notice - 9-16-15 -v2 finance, efficiency, economy and ... · finance, efficiency, economy and...

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NOTICE OF PUBLIC MEETING PHOENIX CITY COUNCIL

FINANCE, EFFICIENCY, ECONOMY AND SUSTAINABILITY SUBCOMMITTEE

Pursuant to A.R.S. Section 38-431.02, notice is hereby given to the members of the FINANCE, EFFICIENCY, ECONOMY AND SUSTAINABILITY SUBCOMMITTEE and to the general public, that the FINANCE, EFFICIENCY, ECONOMY AND SUSTAINABILITY SUBCOMMITTEE will hold a meeting open to the public September 16, 2015, at 10:00 a.m. located in Phoenix City Hall, Assembly Rooms, 200 W. Washington Street, Phoenix, AZ. One or more members may participate via teleconference.

The agenda for the meeting is as follows:

1. Call to Order Chairman Gates

2. Approval of June 17, 2015 Minutes Subcommittee

Page 5

Items 3 - 4 are for information only.

3. JULY 2015 KEY PHOENIX ECONOMIC INDICATORS REPORT This report transmits the July 2015 report on Key Phoenix Economic Indicators to the Subcommittee.

This item is for information only.

Jeff Barton,

Acting Budget and Research Director

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4. TECHNOLOGY SUMMIT RECOMMENDATIONS – IMPLEMENTATION PLAN

This report provides the Subcommittee with information on the implementation plan for the Task Force on Technology Advancement’s recommendations from the Technology

Summit. This item is for information only.

Debbie Cotton,

Chief Information Officer

Page 29

Items 5 – 10 are for discussion and possible action

5. AUTHORIZATION TO ENTER INTO DEVELOPMENT AGREEMENTS BETWEEN CITY OF PHOENIX AND W.L. GORE & ASSOCIATES, INC. AND CANYON CROSSROADS, LLC This report requests the Subcommittee recommend City

Council authorization for the Community & Economic Development Department to negotiate terms and enter into

separate development agreements with W.L. Gore & Associates, Inc. and Canyon Crossroads, LLC for development of Gore’s future campus at Canyon

Crossroads.

This item is for discussion and possible action.

Christine Mackay Community &

Economic Development Director

Page 45

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6. COBRA AND FLEXIBLE SPENDING ACCOUNT ADMINISTRATION SERVICES CONTRACT This report requests Subcommittee recommend City Council

approval for the Human Resources Department to enter into a contract with ASIFlex to provide COBRA and Flexible

Spending Account (FSA) administration services. This item is for discussion and possible action.

Cindy Bezaury,

Acting Human Resources Director

Page 55

7. STRATEGIC GOAL SETTING CONSULTANT CONTRACT This report requests Subcommittee recommend City Council approval to enter into a contract with The Mejorando Group

to provide strategic planning goal setting services to the City. This item is for discussion and possible action.

Toni Maccarone, Special Assistant to

the City Manager

Page 57

8. CITYWIDE OFFICE SPACE STUDY RESULTS AND RECOMMENDATIONS This report provides information about a Citywide office space study, gives an update and recommendations regarding the Human Resources (HR) building, and requests

that the Subcommittee recommend staff develop a Request for Proposals (RFP) to market and sell the HR building.


Toni Maccarone, Special Assistant to the City Manager

Page 59

9. CITY MANAGER’S LEAN TEAM This report provides information to the Subcommittee on the creation of the City Manager’s Lean Team and request Subcommittee recommend City Council approval to issue a

RFP for consultants.


Mario Paniagua, Deputy City

Manager

Page 61

10. REVIEW COLLECTION AGENCY AND LIEN COST RECOVERY INFORMATION This report provides additional information to the

Subcommittee relating to cost recovery of collection activities. Staff requests Subcommittee affirm its earlier

recommendation for City Council approval to decrease the costs of the collection of delinquent City accounts receivable balances by allowing the recovery of collections

as well as the lien documentation and processing costs from the debtor.


Denise Olson,

Acting Chief Financial Officer

Page 63

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Item 11 is for information and discussion

11. PAYMENT STRATEGY This report provides information to the Subcommittee relating to a payment strategy the Finance Department plans to

implement over the next year allowing the City to make electronic payments.

This item is for information and discussion.

