is a creative thinking 

expert with more than 20 years of 

experience speaking and coaching in 

Fortune 500 companies. 


44

Got GASB Quessons? 

As GFOA members connnue to have quessons 

related to GASB 87 and GASB 96, we've compiled 

a list of resources in one place on GFOA's website. 

This new resource center includes recent arrcles 

and do-it-yourself tools and templates to help in 

the learning and implementaaon process. 

Learn more at 

gfoa.org/gasb-resource-center

46

BETTER DECISIONS IN THREE STEPS 

Better Decisions 

in Three Steps 

Using a triage process for more efficient problem-solving 

BY SHIELA MIE LEGASPI 

Managers face any number of challenges that require immediate attention and action, so the ability to make 

decisions and solve problems quickly can be critically important. One tool that can be of help is the triage 

decision-making process. Triage decision-making is used in emergency medical situations to determine 

the treatment required for patients, who are prioritized based on the severity of their condition and the 

likelihood of recovery, as well as what additional measures will need to be taken for them to fully recover. 

This same approach can be applied to business management. Managers can use this to prioritize issues 

and allocate resources to address the most pressing problems. More importantly, it puts a process in 

place: each person knows how they fit into the triage decision-making process and can tap in if needed. 

Without triage and defined roles, the issue can escalate rapidly. Here is how to put it into practice. 

©2023 JAMES YANG C/O THEISPOT.COM 

Identify the issue. 

The first step is to identify the issue or problem. To determine 

the scope and impact of the problem, gather all relevant 

information and data. At this stage, involving stakeholders— 

including employees and customers—will help you 

understand the full scope of the issue. Adopting a big-picture 

mindset to better understand the issue helps you effectively 

strategize and appropriately allocate people and resources 

toward the desired outcome. 


BETTER DECISIONS IN THREE STEPS 

Prioritize the urgency of the issue. 

Based on its urgency and importance, prioritize the 

problem into three levels: high, medium, or low. Highpriority 

issues are critical and require immediate 

attention, while medium-priority issues can wait 

a little longer before action is needed. Low-priority 

issues are not time-specific and don’t require immediate attention. 

Some managers like to color-code their problems like nurses do in the 

hospital emergency room. Color-coding allows you to categorize each 

type of problem and reference it easily if it comes up again. 

After prioritizing the situation, immediately allocate resources to 

address the high-priority problems—assigning personnel, providing 

funding, or delegating responsibilities. This ensures that your teams 

focus their efforts where they are most needed. 

Monitor progress. 

The final step in the triage decision-making process 

is to monitor progress and adjust the plan as needed. 

As with any decision-making process, unforeseen 

obstacles or challenges that may arise will need to 

be accounted for. Continually monitor progress and 

adapt the strategy to resolve the issue as effectively and efficiently as 

possible. Also record the entire process, which helps create a system 

to better tackle other problems that arise in the future. 

Using the triage 

decision-making 

process allows for 

quick and efficient 

problem-solving, 

helps reduce 

stress, increases 

productivity, and 

significantly improves 

team communication 

and collaboration. 

Benefits 

This general triage process emulates the one 

used by emergency nurses but setting up a 

three-point decision-making process for each 

department can work just as efficiently. 

For example, start by determining if you or 

your team has set the right expectations, and 

if the “client” understood them (or vice versa). 

Have an evaluation call or meeting to verify 

that the priorities, tasks, and job descriptions 

were clear, and address the mismatch or 

misunderstanding, perhaps by providing more 

or better training. 

Using the triage decision-making process 

allows for quick and efficient problem-solving, 

helps reduce stress, increases productivity, and 

significantly improves team communication 

and collaboration. You might fail, and possibly 

many times, but as they say, hard times create 

strong people. Failure, while disappointing, 

can lead to further learning opportunities, and 

implementing clear processes helps minimize 

the severity of most problems. 

Shiela Mie Legaspi is the president of 

Cyberbacker, a provider of virtual assistant 

services and administrative support. 

©2023 JAMES YANG C/O THEISPOT.COM 

48

Welcome GFOA’s Newest 

Affinity Group! 

At GFOA’s Annual Conference in 

May, the LGBTQIA+ Caucus 

officially launched. Through 

networking and educaaon, this 

caucus will advocate for 

LGBTQIA+ members within the 

profession and work to increase 

the visibility of LGBTQIA+ people 

within GFOA and the profession 

as a whole. 

Join today at 

gfoa.org/lgbtqia-caucus 


LEADERSHIP OPPORTUNITY 

Standing Commiiee 

Applicaaons Open 

Accve throughout the year, GFOA's standing commiiees 

are key links between the changes happening in the 

finance offices of members and the services the 

associaaon provides to help finance officers successfully 

manage those changes. The commiiees give direccon for 

GFOA's services by formulaang new policies and raising 

professional standards via best praccces. 

Apply now at 

gfoa.org/commiiees

In Practice 

FINANCE | ACCOUNTING | PERSPECTIVES | INTERVIEWS 

FINANCE 

METRO, OREGON 

Creating a Collaborative Culture of Curious 

People Who Are Committed to Public Service 

BY KATIE LUDWIG 

Metro, a regional 

government agency 

serving northwestern 

Oregon, has developed a 

collaborative structure 

and culture that helped the organization 

navigate the COVID-19 pandemic and 

its effects, while continuing to focus 

on delivering better outcomes through 

compromise and problem-solving. 

Metro serves about 1.7 million 

people in Clackamas, Multnomah, 

and Washington counties. Brian 

Kennedy, Metro’s chief financial officer, 

explained that the organization was 

created in the 1980s through the merger 

of a council of governments focused on 

land use and transportation planning 

and a solid waste service district. Since 

this merger, the organization has grown 

to accommodate other operations 

including the Oregon Convention 

Center, parks and nature systems across 

the region, the Oregon Zoo, the Portland 

Expo Center, and several performing 

arts centers in the City of Portland. 

“We exist to do a lot of things that 

don’t fit easily into other governments’ 

niches,” Kennedy said, adding that 

Metro recently issued a $653 million 

bond to fund affordable housing 

construction in the region, and in 2020, 

voters passed a personal and business 

income tax to raise about $250 million a 

year to fight chronic homelessness. 

Metro has a centralized finance 

operation, providing budget, accounting, 

financial reporting, procurement, 

and risk management services to the 

entire agency. “No organization has 

Finance just because they think it’s a 

super-awesome thing to have or they 

love producing financial statements,” 

explained Kennedy. “We exist to make 

the rest of the organization work. Part 

of my vision for our team is that we’re 

at the table for every big decision that 

gets made, and I don’t want to force 

that. I want to be invited to those tables. 

I think we have the best data in the 

organization. We have visibility into 

the entire organization. We have some 


IN PRACTICE | FINANCE 

of the best tools for helping to evaluate 

decisions. The way we get invited to 

those tables is by being good partners.” 

“Early in my career, I worked for 

some finance departments that very 

much enjoyed telling everyone ‘no’ 

and being the mean parent in the 

relationship. What I saw is that we didn’t 

get involved in decisions; we didn’t get 

invited into conversations. We were 

always finding out about things after 

the fact,” Kennedy said. “I really want 

us to have a different path, so we have 

finance managers who are embedded 

in each of our departments. Part of what 

we want them to do is earn the trust 

of the directors and the departments 

they’re supporting, so when somebody 

says, ‘I have a big problem to solve,’ the 

first person they think about inviting 

to that conversation is their finance 

manager. I want them to be one of their 

most trusted advisors. That’s how we 

try to enshrine good financial decisionmaking 

throughout the organization.” 

Craig Stroud is the executive director 

of the Oregon Convention Center. “We 

strive for excellence in daily operations 

and in making decisions that are 

strategic for the future. We need the 

right disciplines at the table to make 

and enact decisions, and that comes 

through collaboration,” he said. “I don’t 

have a team that’s expert in finance, 

but Metro has an entire team of finance 

experts. Bringing the right people in, all 

contributing to mission-focused service 

delivery and excellence—that to me is 

collaboration.” 

Rachael Lembo is a finance manager 

at Metro. She currently supports the 

housing and planning department, 

but she previously served the venues, 

including the convention center, the 

expo center, and the performing arts 

centers. “I think our structure excels 

at collaboration because our finance 

managers are encouraged to understand 

the operations, and they feel passionate 

about the mission of their particular 

department,” Lembo said. “I will look 

at something through a financial 

lens, while somebody else is going to 

bring a sales perspective, or a building 

maintenance perspective—but we all 

have a shared understanding of what 

the department is trying to do. Knowing 

that we have the best interests of the 

My vision for our team 

is that we’re a the table 

for every big decision 

that gets made. 

BRIAN KENNEDY, 

CHIEF FINANCIAL OFFICER 

department front and center keeps us 

respectful of each other as we share 

our unique perspectives. Even though 

I didn’t report to Craig, like the rest of 

the convention center team, our shared 

interest helped us work well together.” 

Navigating the pandemic together 

“Our business basically evaporated 

overnight—two weeks and we were shut 

down—and we had no foresight for when 

we would be able to reopen and get back 

into our core business,” Stroud said. “We 

shed about 75 percent of our full-time 

staff and all our variable-hour workers. 

We had about 115 full-time folks before 

the pandemic, and we cut to around 40.” 

Metro’s current chief operating 

officer, Marissa Madrigal, started 

working for the agency in early March 

2020, just as COVID-19 was beginning 

to spread rapidly across the United 

States. The organization was exploring 

operational scenarios and developing 

contingency plans for their venues. 

Because Madrigal couldn’t visit all the 

venues and meet with the directors in 

person, because of the speed of service 

impacts from the pandemic, she relied 

heavily on the finance managers to 

provide her with weekly updates on each 

venue’s current financial position and 

outlook. “We were able to collaborate 

in a unique way, where rather than her 

having to speak to each venue, she got 

the information consolidated from the 

finance managers,” Lembo explained. 

This information made it clear that 

the organization’s immediate financial 

outlook was bleak, and Metro’s executive 

leadership was going to have to make 

significant short-term cutbacks. 

On April 1, 2020, Metro laid off 700 

employees, approximately 40 percent of 

its workforce. Most of these staff worked 

in the venues. 

