Municipal Government Finances: Tiptoeing Through the Political Tulips

We strongly suggest that the chief fire officer who seeks to receive funds from a dedicated user-oriented fee schedule seek both political and legal advice before proceeding with such a program.

Local and county enforcement agencies receive the other 80 percent to fund their operations. This program has allowed most fire prevention bureaus in New Jersey to increase their size and improve the delivery of fire prevention and inspection services.

We strongly suggest that the fire officer who seeks to receive funds from a dedicated user-oriented fee schedule seek both political and legal advice before proceeding with such a program. This may speed success and eliminate opposition. Any additional funding initiatives must be enacted by the political powers that be.

Historically, one of the additional sources of funding for local fire protection programs came from the transfer funds available through federal revenue-sharing programs. An example of such moneys was Comprehensive Employment and Training Act (CETA). Many of today’s career fire fighters got their start as CETA employees, with a percentage of their salaries coming directly from federal fund accounts.

Community Block Grants frequently bought the land and built the fire stations now used in many cities, towns and villages across America. This is typified by loans available from the Farmer’s Home Administration (FHA) and various development grants.

Intergovernmental transfers of funds are still quite prevalent in such areas of government service as health and educational programs. In these cases, state and federal programs mandate the delivery of certain programs. If monies are not forwarded to accomplish these tasks, they would be underfunded and would probably miss most of the targeted user population.

Funding for mandated programs does not normally come to the fire service, except in certain specific cases such as the Uniform Fire Code Program in New Jersey. However, the fact that such funding mechanisms exist for education and health care should indicate that funds may become available for local fire programs. If transfer funds can be mandated for other public sector programs, the fire service should also demand its share.

Unfortunately, there is frequently insufficient capital on hand to do all that the politicians and administrator want. And don’t look to borrow money for anything that isn’t a fixed capital expenditure, such as fire apparatus and buildings. Borrowing money to pay for the daily expenses of governmental programs and services is an extremely poor practice.

One need look no further than the federal deficit to understand how wide spread is this practice. While the federal deficit may seem to indicate that borrowing for governmental purposes is a poor practice, the converse may be accurate.

When borrowing is done in reasonable amounts, at reasonable interest rates for necessary capital improvements, capital financing is an excellent way to spread the cost of high-priced, large-scale projects over a number of years. This practice will lessen their impact on any one budgetary year.

An excellent example that can be put forward in favor of creative capital financing comes fromSt. Louis,Missouri. A number of years ago, this fire department put together a large-scale bond proposition which replaced every piece of fire department apparatus and refurbished most of the fire stations. The same issue funded a new communication center and a modern training facility. While the cost was high, every segment of the community benefited and the cost was extended over a number of years to bring it within reach.

And the politics was superb, as every member of the city council received better protection for their people.

Yet another word of warning. As we stated earlier do not borrow long-term capital funds to pay current expenses. This helped to create the financial problems faced byNew York Cityin 1975. Stringent financial controls, personnel layoffs and program reductions combined to help the city stave off bankruptcy.

Remember that there is always a cost involved in using borrowed money. The debt service on long-term capital financing can eat up the funds necessary for meeting current expenses. It is, therefore, essential to maintain a proper debt-to-capital ratio so that current and long-term financial obligations can be met. It may be wise to seek professional financial assistance before embarking on a large-scale borrowing and spending programs.