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THE MUNICIPAL ADVISORY BOARD A sense of fiscal limits The real world of politics and municipal finance was brought to the research study by a Municipal Advisory Board of mayors, municipal officials, government experts, and academic scholars. The Board offered guidance to the research staff on the direction, scope, and focus of the study. The following edited transcript reflects concerns expressed at an August meeting of the board. Participating in this portion of the discussion were: Fred Armstrong, controller, Indianapolis, Ind.; Peter Bearse, Princeton University; Clark Burris, controller, Chicago, III.; Arthur Holland, mayor, Trenton, N.J.; Walter Kelleher, former mayor, Maiden, Mass.; Arthur Naftalin, former mayor, Minneapolis, Minn.; Mason Neely, finance director, East Brunswick, N.J.; and Florence Rubin, League of Women Voters. The moderators were: James Howell, First National Bank of Boston, and Charles Stamm, Touche Ross. BEARSE: The basic question is: what do we really mean by fiscal stress? We need to come up with indicators for people on the firing line. What kind of data, what kind of information system does one need in order to manage a city's financial affairs? Perhaps it's a matter of looking at the behavior of a city over a period of years and asking: what are the warning signals, and what should I do in response to them? Take the pension fund problem. People who have Rubin worked on this recognize that we've got a time bomb here. Another warning signal can be the rise in short-term debt. NEELY: And what about your long-term debt that is authorized but not issued? How much hidden debt is there out there, because people are afraid they're going to lose their rating or they won't be able to issue the debt. Instead, they're building progress out of borrowed funds or fund surpluses, and this authorized debt doesn't show up on the balance sheets. It's just not recorded. ARMSTRONG: There's also the question of whether it is social factors or economic factors that are causing your fiscal stress. Indianapolis used to have a strong welfare program with a year's residence requirement, and you had to have a meaningful job as a taxpayer before you were eligible. Then we dropped those requirements about four years ago, and the welfare rolls went sky high. So social programs can have their own impact. HOLLAND: Perhaps the point is, if you're in need of money in this country, you go after whatever's available. Out of general revenue sharing, for example, one affluent county in New Jersey built bridal paths. One township in our county, which did not need public works money, nevertheless applied for sewer money under the program. NEELY: The risk is rewarding inefficiency. If people who operate inefficiently get more money, you will encourage inefficiency. Holland Naftalin HOLLAND: The latest CETA legislation provides very rigid requirements on accountability and against abuses. We supported it because people who spend money properly don't want to have it cut off. NAFTALIN: It's clear that some cities have extended themselves beyond the realities of their economic base. But it is a very subjective question: what are the realities of an economic base? Clearly, many northern cities extend themselves beyond their limits, if you compare some of the growing sunbelt cities. But you get involved in a choice of values there. I'm uncomfortable with that kind of measurement. BEARSE: One of the things you can do with a complete data base is see the trade-off between the current expenditures burden and the capital expenditure ratio, whether you're trading off the future for present expenditures. If you look at that in relation to things like the tax base, you'll get a sense of your limits, at least with respect to debt. HOLLAND: I like what Peter is saying about debt and time, for I really believe people do use current funds to rob the future. And then all of a sudden they have a crisis, for the waterworks has not been maintained and it just cannot handle the capacity, and they're faced with an emergency and they rob the future again. BEARSE: One of the reasons, of course, that it is easy for public officials to postpone maintenance is 19
Object Description
Title |
Municipal advisory board: Sense of fiscal limits |
Author |
Armstrong, Fred Bearse, Peter Burris, Clark Holland, Arthur Kelleher, Walter Naftalin, Arthur Neely, Mason Rubin, Florence Howell, James Stamm, Charles F. |
Subject |
Municipal finance |
Portrait |
Armstrong, Fred Bearse, Peter Burris, Clark Holland, Arthur Kelleher, Walter Naftalin, Arthur Neely, Mason Rubin, Florence Howell, James Stamm, Charles F. |
Citation |
Tempo, Vol. 25, no. 1 (1979), p. 19-20 |
Date-Issued | 1979 |
Source | Originally published by: Touche Ross, & Co. |
Rights | Copyright and permission to republish held by: Deloitte |
Type | Text |
Format | PDF page image with corrected OCR scanned at 400 dpi |
Collection | Deloitte Digital Collection |
Digital Publisher | University of Mississippi Library. Accounting Collection |
Date-Digitally Created | 2010 |
Language | eng |
Identifier | Tempo_1979_Spring-p19-20 |