By Joseph P. Casey
A Virginia County Administrator brings the financial resilience concept to ground level for the local government manager, emphasizing its four key components: engaging stakeholders, earning trust, countering emotional decision-making, and deploying economic development incentives.
Financial resiliency is a way of doing business that builds a foundation for excellence in local government and a high quality of life for citizens. More than a plan or policy, resilience is a daily mindset. Resilience in local government has four key components: engaging stakeholders, earning trust, countering emotional decision-making, and deploying economic development incentives. A local government that conducts itself according to these principles is well-positioned to weather future financial storms.
Background: From “Sustainability” to “Resilience”
In 2001, Bob Eichem, a local government finance director, was in the audience during the newly-inducted Government Finance Officers Association (GFOA) President’s acceptance speech about sustainability. In the early 2000s, sustainability was increasingly becoming part of the vernacular of public sector financial management efforts. Everyone, myself included, was implementing financial sustainability plans for long-term benefits to the various communities we inhabit—local, state, national, and even global strategies. Establishing a sustainability strategy meant assessing the environment, identifying possible fiscal risks, and putting plans in place to mitigate them. Sustainability plans for high-performing local government organizations focused in large part on maintaining sufficient debt capacity, increasing assigned and unassigned fund balances, and identifying “tools in the toolbox” that could be brought out if adverse fiscal conditions made it necessary (e.g., capital projects that could be deferred, attrition savings). The financial risks that sustainability plans sought to mitigate had the potential to impact all of the quality of life attributes that concern local governments—jobs, safety, education, infrastructure, health care, and the environment.
In 2007, during the initial phases of the Great Recession, localities that had deployed fiscal sustainability plans were able to weather initial impacts and support quality of life (QOL) much more successfully than localities that had not. The depth and prolonged nature of the recession, however, eventually resulted in impacts to local quality of life even in localities with sustainability plans in place. Local governments’ fiscal foundations simply were not strong or dynamic enough with sufficient timely counter-measures to forestall all negative impacts to QOL. Even after traditional federal economic measurements (i.e., resumption of GDP growth) signaled the end of the recession in 2010, many localities were not able to recover because jobs that had left were not coming back and property values remained depressed.
Fast-forward to 2014. Once-audience member Bob Eichem was now the newly elected GFOA President. In his acceptance speech, he announced the creation of a President’s Task Force on Resiliency. The Task Force, on which I served, included financial manager representatives from diverse locations and levels of local government. We were charged with discovering the core concepts of financial resiliency together based on our own experiences and approaches for weathering the recession, and with developing recommendations to assist local governments in formulating their own resiliency strategies.
The terms sustainability and resiliency are often used interchangeably, but they are distinct concepts. Sustainability focuses on known risks, with plans and strategies to overcome or mitigate their impacts. A resiliency approach, in contrast, prepares an organization for unforeseen risks (as well as known ones) by emphasizing organizational behavior that allows it to quickly, intelligently, and rationally deal with a changing and unknown environment, including longer durations of financial stress than anticipated. Resiliency, then, is a local government’s ability to withstand acute shocks and chronic stresses—both known and unforeseen—while maintaining and improving essential services, recovering quickly and in better shape than it was before. Once a resiliency approach is adopted by elected officials and staff leadership in a strategic plan or a vision/mission setting process, it can be threaded into all the day-to-day operations of local government.
So what does all this mean to the local government manager?
Resilience Means Engaging Stakeholders
An early step in any exercise associated with financial resiliency is understanding and defining local stakeholders. It goes without saying that, in local government, the citizen is the most fundamental stakeholder. Citizens should benefit from any goal or outcome, even if indirectly (e.g., more efficient internal systems → lower costs → lower tax burden). Putting stakeholder benefits front-and-center is especially important when financial managers present plans to elected officials, since their desire to benefit their constituents is, or should be, their utmost concern.
In Chesterfield County, we have implemented a citizen engagement process called Blueprint Chesterfield. To help focus county government’s attention on issues of pressing public concern, the Board of Supervisors and School Board asked citizens what was important to them. The County received over 6,000 citizen suggestions via community meetings and an online web portal. County leaders will use this feedback to shape the county’s priorities during its budget process.
In addition to citizens, local government stakeholders also may be employees, visitors, commuters, businesses, regional government organizations, and other community partners. The universe of stakeholders for any particular project can range in size and scope. A plan for a smaller area, such as the revitalization of a particular neighborhood, may need input only from those living and working in that area. In contrast, a community-wide effort, like a proposal for upgrading the county water and sewer system, would need much wider input. Engaged stakeholders’ contribution of their time, talents and, hopefully, investment, serve as the foundation for a culture of resiliency.
Resilience Means Earning Trust
Once stakeholders have been identified and engaged, a financially resilient local government organization needs to earn and maintain stakeholder trust. This trust will enable stakeholders to contribute to the development, be willing recipients during implementation, and to fairly gauge the outcomes of resiliency efforts. This trust also positions the financial resiliency strategy to be relevant, efficient, and a pathway towards a defined goal.
The International City-County Management Association (ICMA) has developed a formula for citizen trust whereby Trust = Transparency + Engagement + Performance + Accountability. Each of these four variables needs to be fully functioning for local governments to establish and maintain a trust relationship with citizens.
