Reforming the City’s Budgeting and Financial Planning

The current budget process is not structured to take into account public input, to measure the true cost of providing a service, to calculate the long-term consequences of budgetary decisions, or to correlate expenses with related revenue-generation and cost-savings.

Summary of the Proposed Solution

We will restructure the budget process to make it a community-wide collaborative process of setting goals and protecting the financial health of the City. This process will include:

i) Budgeting programmatically for the outcomes we hope to achieve;

ii) Factoring the interrelationship between spending and revenue into the budgeting process;

iii) Creating a five-year fiscal plan;

iv) Developing a financial investment plan that maximizes the return on our financial assets; and

v) Developing a capital asset management plan that maps out the work needed to maintain our infrastructure and other capital assets.

Discussion and Implementation Plan

i) Programmatic Budgeting

Each year’s budget process should begin by listing our goals and objectives, then costing-out and prioritizing those programmatic goals. For each item, we should ask what the most cost-effective way of achieving the objective is and whether there are opportunities to achieve it at lower cost. This process should include negotiating a Service Level Agreement (SLA) with the department or contractor providing the service. For example, we could have an SLA that all potholes will be filled within 48 hours of being reported. It is important to consider SLAs when examining lower-cost alternatives, as it is a false economy to pay less for a lower quality service.

ii) Factoring Spending and Revenue Interrelationships into Decisions

Another type of false economy occurs when an expenditure is reduced that results in increased costs or decreased revenue. For example, the elimination of parking control officers in Newton resulted in lost parking revenue.

iii) Creating a Five-Year Fiscal Plan

Newton currently produces a five-year fiscal forecast that shows large budget deficits going forward with no plan to address those deficits. We should integrate into our annual budget process a five-year fiscal plan that takes into account the long-term impact of budget decisions, such as deferred maintenance. This plan should also address deferred liabilities, such as our post-retirement health care liability.

iv) Developing a Financial Investment Plan

Newton has an average daily cash balance of nearly $100 million. We need to tap into all available financial expertise to make sure we are maximizing the return on our financial assets, while protecting taxpayer dollars against financial market uncertainty and maintaining sufficient liquidity. The Newton Financial Advisory Committee should be tasked with examining our financial management strategy with these goals in mind.

v) Developing a Capital Asset Management Plan

Our budget process should include examination of the cost of maintaining our capital assets and our future needs, mapping out the work needed to maintain our facilities, infrastructure and other capital assets. This plan should include:

• Development of a citywide building maintenance plan;
• A complete inventory of all capital assets;
• A needs assessment of what assets will be needed over the next five years to deliver services;
• Active planning to minimize capital project costs and to maximize value through the use of a Building Information Modeling system to track and manage construction, renovation, and maintenance, giving the city more control over the early conceptual design, programming and upgrade process and thereby avoiding costly changes of course later in the process;
• Exploration of different approaches to architectural procurement, including design competitions and design/build contracts;
• Realistic cost estimating at every stage of the project; and
• Selection of firms that can quickly and cost-effectively produce schematic design and construction budgets, such as local firms that do not have the capacity to produce construction drawings, but can help us to meet our building needs within our budgets.