Risky Business

Last weekend, I visited with seven of my grandchildren at my son’s place near Adair Village.  We did a little fishing at a pond on the property he rents, and then I took pictures of the kids as they raced their bicycles down a slope I have come to call “Suicide Hill.”




The first picture shows my nine-year-old granddaughter, Taylor, going over the handlebars of her bike, just before she did a face plant in the middle of the road.  The second image is my barely three-year-old grandson, Porter, prior to the moment of impact on the same road.  Happily, both children were fine and hopped back on their bikes to continue racing.  Five-year-old Andrew’s wreck was not captured in a photo, and his involved a little blood plus a number of tears.

The picture below shows the gang eating hot dogs by the pond following the race.  It provides evidence that they all survived and escaped serious injury. 

Raising children involves a number of risks; and no matter how many precautions you take, bad things can happen.  Acknowledging risks does not mean there should be no attempt to mitigate them.  My grandchildren all wear helmets when they ride their bikes, which is something I never did as a child.  Bike helmets, child car seats, and even seat belts were not available when I was their age.

The City faces different perils or risks than those parents confront while raising children, but many of the same principles of how to deal with them apply.  City bankruptcies in California and financial problems in some small Oregon communities have raised concerns about similar possibilities in Albany.  I believe the greatest risk we face is uncertainty about property tax revenue in the years ahead.  We know that other Oregon cities have seen an actual decline while we have experienced only a decline in the rate of increase.  We have dealt with this risk or challenge by cutting costs and by trying to hold the line on future increases in costs that are likely to exceed any projected increase in revenue.  We have learned from the experience of other places, just as we learned about the wisdom of bike helmets or child safety seats, that you need to adjust behavior in response to new information about risks to prevent harmful consequences.  We also know that reducing risks doesn’t eliminate them.

The pictures of my grandchildren show them wearing helmets that do nothing to prevent them from breaking an arm or leg.  The City’s reduction in costs, primarily through staff reductions, allows us to maintain current service levels but may or may not be enough to deal with declining future property tax revenue. 

I confess that I care more about the safety of my grandchildren than I do about almost anything else in life, yet I still encourage them to ride their bikes and do other things that put them at some risk.  I can think of no precautions I can take that will remove all risk from my grandchildren’s lives, and I do not know how to eliminate all financial risk to the City.  I do know enough to insist on high standards for financial management and reporting to minimize our risks.  Balancing risk against reward is an important part of life that requires our attention every day.

Signs of a Financially Healthy City

I attended a conference in Central Oregon last week where I talked with a colleague from California about the increasing number of city bankruptcies in his state.  The number of employees in his city has fallen from more than 350 to less than 190 in the past three years, and there is no reason to believe conditions will improve in the months ahead.  My friend predicts there could be as many as 100 city bankruptcies in California in the near future.  He attributes his city’s problems to a state decision to take money from cities and a generally poor economy.

Oregon law has no provision allowing for municipal bankruptcies; and, consequently, no city has declared bankruptcy in the history of the state.  Cities with financial troubles are forced to either cut expenses, raise taxes, or both.  The City of Oakridge used a short-term loan from the County to deal with some recent problems, while also cutting their workforce by more than a third and raising utility rates.

I think cities (and individuals) get into trouble by assuming the future will look very much like the past.  Many of us have learned from experience that maintaining financial health requires active, thoughtful management, which recognizes changing conditions and adapts to new circumstances.  I learned this lesson early in my career when Oregon cities were forced to address tax limitations that suddenly changed the way public services were financed.

Financially healthy cities closely monitor fund balances and recognize when ongoing responsibilities (costs) begin to exceed the revenue necessary to support them.  Cities continually struggle with balancing expenses against income because there are so many legitimate demands for available resources.  No city will be able to maintain its core services without the ability to set priorities and say “no” to requests for funds that are beyond the capacity of the organization to provide.  I have written many times about the difficulty of conveying this message when so many city funds are designated for specific purposes.  People frequently do not understand why money is available for something they consider to be a low priority when what they see as an essential service is underfunded.

Public understanding is not necessarily increased by improving the transparency of city finances, but I believe it is an essential part of maintaining financial health.  If the city’s financial oversight is based on the knowledge that everything is open to public scrutiny, there is a very high motivation for policy makers and managers alike to get it right.  Getting it right also involves working to standards such as those set by the Government Finance Officers Association (GFOA) for financial statements and by insuring that annual audits are conducted by competent accountants.

The most important city asset is the trust of our citizens, and nothing will erode that trust more quickly than mismanagement of city funds.  Albany has a good history of financial management, and there does not appear to be any danger of default on obligations in the foreseeable future.  Resources will continue to be constrained, however, and that circumstance is unlikely to change anytime soon.