responding to fiscal challenges how to deal with a changing economic climate jeff tyne – budget...

Responding to Fiscal Responding to Fiscal ChallengesChallenges

How to Deal with a Changing Economic How to Deal with a Changing Economic ClimateClimate

Jeff Tyne – Budget Director

City of Peoria, Arizona

Today’s AgendaToday’s Agenda

•Causes and Triggers - How to Assess Your Fiscal Situation

•Preparing Your Organization – How to Approach the Issue

•Strategies – How to Address Shortfalls

•Restoring Balance – How to Take Something Away From This Event

Current Size 178 Square Miles

PopulationCurrent 153,000Projected Build Out 500,000

10-Year Capital Plan $1.1 Billion

Fiscal DistressFiscal DistressHow Does it Present Itself?How Does it Present Itself?

•Economic Cycles

•Problems Emerge Gradually

•Two Worlds Collide-Resource Decline & Cost Demands

•Arizona Communities-Subject to the “Perfect Storm”

•Operating Funds Usually More Vulnerable

•Intergovernmental Aid?

Judging Your Financial Judging Your Financial ConditionCondition

On Which Step is Your On Which Step is Your Community?Community?

Cash Position

Upcoming Fiscal Position

Long-Term Fiscal Position

Service Level Ability

The Warning SignsThe Warning SignsHow to Measure Fiscal DistressHow to Measure Fiscal Distress

•Learning to Read Financial Documents

•Measure Long-Term Structural Condition

•Word on the Street - What are the Credit Agencies Saying?

•Financial Indicators/Status Reports

•Waves Come in Sets-Progressive Rounds

Financial BudgetFinancial BudgetProjected Inflows vs. OutflowsProjected Inflows vs. Outflows

$50,000,000

$55,000,000

$60,000,000

$65,000,000

$70,000,000

$75,000,000

$80,000,000

$85,000,000

$90,000,000

FY 2005

Outflows Inflows

$1,995,220

What do you do with the difference?

$50,000,000

$55,000,000

$60,000,000

$65,000,000

$70,000,000

$75,000,000

$80,000,000

$85,000,000

$90,000,000

FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

Outflows Inflows

$1,995,220

($1,726,160)

($1,969,805)($2,414,751)

($3,442,795)

Financial BudgetFinancial BudgetProjected Inflows vs. OutflowsProjected Inflows vs. Outflows

The Warning SignsThe Warning SignsHow to Measure Fiscal DistressHow to Measure Fiscal Distress

•Learning to Read Financial Documents

•Measure Long-Term Structural Condition

•Word on the Street - What are the Credit Agencies Saying?

•Financial Indicators/Status Reports

•Waves Come in Sets-Progressive Rounds

Financial Analysis & ReportingFinancial Analysis & Reporting

The Warning SignsThe Warning SignsHow to Measure Fiscal DistressHow to Measure Fiscal Distress

•Learning to Read Financial Documents

•Measure Long-Term Structural Condition

•Word on the Street - What are the Credit Agencies Saying?

•Financial Indicators/Status Reports

•Waves Come in Sets-Progressive Rounds

How to Approach How to Approach An Organization in Fiscal DistressAn Organization in Fiscal Distress

•Be All-Inclusive•Department Action Teams•Triage Concept•Spread Burden Among All Levels of Government

•Emphasize Goals

•Promote Innovation

•Present Measures as a “Work Plan”

•Continue with Organization’s Core Values

•Make Lemonade

•Celebrate Successes

Potential Goals

An Organization in DistressAn Organization in DistressWays to Approach the Ways to Approach the

ProblemProblem•Be All-Inclusive

•Department Action Teams•Triage Concept•Spread Burden Among All Levels of Government

•Emphasize Goals

•Promote Innovation

•Present Measures as a “Work Plan”

•Continue with Organization’s Core Values

•Make Lemonade

•Celebrate Successes

Long-Lost InitiativesLong-Lost InitiativesTime to Resurface?Time to Resurface?

