Winning a Budget Award Doesn’t Mean Your City Is Doing Well Financially
This article was originally published, in slightly different form, on Strong Towns member Michel Durand-Wood’s blog, Dear Winnipeg. It is shared here with permission. All images were provided by the author.
A budget award is not the same thing as a report card.
This may come as a shock to absolutely no one, but I read a lot of local news. Like, probably an unhealthy amount.
I do it mostly for the same reasons that other people do: to stay informed on what’s happening in my city (Winnipeg, Manitoba). And for the daily Sudoku.
But since I also keep loose tabs on the latest meeting agendas coming out of City Hall, I also do it just to see what’s being reported on, how it’s being reported on and, just as critically, what isn’t being reported on at all.
I’ll often bookmark articles into a special folder as inspiration for topics here.
Like this one about two dads taking it upon themselves to remove the ice from a footbridge when the city didn’t.
Or this one about citizens risking fines for clearing the snow from bike lanes, also when the city didn’t.
Or this one about a guy who'd had enough of waiting years for the city to fill the pothole on his street, so he went ahead and filled it himself.
There’s also this one about downtown garbage.
And these ones about violent crime, vacant property fires, sewage leaks, homelessness, abandoned infrastructure and pool closures.
The ways our city is failing us is a list that just seems to keep growing.
And just yesterday, I came upon an article on CBC about another homeless encampment in a city park. But ultimately, it was this quote from an area resident that made me bookmark it:
Overall, this is part of a bigger problem. It’s so much more than just safety. I think we’ve got poverty issues, homelessness, access to resources, addiction and mental health. I don’t even know where to begin actually. It’s overwhelming.
And that’s the crux of it for all of us, I think. Faced with a laundry list of things to address, the enormity of the challenge before us is imposing. It is overwhelming. It is hard to know where to begin.
It’s in instances like these that I find it’s useful to follow the money.
It’s too easy to fall into the trap of thinking that municipal finance is some theoretical abstraction. The truth is, how well our city is doing financially has very real and immediate impacts on the quality of our lives. It affects everything. To paraphrase Homer Simpson, municipal finance is the glue that holds together the gears of our city.
That is, of course, stating the obvious. All of the things I mentioned above aren’t problems in themselves as much as they are symptoms of a lack of money. And we know that things weren’t always like this.
We know, in our gut, that things are going poorly. We see it all around us.
But what about the city’s great credit rating, AA+ from Standard & Poor’s, the second highest rating they give?
As I’ve explained before, the city’s credit rating isn’t a report card on how well we’re doing. It’s not even for us, the citizens of the city. It’s a tool for bond investors that answers one question, and one question only: “How likely is it that the city of Winnipeg will default on a debt payment in the next 24 months (assuming that the province will bail them out if they come close)?”
In that case, it’s not hard to give the city an AA+ because, obviously, the city won’t default on a debt payment in the next 24 months.
But defaulting on debt is not the first sign of financial trouble. It’s the last. As Ernest Hemingway wrote, bankruptcy happens gradually, then suddenly.
When a city borrows money, repaying those loans becomes their first priority for any cash coming in. Bond investors don’t care if the city has to raise taxes in order to make their debt payments. They don’t care if it has to cut services, close pools, abandon bridges or reduce transit service. None of that matters to them.
But it matters to us.
When we’re forced to make cuts to transit service, that will have real-life impacts on people’s ability to access jobs, schools and other economic opportunities.
When we’re forced to make cuts to recreational amenities, that will have real-life impacts on youth development, health outcomes and potential gang involvement.
When we’re forced to increase taxes to a level beyond what the community can bear, that will have real-life impacts on affordability and quality of life.
Before we suddenly miss a debt payment, we’ll have gradually made life worse for everyone in the city for a long time. Decades, even.
And worse yet, the further we travel down that path, the more jaded we become about it, the less we engage, and the easier it becomes to accept that decline is normal. And trust me, it isn’t.
Fundamentally and symbolically, it just doesn’t instill confidence in city government if they can’t even have a properly functioning clock on top of their building. — Exchange District resident
And yet, there’s no money for all that.
So what about the media release the city issued a few weeks ago that didn’t make it into the news?
No, not the one on how to deal with the aggressive wasp population. I’m talking about the national award our budget recently won!
Again, it’s important to understand what this award is and what it isn’t.
What it is: The Distinguished Budget Presentation Award, presented by the Government Finance Officers Association (GFOA), recognizes the city’s hard work on the budget. It is the highest form of recognition in governmental budgeting.
What it isn’t: a report card on how well the city is doing financially.
In case you didn’t know, the GFOA also gives out the Canadian Award for Excellence in Financial Reporting, which our city also takes home every year.
That is also not a report card on how well we’re doing financially.
Not to take away from the hard work that our city’s financial staff have put in to deserve these awards, but these are not awards for having a great budget and financials. They’re awards for having a great budget document and financial report.
The criteria are things such as these:
Is there a table of contents?
Does the table of contents hyperlink to the appropriate pages?
Does it include a legible organization chart?
Are individual revenue sources described?
Etc.
The goal of these awards is to ensure that cities are reporting all the relevant information accurately and transparently so that citizens, the media and council members can make informed decisions based on the financial facts.
And these awards say that, yes, the information is all there.
That’s not a small feat. So, congrats to the city’s finance department on a well-deserved award! Not every city is as thorough.
But just because the information is there doesn’t mean the public, the media, and the council members are equipped to understand it.
The city’s latest financial report is nearly 100 pages long. And the most recent budget has more than 700 pages spread over two volumes!
How do we make sense of all this data at a very high level? How can we get a feel for the overall financial trends our city is facing, so that we know which questions to ask? And how do we do it without having to sort through 800 pages of small-print financial documents?
And, importantly, how do we do it without needing to be an accountant?
Ideally, the city would produce this type of analysis as part of its annual reporting. That would allow us to spot financial decline before it turns into real-world decline and reverse course.
Unfortunately, we’ve had to fly blind with respect to our city’s financial condition, which has been bad and getting worse for a long time. But the information is all there to show it, and we have the awards to prove it.
We just need to learn how to read it. Because it’s not theoretical — we’ll be living with the consequences for the rest of our lives.
P.S. If you’re interested, I’m giving a webinar with Strong Towns’ Chuck Marohn as part of their Local-Motive series. It's on September 19th, 2024, at noon CDT, titled "Parsing Through Your Local Budget to Find Some Real Answers." I promise it’ll be more fun than it sounds. If you can’t make it to the live webinar, you can still register and access the recording afterward.
P.P.S. I was also on the Strong Towns Podcast a few weeks ago to chat about the webinar. Give it a listen and let me know what you think!
Michel Durand-Wood lives in the Winnipeg neighborhood of Elmwood with his wife and three children. He writes at DearWinnipeg.com, a really fun blog about infrastructure and municipal finance. He has no formal training or education in city planning, municipal finance, infrastructure maintenance, or anything else he talks about. He's just a guy, in love with a city, asking it to make better use of his tax dollars.