Anticipating the black swan.

• Author: Ley, Jim

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City and county managers learn that some events can be anticipated and, therefore, influenced, but many others can't be foreseen at all. Municipal managers add value by learning how to anticipate unforeseen problems, more often than not, and to think strategically about the future. This is accomplished not just by managing risk, as many managers do with great skill and competence, but by finding ways to position the community for a better future --facing the unknown as a strategist first, and then as a tactician. This approach, which builds on a base of skills that cross a number of disciplines, is needed in preparing for "black swan" (1) events like the one that Sarasota County, Florida, experienced in 2008, when the collapse of the nation's housing market and the weakening of the financial infrastructure supporting the local real estate economy affected the tax base in ways that no one could imagine.

The trying circumstances that Sarasota faced in the Great Recession and its aftermath highlight the dangers of relying too much on statistical information that is disconnected from the realities of community and place. Not only does such information look backward--not that useful in a black swan context--but when viewed from outside of the context that generated them, such data can hide or muddle the cultural considerations that might shape a more thoughtful and nuanced response.

Before 2008, few professionals in local government gave a second thought to the real estate portion of their financial picture. Indeed, property tax collections were Sarasota County's most reliable revenue component. The sudden reversal was especially surprising after 90 years of federal monetary policy aimed at maintaining stability and growth in the value of the housing market, and, of course, all the associated banking and mortgage underwriting standards and regulations. With so many powerful forces working in concert, such an outcome seemed inconceivable, even in a worst-case scenario. Yet it did happen, and Sarasota County took one of the worst hits in the nation. (2)

DEALING WITH THE DOWNTURN

Looking back at the Great Recession, it's easy to see opportunities where the county could have prepared better for the gathering storm. The asset side of its balance sheet had always been relatively predictable, and that part of the financial picture was taken for granted. Once the shortfalls hit, the opportunity for proactive measures in that realm...