Denise Olson, Acting Chief

Financial Officer

Page 65

11. Call to the Public Chairman Gates

12. Future Agenda Items Chairman Gates

13. Adjournment Chairman Gates

For further information, please call Kweilin Waller, Management Assistant II, City Manager’s Office at 602-534-3916. 7-11 Friendly

Persons paid to lobby on behalf of persons or organizations other than themselves shall register with the City Clerk prior to lobbying or within five business days thereafter, and must register annually to continue lobbying. If you have any questions about registration or whether or not you must register, please contact the City Clerk’s Office at 602-262-6811. For reasonable accommodations, call Kweilin Waller at 602-534-3916 as early as

possible to coordinate needed arrangements. 7-11 Friendly

September 10, 2015

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Finance, Efficiency, Economy and Sustainability Subcommittee, September 16, 2015, Item 2

CITY OF PHOENIX CITY COUNCIL FINANCE, EFFICIENCY, ECONOMY, and SUSTAINABILITY SUBCOMMITTEE

SUMMARY MINUTES June 17, 2015

Assembly Rooms A, B, and C Phoenix City Hall

200 West Washington Street Phoenix, AZ 85003

Council Members Present Councilman Bill Gates, Chair

Vice Mayor Daniel Valenzuela Councilman Michael Nowakowski Councilman Jim Waring

City Staff Present Ed Zuercher Christine Mackay Cindy Bezaury Paul Blue Neal Young Mary Kyle Mario Paniagua Mario Paniagua Kacie Howard

Tracee Crockett Chris Fazio Luis Schmidt Karen Peters Ray Dovalina David Urbinato

Penny Parrella Mark Hartman Corey Williams Debbie Cotton Ken Leake Jesse Benavidez Rob Sweeney Melissa Sweinhagen

Public Present Greta Rogers Richard Rea Michele Minton Lauren Marshall Dianne Baker Mike Askins

Rachel Gumpert Steve Schramm Jon Andrews 1. CALL TO ORDER Chairman Bill Gates called the meeting to order at 10:07 am with Councilman Michael Nowakowski present. Vice Mayor Daniel Valenzuela called in via telephone then

arrived at 10:10 am. Councilman Jim Waring called in via the telephone then arrived at 10:15 am.

Chairman Gates announced that Avalon Rosa Oliver, a student from sunny slope high school was in attendance.

2. APPROVAL OF MAY 20, 2015 MINUTES Councilman Nowakowski moved approval of the meeting minutes. Vice Mayor

Valenzuela seconded the motion, which was approved unanimously.

This item was heard out of order due to phone difficulties. 3. MAY 2015 KEY PHOENIX ECONOMIC INDICATORS REPORT This item was for information only.

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City Manager Ed Zuercher confirmed the economic indicator report had been

updated to include the suggestions made by the Subcommittee to add the peak year measures which provided a benchmark for annual comparison.

Chairman Gates thanked staff for adding the additional information.

4. FEES SUBCOMMITTEE AGENDA ACTION ITEMS SUMMARY This item was for information only.

5. CITY OF PHOENIX RECENT RANKING BY ACEEE This item was for information only.

City Manager Ed Zuercher recognized Mark Hartman, Chief Sustainability Officer for his work since the City received a positive ranking for energy efficiency.

6. CITY SURPASSES $100 MILLION INNOVATION AND EFFICIENCY SAVINGS GOAL Mr. Zuercher introduced the Innovation and Efficiency Task Force co-chairs Mario Paniagua, Director Budget and Research Department, Toni Maccarone, City Manager

Special Assistant and Chris Hallett, Director of Neighborhood Services. He also introduced some of the task force board members, Roger Peck, Peck & Associates,

Richard Rea and Diane Sheerer, Phoenix Association of Realtors. Chairman Gates commented on the challenges the City faced during the recession

and that the Council was committed to continuing to provide services more efficiently in an effort to avoid raising taxes or cutting services.

Chairman Gates thanked the task force and acknowledged the hard work and dedication from all the board members.

Chairman Gates also thanked former City Manager, David Cavazos, who started the effort and former Mayor Phil Gordon who created the subcommittee He also thanked

his colleagues for their great service over the years.

Chairman Gates mentioned that the presentation was to summarize the efforts and opened the floor to the Subcommittee for comments.

