“Flat is the new up,” said Ronald Green, Controller for the City of Houston, when discussing trends in city revenues at the recent Bloomberg State & Municipal Finance Conference held in Chicago.  Many conference attendees chuckled and nodded their heads in agreement.

This prolonged recession has left many local governments searching for creative financing and service delivery models, a theme echoed by many panelists throughout the day-long conference.   Another theme: negotiating the balance between keeping costs under control while striving to maintain a competitive position in the global economy.

Cooperation Often Breeds Greater Efficiency

Intergovernmental cooperation and public-private partnerships were presented as two ways to preserve certain public services while cutting or reducing financial pressures on county and/or local government. Neither of these concepts is necessarily new, but many governments may find themselves in a position to consider them in a new light.

Green talked about how the City of Houston and Harris County have had success in cooperatively providing public library services – one example of an intergovernmental joint effort to provide a public service. Two public library buildings in Houston were funded by the City, while the County maintains responsibility for their operation.

Speaking on a separate panel, Kurt Summers, Chief of Staff to Cook County Board President Toni Preckwinkle, said that in early 2011, the City of Chicago and Cook County began taking a closer look at ways in which to work together to reduce costs and improve the efficiency of service delivery.

The City and County are increasingly finding ways to collaborate in several high-impact areas, including Workforce Development, Homeland Security, and Anti-Violence and Community Stabilization. Both Mayor Rahm Emanuel and County Board President Toni Preckwinckle have been vocal in their support of collaboration as a means to save taxpayer dollars and increase the quality of public service.

Is it the government’s business?

In addressing county-run programs and services, Summers said, “We have to think differently about how we do business nowadays,” he said. “It’s not a simple question of making budgetary cuts; it’s also about revising the models of service delivery.”

“Are we the best ones to provide this public service, or could it be delivered better through the private sector or an intergovernmental arrangement?”

Speaking on the same panel, James Reynolds, Jr., Chairman and CEO of Loop Capital Markets, said that public-private partnerships may be one of the biggest game-changers in government service delivery.

“Governments need to clearly define their core mission. Typically, most of the things that the public sector can do, the private sector can do better.” Many governments are currently in a position where they are unable to raise taxes in order to increase revenues – yet, at the same time, they can’t let their levels of service deteriorate. For that reason, public-private partnerships may be on the rise.

Funding education = funding the future

Royce West, Senator for the 23rd District of Texas and Managing Partner at West & Associates, L.L.P., was among several panelists who addressed the need for governments to remain economically competitive while cutting money from the budget.

The panel discussed the importance of adequate funding for schools in an effort to support the state’s significant population growth. As schools in cash-strapped districts deteriorate, or even close their doors, residents move to other areas, putting stress on their infrastructure.

“Education is the key to retaining a competitive position in the global economy,” said Senator West.

Is the pain worth the budgetary gain?

Summers acknowledged that some cuts make more long-term sense than others. For example, while the capital markets may be requesting long-term wage freezes for public employees, this type of action can lead to difficulty in attracting and maintaining a quality work force.

Why would a doctor choose to work for Cook County Hospital, for example, when that same doctor could earn far more money working for a private-sector hospital in the area?

Population loss leads to tax base decline … Time to reverse the trends.

A declining population in both Cook County and Chicago has resulted in a lower tax base. Some of that population loss has been driven by corporate decisions to curtail their operations or relocate. As the jobs leave, the population follows.

“If we don’t do something now, we can’t continue to be the powerhouse of the Midwest, and Chicago will struggle to compete in the global economy.”

And what is that magic “something?” The experts agree: Cook County and Chicago need to take action to reverse current trends with a three-part formula: a.) Grow the area’s economy b.) Increase the number of area jobs; and c.) Control expenses.

Heard at the conference ….

  • “Flat is the new up” – Ronald Green, Controller, City of Houston
  • “Are we the best ones to provide this public service, or could it be delivered better through the private sector or an intergovernmental arrangement?” – Kurt Summers, Chief of Staff to President Toni Preckwinkle, Cook County Board of Commissioners
  • Education is the key to retaining a competitive position in the global economy.” – Royce West,Senator, 23rd District, Senate of Texas; Managing Partner, West & Associates, L.L.P.

Editor’s Note: Bloomberg will be holding its next State & Municipal Finance Conference in New York City on October 3, 2012.