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Welcome to Roll Call, a newsletter about the state of policy and technology in public safety, and the people shaping it. If you’d like to sign up, you can do so here. Or just read on…
TL;DR
Not all revenue is equal! Some funds are more liquid and/or flexible than others.
Intra-year revenue is difficult to monitor and easy to spend (to avoid rolling over at end of year).
The five major revenue streams are the General Fund, Supplementary LE Funds, Other Funds, Grants, and Fines/Fees/Forfeitures:
Today’s note is on police department income. On principle, Roll Call is far more interested in how public safety dollars are spent than how they are earned, but we’ve already seen a couple cases where the origin of the spent money matters.
Police misconduct lawsuits, which we covered when looking at Benchmark Analytics, are often paid out of the general fund instead of the agency’s budget.
Technology products have often been bought with the proceeds of forfeited assets. Just in 2019, Simi Valley PD procured Tasers/BWCs and Norwich PD procured BWCs with impound funds. Agencies that do it this way can avoid a line-item bureaucratic scuffle during the budgeting process.
The point is: if you’re selling to public safety or if you’re buying as a public safety entity, the channels in which you choose to deal matter a great deal. If you know what revenue streams - and therefore, purchasing power - an agency has at its disposal, you can get a sense of what kind of projects/products align with the agency’s financial position. That can be the difference between selling with or against the grain - it’s smooth when commerce channels align and tough sledding when they don’t.
The Channels
Ten police departments and their revenue streams are charted below. In this section, we’ll look at the revenue streams, what being over-allocated in any one channel tells us about the agency, and how flexible each is.
General Funds - The largest, most reliable, and best-planned revenue stream. At a minimum, the general fund covers personnel, contractual services, and equipment. 90.5% of average revenue.
Over-allocated: Can mean three different things. It could mean that the municipality and agency value specificity in the budgeting process, and spending plans are set in stone before the fiscal year even begins. If that’s the case, tech company sales cycles are in lockstep with budgeting cycles, and the real buyer is city council (or city manager, or whoever controls municipal budget). Los Angeles PD is a good example here. An over-allocated general fund could also mean that the agency has ad-hoc operating budget within their general fund allotment. This would indicate more trust from the local government body, and more flexibility in what funds are spent on. We will get into procurement process mayhem in a later post, but this does not indicate that these agencies can spend large sums without the speed bumps of an RFP process. Finally, it could mean that many of the high-leverage decisions do not rest with the department, but with a neighboring agency that takes on more of the project procurement and deployment burden. Ft. Lauderdale PD is a good example of the second two options - they have some opacity and flexibility in the budget, but Broward County Sheriff’s Office takes the lead on most large technology initiatives and collects payments from the PDs in the county.
Flexibility: Ranges from Medium-Low to Medium-High.
Grants - Includes federal and non-federal grants. Almost always earmarked for a specific purpose. DOJ has an up-to-date list of available grants here. 3.0% of average revenue.
Over-allocated: If an agency has >3% of revenue as grants, that signals that the agency has a strong grant-writing operation, whether in-house or contracted. Tech companies should know which agencies can flex this muscle and what grants (federal and non-federal) apply to their products. These are high-impact dollars because it doesn’t come out of the city budget. Everyone feels like a winner when grant money is spent.
Flexibility: Low.
Supplemental LE Funds - Generally the result of a tax increase, a certain percentage of which goes to the PD. 2.9% of average revenue.
Over-allocated: If an agency has >3% of revenue as supplemental funds earmarked for law enforcement, it signals some amount of disarray at the municipal level. It’s either a piecemeal increase of personnel that is separate from the general fund (which makes it easier to repeal and remove later), or the agency is facing a specific issue that requires specific attention. Both are often a consequence of extreme population growth. This is certainly the case in Phoenix, where there’s a Neighborhood Protection Fund, a Public Safety Expansion Fund, and a Public Safety Enhancement Fund. Each was the result of a sales tax increase.
Flexibility: Medium. Essentially a small general fund.
Other Funds - Funds that are usually allocated for capital improvements projects regardless of department. 2.5% of average revenue.
Over-allocated: If an agency has >2.5% of revenue from other funds, it’s either a municipality-wide example of the description above (piecemeal addition of funds), or funds explicitly dedicated to infrastructure improvement. As a rule of thumb, I would assume that an over-allocation of this type of fund signals that the city has recently (last 0-3 years) spent effort on a large capital outlay. This has significant power implications, as bond issuances and big capital raises require an equal amount of political capital expenditures. For now, suffice it to say that if a PD is working on big infrastructure projects, they might have less bandwidth for op-ex purchases.
Flexibility: Low.
Fines / Fees / Forfeitures - The only form of revenue that is directly attributable to the agency. It’s also the revenue stream that gets the most press, legislative oversight, and activist attention. 1.1% of average revenue.
Over-allocated: First, it’s important to note that this form of operating revenue is sometimes difficult to see in a budget document. It’s often hidden in the general fund because, the reasoning goes, it’s collected and spent by the end of the year. It doesn’t impact net expenditures for the municipality. Other agencies, like those in Florida and Arizona, pool seized assets at the state and/or county levels. Arizona agencies report seized assets quarterly to the Arizona Criminal Justice Commission as RICO funds, while Florida agencies had no requirement to report seized assets at all until 2019, but now do so to FDLE. A 2015 report by the Florida Legislature’s Office of Program Policy Analysis and Government Accountability (what a horrible name, and OPPAGA isn’t better) broke down the spending of asset forfeiture funds below:
Because this is the one source of revenue that police departments control themselves, it’s worth looking closer at the incentives the program drives. There’s lots of reporting on how this can go wrong (this deep dive into Greenville PD’s practices is eye-opening), but research like this paper shows “that drug arrests increase in counties where local governments are running deficits, but only in states that allow police departments to retain seizure revenues. These increases, however, are only observed for black and Hispanic drug arrests; white drug arrests remain unchanged… [T]he seizure of non-narcotic property from black and Hispanic arrestees is increasing with size of the deficit in states where police departments can retain revenue from seized property.”
From an agency perspective, 1% of revenue is not that significant. However, fund amounts >1% would indicate that an agency aggressively pursues drug-related crimes and/or is very transparent about other payments received (like charging for dead animal collection or licensing/permitting fees). From a company perspective, this is the most liquid and discretionary money out there, and an agency could be feeling pressure to spend it before the financial end of the year. Looks tasty.Flexibility: High.
More Detail for the 10 Agencies Above:
Useful References:
Funding Community Policing to Reduce Crime: Have COPS Grants Made a Difference?
To Serve and Collect: The Fiscal and Racial Determinants of Law Enforcement
Finders Keepers: Forfeiture Laws, Policing Incentives, and Local Budgets
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-MA
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