•Performance-Based Wage Structure

•Outsourcing/Privatizing Services

•Dealing with “Sacred Cows”

•Performance Management

•Be All-Inclusive•Department Action Teams•Triage Concept•Spread Burden Among All Levels of Government

•Emphasize Goals

•Promote Innovation

•Present Measures as a “Work Plan”

•Continue with Organization’s Core Values

•Make Lemonade

•Celebrate Successes

An Organization in DistressAn Organization in DistressWays to Approach the Ways to Approach the

ProblemProblem

CouncilInvolve Early and OftenManager Briefings

OrganizationStanding Agenda ItemEngage Broad Range of EmployeesIncentives

CitizensCommunity OutreachSpecial CommitteesUse of Surveys

UnionsStanding Agenda ItemPromoting Collaboration

MediaGet out the Right Message

Celebrate SuccessCelebrate Success

A New Day in Long Beach• From Fiscal Crisis to Stability• From Downsizing to Directed Investments• From Subsidies to Cost Recovery• From Organizational Management to Performance Management• From Short-term Solutions to Core Long-term Investments

Employee Reductions

Avoid these “Detached Management” Approaches

-Curtness

-Keep Employees “In the Dark”

-Surprise Announcements

-Perceived Unfairness

-Public Humiliation

Consider these Approaches-Be Empathetic-Consider Legal Aspects (Policies, Union MOU’s,

Documentation)-Consider their Future

Solutions & AlternativesSolutions & AlternativesRevenue StrategiesRevenue Strategies

Fees for Service-Taking a Hard Look•Taxpayer Subsidy Perspective•Include “Indirect” Costs?

Cost Allocation Models•Fully Using Chargebacks?•Worth reviewing demand factors

Sales Tax Options•Differential Taxes•Dedicated Sales Tax•Audit Programs

Use of Fund Balance/Rainy Day FundsOther Revenue Sources

•Maintenance Improvement Districts•Utility Users Tax•Franchise Fee Levels

Solutions & AlternativesSolutions & AlternativesCost Containment StrategiesCost Containment Strategies

•Across-the-Board Cuts•Cost Category Option•Negotiated Exemptions

•Hiring Freezes-Be Thoughtful•Note Exemptions Before the Freeze

•Employee Education/Wellness Programs

Commonly Used Measures-Who are you hurting?

Solutions & AlternativesSolutions & AlternativesCost Containment StrategiesCost Containment Strategies

•Assessing Market Position-Compensation Packages•Review Benefit Plan•Sick and Vacation Time•Use of Overtime•Incentivized Programs

•Retirement•Voluntary Termination

•Reduce Employer Commitments to Defined Contribution Programs

Personnel-Related Ideas

Solutions & AlternativesSolutions & AlternativesCost Containment StrategiesCost Containment Strategies

•Costing Out Services•Use of Performance Management•Job Sharing Opportunities•Job Shifting

Important Initiatives

Solutions & AlternativesSolutions & AlternativesCost Containment StrategiesCost Containment Strategies

•Operating Impacts of Capital Plan•Excise Tax Debt Service Payments

Future Liabilities

Solutions & AlternativesSolutions & AlternativesCost Containment StrategiesCost Containment Strategies

•Closely Scrutinize Replacement Programs•Reevaluate Compliance “Mandates”

Some Possible “Deep Pockets”

Solutions & AlternativesSolutions & AlternativesCost Containment StrategiesCost Containment Strategies

•Travel Budgets•Contractual Services•City Vehicle Usage•Utility Costs-Lighting, water usage•Special Events•Reduce Printing Costs-Use of Electronic Media•Reassess Cell Phone Usage•Employee recognition events•Public Safety Education Programs•Facility Maintenance/Custodial Reductions•Reduction in Fleet Service Levels•Citizen Committees/Training Sessions

Other Common Targets

Solutions & AlternativesSolutions & AlternativesCost Containment StrategiesCost Containment Strategies

•Avoid “One-Time” Fixes to Handle Recurring Problems•Be careful – Travel & Training are Linked

Some Other Tips

Policy Decisions for Your Policy Decisions for Your ElectedsElecteds

•Recommended Cuts to High Priority Functions

•Personnel Options

oOutsourcing/Contracting

oManaged Competition

oRegionalization

•Use of Auditing Function

•Implementation of New Technology

•Performance Management

oFinancial Principles

oEconomic/Financial Indicators

Restoring BalanceRestoring BalanceTips for Next TimeTips for Next Time

•Routine Fiscal Assessment•Long-Term Financial Planning•Talk to your “Tax Generators”•Establish Fiscal Policies

oRainy Day FundoOne-Time Uses of FundingoDebt

•Assess Balance to Land Use•Have an Inventory of Services Provided

Responding to Fiscal Responding to Fiscal ChallengesChallenges

How to Deal with a Changing Economic How to Deal with a Changing Economic ClimateClimate

Jeff Tyne – Budget Director

City of Peoria, Arizona