“The layoff process was unlike 

anything I’ve ever done before. I think 

Human Resources and Finance were 

brought into that process because, as 

emotional as it was for me, it was even 

more devastating for the managers in 

the venues,” Lembo said. “The managers 

knew we needed to move forward with 

layoffs, but I think it was just too hard 

for them to do. They really leaned on 

Finance and Human Resources to assist 

in that process, and we supported them 

as much as we could through that really 

awful undertaking.” 

“There wasn’t enough time to provide 

the emotional support to the organization 

and the technical execution,” Stroud 

said. “I think there’s little instances of 

this happening every day, but this was an 

exceptional example of how Finance and 

Human Resources stepped in. It really 

did take a huge burden off my plate, so 

I could focus on the people and let our 

partners deal with the process.” 

Lembo stressed that Finance and 

Human Resources were only able to 

provide this needed support because 

they had existing relationships with 

these other parts of the organization. 

“The support could only happen because 

there had been collaboration for years 

before that moment, and there was real 

trust. Having any old Finance person 

come in and provide input about whom 

52

you’re going to lay off—no. But we were 

able to do that because of those strong 

relationships and our understanding of 

the overall business and operations,” she 

explained. 

“There was a real existential crisis in 

that moment. We didn’t know if we’d be 

able to come back if we shut everything 

down. That was on the table at some 

point—do we lay every single person off 

and just lock the doors, turn off the lights, 

and try to come back at a later date?” 

Kennedy said. “We decided not to do that 

because we knew we wanted to be able to 

come back, and we knew that there would 

be opportunities for our venues, especially 

the convention center, to serve the 

community, even during the pandemic.” 

“If there was any silver lining of the 

pandemic, it was our ability to pivot and 

support our community,” Stroud said. Very 

early on, the convention center hosted 

drive-through COVID testing in its parking 

garages, which provided protection from 

spring rains and summer heat. 

The convention center also partnered 

with Multnomah County to house 

homeless people. The county’s existing 

shelter locations weren’t sufficient to 

allow for adequate social distancing. 

A portion of the convention center halls 

were converted to a homeless shelter, 

eventually providing about 55,000 

nightly stays. 

Stroud said the convention center’s 

biggest accomplishment was operating 

as a regional mass vaccination center. 

The vaccination operation ran for 

about six months, starting with about 

1,000 vaccinations per day in the 

initial periods and ramping up to 

close to 10,000 vaccinations per day 

at the peak. In total, nearly 550,000 

vaccinations were administered at the 

convention center. 

“If we had shut everything down, 

we couldn’t have responded quickly 

enough to accommodate those critical 

needs,” Stroud said. 

Making collaboration work 

“Having a human connection is 

incredibly important” for collaboration 

to be successful, Stroud said. “When 

Rachael was the finance manager 

for the convention center, she was 

an active part of my leadership 

team. She had a seat at the weekly 

strategy meeting and participated 

in the conversations. So, for me, for 

collaboration to really be successful, 

you must have a human connection 

and appreciation for their expertise. It’s 

really about that human connection, 

and then in times of stress, that 

relationship can be built upon.” 

Lembo explained that she once 

worked for a nonprofit and enjoyed the 

mission-driven aspect of that work, 

but as part of a small finance team 

she didn’t have colleagues she could 

collaborate with on finance-related 

work. Conversely, she once worked at 

a CPA firm that was all finance folks— 

but she didn’t feel a connection to a 

broader goal or purpose. “For me, the 

structure at Metro is just perfect, where 

I have both of those things, and I feel 

super-supported,” she said. 

“I’ve always been attracted to 

operations and the mission of 

whichever entity I’m working at. 

That’s a big draw for me, as important 

as my job duties,” Lembo said. “The 

amazing thing about the structure 

at Metro is that I get to be part of the 

operations team of the department 

I’m supporting, and I’m also part of 

the finance manager team. The other 

finance managers help me brainstorm 

ideas and solutions that improve 

the finance support I provide to the 

department. I have two teams that I 

can collaborate with in different ways.” 

Challenges to collaboration 

The current remote and hybrid 

workplace makes collaboration a bit 

more challenging because it can be 

more difficult to establish a human 

connection and get to know people 

as individuals, Stroud mentioned. 

“A lot of that doesn’t happen online; 

it happens when you’re at the water 

cooler. It happens when you grab 

lunch together. It happens in those 

off-moments, and we’re not spending 

time like that together,” he said. “I 

think that’s a barrier that we haven’t 

mastered yet, and we need to master 

it in order to really be prepared to roll 


IN PRACTICE | FINANCE 

Metro serves more than 1.7 million people 

in Clackamas, Multnomah, and Washington 

counties. The agency’s boundary 

encompasses Portland, Oregon and 

23 other cities. 

out collaboration and teamwork and get 

through stresses in the future.” 

Difficulty in retaining and recruiting 

staff has been a bit of a challenge to 

collaboration in recent years. “A lot of 

people we’ve had have stuck around 

for relatively long periods of time, but 

over the last couple of years—we’ve 

had two different finance managers 

supporting the venues since we asked 

Rachael to move to another department 

to fill a finance manager vacancy,” 

Kennedy explained. He thinks one factor 

driving the higher attrition rate in these 

positions is that right now, there are 

plenty of good job opportunities working 

in local government in the Portland area. 

Folks who work at Metro as a finance 

manager get a good combination of 

budget, accounting, and operations 

experience, which makes them 

attractive job candidates. “In terms of 

building those relationships, we’ve had 

to start over a couple of times when we 

get new people in, and just like everyone 

else, it’s a challenge to recruit and a 

challenge to find the people who have 

the right set of skills—great interpersonal 

skills to build those relationships, but 

also the solid finance background.” 

Advice on becoming more 

collaborative 

The Metro team offered their advice on 

how Finance and Operations teams can 

collaborate to achieve better outcomes 

for their organizations. 

Knowing that we have 

the best interests of 

the department front 

and center keeps us 

respectful of each 

other as we share our 

unique perspectives. 

RACHAEL LEMBO, 

FINANCE MANAGER 

Better collaboration might initially be 

uncomfortable, Lembo acknowledged, 

but over time it becomes easier. “For 

the finance person, developing a real 

interest, providing creative ideas, and 

saying, ‘Yeah, I can look into that,’ 

instead of immediately saying no—even 

if you later have to follow up with a no— 

is very effective,” she said. “I think one 

of the barriers to collaboration is that it 

can feel like you’re giving up a little bit of 

power. For the operations side, it’s about 

knowing that if you let that finance 

person in a little bit, you’re going to get 

their creativity and you’re going to be 

able to get to yes more often, which is 

ultimately where you want to go. Doing it 

behind their back isn’t going to work. 

Both of you have to lean in a little bit 

from the natural stance, but then that 

becomes more comfortable and becomes 

the new natural.” 

Stroud agreed and explained that 

effective collaboration requires “having 

people who are appreciative and excited 

about the mission and operations, and 

they’re learning about it, and they’re 

trying to figure out how to improve it. That 

creates the opportunity to move forward 

and meet in the middle.” 

“I come out of the finance world, so I 

appreciate cash controls,” Stroud. said 

“I understand why finance requires we 

use effective controls that others see as 

bureaucratic. They think, ‘Oh, Finance 

is just making us do this.’ No, they’re not. 

They’re requiring controls to protect us 

should money go missing.” 

Kennedy’s advice for developing a more 

collaborative culture stressed hiring 

curious people who are committed to 

public service. “I come with an unusual 

background. I started as a land use 

planner and then ended up in Finance and 

spent some time in Parks running park 

operations and park capital projects. I love 

government. I’m a true believer. I think 

government can do great things, and we 

should put more trust and confidence 

in the ability of government to solve 

problems,” he explained. “Part of what 

I want from the people on our team is a 

deep curiosity and interest in what we do 

as an agency. You run into a lot of Finance 

people who are just deeply uncurious 

about the rest of the things that happen in 

the organization. I think that’s the wrong 

way to approach it. I want people who are 

really excited and interested in diving 

into the work that we do because the work 

that happens at our venues, the solid 

waste transfer stations, or at the parks is 

incredibly fascinating. You can care about 

both—producing great, accurate financial 

statements and this amazing work.” 

Katie Ludwig is director of resource 

development in GFOA’s Research and 

Consulting Center. 

54

“Very informaave, touched on a lot of 

important informaaon.” 

2022 Forum AAendee 

“Speakers were great, and introduccons 

were thorough. I liked hearing real-life 

examples.” 


“Good breadth of different experiences 

in local government.” 


New to public finance? We’ve got just the event for you! This year’s Fundamentals 

Virtual Forum will walk you through a day in the life of a finance officer. Topics will 

include Accounnng, Budgeeng, Leadership, Treasury Management, Procurement, 

and Risk Management. 

July 10-14 | gfoa.org/fvf 


IN PRACTICE | ACCOUNTING 

ACCOUNTING 

Subscription Supposition 

A Look at Practical SBITA Examples 

BY MICHELE MARK LEVINE 

T 

he authoritative accounting 

guidance in Governmental 

Accounting Standards 

Board (GASB) Statement 

No. 96, Subscription-Based 

Information Technology Arrangements 

(GASB 96), is effective for fiscal 

years beginning after June 15, 2022, 

and all reporting periods thereafter. 

This implementation is challenging 

governments in many of the same 

ways we were challenged by GASB 

Statement No. 87, Leases (GASB 

87), 1 and in some different ways as 

well. Like leases, subscription-based 

information technology arrangements 

(SBITAs) are often not centrally 

managed, so just gathering information 

about contractual arrangements that 

might be—or contain—SBITAs from 

multiple departments can be a timeconsuming 

first step. Like for leases, 

the information necessary to properly 

classify contracts as being SBITAs 

or containing SBITA components, to 

determine the subscription term, and 

to recognize and measure subscription 

liabilities and assets, may require 

legal expertise for interpretation. 

But for SBITAs, there is arguably 

more complexity to measurement of 

subscription assets than there is for 

lease assets, as certain development 

costs are included. The good news is that 

GASB has already issued a substantial 

amount of implementation guidance for 

lessees, much of which can be applied 

by analogy to governments in SBITAs, 

and that identifying the additional 

capitalizable costs has considerable 

precedent in preexisting generally 

accepted accounting principles (GAAP) 

applicable to internally generated 

computer software, so it will be familiar 

to some. 2 

GFOA has prepared two examples of 

SBITAs (available online at gfoa.org/ 

gasb-resource-center), each based on a 

different subscription model. In each 

case, incurred costs are identified and 

categorized in accordance with the three 

stages of development and the capitaleligibility 

rules identified in GASB 96. 

