City’s financial failure must be addressed

The unfolding financial crisis at the city makes it clear that we have failed the most basic tenets of local government. The value of government is to address common needs that cannot be met by individual citizens, such as life/safety and infrastructure needs by carefully spending the tax money it receives. It is important we learn how we got into this deficit position and how we get back on a responsible fiscal track.

The first level of failure occurred with a lack of timely financial reporting. We are now in May and we still do not know what the city’s cash balance was last December, much less the details supporting where all of the money went. For management purposes, financial information is a lot like potato salad — only good when fresh. Complete financial statements and analysis must be provided to the Bainbridge Island City Council within two to three weeks of a month’s end to give it the necessary information to make informed decisions. Having nothing to report four months after a year’s end is a complete and total failure by the city’s Finance Department. The city must determine the root cause of this failure and determine if it is related to some combination of employee incompetence, staffing, processes or systems. Any time complete financial statements and analyses are more than three weeks past a month’s end, they should be considered unacceptable.

The second level of failure rests with Mayor Darlene Kordonowy and her senior executive staff. She is the chief executive officer in charge of the overall operations. If she had no understanding of the current financial position she should have demanded it. She also had a responsibility to the council to communicate the growing fiscal problem. She must understand the financial implications of any decision she may make. She has failed in all areas of fiscal management.

The third level of failure rests with the council. Perhaps the most troubling concern is that a council majority is continuing to make commitments with no understanding of how they would pay for them. Much like consumers of “five-month-old potato salad,” the city administration and the council majority are going to have to withstand the discomfort of breaking promises made because they just don’t have the money. A heightened sense of priorities will have to take place within our executive and legislative branches to minimize the broken promises.

When times are good and cash is easy, organizations tend to get fat and sloppy. They often exercise less “due diligence” in the course of their fiscal affairs. Recessions prune out the weak and inefficient. The city should have predicted the current situation by paying attention to key performance indicators such as building permits. There appears to be much pruning and priority-setting required at the city.

A self-imposed crisis is an opportunity for us to determine what we will do differently in the future to avoid a repeat of this situation. Hopefully we will learn from this and the city will: 1) develop enhanced measurable expectations for finance and other city departments; 2) review and understand the monthly financial situation from the current financial analysis that will be provided, and; 3) require a projected fiscal impact analysis for any and all projects before the council votes. Perhaps most importantly, citizens need to pay closer attention to our local governments and make sure the proper questions are asked.

Fiscal responsibility is not only a state of mind, but a statutory requirement. As citizens we have the right to demand accountability and due diligence from all elected officials and city employees.

Doug Johnson is a member of the Bainbridge Resource Group, and a former member of the Bainbridge Island School District and Fire Department boards. He served as chief finance officer for a maritime company in Seattle before retiring.

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