Vice Mayor Valenzuela thanked Chairman Gates and Mr. Zuercher for their leadership. He also thanked the task force for leading the efforts in the private/public partnerships

that were established and all the City staff that contributed to creating efficiencies. Councilman Nowakowski commented that the achievement was a perfect example of

a team Phoenix approach, where everyone is brought together. He thanked the advisory committee, City Directors, Managers and Supervisors for leading the efforts.

Mr. Paniagua led a presentation explaining the task force goals and summarized the accomplishments.

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Mr. Paniagua mentioned that the task force was formed in December 2009 when the City was facing a $277 million deficit. The original task force savings goal was to

achieve $10 million which was reached in fiscal year 2010-11. The goal was expanded to $100 million in savings by December 2015 which was achieved ahead of schedule.

Mr. Paniagua confirmed that the task force had exceeded the goal and reached a total savings of $103 million. He confirmed that over half of the savings were in the

general fund.

Mr. Paniagua provided a complete list of the board members and some examples of the initiatives that resulted in savings to the city. He stated that many of the changes implemented actually wound up delivering better customer service.

Mr. Paniagua thanked the task force and all the people involved.

Mr. Rodger Peck mentioned that the task force was the vehicle to achieve these goals, but credit was due to the willingness and effort of the City employees who had

wonderful ideas. He thanked the Council and City Manager for opening the door to provide the opportunity for staff to implement efficiencies.

The Subcommittee and Task force broke for a photo and cookies to celebrate.

7. HEALTH INSURANCE AND PHARMACY BENEFITS UPDATE Mr. Zuercher stated that the pool of opportunities for efficiencies is shrinking but the efficiency committee has been focused on several big frontiers which include systems

that need to be transformed, pension reform, and identifying ways to reduce healthcare benefit costs.

Mr. Zuercher stated that the world of healthcare is dramatically changing and there are opportunities that need to be taken advantage of to move the City to a new way to provide better healthcare to retirees and employees.

Mr. Zuercher introduced Cindy Bezaury, Acting Human Resources Director, Mary Kyle,

Assistant Human Resources Director, and Steve Schramm, healthcare reform consultant who are leading the effort.

Mr. Zuercher explained that the team would be presenting two action items at formal agenda and the objective was to bring the subcommittee up to speed on the strategy

moving forward. Mr. Zuercher stated that the City’s healthcare costs had increased by $58 million over

10 years, from $95 million to $153 million and that due to the Federal overhaul of healthcare, the City would be facing a Cadillac Tax in 2018 with a potential additional

cost of $11 million by 2022 if nothing was changed. He mentioned that the goal was to find quality healthcare that both the City and its employees could afford.

Mr. Zuercher turned the presentation over to Ms. Kyle to discuss the options.

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Ms. Kyle explained the current healthcare costs. She discussed the two City subsidies, MERP or PEHP and a qualified City contribution, which helps offset the healthcare

premium costs. She explained that MERP is a benefit negotiated for some employees depending on service and category and that PEHP is an investment account for newer

employees. She explained that the qualified City contribution is approximately $6.2 million annually.

Mr. Zuercher explained that in 2007 the City was required to separate out the retiree costs from the employee costs which resulted in a dramatic increase in costs to retirees.

He explained that the City’s solution to help offset this cost increase was to provide the healthcare subsidy benefit.

Ms. Kyle further explained the various options to lower healthcare costs. She reviewed each option which included shifting costs, changing network options, finding a private marketplace or finding alternative strategies to contain costs.

Ms. Kyle provided a list of the current healthcare task force members which included a

representative from each bargaining unit as well as a retiree representative. Ms. Kyle provided an overview of the current retiree cost saving solution being

presented to formal Council which would move the retiree plan to the healthcare marketplace. She reviewed the amounts retirees currently pay and the estimated

savings opportunity. Chairman Gates asked if the costs provided included the City contribution.

Ms. Kyle clarified that the statistics were the full premium costs.

Ms. Kyle stated that the Healthcare task force is working on several solutions for active employees as well, which include reviewing network options and bidding out the

pharmacy plan. She mentioned that the task force is looking into narrowing the number of pharmacies and implementing mandatory mail order requirements for maintenance medications which could result in a significant savings.

Ms. Kyle provided an update on the status of the pharmacy benefits solicitation. She

stated that the task force had recommended Towers Watson as the Pharmacy Benefits Management Consultant to assist with issuing a pharmacy benefits solicitation or negotiation of the existing contract. She stated that the consultant would cost $102,000

per year and the cost would be paid from the Health Care Benefits Trust.