The calculations used to measure the 

subscription liabilities and subscription 

assets are shown, along with their 

amortization schedules. Finally, journal 

entries for each event are provided, linked 

back to the calculations from which the 

amounts are derived. Entries for the 

SBITAs are illustrated both (1) on the 

current financial resources measurement 

focus and the modified accrual basis 

56

of accounting used for governmental 

funds and (2) on the economic resources 

measurement focus and accrual basis of 

accounting used for all other reporting. 

The entries to convert between the 

two are also shown. While this article 

will point out some key aspects of 

these examples, their full benefit 

can only be derived by reading the 

complete assumptions and reviewing 

the workbook, which links amounts 

from assumptions categorizations 

summarizations liability and 

asset measurements and amortization 

schedules journal entries. This 

article cannot cover or describe all 

the important details. 3 Before delving 

further into the examples, though, 

let’s do a quick review of the basics of 

accounting for SBITAs. 

Highlights of GASB 96 and 

similarities to GASB 87 

GASB 96 defines a SBITA as “a contract 

that conveys control of the right to use 

another party’s (a SBITA vendor’s) IT 

software, alone or in combination with 

tangible capital assets (the underlying 

IT assets), as specified in the contract 

for a period of time in an exchange or 

exchange-like transaction.” 4 The only 

difference between this definition and 

the definition of a lease is the phrase “IT 

software, alone or in combination with 

tangible capital assets (the underlying 

IT assets)” in place of “nonfinancial 

assets” in the lease definition. This 

reflects the broad similarity in the 

accounting and financial reporting by 

governmental lessees and governments 

in SBITAs. The apparent overlap of the 

definitions (IT assets are nonfinancial 

assets) is resolved by the statement 

in GASB 96 that it does not apply to 

arrangements “in which the software 

component is insignificant when 

compared to the cost of the underlying 

tangible capital assets.” 5 

A subscription term is determined 

in essentially the same manner as a 

lease term, and it begins as soon as the 

first independently functional module 

is—or the first set of interdependent 

modules are—placed into service. 6 That 

is the point at which the subscription 

liability and the subscription asset 

(which are discussed further below) are 

first recognized, and amortization of 

The good news is that 

GASB has already issued 

a substantial amount of 

implementation guidance 

for lessees, much of which 

can be applied by analogy 

to governments in SBITAs. 

the asset begins. It is also the point after 

which payments to the SBITA vendor 

for the right to use the underlying IT 

assets should be treated as subscription 

payments. Any payments made to the 

vendor for that purpose at or before the 

SBITA inception date are prepayments. 

In many cases, the subscription term 

will begin after the term of the contract 

that contains the SBITA began, as it is 

quite common for license payments to 

be required before any configuration—let 

alone usage—can begin. While there is 

a parallel requirement that a lease term 

and lease payments not begin until 

the lessee has access to the underlying 

capital asset, 7 this has nonetheless 

caused some confusion for many 

governments implementing GASB 96. 

The present value (PV) of 

future payments to be made by the 

government to the SBITA vendor 

for the use of vendors’ underlying 

IT assets (subscription payments) 

constitutes a subscription liability, 

just as the PV of future lease payments 

to a lessor constitutes a lease liability 

for a governmental lessee. The 

kinds of payments to be included as 

subscription payments (such as fixed, 

fixed-in-substance) are similar to 

those treated as lease payments, and 

similar remeasurement requirements 

apply. As in the case of lease 

liabilities, the subscription liabilities 

must be amortized using the effectiveinterest 

method. 8 

The primary difference between 

the accounting for SBITAs and leases 

is in the measurement of the related 

intangible right-to-use capital assets, 

called the subscription asset, in the 

case of a SBITA. Unlike a lease asset, 

for which only necessary ancillary 

costs (transportation, testing) are 

added to the lease liability and the 

net of other payments to or from the 

vendor (prepayments, incentives), 

the subscription asset’s measurement 

includes certain implementation 

costs, as shown in Exhibit 1. 

EXHIBIT 1 

IMPLEMENTATION COSTS INCLUDED IN THE MEASUREMENT OF THE SUBSCRIPTION ASSET 

Lease Asset = Subscription Asset = 

Lease liability (PV future 

lease payments) 

+ Prepayments 

+ Ancillary costs 

+ Incentives received 

Subscription liability (PV future 

subscription payments) 

+ Prepayments 

+ Certain capitalizable 

implementation costs 

+ Incentives received 



EXHIBIT 2 | EXAMPLES OF THE ACTIVITIES AND TREATMENT OF COSTS IN 3 IMPLEMENTATION STAGES 

Beginning of 

subscription term 

1. Preliminary Project Stage 

• Formulate and evaluate alternatives 

• Determine existence of needed 

technology 

• Select among alternatives 

Expensed as incurred 

2. Initial Implementation Stage 

• Design, configure, code, install, and test 

• Convert data needed to make 

underlying assets operational 

Certain costs are capitalized, becoming 

part of subscription asset 

3. Operation and Additional 

Implementation Stage 

• Train users 

• Convert data (other than that needed 

to make underlying assets operational 

• Maintain software (and hardware) 

• Implement additional modules 

Expensed as incurred, unless improves 

functionality or efficiency 

GASB 96 provides guidance on what 

costs should be included in the asset 

measurement (for example, capitalized) 

and that guidance very closely 

resembles the capitalization guidance 

for internally generated computer 

software, including the use of three 

implementation stages, although the 

stages differ slightly. 9 Exhibit 2 gives 

examples of the activities and treatment 

of costs in each of those stages. 

Following the initial implementation, 

costs incurred to increase the 

functionality or efficiency of an 

existing subscription asset, such as the 

implementation costs of subsequent 

modules, should be capitalized. 10 Thus, 

there can be additions to subscription 

assets after they are first put into 

service, at the same time that they are 

also being depreciated. Subscription 

assets are amortized in a “systematic 

and rational manner over the shorter of 

the subscription term of the useful life 

of the underlying IT assets,” 11 generally 

using the same method used to 

depreciate or amortize the government’s 

owned capital assets. Most other 

aspects of accounting for SBITAs (such 

as contract modifications, contacts 

with multiple SBITA and non-SBITA 

components, disclosures) are also very 

similar to those of lessee accounting for 

leases. 

With that bare-bones refresher, let’s 

turn back to the examples. 

1. In Example 1, a government contracts 

to use proprietary workflow and 

document management software, 

to be hosted on the vendor’s servers 

(hardware) and accessed by the 

government’s staff and the public 

through the internet. The government 

pays the vendor to initially configure 

the software for the government’s 

use and then for licenses to use the 

vendor’s software and hardware, 

and also pays the vendor to perform 

ongoing maintenance. 

2. In Example 2, a government contracts 

for an enterprise-wide license to use 

a vendor’s proprietary enterprise 

resource planning (ERP) system 

(software and hardware) with multiple 

modules. The government also 

separately contracts with a third party 

to configure modules and to maintain 

the system. This example illustrates 

how the sequential implementation of 

independently functioning modules 

may be accounted for. 

Example 1 

In Exhibit 3, all costs related to the 

workflow and document management 

system (system) are first classified using 

the stages discussed above. Only a single 

column is needed for the preliminary 

project stage, as none of those costs 

should be capitalized. For the initial 

implementation stage, in which most 

costs are capitalizable, the example uses 

three columns to classify costs as being 

(1) paid to the vendor and capitalizable, 

(2) paid to others (in this case, internal 

staff) and capitalizable, and (3) 

noncapitalizable costs, regardless of the 

payee. For the operating and additional 

implementation stage, no costs are 

incurred that increase the subscription 

asset’s functionality or efficiency, as 

would be the case if a new module were 

implemented, so there are no additional 

capitalizable costs. The operating 

and additional implementation stage 

payments are either subscription 

payments or period costs for ongoing 

system maintenance rather than for the 

right to use the underlying IT assets. 

As seen in Exhibit 3, payments to the 

vendor for the right to use the underlying 

IT assets and for their implementation 

work that are made at or after the 

inception date (totaling $11,000 on 

January 1 and $12,000 on March 1) 

are reported as capital outlays in the 

general fund and as development-inprogress 

(a capital asset) in statements 

prepared on an economic resources 

measurement focus. Other capitalizable 

costs—$2,040 in employee costs in this 

58

EXHIBIT 3 | CLASSIFYING ALL COSTS RELATED TO THE WORKFLOW AND DOCUMENT MANAGEMENT SYSTEM 

Stage 1: 

Prelimimary 

Project Stage 

Stage 2: 

Initial Implementation 

Stage 

Stage 3: 

Operation and Additional 

Implementation 

Date Incurred 

Description 

Amount 

Capitalizable– 

Paid to SBITA 

Vendor 

Capitalizable– 

Other 

Noncapitalizable 

Subscription 

Payments 


FY 20X0 Consultant costs (scope, technical feasibility, RFP and specifications development) $6,000 $6,000 

FY20X0 City staff time (scope, technical feasibility, RFP and specifications development) $3,000 $3,000 

1/1/X1 Five full licenses full year @$600 $3,000 $3,000 

1/1/X1 First installment for implementation $8,000 $8,000 

3/1/X1 Eight full licenses @ $600 for 10/12 months $4,000 $4,000 

3/1/X1 Second installment for implementation $8,000 $8,000 

$11,000 

$12,000 

3/31/X1 City staff time for implementation, of which $960 is for training $3,000 $2,040 $960 

4/1/X1 Twelve full licenses @ $600 for 9/12 months $5,400 $5,400 

4/1/X1 Final installment for implementation, of which $3,000 is for data conversion and training $9,000 $6,000 

$24,900 $3,000 

4/1/X1 Block of 50,000 user licenses @ $18,000 for 9/12 months $13,500 $13,500 

4/1/X1 Annual maintenance/support @ $12,000 for 9/12 months $9,000 $9,000 

4/X1-12/X1 City staff time for system administration @ $6,000 for 9/12 months $4,500 $4,500 

1/1/X2 25 full licenses for year @ $600 $15,000 

$15,000 

$33,000 

1/1/X2 Block of 50,000 user licenses @ $18,000 for year $18,000 $18,000 

1/1/X2 Annual maintenance/support @ $12,000 $12,000 $12,000 

FY 20X2 City staff time for system administration @ $6,000 $6,000 $6,000 

1/1/X3 25 full licenses for year @ $600 $15,000 

$15,000 

$33,000 

1/1/X3 Block of 50,000 user licenses @ $18,000 for year $18,000 $18,000 

1/1/X3 Annual maintenance/support @ $12,000 $12,000 $12,000 

FY 20X3 City staff time for system administration @ $6,000 $6,000 $6,000 

$178,400 $9,000 $47,900 $2,040 $3,960 $66,000 $49,500 

example—are reported in the same 

manner. When the subscription asset 

is put into service (April 1, 20X1), 

the accumulated development-inprogress 

($11,000 + $12,000 + $2,040 

= $25,040) is eliminated (debited), and 

the balance of that account is added to 

the amount of the initial subscription 

liability ($61,270, the present value of 

the two $33,000 future subscription 

payments) and capitalizable payments 

to the vendor that are made at that 

time ($24,900), and recognized as the 

subscription asset. See Exhibit 4 for the 

calculations of the subscription liability 

and subscription asset values. 

