Financial Advisor, Ehlers & Associates
Recognizing that change is inevitable, most communities have undertaken a planning process to view where they are and where they want to be. As a result, most communities in Illinois have comprehensive plans to guide their physical development. However, do these communities have a similar plan to direct their fiscal development? The answer is no. Officials recognize that communities grow and age. They may need new facilities or to replace aging infrastructure. Unfortunately, analyzing only the physical side of the equation does not make a complete and doable vision.
Just as a community needs a comprehensive plan to guide change in the community, it needs a financial plan that provides a framework for good fiscal decision-making. This is not just a budget or a capital improvements program. A financial strategy looks at setting financial goals for the community and the methods to achieve those goals. Both revenues and proposed capital items are parts of a framework that guides the financial decisions of the community. Tying this financial strategic plan to existing financial components and comprehensive planning creates a plan for the community that works.
When a community desires to pursue an action, it will know in advance whether that action is a financial reality. The financial strategy also provides a context in which elected officials understand their options and the implication of their decisions. The impact of competing needs can be fully understood and priorities are realistically set without putting taxpayers at risk. Can you afford to undertake that economic development project? Or, perhaps more importantly, can you not afford to undertake that project?
Communities in other states in the Midwest have embraced this new financial planning tool. For example, The Fitchburg Star, Fitchburg, Wisconsin noted that the process included a well-organized outline of borrowing options and an equally well-organized list of ramifications. The paper then praised the community’s decision to undertake the strategy.
Illinois communities should, likewise, consider this key strategic financial component that includes the following:
Confirm and prioritize community goals;
Review the community’s current financial position;
Develop an inventory of capital needs and program request beyond the traditional Capital Improvement Program;
Develop an inventory of financial resources;
Analyze the financial impact of each option;
Prepare an affordable, comprehensive financial plan;
Develop a framework to review future capital projects.
Even the rating agencies have noted that this long-range view of the community’s finances is beneficial. According to both Moodys and Standards and Poor the process assists in the rating process.
Undertaking a “Key Financial Strategies” process is now timely given the positive nature of the economy. Waiting may mean that the community may sacrifice some of its options and, in general, will face less flexibility as it attempts to prepare for the future. Developing a financial strategy will become a necessary tool as communities face the future. Illinois communities should consider this new program quickly to assure that their financial future is sound.
As Printed in the Illinois Municipal League Review, March, 2000