Chairman Gates asked for clarification on the projected potential savings. Ms. Kyle stated that narrowing the pharmacy network could result in about $1.8 million

annual savings and implementing mandatory prescription mail service could result in $3 to $5 million annually savings.

Ms. Kyle provided a summary of the taskforce goals for plan year 2016 and 2017. She stated that in plan year 2016 they will be focused on reducing health insurance

premiums and not preparing to go to the marketplace solution until plan year 2017. Ms.

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Kyle mentioned that the dependability audit request for proposal (RFP) will be complete in August at which time she would return to subcommittee for approval.

Councilman Waring asked for clarification on the terms narrowing and hi-performing

network. Councilman Waring asked how the network is identified. Mr. Schramm clarified the process of identifying a hi-performing network which provides

a narrowed group of providers that have a proven history of providing high quality service at lower costs. Mr. Schramm commented that insurance providers utilize

analytic tools that facilitate the process. Ms. Kyle clarified that the marketplace would provide layers of options for employees to

identify individual needs at various cost options. Ms. Kyle confirmed that the aim is to reduce costs for both the employees and the City.

Chairman Gates voiced his support for the extensive research being done and his

support for pushing out the marketplace option to plan year 2017 to allow for more time to review other public entities healthcare plans.

Ms. Kyle summarized the task force short and long-term goals. She stated that staff were requesting the Subcommittee recommend selection and related expenditure for

Towers Watson to provide a private retiree health care marketplace and Health Reimbursement Account (HRA) administration to City retirees. She also requested the Subcommittee to recommend the selection of Towers Watson to provide consulting

services for pharmacy benefits management.

Councilman Nowakowski asked for clarification on the differences from the marketplace costs compared to the State healthcare plan that is a current available option for Police and Fire.

Ms. Kyle confirmed that compared to the State plan there would be a significant savings by going to the marketplace.

Councilman Nowakowski asked for clarification on the mail order and narrowed

pharmacy network potential changes. Ms. Kyle explained that CVS and Walgreens are the most expensive pharmacy chains,

and that by eliminating those places from the City’s network a significant savings could be found. She mentioned that local grocery stores and many local retailers would still

be available. Ms. Kyle clarified that the employee would be able to use the pharmacy three times

before being required to go to mandatory mail order for maintenance medications. She also mentioned that the employee would see a savings in co-pays.

Mr. Zuercher explained that each pharmacy charges the plan various costs even though the employee pays the same co-pay. He further clarified that in the current

process, there is no current incentive to use a less expensive pharmacy.

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Councilman Nowakowski asked for examples of other major entities that are utilizing the marketplace solutions.

Ms. Kyle introduced Jon Andrews, Regional Vice President Towers Watson.

Mr. Andrews commented that Towers Watson had worked with 62 public organizations over the years to implement a healthcare marketplace solution. He confirmed that the

largest city was Colorado Springs but they also worked with several states which included Nevada, Rhode Island and Ohio. He mentioned some of the larger

organizations such as Universities and Counties. Councilman Nowakowski asked for clarification on whether the City’s retirees were

being used as a testing ground. Ms. Kyle confirmed that a major part of the RFP criteria was experience, the number of

employees transitioned and the customer service. She mentioned that Towers Watson has extensive proven experience in working with large organizations such as Century

Link and AT&T. Ms. Kyle explained that the concierge service that would be provided would give

retirees a higher level of service then they are currently getting today.

Councilman Nowakowski asked for clarification on the time period and the approval process once Council approval was given. He expressed his concern for retirees and the potential negative effects of moving the retirees to a marketplace solution.

Councilman Nowakowski expressed his concern for the retirees not having a solution to fall back on if the new solution failed.

Mr. Zuercher stated that the plan would have to be decided by July 2016 in order to be ready to implement in January 2017.

Mr. Andrews confirmed that Towers Watson had worked locally with APS retirees and mentioned that the marketplace solution had been in place for ten years. He

confirmed that this strategy has a proven history with a win-win for both the employer and the employee.

Councilman Waring asked for further clarification on the mandatory mail solution. He also asked for a chart separating the proposed changes for employees and retirees.