EXHIBIT 4 | SUBSCRIPTION LIABILITY AND ASSET MEASUREMENTS 

Subscription Liability and Asset Measurements 

$ 61,270 Net present value of future payments ($66,000) = subscription liability 

$ 61,270 Subscription liability 

47,900 Prepayments (1/1, 3/1, and 4/1/20X1 payments to vendor) 

2,040 Other capitalizable implementation costs 

$ 111,210 Subscription asset 



The subscription liability 

amortization table for this example, 

part of which is shown in Exhibit 5, is 

prepared using monthly periods even 

though the licenses are annual. While 

the term of the contract that contains 

the SBITA begins in January 20X1, 

the subscription term doesn’t begin 

until April 1, necessitating part-year 

amortization. Also note that interest 

accrues even during months in which 

no payments are made, as the interest 

is assumed to compound monthly, and 

that the interest payable is tracked 

separately from the subscription liability, 

based on implementation guidance GASB 

promulgated for leases that appears 

applicable to the SBITA in this example. 12 

Since there are no subsequent modules 

implemented in this example, the 

amortization table for the subscription 

asset can be established at the time of 

implementation. A portion of that table is 

also shown in Exhibit 5. 

Example 2 

This example is different from Example 

1 in that: 

• The full cost of annual licensing begins 

to be paid at the start of the contract; 

• The implementation and maintenance 

work are performed by a thirdparty 

contractor, rather than by the 

SBITA vendor through a non-SBITA 

component of the same contract; and 

• A second module is implemented after 

the first module is put in service. 

EXHIBIT 5 | SUBSCRIPTION LIABILITY AMORTIZATION 

Period # 

Payment Date 

Subscription 

Payment 

Amount 

Interest @ 

Monthly Rate 

of 0.50% 

Amortization of Subscription Liability 

Subscription 

Interest 

Payable 

Interest 

Payment 

Principal 

Payment 

Subscription 

Liability 

61,270 

Total 

Remaining 

Liability 

1 4/1/X1 61,270 61.270 

2 5/1/X1 306 306 61,270 61,576 

3 6/1/X1 308 614 61,270 61,884 

4 7/1/X1 309 924 61,270 62,194 

5 8/1/X1 311 1,235 61,270 62,505 

6 9/1/X1 313 1,547 61,270 62,817 

7 10/1/X1 314 1,861 61,270 63,131 

8 11/1/X1 316 2,177 61,270 63,447 

9 12/1/X1 317 2,494 61,270 63,764 

10 1/1/X2 33,000 319 2,813 30.187 31,083 31,083 

11 2/1/X2 155 155 31,083 31,238 

12 3/1/X2 156 312 31,083 31,395 

13 4/1/X2 157 469 31,083 31,552 

14 5/1/X2 158 626 31,083 31,709 

Amortization of 

Subscription Asset 

Monthly 

Periods 

Straight-line 

Unamortized 

33 Balance 

111,210 

3,370 107,840 

3,370 104,470 

3,370 101,100 

3,370 97,730 

3,370 94,360 

3,370 90,990 

3,370 87,620 

3,370 84,250 

3,370 80,880 

3,370 77,510 

3,370 74,140 

3,370 70,770 

3,370 67,400 

3,370 64,030 

EXHIBIT 6 | CLASSIFICATION OF COSTS INCURRED DURING THE OPERATING AND ADDITIONAL IMPLEMENTATION STAGE 

Classification of costs: 

Date 

incurred 

Description 

Amount 

Stage 3: Operation and Additional Implementation 

Subscription 

Prepayment 

& Payments 

7/1/X1 Semiannual payment to PERP for right to use cloud-based software and related hardware $ 250,000 250,000 

Stage 

Capitalizable 

– Additional 

Implementation 

7/1/X1 1st installment payment to SLEEPS for implementation of AP module $ 300,000 300,000 


– Operation 

7/1/X1 SLEEPs annual support (1 module for 6 months of 20X1) $ 100,000 100,000 

7/31/X1 County employee work on system AP module implementation $ 35,000 35,000 

8/1/X1 2nd installment payment to SLEEPs for implementation of A/P module $ 300,000 300,000 

8/31/X1 County employee work on system AP module implementation $ 35,000 35,000 

9/30/X1 3rd installment payment to SLEEPs for implementation of AP module ($180,000 data conversion and training) $ 400,000 220,000 180,000 

9/30/X1 County employee work on system AP module implementation ($8,000 data conversion and training) $ 35,000 27,000 8,000 

9/30/X1 GFOA Phase 2 consulting: implementation assistance for AP module ($5,000 data conversion); payable 10/31 $ 30,000 25,000 5,000 

10/1/X1 SLEEPs annual support (additional module for three months of 20X1) $ 50,000 50,000 


1/1/X2 SLEEPs annual support (2 modules for 20X2) $ 400,000 400,000 



1/1/X3 SLEEPs annual support (2 modules for 20X3) $ 40,000 400,000 


$ 4,921,000 $ 1,250,000 $ 942,000 $ 1,143,000 

60

EXHIBIT 7 | SUBSCRIPTION LIABILITY AND ASSET MEASUREMENTS 

Subscription Liability and Asset Measurements 

$ 929,275 Net present value of future payments = subscription liability 

$ 929,275 Subscription liability 

500,000 Vendor prepayments (1/1X1 and 7/1/X1) 

893,000 Other capitalizable pre-term implementation costs (Stage 2 Capitalizable - Other) 

$ 2,322,275 Initial subscription asset 

EXHIBIT 8 | SUBSCRIPTION ASSET AMORTIZATION 


Months of 

Subscription Term 

Lapsed in Period 

Module 2 

placed into 

service 

9/1/X1 

Remaining 

Life at End of 

Period (Months) Period Ending Additions 

Amortization 

of In-Service 


Balance 

36 1/1/X1 

$2,322,275 / 30 

30 6/30/X1 2,322,275 months 

2,322,275 

1 29 7/31/X1 335,000 77,409 2,579,866 

1 28 8/31/X1 335,000 77,409 2,837,457 

1 27 9/30/X1 272,000 77,409 3,032,048 

1 26 10/31/X1 112,298 2,919,749 

1 25 11/30/X1 $3,032,048 / 

112,298 2,807,451 

27 months 

1 24 12/31/X1 112,298 2,695,153 

6 18 6/30/X2 673,788 2,021,365 

6 12 12/31/X2 

$112,298 * 

673,788 1,347,577 

6 months 

6 6 6/30/X3 673,788 673,788 

6 – 12/31/X3 673,788 – 

3,264,275 3,264,275 

Asset as 

measured 

at inception 

$2,322,275 

+ $335,000 

- $77,409 

Exhibit 6 shows the classification of 

costs incurred during the operating and 

additional implementation stage. While 

the classification is similar to that in 

Example 1 for preliminary project stage 

and the initial implementation stage, 

here we see capitalizable costs incurred 

during this final stage because of the 

additional module that is implemented. 

Exhibit 7 uses data from the 

classifications of costs incurred at all 

stages, not only those in the operation 

and additional implementation stage 

in Exhibit 6, and shows the calculation 

of the subscription liability and the 

subscription asset. 

Exhibit 8 shows the subscription asset 

amortization table for this example, 

illustrating that amortization of the inservice 

component occurs concurrently 

with additions to the asset value based 

on capitalizable costs incurred for the 

implementation of a second module 

while the first is in use. This treatment 

would be applicable to any costs 

incurred to increase the functionality or 

efficiency of an in-service subscription 

asset, whether or not planned for at the 

inception of the subscription term. Note 

that for the purpose of this illustration, 

the asset value is tracked on a monthly 

basis until all implementations have 

been completed. 

Please pardon the crowded 

appearance of this final exhibit. 

Hopefully it will encourage you to look 

at the example itself, and hopefully you 

will find it worth your time to do so. 

Michele Mark Levine is the director of 

GFOA’s Technical Services Center. 

1 

Leases guidance can be found in GASB 2022-2023 

Codification of Governmental Accounting and 

Financial Reporting Standards (Cod.), Section (Sec.) 

L20, “Leases.” 

2 

GASB Cod. Sec.1400, “Reporting Capital Assets,” 

paragraphs .128 to .134. 

3 

The examples illustrate possible approaches to 

recognizing and measuring elements of SBITAs. 

They do not necessarily represent the only 

acceptable, or the best, application of GAAP. 

4 

GASB 96, paragraph 6. 

5 

GASB 96, paragraph 4.a. 

6 

GASB 96, paragraphs 9, 15, and 30. 

7 

GASB Cod. Sec. L20.702-1. 

8 

GASB Cod. Sec. L20.715-4. 

9 

GASB Cod. Sec. 1400, “Reporting Capital Assets,” 

paragraphs 128 to 134. 

10 

This is reflected in the name of the last stage: 

Operation and Additional Implementation. 

11 

GASB 96, paragraph 27. 

12 

GASB Implementation Guide 2021-1 paragraphs 4.10 

and 4.17, effective for fiscal years beginning after 

June 15, 2022, and all reporting periods thereafter. 


IN PRACTICE | PERSPECTIVE 

PERSPECTIVE 

Are Tax Incentives Good for Cities and States? 

BY KATHERINE BARRETT AND 

RICHARD GREENE 

Alittle more than 30 

years ago, the State of 

Alabama used hundreds 

of millions of dollars in 

tax incentives to attract 

a giant Mercedes-Benz plant to the state. 