Transparency is the openness and availability of government data to the public. The fewer barriers to such information, the better. Henrico County, Virginia uses a transparency portal called Our Henrico Way that provides access to literally hundreds of databases containing relevant information and easy pathways for users to contact staff for further information. In Chesterfield County, Virginia, the transparency portal constantly evolves to help meet citizen needs for information quickly and easily. When citizens are readily able to access local government information, they can develop informed opinions to more meaningfully participate in decision-making.
Engagement is a meet-in-the-middle mindset offering opportunities for all citizens, businesses, and community associations to make their views known via an array of communication channels, from online portals and mobile apps to old-fashioned town hall meetings. A local government engagement effort can present a menu of topics to help citizens and community groups select subjects of interest and to ensure that knowledgeable employees are available to answer questions. The Blueprint Chesterfield engagement activity met citizens on their home turf in various community settings. Similar to a job fair, county agencies set up booths to facilitate one-on-one conversations with citizens, enabling more customized engagement compared to a traditional town hall-style meeting.
Performance is how well and how efficiently local government delivers services. There are traditional performance measures (e.g., response times for public safety), but local government is getting better at illustrating nontraditional measures (e.g., measuring the correlation between preschool and third-grade reading levels). A local government can also benchmark how well it is performing on resiliency itself, establishing performance metrics and action plans when the resiliency strategy is adopted.
Accountability works not only to mitigate negative trends in local government performance, but also to recognize public employees and departments for positive outcomes. Accountability motivates good workers to perform better and use their talents for organizational success, while low-performing workers can be identified and either retrained, positioned elsewhere to succeed, or terminated. Human resource and personnel policies can include resiliency metrics as one way of assessing employee performance.
Accountability is the linchpin of the trust equation. Transparency enables stakeholders to make informed decisions; engagement allows them to provide feedback to a responsive local government; performance shows citizens how well government is working; and accountability holds local government responsible for both its successes and its failures, including in the resiliency effort itself.
Resilience Means Countering Emotional Decision-Making
Local governments frequently face challenging fiscal decisions. Emotional considerations (like believing an important project will be “too painful” in the short term) can sometimes be intense, while the benefits of a necessary course of action might seem distant or obscure. “10/10/10 analysis” is one method a financially resilient organization can deploy to create emotional distance in decision-making.
10/10/10 analysis asks decision-makers to take a step back and to consider the short-, medium-, and long-term implications of their decision: How would they feel about the decision 10 minutes from now? 10 months from now? 10 years from now? 10/10/10 analysis works because it explicitly identifies shorter-term emotional considerations and compares them with longer-term benefits and costs.
For example, in a major road interchange improvement, nearby residents and their elected officials might feel a great deal of angst 10 minutes or even 10 months after the project is announced. Traffic backups and disruptions to daily life could be painful in the short term. Commercial land owners and the business community might be excited by the idea from the beginning, as they may more able to see the longer-term benefits the project could yield in making their businesses more accessible to customers. Because the project could take a few years from start to finish, the best measure of project success might be 10 years later. At such point, the disruption would be in the past and the use of the interchange would be an inherent part of the transportation system, providing safe and easy access to the neighborhoods and commercial areas alike. 10/10/10 analysis is a tool to help all stakeholders visualize this outcome at the beginning of the project.
10/10/10 is most useful when the decision you face meets the following characteristics:
- Significant long-term implications
- High profile
- Cannot be easily reversed
- Impacts multiple processes or plans
The 10/10/10 approach can be used informally to simply and quickly envision project impacts and think through a decision more carefully. It can also be formalized and applied with stakeholders in a group setting, but this requires time and energy, so employ it with discretion.
Resilience Means Deploying Economic Development Incentives
Financially resilient local governments don’t just wait for development prospects to knock on the door and results to occur; resiliency is dependent upon a proactive approach to economic development. Diversification of tax revenues from a diverse workforce in diverse businesses allows a high-quality-of-life environment to emerge and be sustained. In Henrico County, we employed a variety of incentive-based tools to stimulate local investment. Examples include developing suitable infrastructure (e.g., roads, water, sewer, stormwater) in areas with high potential for commercial investment to provide site-ready parcels that can be more easily developed. A financial incentive might include a custom-designed economic development agreement that leverages state or federal funds and incentives, as applicable. These one-time expenditures can be offset by a continuum of tax revenues and quality jobs in a short return-on-investment period. Another tool is the deployment of Community Development Authorities providing public improvements to a developing area; improvements are funded by the tax increment revenues generated by the properties being developed.
Financial Resilience Means Excellence in Local Government Management and a Higher Quality of Life
Aristotle said, “We are what we repeatedly do. Excellence, then, is not an act, but a habit.” Financial resilience is set of organizational behaviors that can, upon repetition and practice, establish a habitual pathway towards excellence in local government. Resiliency is more than an assurance that local government can continue to operate during economic downturns. It is not a “one and done” plan written down and put on a shelf. Financial resiliency is a daily mindset among local government leaders, public employees, citizens, and the business community to make decisions from a long-term, transparent, engaged, and accountable perspective. As the resiliency mindset becomes a habit, it builds a foundation for excellence in local government and a high quality of life for the community, no matter what fiscal challenges it may encounter.