Ms. Kyle further explained how the cost of the dispensing fees drive costs up based on

the distribution method and how mail order could dramatically reduce costs. She also confirmed that the pharmacy solution is only being recommended for active employees not the retirees.

Chairman Gates thanked Mr. Zuercher for bringing the discussion to Subcommittee in

an effort to address a large budget deficit the City if facing. He asked staff to confirm the potential savings.

Ms. Kyle confirmed that the potential savings for moving the retirees to the marketplace was $4- $6 million.

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Ms. Kyle confirmed that the potential savings for narrowing the pharmacy network was

$1.8 million and implementing a mandatory mail order solution was $3- $5 million. She mentioned that if both solutions were implemented that the total estimated savings

would be $5 million. Councilman Waring asked if the savings were all general fund.

Mr. Zuercher clarified that next year’s expected budget deficit is $40 to $50 million and

that half of the savings would be seen in FY 2016-17 and that a full year of savings would be in FY2017-18. He clarified that the savings was approximately 55% general fund and 45% enterprise funds.

Chairman Gates asked for a motion. He clarified that staff were requesting two motions (1) Towers Watson to provide a private retiree health care marketplace and Health

Reimbursement Account (HRA) administration to City retirees and (2) recommend the selection of Towers Watson to provide consulting services for a pharmacy benefits RFP

development. Councilman Waring motioned both items be approved and Chairman Gates

seconded the motions which passed 3 to 1 with Councilman Nowakowski voting in opposition.

8. FMLA ADMINISTRATION Cindy Bezaury, Director Human Resources Department provided a status update on the finding from the recent CORE analysis of the City’s Family and Medical Leave Act

(FMLA) program administration. She stated that under FMLA, the City has a federal obligation to provide 12 weeks of unpaid leave for serious health conditions, adoption and birth of a child and exigent military care.

Ms. Bezaury stated that currently the FMLA administration program at the City is decentralized and manually tracked taking staff over 10,000 people hours per year to

manage. She stated that the decentralization has created inconsistencies in procedures and difficulties managing paperwork and communications.

Ms. Bezaury explained that the recommendation from the evaluation was to centralize the program administration and create more consistent procedures.

Ms. Bezaury provided an overview of the FMLA hours used by department.

Ms. Bezaury stated that after a review of data gathered across the City and some consultation from the Law Department, the preliminary recommendation was to

centralize processing of the FMLA administration. Ms. Bezaury stated that due to limited staffing resources within HR, they would like to process an RFP to identify an FMLA

administer provider. She said she was not aware of the cost but would bring the findings back to the Subcommittee for consideration in September.

Mr. Zuercher stated his concern for the FMLA program not being administered consistently or effectively. He recommended moving the administration back to HR but

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he was concerned about HR’s ability to handle the administration of the program due to limited resources. Mr. Zuercher confirmed that the request for the RFP was to identify

and research private sector firms who provide this service.

Mr. Zuercher confirmed that the findings would be brought back through Subcommittee and full City Council for approval.

Chairman Gates opened the meeting up for public comment.

Luis Schmidt expressed his support to centralize the FMLA administration but felt existing HR staff, if brought back into the main HR Department, could manage the program effectively. He felt the cost to hire an outside agency was too high.

Rachel Gumpert was opposed to the item but did not speak.

Mr. Zuercher confirmed that the issue was with the daily administration of the program. Mr. Zuercher stated he would have staff conduct an analysis of existing City staff to

review the existing capabilities. Councilman Waring asked for clarification on the amount of staff currently

administering the program and if the amount of employees utilizing the FMLA program was high compared to industry standards. He asked for statistics from other cities.

Ms. Bezaury clarified that approximately 20 staff around the City administer the program and spend a portion of their day depending on the volume of work. She also

clarified that compared to industry standard the ratio was high.

Mr. Zuercher clarified that statistic could be high due to the current decentralized process.

Councilman Nowakowski requested an organizational chart for HR to gain a better understanding of the department layout and the existing resources.

Mr. Zuercher confirmed that would be included in the analysis.

Chairman Gates asked for clarification to confirm which types of leave this item addresses.

Ms. Bezaury stated she felt the other types of leave were being managed well through the automated leave management system (LAMP). She confirmed the focus was on

FMLA leave only. Chairman Gates asked for a motion.

Mr. Zuercher clarified the motion was to issue an RFP to gather information to evaluate

the various methods to administer the FMLA program as well as for staff to conduct a comprehensive review of existing staff resources.

