A How-To Guide for Making Sense of Your City’s Budget
Do you know how much money your city takes in each year and from where? Or how about whether your city spends more on roads or schools?
It can be intimidating to try and wade through a 200-page government PDF filled with obscure acronyms and confusing charts, but we’re here today to lift the veil on municipal budgets and give you the confidence to take a look at yours. You can do this. We will walk you through the process.
Our friends at Urban3 put together this video to help. In it, Josh McCarty, a seasoned budget examiner who sifts through these documents on a regular basis to uncover the financial productivity of cities around the country, talks with Maxine Eng, an intern at Urban3 who is, in this video, filling the roll of “regular person who’s never looked too closely at a municipal budget before” —i.e. most of us.
For this demonstration, Maxine chose to investigate Asheville, NC where she lives. She was particularly curious about transportation funding—and the breakdown between sidewalks, transit and roads—as well as the police budget in her town.
What she and Josh learned in the process is that budgets are indeed complicated—they take many twists and turns, and plenty of info is buried under different boxes and buckets. But by starting to look through a city budget, you can learn which information is important, where to find it, and where to go if you have further questions.
If you want to experience the full walk-through of Josh and Maxine digging into the Asheville city budget, watch this video. We’ve also outlined the steps to budget understanding below (and you can refer to the video for any of these steps using the provided timecodes).
Time to learn: how much money does the city have? Where is it coming from? And where is it going?
Pick your city and do an internet search for the most recent version of your municipal budget. (2:25) As Josh notes: It’s a nice indicator of civic pride if your government website is the first hit for this search, vs. Budget rental car. Josh also suggests picking a budget that is complete—i.e. not the current year’s budget—otherwise you’ll be looking at projections instead of concrete numbers.
Open an Excel spreadsheet and get ready to scroll through the budget document until you see some charts. (3:15) Pro tip: The more boring the table, the more info it probably has for you. Add important info that you’re interested in tracking to the Excel doc as you go along. For Maxine, she was especially paying attention to that transportation funding, as well as basic numbers like the General Fund income.
Start noting the many different pots of money feeding your government. (5:00) These might include General Fund—the main pot which includes police, public works, etc.—and Enterprise Funds, items that function like a business but are part of government (sometimes utilities, parking; these can get confusing because some are owned by government but managed by another party, or some other variation) Note: City governments often don’t do a great job of accounting for or displaying one-time expenses that only happen occasionally, like new construction projects, road repaving work. Bucket: Capital fund.
Start tracking the relationship between income and expenses. For instance at 12:00, Josh notices the total general fund is $130 million and it takes $40 million to run the municipal water system. If you live in Asheville, did you know that more than 30% of your general fund is paying for your water system? Is that an appropriate percentage? This is going to depend on your other expenses and sources of revenue, but the more informed you can be about these sorts of costs, the better.
Watch out for things like “interfund transfers” where money is moved from one bucket to another—and debt, which can hide in all sorts of places. (11:15)
Pay attention to the planned vs. actual budget. (12:30) Josh describes to Maxine the difference between Original, Amended and Actual Budget.
As you look through, note different types of revenue that might be vulnerable to economic shocks, like the pandemic. (18:30) Sales tax revenue, for instance is currently experiencing tremendous decline, the likes of which has been unseen since the 2008 Recession (read more about that here). What percent of your city budget is relying on sales tax revenue and what might that mean for your future outlook?
After the first 20 minutes of the video, Josh gets into a lot more detail and depth. If you’re looking to dig deeper, here’s a look at what’s covered in the rest of the video:
Police budgets (34:00)
Comprehensive Annual Financial Reports or CAFRs (38:00) – Josh explains that this can be an easier document to get info from than a budget because it’s standardized in a way that budgets aren’t. It’s more like an accountant’s report
School budgets (43:00) - In most municipalities, schools operate separately from the rest of local government. They collect their own revenue and spend their own funds, so naturally they have their own budgets. Keep this in mind as you’re exploring your municipal budget because you’ll likely need to hunt down a separate school budget if you’re curious about those funds.
Comparing county and city budgets (47:00)
Social service funding vs. police funding — and the challenges of comparing these. (53:00)
Debt service (58:00) and debt limits (1:03:00) – You might be surprised (and not in a good way) by how much debt your city allows itself to take out.
Capital Improvement Plans or CIPs (1:00:50) – These tell you where the money is being outlaid to do big projects like build a road or stadium
In closing, right around the hour mark, Josh makes a really important point: If you have questions about your city’s budget, just pick up the phone and call the folks who created it. You can usually find their contact info on the same webpage (or same part of the government website) where you found the budget. If you do your homework ahead of time and know the question(s) you want to ask, city government folks are often happy to talk with you and provide more information.
With that, we want to hear from you. What did you learn by exploring your city’s budget? What surprised you? Join us on the Strong Towns Community site to discuss!
For a city, being in good financial condition isn't just about having good reporting practices and not defaulting on debt payments. It's about fulfilling responsibilities and providing a good quality of life to residents.