In this article, Peter Nichols draws some findings from a recent municipal review in New York City that may be relevant here.

The challenges faced by the City of New York might seem far removed from those in this province, but a recent set of investigations in the "Big Apple" offer some interesting ideas for improving the performance of that city -- and may provide some thoughts that can be applied here as well.

In 1995, the Citizens Budget Commission convened a group of concerned and influential New Yorkers to consider the financial future of New York City and New York State. The initiative came in response to concerns about the "structural deficits" and apparent decline in economic competitiveness of the two New Yorks. Each year, projections of spending exceeded projections of revenue. In the commission's view, the traditional governmental responses were short-sighted and ultimately self-defeating: taxes were raised, providing short-term revenue solutions but eroding longer-term economic growth; services were cut without improving productivity; required expenditures were being deferred; and the costs of current services were being passed on to future generations by way of new debt. During all this, relative job growth and personal incomes in New York were declining.

In response, the Citizens Budget Commission embarked on a two-year project to develop recommendations to guide the fiscal policies of the two New Yorks. The recent findings of the Commission make for interesting reading.

With regard specifically to the City of New York, the Commission examined five main areas where savings could be realized. Two of those -- in the fields of social welfare and public education -- are not directly relevant to Alberta municipalities and are not discussed in this article.

The more relevant areas involved capital spending and debt service, the delivery of municipal services, and tax expenditures, the latter more commonly known as tax deductions and exemptions.

Capital Spending and Debt Service

The key problems identified by the Commission in this area included the following:

• unduly long and complicated review and approval processes, which increased the time and money required to complete capital projects.
• inefficient project management, which raised capital costs. For example, historical regulations required municipal projects in excess of $50,000 to be divided into at least four separate subcontracts.
• a lack of attention to maintenance planning and an underfunding of maintenance. In some instances, less than 10% of necessary maintenance was being carried out, compounding the need for capital replacement.
• inadequacies in the capital planning and priorities process, which compromised the returns achieved from capital spending.
• the use of debt to fund operating deficits, which passed on operating costs to future years.
• the use of proceeds from the sale of fixed assets to fund current year operating deficiencies, rather than to finance new capital construction or to retire outstanding debt.

Savings in Other Services

The Commission's examination of the City's services revealed that the City spent roughly one-third more than other localities to provide essentially the same package of services. The City's operating expenditures had increased by approximately 6% per year for almost two decades. Compared to other large centers, New York used 25% more employees per capita to deliver services and it paid its employees in excess of one-quarter more on average.

The strategies recommended by the Commission included:

• the elimination of unnecessary or low-priority functions. The proposed criteria for discontinuing services provided by the City included those that produce relatively limited public benefits or are provided in an environment where a private market for the activity exists or could be created without government intervention.
• the introduction of competition to the provision of services, which could produce average savings of 25% to 30%. Particular service candidates identified by the Commission included sanitation; snow removal; bridge maintenance; and support services as data processing, technology development and maintenance; property, equipment and fleet management and maintenance; printing; and billing and collection. The report suggested that while government funding or regulation may be necessary to ensure that a service is provided, direct government provision does not inevitably follow. Likewise, "contracting for service delivery with private firms is not the necessary consequence of competition. Generally, both private and public organizations can compete."
• making services provided by government more productive. For those remaining services that continue to be funded and provided directly by the City, the Commission recommended a number of specific initiatives for producing savings. The two broad thrusts included process re-engineering, involving the consolidation of organizational arrangements, the introduction of new technology (e.g., computer-based scheduling, document imaging, etc.), the modification of work rules relating to employees (e.g., civilianization of police administrative activities), investment in prevention (for example, fire prevention to reduce fire-fighting costs), and research and development pertaining to ongoing restructuring and service re-engineering. The second thrust involved compensation re-engineering, including changes in the system of financial rewards (for example, financial incentives for innovation and improved productivity), the rules defining work frequency, and compensation costs (for example, overtime costs, health insurance, etc.).
• the removal of institutional barriers to change, including the modification of existing budgeting and financial management practices, the civil service system, and the collective bargaining system.

Tax Expenditure Savings

The final area of the City's activities that was critically examined by the Commission related to the municipality's use of property tax and other tax exemptions to encourage firms to remain or expand within the City. The Commission found that the benefits of these exemptions in terms of job retention and economic activity were not clearly evident and that the adverse impacts of those exemptions on other industry suppliers and on other taxpayers were generally ignored. The Commission's goal rather, would be to reduce overall tax levels on an economically neutral basis (that is, equal treatment to all industry) and to improve services. The achievement of those goals would provide an attractive and competitive environment to all businesses.

It is unclear how far New York will go in embracing the findings and recommendations of the recent studies, and while the challenges faced by that City appear to be far beyond those experienced by municipalities in Alberta, many of New York's policy debates and prospective avenues for improvement are relevant to municipal leaders here.