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Councilman Nowakowski recommended a review of the internal process before going out for an external review. He felt with better communication and reorganizing existing

staff that many of the administration problems could be addressed.

Mr. Zuercher agreed to conduct an internal comprehensive review and prepare a presentation of the finding for further Subcommittee review.

9. CAPITAL PROJECTS IN SUPPORT OF ECONOMIC DEVELOPMENT This item was postponed to a future agenda item.

10. CALL TO THE PUBLIC

Chairman Gates asked for a call to the public. Ms. Greta Rodgers spoke in support of the Innovation and Efficiency Task Force.

11. FUTURE AGENDA ITEMS No items were addressed. 12. ADJOURNMENT Chairman Gates adjourned the meeting at 11:50 a.m.

Respectfully Submitted, Jesse Benavidez

Budget and Research Department

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CITY COUNCIL REPORT

TO: Ed Zuercher

City Manager

FROM: Jeff Barton

Acting Budget and Research Director

SUBJECT: JULY 2015 KEY PHOENIX ECONOMIC INDICATORS REPORT

This report transmits the July 2015 report on Key Phoenix Economic Indicators to the Finance, Efficiency, Economy and Sustainability (FEES) Subcommittee.

THE ISSUE

As requested by members of the FEES Subcommittee, the revised report now includes data from the peak year (when the peak year differs from the current year) as another

reference of comparison for each of the measures. Also requested by members of the Subcommittee, the updated monthly report will be included in the agenda packet for

the regularly scheduled FEES Subcommittee meetings. As part of efforts to continuously improve budget forecasting and reporting, the Budget

and Research Department compiles 19 Key Phoenix Economic Indicators into the attached monthly report. The data is collected with assistance from the Aviation, Planning and Development, Public Works, and Water Services departments. The

indicators are attached to this report for review by the FEES Subcommittee.

OTHER INFORMATION The July 2015 report on 19 Key Phoenix Economic Indicators provides insightful data

that, when reviewed collectively, can reveal a helpful overall picture of recent economic activity trends specifically within Phoenix. Although outside sources of

economic data are also available, most of that information covers the entire Greater Phoenix region or the State of Arizona. However with the exception of two statewide measures, the indicators in the attached report relate to data specifically within City of

Phoenix boundaries, which may differ from the region or state. The 19 Phoenix data measures include:

1. Sky International Harbor Airport Passengers: This measure indicates regional tourism and business activity.

2. Phoenix Water Service Accounts: This measure may indicate changes in Phoenix population and commercial and residential property development.

3. New Phoenix Single Family Home Construction Permits Issued: This measure may indicate Phoenix population growth and shifts in housing preferences or demographics, as well as spill over benefits to other economic sectors such as construction, retail, manufacturing, and utilities.

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4. New Phoenix Multifamily Units Permitted: Like single family permits, this measure may indicate Phoenix population growth and shifts in housing preferences or

demographics, as well as spill over benefits to other economic sectors such as construction, retail, manufacturing, and utilities.

5. Total Value of Permitted Phoenix Activity: Along with other factors, this measure may provide an indication of Phoenix property market values and development, as well as overall strength for commercial and residential markets.

6. Phoenix Solid Waste Total Tonnage Collected: This measure may indicate changes in Phoenix population, development, economic activity or

environmental factors.

7. Phoenix Solid Waste Recycling Tonnage Collected: Although significantly affected by shifts in consumer behavior, this measure may also indicate changes

in Phoenix population, development, economic activity or environmental factors.

8. City of Phoenix Overall Sales Tax: This measure indicates overall economic activity related to all categories of taxable sales within Phoenix.

9. City of Phoenix Retail Sales Tax: This measure indicates economic activity related to taxable retail sales and consumer spending levels within Phoenix.

10. City of Phoenix Hotel/Motel Sales Tax: This measure indicates economic activity related to tourism within Phoenix.

11. City of Phoenix Restaurants/Bars Sales Tax: This measure indicates economic strength, population changes, and tourism activity within Phoenix.

12. City of Phoenix Contracting Sales Tax: This measure indicates economic activity related to taxable commercial and residential construction in Phoenix. However, the effectiveness of this measure as an economic indicator may be lessened

due to the state’s recent Transaction Privilege Tax reform measures relating to contracting.