That was the beginning of an escalating 

battle on the part of cities, counties, and 

states to attract business by handing 

over large amounts of taxpayer dollars. 

According to David Brunori, visiting 

professor of public policy at George 

Mason University and senior director 

at RSM US—which provides audit, tax, 

and consulting services to the public 

sector—“they’ve been proliferating ever 

since, and the number has grown every 

year since 1992. In fact, there’s a whole 

industry that does nothing but look for 

tax incentives for companies.” 

The big question, of course, is whether 

this is genuinely good business for cities, 

which generally give up property taxes, 

and states, which largely forfeit income 

taxes. Most experts, as well as much 

academic literature, say that the answer 

to this is no. 

Shayne Kavanagh, senior manager 

of research in GFOA’s Research and 

Consulting Center, said, “There is 

compelling evidence that these things are 

often not effective.” He noted that many 

places use tax incentives largely because 

they don’t want to take the chance of being 

the only player who isn’t in the game—even 

if there’s little to nothing to win. “It’s an 

arms race phenomenon in games theory,” 

he said. “If you don’t do it, the next guy will.” 

The costs of tax abatements can be huge, 

and when property tax money is used in 

cities, those dollars aren’t available for 

other important services. The obvious 

losers are the schools, which tend to be 

the largest single users of property taxes. 

According to a report by Good Jobs First, 

“Schools in New York State lost at least 

$1.8 billion in fiscal year 2021 to corporate 

tax abatements.” 1 

©2023 DAN BEJAR C/O THEISPOT.COM 

62

The irony here is obvious. Businesses 

are attracted by a well-educated workforce, 

and if the schools suffer and fail to attract 

businesses in any one year, it makes the 

city less attractive for further economic 

development in the future. To make 

matters worse, there isn’t much evidence 

that the tax incentives are a powerful 

economic incentive tool in the first place. 

Nathan Jensen, professor of government 

at University of Texas at Austin and an 

authority on the topic, said: “Academic 

research shows that the majority of firms 

would have made the same decision, to 

relocate, expand or stay, even without 

incentives. In these cases, incentives are 

just a transfer of taxpayer-funded benefits 

to firms for no new economic activity.” 2 

Despite this, corporate America has 

long been able to pit one city against 

another when it comes time to settle or 

expand. It’s a giant game of poker in which 

corporations can easily bluff their way 

into a big payoff. 

One of the most notorious examples 

of this was uncovered a few years ago by 

The New York Times, which reported that, 

“In total, over five years, 12 companies 

threatened to leave New Jersey and move 

to Blue Hill Plaza (in New York) unless 

the state provided tens of millions in tax 

credits. None followed through on the 

threat. In fact, an investigation by The 

New York Times suggests that most of the 

12 companies never seriously considered 

moving to New York. But all 12 received 

lucrative tax credits from New Jersey 

to stay—more than $100 million in 

total, according to documents obtained 

by the Times.” 3 

The promises made by the corporations 

involved frequently don’t come to pass. 

Katherine Loughead, senior policy analyst 

at the Tax Foundation, said, “We’ve 

seen countless examples of massive tax 

incentive deals offered to companies that 

overpromise but underdeliver, tying up 

taxpayer resources in the process.” 

Unfortunately, as much as elected 

officials may enjoy the ribbon cuttings 

and newspaper headlines when a new 

deal is announced, the details can be 

difficult to find. “A lot of this is very 

nontransparent,” says Loughead. “Many 

of these incentive deals are made behind 

closed doors to a mystery company going 

to locate in the state.” 

The costs of tax 

abatements can be huge, 

and when property 

tax money is used in 

cities, those dollars 

aren’t available for other 

important services. 

With all this in mind, why do states 

and localities continue to fixate on tax 

incentives? 

One clear reason is essentially 

political in nature. It’s difficult for 

elected officials to take credit for many 

of the things that genuinely attract 

new businesses, like good education 

systems, a willing workforce, local 

amenities like golf courses and, 

naturally, the weather. Even the most 

hyperbolically inclined politician in the 

world simply can’t take credit for blue 

skies and a temperate climate. 

But whatever the incentives, “voters 

think they work,” Jensen said. “If a 

company comes to your area because of 

other factors involved in the location, 

the mayor or the governor can’t 

take credit for it. But if they give out 

incentives, they can take credit.” 

One area in which tax incentives 

are sometimes seen as a worthwhile 

approach is when they are used to 

attract business to blighted inner city 

areas that are desperate for investment 

of any kind. These are frequently given 

through tax increment financing (TIF) 

districts that are designed so that local 

governments can use increased tax 

revenue generated in designated areas 

to pay for development costs in those 

areas. Governments often issue bonds 

in anticipation of the increased revenue 

generated in the district and then can 

use the proceeds to pay for upfront 

development costs. 

This sounds like a win-win situation, 

but there are some serious shortcomings 

to this means of using taxes to create 

incentives for business development in 

blighted areas. Josh Goodman, a senior 

officer who works on state fiscal policy for 

the Pew Charitable Trusts, ticks off three: 

• Tax revenue in the districts may have 

increased even without the creation of 

the TIF district and, if so, schools miss 

out on revenue they otherwise would 

have received. This is particularly 

likely when local governments create 

TIF districts in neighborhoods where 

investment is occurring and property 

values are rising prior to the creation of 

the TIF district. 

• Businesses and residents that 

otherwise would have located 

elsewhere in the locality may choose 

to locate in the TIF district instead. As 

a result, revenue from these taxpayers 

that would have gone to general 

purposes is used for the TIF district 

instead. 

• Depending on how the bonds are 

structured and the willingness of local 

leaders to accept a default, there could 

be some risk that general dollars will be 

needed to pay the debt service on bonds 

if incremental increases in tax revenue 

in the district aren’t sufficient to do so. 

Another challenge Goodman brings up is 

that TIFs are designed to help the people 

in the geographically targeted areas, “but 

most people don’t work where they live. 

So, they could go to the distressed area 

for their jobs, and then travel back to their 

homes elsewhere.” 

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. 

1 

Christine Wen and Greg LeRoy, “Corporate 

Subsidies versus Public Education: How Tax 

Abatements Cost New York Public Schools,” Good 

Jobs First, February 2023. 

1 

Nathan M. Jensen, “Job Creation and Firm-specific 

Location Incentives,” Journal of Public Policy, 

published online by Cambridge University Press, 

March 28. Available at https://www.cambridge. 

org/core/journals/journal-of-public-policy/article/ 

abs/job-creation-and-firm-specific-location-incenti 

ves/8DEF2F1624A629AEA87B71A533E4EB9D 

1 

Nick Corasaniti and Matthew Haag, “Businesses 

Are Cashing In on Empty Threat to Leave New 

Jersey,” The New York Times, September 24, 2019. 


IN PRACTICE | PERSPECTIVE 

PERSPECTIVE 

A New Premium on Discount Rates 

BY JUSTIN MARLOWE 

M 

oments after his 

inauguration, President 

Biden signed a document 

titled, “Memorandum 

on Modernizing 

Regulatory Review.” It’s as technocratic, 

inconspicuous, and inside-the-beltway 

as the title suggests. But it could reshape 

the way we think about the costs and 

benefits of state and local government. 

This memorandum set in motion a 

review of how the federal government 

evaluates the impact of proposed 

regulations. That review has several 

components, including a careful look at 

how to better incorporate perspectives 

from those who are affected by regulation 

but haven’t traditionally had a voice in 

policymaking. But the component that 

could affect state and local finance the 

most is a rethinking of discount rates. 

As a quick refresher, recall that a 

discount rate is a number used to adjust 

future benefits to today’s terms. For 

instance, imagine that a friend owes 

you $1,000. They offer to pay you 

back the full $1,000 in three years 

or pay you $500 today. They’re also 

quite unreliable, so there’s a good 

chance the future payment will be less 

than $1,000. You need to build that 

uncertainty into your decision. 

We quantify that intuition through a 

discount rate. Discount rates are higher 

when a future outcome is less certain, 

when an outcome is simply more 

valuable to us today than in the future, 

and when we expect higher inflation, 

among other reasons. Discount rates 

and interest rates go hand in hand. 

A borrower who is less creditworthy 

will pay a higher interest rate for a loan 

precisely because the lender applies a 

higher discount rate to the repayment 

of that loan. This same thinking also 

applies to costs. In that case, a higher 

©2023 KOTRYNA ZUKAUSKAITE C/O THEISPOT.COM 

64

discount rate means future spending 

feels “less costly” in today’s dollars. 

Discount rates are everywhere 

in the federal government. Today 

approximately $50 billion of annual 

federal spending on certain state and 

local infrastructure projects, especially 

in areas like mass transit systems and 

levees, is subject to formal benefit-cost 

analysis. Federal agencies also conduct 

benefit-cost analysis of many proposed 

regulations. The Office of Management 

and Budget and the Congressional 

Budget Office use discount rates in 

their long-term projections of future 

federal revenues and spending. In all 

these cases, policymakers’ views on 

whether a proposed project, regulation, 

or budget appropriation will generate 

more benefits than costs are tied to the 

discount rate in play. 

Discount rates are hard-wired into 

state and local government finance, 

too. Perhaps the most visible, and 

often controversial, application is in 

calculating liabilities for state and 

local government defined benefit 

pensions. Pension plan sponsors use 

a rate based on long-term investment 

returns to express the cost of future 

retiree benefits in today’s dollars. A 

small decrease in that discount rate can 

increase those liabilities by millions or 

billions. Several state departments of 

transportation use benefit-cost analysis 

to evaluate different procurement 

options for the same project. We also see 

benefit-cost analysis at work in state 

and local budget shops, internal audit 

programs, tax incentive evaluations, 

and many other areas. Perhaps no 

other single, wonky number is quite as 

consequential. 

For decades, federal agencies have 

relied on two basic discount rates. One 

is a 3 percent rate, used to evaluate 

proposed regulations. It follows from 

the idea that proposed regulations lead 

to higher prices, and that causes us 

to consume fewer goods and services 

over time. What’s that consumption 

worth? About as much as investing the 

Higher discount 

rates will mean 

more valuable future 

benefits and more 

“costly” costs today. 

same amount of money in risk-free 

U.S. Treasury bonds. When the federal 

guidelines were last updated in 2003, 

the average yield on US Treasuries was 

3 percent. The 7 percent rate applies 

to the benefits of federal government 

investments in infrastructure projects. 

