By John Coffey, City Manager, City of Indian Harbour Beach
As local government professionals, we all know the tug of war we face in addressing the immediate needs of the organization versus trying to make strategic long-term planning an integral part of our daily lives. Whether we work in a large or small organization; in the City Manager’s office, budget office, or a department; we all play a part in the development of annual budgets. I have worked in organizations where I was the only person responsible for the budget (in addition to many other duties) and in larger organizations as part of centralized multi-person budget offices.
We all are required to have five-year capital improvement plans. What we are not required to do is to have a plan that is financially feasible versus just being a one or two-page wish list of future projects. Most of us would agree on the value of multi-year planning, but often the organization does not make the development and annual updating of such a plan a priority because of the belief it takes too much time. I have worked in cities where a simple wish list was all we had and saw how everyone winked and nodded about the fantasy of future projects we would present to the City Council and community. I have also worked in organizations where a “financially feasible five-year financial model and capital improvement plan” was created and annually updated. While extra work is involved, the benefits of greater confidence in the probability of future projects actually happening always outweighed the “extra work.” Budget workshops tend to run much smoother when everyone has confidence that specific projects will actually be funded in out years versus telling citizens that “we hope to do that project in the future.” Most importantly, consistent capital and financial planning that incorporates anticipated revenues help elected leaders look beyond the “next fiscal year” and more importantly beyond the end of their term in office.
Connecting future resources to future capital and operating needs is not as complex as it sounds. While there are commercial products that provide an easy to use interface and prints nice reports, I have found simply using an Excel file with a few worksheets and some basic formulas meets the needs of cities with budgets ranging for $5 Million to $180 Million. The key is to keep it simple and group revenue sources within each fund in categories of similar growth patterns and to add cells that allow easy changes to growth assumptions (i.e., tax rate, health insurance costs, employee raises, etc.). This makes your financial model interactive and your elected officials will enjoy being able to see the five-year impact of raising or lowering the proposed tax rate or adding or deleting specific capital projects. Years ago when I separated from a city manager position, the City Council put in my separation agreement a clause that I had to come back a few months later to run their budget workshops because they so enjoyed the interactive nature of their five-year plan.
The last consideration you need to make is whether you or your staff have the capacity to implement a financially feasible five-year financial model and capital improvement plan all at once or whether you should take a multiyear approach. I have done both successfully, but unless you have multiple people in a budget office I would encourage you to take an incremental multi-year approach. That is what I am starting here in Indian Harbour Beach. My FY 24 Proposed Budget will contain a simple five-year listing of projects listed by priorities. Then the FY 25 Budget will add a short narrative description of each project and the refinement of listed projects. Finally, the FY 26 Budget will add the financial model and interactive features.
Hence, there are many ways to implement a robust five-year financial and capital plan. Which one you select depends upon your organization and its needs. Continuing to just focus on next year is an option, but an option that hurts you, your organization, and community in the long-run. Feel free to contact me if you would like more information or a sample of the model I most recently used. A financially feasible five-year plan works for me and can work for you!
