This week I’m on the road in Lafayette, Louisiana, with my good friend and frequent collaborator, Joe Minicozzi. For this Minnesotan, where anything over 80 degrees is starting to get uncomfortably warm, this promises to be an interesting week. Let me fill you in on what we are attempting to do.
One of the things Joe and I both experience everywhere we go – and in the past few years, that is almost every state in the country – is that cities compile amazingly little information to help them make decisions. Despite running corporations (most cities are “incorporated” municipalities) that have billions of dollars in assets and liabilities and annual cash flows in the tens, and sometimes hundreds, of millions of dollars, few ever ponder some shockingly simple questions.
- What are our total assets, the value of the tax base that constitutes our community’s wealth?
- What are the long term obligations for infrastructure maintenance associated with sustaining those assets?
- In terms of geography, what parts of our community have a positive Net Present Value (cash from long term assets minus the cost of long term liabilities) and which have a negative Net Present Value?
The answers to these questions constitute a community’s balance sheet, the most basic of accounting requirements for any family or business but one which cities largely ignore. Where I’ve seen cities attempt to assemble one (in Minnesota, something like this is required), they are so lacking in sophistication and accuracy as to be worthless. No city tracks their balance sheet year to year to ensure their policies are having a positive impact on the community’s wealth.
Since we don’t know the answer to these basic questions, we can’t even begin to ponder some more sophisticated, but obvious, things that all cities face.
- How does that tax base change in response to certain policy decisions?
- What types of land use patterns create the most wealth for the community?
- What types of land use patterns experience the greatest degree of volatility?
- How does a park impact Net Present Value? How far from the park does that effect extend?
- How does a stroad impact Net Present Value? How far from the stroad does that effect extend?
- Where can we deploy limited resources to have the greatest overall impact?
- How stressed would the city be if there were a 20% increase in fuel and asphalt prices?
- How stressed would the city be if there were a 10% drop in commercial real estate prices?
Understand that the answers to these questions and more are quite knowable, that any private business of the size and scale of a city would have more than a gut hunch as to what they are. Cities are not businesses and we never suggest that they should be run in order to maximize profit, yet solvency is a prerequisite to any good that a local government can perform. There is no decent reason why, in the year 2014, all local governments shouldn’t have this base level of sophistication.
In the last year, both Joe and I have had the opportunity to speak with people throughout Lafayette, community leaders in and out of government, young and old alike. While the challenges facing most of our cities are likewise present here, what is also here is a desire to become more sophisticated decision-makers. They want to be able to answer these questions. They have invited us in to help with that and we’re really excited to be here.
Our task this week is quite preliminary. We’re going to figure out what we know and what we don’t (“we” being Joe and I along with the Lafayette Consolidated Government) and figure out how the data can be aggregated and arranged to produce some actionable results. If we’re successful – and we have no reason to think we won’t be – then the next step will be to help them create a tool that provides an ongoing, real time, financial analysis of the community. This will be unlike anything else we’ve seen across the country. It will not only help them make decisions, it will establish Lafayette as clear leaders in the push for smarter, more sophisticated governance.
We’re planning some brutally long days and evenings but I’ll try to provide some updates as we go. At the very least, with Joe and me you can always count on some stroading photos.