That investment displaces privatesector 

investment, the logic suggests, 

so the benefits of that regulation should 

exceed the return on investment of 

private capital. Those guidelines were 

last updated in 1992, and back then 

those returns averaged 7 percent. 

In April 2023 the administration 

took the next step toward some major 

changes when it released a draft set of 

revisions to the two main documents, 

OMB Circular A-4 and OMB Circular 

A-94, that apply to these issues. In 

short, those revisions call for replacing 

the 3 percent rate with a 1.7 percent 

rate based on more recent trends in U.S. 

Treasury yields, and the 7 percent rate 

with a to-be-determined lower rate. 

These changes are only proposals, but 

assuming they’re adopted, they’ll have 

three big implications. 

First, and practically speaking, 

higher discount rates will mean more 

valuable future benefits and more 

“costly” costs today. If a taxpayer 

today expects to receive $100,000 in 

benefits from a new local government 

project over 20 years, the present 

value of those benefits at a 3 percent 

discount rate is $55,000, and at a 7 

percent discount rate it’s a bit more 

than $25,000. At discount rates of 1.7 

and 4.5 percent, those present values 

are $71,300 and $41,400, respectively. 

Those are qualitative shifts. 

Second, with this proposal the 

federal government acknowledges 

that interest rates and returns on 

investment for private capital have 

both trended lower over time. Critics 

of state and local pensions have 

long argued those plans employ 

unrealistically high discount rates 

of 7 to 8 percent. Proponents say 

those rates properly reflect longterm 

market trends, even though 

markets as of late have defied those 

trends. With this proposal the federal 

government has come down clearly in 

favor of the opponents. They’ll almost 

certainly seize on this point. 

And third, this proposal solidifies 

that climate change has forever 

changed the relationship between 

current and future benefits. Imagine, 

for instance, that a city government 

proposes to spend millions today 

to decarbonize all its public 

buildings. Most of the benefits of 

that investment will be “discounted 

away” at a discount rate of 7 percent 

over several decades. And yet, many 

believe that without decarbonization, 

climate change will destroy, in just a 

few decades, the markets from which 

that 7 percent discount rate was 

derived. These proposed changes give 

federal agencies the option to explore 

even lower discount rates on climate 

adaptation projects for precisely that 

reason. This opens the door for state 

and local governments to do the same. 

The federal government is about 

to put an even larger premium on 

discount rates. State and local 

finance professionals should prepare 

in earnest. 

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. 


IN PRACTICE | INTERVIEW 

Embracing Complexity and 

Continuous Improvement 

Since joining the City 

of Guelph in January 

2011, Tara has moved 

progressively through 

roles including corporate 

analyst and manager 

before moving into her current position 

in June 2016. In 2022 and early 2023, 

she served as acting general manager 

for IT before returning to finance. Before 

entering the municipal finance sector, 

Tara was an assurance manager at KPMG. 

A chartered professional accountant, 

Tara has been an active member of 

GFOA since 2011 and has been part of 

GFOA’s Rethinking Budgeting team 

since its inception in 2021. 

Finding her place ‘in industry’ 

Tara didn’t begin her career in municipal 

finance, but she has certainly found her 

passion as she’s built a career working for 

the City of Guelph. After graduating from 

McMaster University with a Bachelor of 

Commerce in business, Tara became a 

CPA and went into public accounting. 

At KPMG, Tara conducted audits in a 

AN INTERVIEW WITH TARA BAKER 

Jara Kern, writer with Right Angle Studio, 

spoke with Tara Baker (left), treasurer 

and general manager of finance for the 

City of Guelph in Ontario, Canada, about 

her career path in municipal finance, 

the biggest challenges facing local 

governments, and how finance officers 

can better embrace complexity. 

wide range of industries, including 

manufacturing, non-profit, education, 

health care, and local government. 

“When I left public accounting to go into 

‘industry,’ as we call it,” she recalled, “it 

was local finance that appealed to me 

because I really liked the people and the 

culture I had encountered. I could also 

see how the work really impacted people 

and that it mattered.” Her first role 

with the City of Guelph was as a senior 

corporate analyst, a financial reporting 

role similar to her work in audit—but now 

on the other side, in a new sector. 

Tara immediately embraced the 

complexity and challenges. “Right 

away, I found the dynamic between 

an elected council of decision makers 

and a professional administration very 

interesting. We deliver many different 

services, and it’s a challenge to stay 

connected to everything that’s going 

on, see the need, and bring the financial 

strategies and recommendations 

that pull it all together for council and 

community. I enjoy the whole process 

and all its moving parts.” 

Shifting toward strategy 

For Tara, success in her career has come 

from not shying away from its complexity, 

but instead developing a level of comfort in 

bringing knowledge, skills, and experience 

to move ideas and problem solving forward. 

As she advanced into new roles with the 

City of Guelph, she had to transition away 

from a pure focus on financial reporting 

and accounting, and toward strategy and 

budgeting. “In accounting, you have a 

historical lens on the business, creating the 

financial statements and conducting the 

trend analysis after things have happened,” 

she explained. “It’s different in budgeting. 

As you find disconnects, or explain why 

actual results differ from projections, 

you see how essential it is to connect the 

dots between finance and strategy at the 

front end of any planning. This is where I 

could get involved in how to change policy 

and the budget presentation to address 

gaps between what’s actually happening 

between accounting, budgeting, and 

planning.” 

Tara relishes the challenge of 

orchestrating the budgeting process, 

including performance reporting, the 

strategic planning cycle, and functions that 

feed into and flow out of the budget, to create 

successful outcomes and communications. 

“As treasurer, I have to set the tone. I lead the 

process of generating the budget as well as 

the education and communications around 

it. Budgeting brings individual departments 

together as one entity, with financial 

strategies and policies that can help council 

make better, more informed decisions. As 

government finance officers, we can be 

an important part of the solution for the 

important issues our communities face.” 

For the last three years, Tara has 

served on GFOA’s Rethinking Budgeting 

team. “When it comes to the principles 

and process, budgeting has been done 

the same way for a long time. Rethinking 

Budgeting is so interesting and important 

because it’s focused on improvement and 

innovation in the budgeting process.” Such 

areas include community engagement, 

equity considerations, innovations in 

communication, and the relationship of 

the budget to the strategic planning cycle. 

“Together we are generating innovation 

that will change how communities across 

the United States and Canada address 

budgeting.” 


66

Addressing local government 

challenges 

Despite being on different sides of 

the same border, local governments 

in the United States and Canada 

face many of the same urbanization 

challenges: housing affordability, aging 

infrastructure, social service delivery, 

limited revenue and data access and 

use, climate change, and more. “The 

significant weather events resulting from 

climate change are forcing us to look at 

infrastructure in new ways to mitigate 

the impacts,” Tara emphasized, “as well 

as how we can fund these needs and more 

with a limited revenue base.” 

Tara pointed to asset management and 

infrastructure renewal as an area where 

Canadian government finance officers 

are making progress, perhaps ahead of 

their U.S. counterparts. “In budgeting and 

strategies, we are very focused on having 

asset management plans and aligning 

our budget to the priorities that come 

out of these plans, as well as creating 

financial strategies that maintain 

current assets. These plans also define 

the service level of these assets, and the 

different financial investments required 

to maintain them at the standard the 

council expects for the community.” 

With a population of 145,000 and 

growing, the City of Guelph faces many 

of the same urbanization challenges 

outlined above, particularly housing 

affordability and demand for social 

services to address homelessness and 

support for mental health, including 

addiction. Tara said, “When you really 

unpack these problems, they are not core 

functions of city service delivery. But 

they are the real needs in our community, 

and we in local government are closest 

to them. When you layer on things 

like the limits to property tax dollars, 

infrastructure needs, and high inflation, 

you see the financial pressure start to 

stack.” It’s this kind of complexity and 

the opportunity to advance solutions 

that have always drawn Tara to work 

through the fiscal challenges of meeting 

community needs. “It’s really about 

the importance of being the fiduciary 

responsibility over public funds.” 

Communicating process and progress, 

though, is not always easy, and there 

is room for improvement in the ways 

local governments share financial 

information with stakeholders, including 

the public. “If you can turn your complex 

financial reports into more accessible 

communications, it builds trust. There 

is such a return on that investment in 

building trust.” 

Building and maintaining connections 

Tara makes connecting with other 

municipal finance officers a professional 

priority. In addition to taking an active 

role with the GFOA Rethinking Budgeting 

team, she belongs to the Municipal 

Finance Officers’ Association of Ontario. 

This provincial-level association enables 

members to share best practices as well as 

work through changes to legislation that 

may affect service delivery and policy 

at the local level. She also participates 

on the peer review board of MFOA’s ONE 

Investment, which opens investment 

management opportunities on behalf of 

municipalities in the province, helping 

them pool assets or maximize potential 

returns on excess cash. 

Connection is also critical to effective 

process improvement. At the City of 

Guelph, Tara is continually focused on 

building relationships between her team 

and other departments. Like many other 

governments, the city has experienced 

recent turnover. This has brought new 

ideas and energy, but it also resulted in 

a loss of some institutional knowledge 

about processes. Recently, Tara and her 

team introduced a new learning and 

improvement initiative, the “Who Does 

What Series.” The inaugural event focused 

on capital funding and brought all staff 

together to learn, interact, and build 

relationships. “Because our workplace 

has a hybrid model, we don’t see each 

other in person all the time. This session 

helped provide some foundational process 

education but also built rapport. We ended 

it with a valuable list of opportunities for 

improvement that we are working through.” 

Being relationship-focused also helps 

in navigating politics, which can present 

challenges for finance officers in any 

municipality. “My colleagues and I try to 

remember that our role is not political, 

that we are to provide the best professional 

advice we can, and frame it for our 

audiences. Key to this is being agile and 

flexible, and building relationships based 

on trust that endure over time.” 

Meeting the future head-on 

Tara and her team cultivate a continuous 

improvement mindset when it comes to 

the big challenges and opportunities for 

local government. She highlighted two 

that many face: attracting talent and 

advancing digital transformation. 

“We are competing for talent with all 

sectors, not just municipal finance,” Tara 

said. “We must be more progressive to 

be competitive, and this means offering 

flexibility like remote and hybrid work. 

