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Municipal Government Finances: Tiptoeing Through the Political Tulips

Many times during my years as a speaker and teacher at the Fire Department Instructor's Conference (FDIC) attendees have asked me to help them learn to navigate the rocks and shoals of the budgetary maelstrom which exists in many places. In order to help these fine folks to get the most for their fire departments I will provide some more thoughts about the wonderful world of politics as it impacts upon our search for the almighty dollar.

It is critical to remember that no matter what career government administrators wish to do, the approval of those representatives directly elected by the populace is always involved. What may seem like a reasonable expenditure to the fire department may run afoul due to the needs or election promises of elected government officials to remain in power. Very few politicians will jeopardize the political careers for the good of the fire service.

We wish to stress that political expediency frequently takes the place of a viable government policy. Taxation, as the conduit for our funding is no different. The matter of public finance is a frequent target of partisan politics. It is important to remember that politics will always be a part of the manner in which government raises its operating capital. You must, therefore, gather three very important elements in your campaign for fiscal resources which must be fought with politicians: facts, figures and friends.

The necessary facts to prove fire department need create rock-solid arguments necessary to withstand the glare of the public spotlight. It is difficult, although not impossible, for a politician to argue against a reasonable presentation supported by facts, although they often do.

Figures are essential to the fire administrator in search of organizational improvements. Anything which comes from the public’s largess, must be justified by accurate figures which show exactly how much they will cost.

An even better approach would be to demonstrate just how much will be saved by getting them. Nothing is saved by getting them. Nothing is saved by merely having figures – only by their application. The shrewd fire officer will gain friends throughout their community. These are the people who can fight the political battles. You must avoid such fights at all costs. You will only make enemies. In such a battle, whether you win or lose. Either way, somebody will be mad at you.

The setting and collections of user-based fees and charges is an extremely efficient way for local government to bring in the funds necessary to provide governmental services to any jurisdiction. When taxing the capacity in an area is exhausted, either by legislation or consumer activism, government frequently turns to specific user fees to fill in the revenue gaps.

This was frequently the case in California following the effects of Proposition 13 fever in the late 70’s and early 80’s. Fees were assessed for many of the services normally provided as part of governmental tax collection. In some instances they were overturned in court for being too vague in their justification. In others, they were allowed as a justifiable expense of doing business.

Many jurisdictions charge separate fees for services such as fire inspections, code and plan reviews and extinguisher charging. One innovative fire department in Texas has even developed a program to rent Wet-Vacs for dewatering purposes in their community. While the funds raised are often too low to cover the cost of providing the service, a fire department can still create some additional income and a bit of good will by providing these extra services.

Another good example is New Jersey’s Uniform Fire Code funding mechanism. It establishes a system whereby fees are set by the various local, county and state inspection programs. These fees are collected by the level of government which performs the service and then forwarded to the Bureau of Fire Safety for processing. The state retains 20 percent of the fees for agency expense and fire code administration.

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.

A question often asked by harried taxpayers who pay for fire trucks and other equipment used daily to provide services to us all is, quite simply, “Where does all the money (that you collect in the form of taxes)” go?

Regardless of whether the authority to spend is vested in an independent fire company that raises and spends its own funds;, or lies within a fire district which taxes and spends, or comes directly from local government, the question remains the same. The consequences to the authority receiving the money also remains the same.

A community in Florida developed a program to impress the citizens and politicians in their community with the costs involved in delivering municipal services. All vehicles purchased city-wide had the cost of its purchase indicated on its side, including fire equipment. People were able to compare the cost of a fire truck with that of a street sweeper. The program met with mixed success and was discontinued after a few years.

While funds are available from higher levels of government for health, education, and sanitation, little in the way of money for fire safety comes from transfer payments. The level of spending varies, but it is fair to say that a very high percentage of funding for fire protection efforts comes directly from locally-generated sources.

Responsible communities expect a fair and accurate accounting of how the funds are spent. It is the astute fire officer who constantly reinforces this concept of fiscal accountability to those who provide the tax dollars, as well as those who allocate the resources in local government.

No study of local government expenditures would be complete without a look at the ratio of short-range current expenses to the longer and larger periphery of the bonded capital debt. Two distinct areas of expense make up the local spending arena. Things paid for on a day to day basis, through the current expense funding mechanism take up the immediate attention of the fire administrator. Projects whose cost is spread over a number of years require the administrator’s talent at planning.

The reasons for varying levels of local fire expenditures go well beyond those things which local government can directly control. However, the trends must be monitored and local operations and expenditures tailored to meet the newly emerging protective service needs dictated by these trends.

An example of this would stress that those charged with providing fire protection in an area of explosive suburban growth are powerless to influence the influx of new citizens to their community. Various socio-economical and demographic factors have combined to assure semirural and suburban areas are very attractive to urban dwellers within easy commuting distance.

The astute fire officer cannot wish the people of their community away. They must adjust financial resource commitments to provide everyone with a reasonable level of fire protection. It would also be wise for him to meet with developers in an effort to share some of the cost of new fire stations and make a case for residential sprinklers in new construction.

Public administrators must be responsive to factors which have historically impacted the delivery of services. Population shifts have been referred to previously, but there are other elements which combine to determine the level of local government expenditures.

The overall national economy will impact decisions as to how money will be spent. When the economy is doing well, people are usually more willing to commit funds which they would not consider doing during a downturn. Economic downturns must be monitored for their effect at the local level. Any change in the amount of income flowing into a community can spell change for the jurisdiction and its financial operation system.

Another area of concern for local government financial people us the cost of the service they are providing, in relation to others giving the same service. This may mean more to the person charged with sanitation or municipal recreation than the firefighter, because there are few alternatives to calling the fire department when your house is burning. However, a long-term swing may occur if the private sector can begin to provide fire protection at a lower cost than local government.

The issue of contracting for fire protection comes up every few years in the literature of the fire service. Its popularity seems to ebb and flow with the winds of economic change. It may be that someday all of our fire protection will come from the lowest bidder. It is the wise fire service administrator who will seek to become customer responsive now, before the push to convert comes.

In our next column, we will look at the manner in which financial decisions are made which effect the quality of fire service initiatives.

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