Lessons Learned about Municipal Bankruptcies

Detroit pic
Detroit
Image: forbes.com

An associate at the Edward J. Collins Center for Public Management at the University of Massachusetts, Stephen Lisauskas has a considerable background in helping cities manage their expenses. Stephen Lisauskas has worked with fiscally distressed cities to reduce costs and improve credit.

In 2014, Detroit faced critical distress and declared bankruptcy. The plan to deal with that crisis imposed many hardships, such as layoffs and tax increases, which exacerbated population declines. The Pew Charitable Trusts reported on several measures that states could implement to prevent or better manage municipal bankruptcies. These include offering early assistance to distressed cities and counties; tracking cities’ fiscal condition for warning signs of financial problems; and devising alternatives to bankruptcy, including the appointment of temporary managers and monitors.

When no alternatives exist to bankruptcy, policy makers could consult representatives of all parties who have a stake in the outcome, in order to settle conflicts. Once a government exits the bankruptcy, it should enact a short-term recovery plan and a longer-term strategy of economic growth. Equally important is budgeting to balance revenues and expenses over a multi-year span to help address underlying causes.

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The Collins Center – GAP and Finance-Related Analytics Projects

 

Edward J. Collins Center for Public Management pic
Edward J. Collins Center for Public Management
Image: umb.edu

Having worked with a number of city governments, Stephen Lisauskas serves as the vice president of government affairs and the regional vice president of municipal partnerships at WasteZero. Stephen Lisauskas also helps cities improve their operations and financial management strategies as a senior associate with the Edward J. Collins Center for Public Management at the University of Massachusetts Boston.

Through its Government Analytics Program (GAP), the Collins Center helps governments implement best practices by collecting and applying data during short-term and year-long projects. GAP conducts a number of finance-related analytics projects, including projects focused on budget document development and improvement. According to the Collins Center, the budget document is the most significant policy document a government maintains, so GAP enhances the budget document and updates the budget process based on best practices established by the Government Finance Officers Association.

GAP also develops capital improvement plans, multi-year plans that guide the purchase and maintenance of publicly owned assets. During these projects, GAP works closely with government officials to assess resources, prioritize projects, and evaluate different funding mechanisms.

The Detroit Municipal Bankruptcy

Detroit Municipal Bankruptcy  pic
Detroit Municipal Bankruptcy
Image: news.yahoo.com

Stephen Lisauskas has spent his career helping municipalities avoid bankruptcy and reorganizing local government to increase efficiency. In his work helping to turn around the finances of municipalities such as Springfield Massachusetts, Stephen Lisauskas has managed to help communities avoid bankruptcy. However, there are municipalities across the United States that have not managed to avoid declaring bankruptcy; Detroit filed for bankruptcy in 2013.

The right of a municipal government to file bankruptcy only applies to those municipal governments authorized by their state to file for bankruptcy. This authorization may come from a specific state laws, or by an officer of the government specifically empowered to determine whether a municipality may declare bankruptcy. Since 1937 there have been 665 municipal bankruptcies, of these 51 have occurred since 2010. This marked increase in the rate of municipal bankruptcies may be attributed to the increase in unfunded liabilities, especially pension liabilities, and the economic recession. Detroit is by far the largest municipal bankruptcy in US history with an estimated debt of $18-20 billion.

Detroit filed for bankruptcy on July 18th, 2013 after it became clear that the city was insolvent, with nearly a third of its outgoing payments to pensions. While the city was initially ruled ineligible to declare bankruptcy by a Michigan court, this decision was reversed in October. The Detroit bankruptcy is expected to result in a $7 billion loss to its creditors.

Distinguished Budget Presentation Awards for Public Finance Officials

Distinguished Budget Presentation Award pic
Distinguished Budget Presentation Award
Image: gfoa.org

In his work as an associate with University of Massachusetts’ Edward J. Collins Center for Public Management, Stephen Lisauskas works with municipalities in financial distress with a view to reforming municipal systems for maximum efficiency. For example, as executive director of the Springfield, Massachusetts Finance Control Board, Stephen Lisauskas increased energy efficiency of municipal buildings. While this program costs $1.1 million in debt service per year to maintain, it saves the government $1.17 million worth of wasted energy, a benefit set to increase as energy costs increase. His work on the Springfield Finance Board earned Mr. Lisauskas a Distinguished Budget Presentation Award.

Distinguished Budget Presentation Awards are presented by the Government Finance Officers Association, which includes American and Canadian public finance officials. Established in 1984, the awards aim at promoting and recognizing excellent public finance documents. In order to be eligible, budgets need to be available to the public either in hard-copy format or online. Winners of the award must have well-organized budgets that present both the financial and non-financial goals and also thoroughly explain the financing and budget schedule.