We could also do more to market the 

importance of the work our sector does, 

and to foster a positive culture between 

council and administration. This requires 

a shift, for councils to think of themselves 

as employers and board of directors as 

much as community representatives.” 

She also pointed out the importance 

of building a solid talent development 

pipeline to attract more graduates directly 

from university programs into municipal 

finance roles. 

Recently Tara spent eight months 

as acting general manager for IT with 

the City of Guelph, which has given her 

perspective on the importance of digital 

transformation for local governments. 

“The way of the future is data. While I 

was in IT, I saw firsthand that one of our 

biggest obstacles to a more data-driven 

environment is the way government 

technology has been built over time— 

these are historically on-premise legacy 

systems that are siloed, that don’t 

integrate with each other at all.” This 

reality is forcing governments to think 

differently about their entire technology 

infrastructures to enable the kind of 

workflows that pull and push data across 

all systems, for all customer interactions. 

This is where true customer centricity 

and customer service can happen. “We 

must step back and really think about 

system architecture to make it more 

integrated and agile, so we don’t have to 

rebuild and reinvent for the future again. 

It’s about building for change.” 

Embracing the idea of building for 

change takes a great deal of flexibility and 

resilience—qualities Tara has drawn on 

and honed during her career, and qualities 

that any government finance professional 

would do well to cultivate, too. 

Jara Kern is a marketing strategist at 

Right Angle Studio. 



WITH SAMANTHA BABICH BY MIKE MUCHA 

Mike Mucha, GFOA’s deputy executive 

director, spoke with Samantha Babich, 

the chief administration officer for 

the Renton Regional Fire Authority, 

about a career in fire service, what 

it’s like to build a finance organization, 

the benefits of transparent budget 

decisions, and how governments can 

improve their recruiting. 

Mike: Can you tell us about the Renton 

Regional Fire Authority and your role as 

chief administration officer? 

Samantha: Renton Regional Fire 

Authority, or Renton RFA as we call it, 

was established in April of 2016 when 

Renton voters decided to separate fire 

protection and life safety services 

from the City of Renton and create a 

special purpose district. We originally 

began operations in July 2016. Our 

organization serves over 138,000 

community members across 38 square 

miles of response area, just south of 

Seattle, and last year, we provided more 

than 23,000 emergency responses to the 

Renton community and surrounding 

jurisdictions. We have five divisions: 

response operations; EMS, health, and 

safety; the office of the fire marshal; 

support services; and administration. 

I joined the team two weeks after 

operations began and quickly took on 

the role of the chief administration 

officer over the administration division. 

As CAO, I oversee finance, IT, human 

resources, communications, and 

administrative support. Together, 

these sections conduct the behind-thescenes 

work that makes the more visible 

aspects of the organization possible. 

That’s interesting that residents voted 

to create another government. It 

seems like we hear more focus around 

consolidation. What was the driver for 

creating a Regional Fire Authority? 

We are seeing an increasing number of 

RFAs pop up across the state. One of the 

biggest benefits we have experienced 

is the ability to diversify our funding. 

Typically, fire departments under 

the umbrella of a city are beholden to 

property tax as a primary funding source. 

As you know, property taxes are based on 

assessed property values and can often 

contain revenue growth restrictions. In 

Washington, there is a one percent cap 

on property tax revenue growth yearover-year, 

which does not keep pace with 

inflation. When we branched out to form 

the RFA, the voters also approved what is 

called a fire benefit charge, or FBC, which 

allows for an additional funding source. 

Unlike property tax, a FBC is based on 

the size, risks, and resources needed to 

protect a structure, making it a much 

more predictable source of funding, and 

more directly related to our organization’s 

cost to protect life and property. When 

you pair these two funding sources 

together, they provide more financial 

stability to the organization and more 

freedom to not only bolster existing 

services but truly assess and respond to 

the needs of the community. 

68

Before accepting your current role in 

Renton, you worked for another fire 

service organization. Is there something 

specific about fire service that you enjoy? 

When I was in college, I thought I wanted 

to be an attorney. I received a degree 

in justice, but I quickly realized that 

criminal justice was not for me. In the 

90s I worked in the .com and technology 

sector in the Seattle area and found that 

to be very stimulating, but it lacked the 

public service element I was drawn to. 

In 2003, I moved to Idaho and was 

working on finishing the basement of my 

home. I reached out to Kootenai County 

Fire and Rescue to approve a permit that 

I needed to move forward. When I went 

in to discuss the permit, I also found 

out there was an opening for a business 

manager. I applied, got the job, and fell 

in love with the work and the people. My 

role was to manage the administrative 

support functions for the organization, 

but I really just became a part of the 

family. I enjoyed all of the challenges, 

the opportunities, and the success 

stories from my time there. 

That’s a great story, as other governments 

struggle to hire finance officers. 

It is. I didn’t really know much at all about 

fire service and wasn’t expecting to apply 

for a job. And it turns out that I didn’t 

even need the permit I went to discuss. 

You just never know where or when an 

opportunity will open up to you. 

When you started with Renton RFA, the 

organization was brand new. What was 

it like to develop policies and processes 

from scratch? 

It was both stressful and exhilarating. 

It felt a lot like working in the .com 

industry in its early years where we 

were building something from the 

ground up and anything was possible. 

When I went to work for Kootenai County 

Fire and Rescue, they were working to 

modernize their systems and processes, 

and I was able to bring my knowledge and 

experience in the tech sector to the public 

sector. When I started at Renton RFA, 

the chief asked what I wanted from the 

position, and I said that I loved building 

and wanted to be a part of creating an 

organization from the ground up. Turns 

out, the organization was a good fit for 

what I wanted in my career journey, and 

I think I have been a good fit for the needs 

of the RFA as well. 

“Start with the end in mind. You need a clear vision on what 

the organization should look like and then work backwards.” 

What was the most challenging part? 

We didn’t know what we didn’t know. We 

were learning, building, and growing all 

at the same time. Coming from Idaho, 

I wasn’t familiar with the Budgeting, 

Accounting, and Reporting Systems 

(BARS) used in Washington. Our first 

finance person came from the private 

sector, so there was a bit of a learning 

curve for her in government accounting. 

When we started, we had no chart of 

accounts, no policies, and no ERP system. 

So, like I said, we did a lot of learning and 

building at the same time. Kind of like 

designing and building a bridge as you are 

crossing it. 

Are you still adding policies and 

implementing new functions, or have 

things stabilized? 

It’s been almost seven years, but I 

would say that we are still adding new 

policies. One of our financial analysts 

came back from the Washington GFOA 

conference with information about GFOA’s 

Distinguished Budget Presentation Award. 

She asked if we could apply for next year, 

but I suggested that we do it now, because 

why wait? We ended up submitting it 

for the award in February. I’m proud of 

what we produced. It’s concise and really 

communicates the story of Renton RFA. 

and it connects our values, mission, 

and guiding principles to how we spend 

money. It also made us take a hard look 

at our finance policies to ensure that we 

had all the proper ones in place. 

Is there anything you would have done 

differently, or do you have any advice 

for other finance officers who may be 

facing the challenge of creating a finance 

organization? 

I’m not sure we would have done 

anything differently—maybe we’d 

have decided on our ERP system a little 

earlier. It took us a while to implement 

the system, but having the technology 

in place is necessary. In terms of overall 

guidance, I would say start with the end 

in mind. You need a clear vision of what 

the organization should look like and 

then work backward. I had ten years of 

finance experience in the fire service 

before coming to Renton RFA and felt like 

I had a pretty good feel for what elected 

officials and the fire chief would want 

from our finance team. Once we knew 

what that end looked like, we were able 

to develop processes, reports, and many 

other little things to support the plan. 

The RFA website and budget talk a lot 

about the organization’s mission, vision, 

and guiding principles. How do those 

align with financial processes? 

Our vision, mission, and values posters 

are everywhere in our facilities. We all 

live by them. Our organization’s vision is 

to make our community safer, healthier, 

and stronger. In finance, we often use 

this as our compass when setting our 

budget. Everything we fund should tie 

back to this vision. For example, we have 

recently funded a new service in our 

budget called FDCARES. This program 

is intended to service frequent 911 

users with non-emergent care needs and 

provide proactive services to remove their 

dependency on the 911 system and the 

hospital emergency departments. This 

not only improves the level of care for our 

most vulnerable community members 

but also takes stress off our emergency 



responders by ensuring that they are ready 

for truly emergent calls. As far as our values 

of professionalism, integrity, leadership, 

loyalty, accountability, and respect are 

concerned, we lean into these when we 

are unsure of what the right decision or 

course of action is. The right thing to do 

is usually pretty clear when you use our 

values as a lens. 

Having finance staff work together 

with fire personnel is a focus of GFOA’s 

partnership with the International 

Association of Fire Chiefs (IAFC) to 

develop better budget practices for local 

government fire service and to ensure 

that fire chiefs have an understanding of 

finance issues. How would you describe 

the relationship between administrative 

services and fire chief at RFA? 

I’m thrilled to hear about the joint effort 

between GFOA and IAFC. We have 

membership in both organizations, and 

the collaboration this project is working 

to achieve is spot on. In my current and 

former organizations, they embraced the 

CAO as a position to help advise the fire 

chief just like any other division chief. 

The relationship between administrative 

services and the fire chief can be a 

challenge if you are not on the same page 

about how funds are allocated. Fortunately, 

I have a very positive working relationship 

with my fire chief and enjoy coming to work 

each day. Finance is often perceived as the 

one who only says ‘no’ and who holds the 

purse strings too tight. As finance officers, 

I think the best thing we can do is to be as 

open and transparent as possible. 

Fire chiefs are really under a lot of 

pressure to perform, but protecting the 

community and ensuring the health and 

safety of our first responders is always a 

priority. Apparatus and equipment are 

highly specialized and expensive. Staffing 

response operations 24x7x365 is also 

expensive. When I started in Idaho, the 

fire chief built the budget, and finance 

would ensure that expenses aligned with 

revenue. Because much of that work 

was done in a silo, it seemed like we were 

always defending the budget and resource 

allocations to the firefighters. So, in 

2006, we opened up the budget process to 

everyone in the organization and really 

engaged our membership to help us 

determine our priorities. It was amazing 

to see how many firefighters came to 

meetings on their own time to help guide 

the budget process. Having discussions 

in the open helped make those decisions 

more transparent and strengthened 

the trust between the firefighters and 

administration. 

