Creating a Sound Foundation for Municipal Restructuring

This article first appeared in The Journal of Corporate Renewal.

For some municipalities, the light at the end of the tunnel is becoming more visible, given an improving national economy and rising tax bases. For others, the road to solvency remains unclear. For all, determining a path to fiscal good health is paramount. Quite often, that complicated goal can be achieved through restructuring.

Municipal restructuring shares many attributes with traditional company turnarounds. However, the nature of a municipality’s business/mandate and its consequent value delivery chain demand a different scope of decision-making frameworks and diverse organizational solutions. Importantly, successful municipal restructurings have hinged on several common characteristics, actions that should readily be adopted by government entities as preventive measures to avert future dramatic crises.

Unbuckling common wisdom

In any article or conversation regarding municipal or government restructuring, the first argument one is likely to encounter is that decision times are cumbersome and slow—at times, glacial. As correct and indeed amply supportable as this observation might be, it severely understates the realities and challenges of adapting traditional turnaround business practices to the public sector.

First, government leaders operate amid different realities than a typical CEO. The innate system of governmental checks and balances is such that no governor, mayor, or county official has complete control or domain over most areas of influence. Second, the very nature of government is such that it mimics a Harold Geneen-style holding company model, with very independent agencies and departments operating with reasonably independent boards and allocated budgets, yet without the formal tight financial control and oversight that characterized the success of the Geneen era.