In addition to our elected officials and 

our citizen advisors, approximately 

ten percent of our Renton RFA members 

are involved in the budget process in 

some way. Most are budget managers 

with responsibility for either a division, 

a section, a special team, or a special 

program/project. It is a very collaborative 

process. Sometimes discussions can get 

tense. People have opinions, and that’s 

okay. Elected officials, leadership, and 

even new firefighters can provide feedback 

and weigh in. We want to have all of the 

ideas out there. I love the way we do it 

now. There are no secrets and no hidden 

agendas, just complete transparency. 

I believe strongly that while many 

new fire chiefs could benefit from better 

knowledge of finance, at the same time 

administrative staff need to really get out 

and spend time with the first responders. 

By getting boots on the ground, you get 

to see what their needs are and gain a 

greater sense of and empathy for what it is 

that they do each and every day to protect 

our residents. 

You also oversee IT. How has cloud 

technology changed the way that fire 

service operates? 

Cloud computing is great. I fell in love with 

technology tools to streamline processes 

using automated flows in 2005. At Renton 

RFA we leverage everything we can out 

of the Microsoft power platform. We have 

reduced paper to support sustainability 

and reduce clutter. Most of our forms 

are electronic which trigger workflows 

that send information to the teams that 

need it, ensuring timely information 

flow throughout the organization. The 

IT team here has also worked to develop 

two automated bots. They work to gather 

and analyze data from our IT systems 

and publish information to screens that 

we have hung throughout our offices and 

firehouses. Our ERP system is entirely in 

the cloud, which allows us to work from 

any device anywhere, at any time. We take 

the approach that we want to make use of 

technology for everything that it can do and 

save the human touch for things that need 

a human touch. Coming to work is exciting 

and has a start-up feel to it. We don’t have 

anyone telling us no; it’s about what’s next. 

That’s impressive. When used strategically, 

technology can help lessen the impact of 

hiring challenges that many governments 

face. I also learned a bit about WA Fire 

Careers. Can you explain more about this 

program? 

One of the challenges in the fire service 

is recruiting—it’s just hard. We have more 

retirements than incoming firefighters. 

At Renton RFA one of our primary goals is to 

build a membership that is representative 

of the community we serve. In the South 

King County area, it seemed like we were all 

trying to hire the same people, at the same 

time. We participate in a joint training 

consortium with other agencies which 

allows us to train together, but it also means 

that we are all hiring simultaneously, 

70

“While many new fire 

chiefs benefit from better 

knowledge of finance, 

administrative staff need 

to really get out and 

spend time with the first 

responders. By getting 

boots on the ground, 

you can really see what 

their needs are.” 

and only two times per year. In our 

area, candidates were routinely getting 

four or five job offers for each academy. 

When someone accepts a conditional job 

offer from an agency, the agency then 

incurs costs for medical testing, psych 

evaluations, background checks, and 

gear to prepare the individual for the 

academy. Some departments had the 

same costs for the same candidate. When 

the candidate finally selected their final 

choice, the other departments were left 

to start over or lose a spot in the academy. 

It was painful. With WA Fire Careers, 

Renton RFA joined Enumclaw Fire, King 

County Fire District #20, Puget Sound 

Fire, and Valley Regional Fire to approach 

recruiting and hiring collaboratively. Our 

joint recruiting efforts make the process 

more accessible. Candidates take one test 

for all agencies and can get on a list for any 

of them. Firefighters then interview with 

the departments that select them and rank 

the departments they want to work for. At 

the same time, departments are able to 

rank candidates. We then use algorithms 

to match candidates to their highestranked 

organization, and each will 

receive only one job offer. We’re no longer 

competing with neighboring organizations 

for the same people. 

What a great idea, and a great example 

of governments working together. 

Do you see programs like this working 

for government finance officers? 

I don’t know. Hiring firefighters is much 

different than hiring finance officers, 

but I’d like to think that there could be 

opportunities for local governments to 

collaborate. If we were able to create more 

standardization, it might even be easier to 

fill positions and be more productive when 

new hires start. 

As someone who has spent most of your 

career in public service, and with some 

time spent in human resources, what do 

you think the key to attracting talent is? 

How can government recruit the next 

generation of public administrators? 

Government agencies need to approach 

their recruitment strategy with 

authenticity. As a leader, be honest with 

yourself about what your organization can 

and can’t do. We tend to get so caught up in 

the formality of government interactions 

that we forget to be personable and help 

potential candidates truly feel connected 

to the work we do in our communities 

every day. My division has a great 

communications team, and that is 

something I think we do differently from 

other government agencies when we 

market our positions. 

I’ll give you an example. We recently 

hired a new human resources manager. He 

is a 30-year human resource veteran and 

former vice president of a major private 

sector organization. Realistically, we knew 

we could not pay him as much as he could 

make in the private sector, but we were 

able to bring him on board by positively 

communicating our culture, our diversity, 

our style of leadership, and our mission. 

A lot of people in the job market right now 

are seeking work that not only makes 

them feel valued but makes them feel like 

they’re providing value to others, and 

those are the people we want on our team. 

We hired our IT manager in a very 

similar way. He came to us as a highly 

experienced professional out of the 

Seattle IT scene, but he was woefully 

tired of the negative culture and the 

lack of work-life balance. We showed 

him how he could have a home with our 

organization, and he came aboard. Not 

long after he was hired, he was doing 

some IT work at a firehouse when a 

community member in distress came 

in but could only speak Spanish. As 

a native Spanish speaker, he jumped 

in to translate and ultimately helped 

ensure she received the care she needed 

as quickly as possible. He later shared 

with me that the experience proved to 

him that he was meant to be here at our 

organization. He is a public servant at 

heart. That is the type of people you 

want on your team, and that is the type 

of people you attract when you approach 

your recruitment strategy with genuine 

authenticity. 

I want to switch topics and ask your 

opinion on GFOA. You are well into your 

career in local government but only 

joined GFOA recently. What motivated 

you to become a member, and what do 

you hope to get out of your membership? 

We have always encouraged membership 

in GFOA for our finance members, 

but when we applied for the budget 

award, I asked about getting my own 

membership. For most of my career, I 

thought that GFOA was all about finance, 

finance, and more finance. And it is, 

but there is more, too. I was recently 

looking at the program for the Portland 

conference and noticed there is quite a 

bit for someone like me. 

From a financial perspective, I feel 

like I have more to learn, and I know that 

I will be able to use resources from GFOA 

as we get more involved in long-term 

financial planning. I’m very excited 

about the partnership with IAFC and am 

looking forward to getting involved more 

in GFOA. The ability to bring together 

different parts of the organization and 

build relationships is critical. I love that 

GFOA is focused on relationship building, 

both within finance and with other areas 

of government. 

Mike Mucha is the deputy executive 

director of GFOA. 


10 STEPS 

TO BETTER COLLABORATION BETWEEN 

FINANCE OFFICERS AND FIRE CHIEFS 

GFOA and the International Association of Fire Chiefs (IAFC) are working together 

to develop resources to promote better collaboration between finance officers and 

fire chiefs. An introductory public finance curriculum geared toward firefighters is 

in the works, along with checklists that finance officers can use when meeting with 

their counterparts in the fire department (and vice versa for fire chiefs). 

As a first step, the working group, which is made up of GFOA and IAFC staff and 

members, developed this list, with items geared toward both central office finance 

professionals and fire department executives. We encourage you to share this list 

with your colleagues in the fire department to precipitate a larger conversation 

about how to work together better. 

1 

For both: Go to lunch or have 

coffee together without specific 

work-based tasks in mind. Get to 

know each other as individuals, which 

allows you to build a relationship and 

earn each other’s trust, an important 

precursor to effective collaboration. 

2 

For 

Fire Department staff: Get 

Finance involved early with 

purchases that are outside the 

norm. If you need to purchase a new fire 

engine or fire truck (yes, Finance folks, 

there is a difference), talk to your Finance 

colleagues as soon as the need arises. 

Even better, work with Finance to develop 

a long-term equipment replacement 

schedule for all gear and apparatus. 

3 

For 

Finance Department staff: 

Ask questions and do some 

basic due diligence to learn 

more about firefighting. Start by learning 

the difference between a fire engine and 

a fire truck! (In the simplest terms, an 

engine holds water and hoses, and a 

truck is a mobile toolbox that can include 

large ladders that extend from the truck 

and don’t come off.) 

4 

For 

both: Express your 

gratitude and appreciation 

for each other’s work. 

It demonstrates that you’re paying 

attention and genuinely appreciate 

each other’s contributions. 

5 

For Fire Department staff: 

Invite Finance Department staff 

to get an up-close-and-personal 

view of your department. Invite them to 

come out and see new equipment when 

it arrives. Ask them to go on inspections 

with you. These efforts will give finance 

folks a much better understanding of 

your job and the challenges you face. 

6 

For Finance Department staff: 

Build a more collaborative 

budget process and involve 

the Fire Department early on. Ask them 

to provide a representative to participate 

in any multi-department committee 

work, opportunities, or initiatives. 

When a department makes you aware 

of a concern and wants to work together 

to develop solutions, embrace the 

opportunity. Make sure you understand 

the need and urgency, so you can assist 

with developing a plan. 

7 

For both: Hold monthly 

meetings with members of 

both departments. Review 

Fire Department budget reports and 

performance indicator reports to better 

understand how the money is being 

spent and how the community benefits. 

Also, share information about revenue 

collections, expenditures, and community 

priorities across the entire government 

so the Fire Department staff can see 

how they fit into the bigger picture. 

8 

For Fire Department staff: 

Don’t be afraid to ask for advice 

from Finance staff when needed. 

If you anticipate a need for additional 

funding or foresee a decrease in revenue, 

reach out to Finance right away so they 

can help develop solutions. 

9 

For Finance Department staff: 

Know your fire department’s 

staffing model. Fire suppression, 

rescue, and emergency medicine are 24/7 

jobs, and the Fire Department may need 

to use more overtime and acting pay than 

you’d expect. If you really want to see this 

schedule in action, ask to do an extended 

ride-along with a fire crew. 

10 

For both: Be open to 

questions and finding 

new ways of doing things. 

Don’t be offended if someone asks 

questions about processes. Model this 

behavior at all levels of your department 

to promote an organizational culture that 

fosters curiosity, learning, and innovation. 

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