13. State Overall Sales Tax: This measure indicates economic activity related to all categories of taxable sales within the state of Arizona.

14. State Vehicle License Tax: This measure indicates vehicle sales activity within the state of Arizona.

15. Phoenix Assessed Property Valuation: This measure is based on the Primary Net Assessed Valuation, which provides the basis for City of Phoenix property tax

revenue.

16. Phoenix Full Cash Property Value: This measure indicates the market value of residential and commercial property within Phoenix and is an important economic indicator relating to the overall commercial and residential property markets.

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17. Phoenix Median Household Income: This annually updated measure provides the mid-level household income within Phoenix, an important indicator of job and

wage activity levels.

18. Phoenix Unemployment Rate: This annually updated measure shows the percentage of the active labor force currently unemployed within Phoenix, an important indicator of overall economic health.

19. Phoenix Labor Force Participation: Another measure of employment levels, this annually updated measure shows the percentage of the population aged 16 and older currently in the Phoenix labor force, which can help account for

“discouraged workers” not captured in the unemployment rate. Each measure provides the year-to-date totals and year-to-date growth rates

compared to the: • prior year; • prior three-year average;

• and peak year (when the peak year differs from the current year), as requested by FEES Subcommittee members at the April 20, 2015 meeting.

The current monthly report is also prominently posted online on the Budget and Research Web page at phoenix.gov/budget.

RECOMMENDATION

This report is provided for information only.

Attachment: July 2015 Report Key Phoenix Economic Indicators

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CITY COUNCIL REPORT

TO: Mario Paniagua

Deputy City Manager

FROM: Debbie Cotton

Chief Information Officer

SUBJECT: TECHNOLOGY SUMMIT RECOMMENDATIONS - IMPLEMENTATION PLAN

This report provides the Finance, Efficiency, Economy and Sustainability Subcommittee with information on the implementation plan for the Task Force on Technology Advancement’s recommendations from the Technology Summit.

THE ISSUE

On November 12, 2014, the Task Force on Technology Advancement hosted a Technology Summit at the Phoenix Convention Center. The goals of the Summit were

to determine best practices for technology use within the City of Phoenix, and to enable community-wide advancement of technology to promote economic

development. Recommendations for the first of these goals were outlined in a report from the Task Force, which was presented to the Finance, Efficiency, Economy and Sustainability Subcommittee in February 2015.

OTHER INFORMATION

The Task Force recommended that during the next three years the City focus on building a solid and secure technology foundation by investing in fundamental

technologies and taking action to build a consolidated, streamlined approach towards staffing, budgeting, and managing technology. Through the leadership of the City Council and City Management, significant steps have been taken toward achieving

these goals. Some of the technology projects that will advance this goal include:

• eProcurement – Implemented in May 2015

• Migration to Microsoft Office 2013 – Completed in July 2015

• Email Replacement – Completed in August 2015

• Enterprise Large Data Management – Currently underway

• Telephone Replacement and Network Upgrade – Contract award and funding

plan recommendation expected to be submitted to City Council this fiscal year.

A great deal of progress has been made in implementing the recommendations of the

Task Force in the months since they began meeting. The attached report provides details of the implementation plans and progress on each recommendation.

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RECOMMENDATION

This item is for information only.

Attachment: Technology Summit Recommendations Implementation Plan

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Technology Summit

Recommendations Implementation Plan

September 2, 2015

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Technology Summit

On November 12, 2014, the Task Force on Technology Advancement hosted a Technology

Summit at the Phoenix Convention Center to determine best practices for technology use

within the City of Phoenix, and to enable community-wide advancement of technology to

promote economic development. The Task Force recommended the City focus during the next

three years on building a solid and secure technology foundation, making an investment in

fundamental technologies and taking actions to build a consolidated, streamlined approach

towards staffing, budgeting, and managing technology. This report provides implementation

plans for the recommendations developed by the Task Force on Technology Advancement

resulting from the Summit.

Recommendations and Implementation

The following basic principles are reflected in the implementation plans for all of the Task

Force’s recommendations:

• Stewardship – be good stewards of the public’s funds and trust

• Partnership – look to the private sector for appropriate rightsourcing and hosting

opportunities

• Sustainability – invest in scalable technologies and utilize savings to reinvest in

technology

Italicized statements are taken directly from the Task Force on Technology Advancement’s

Technology Summit Report dated January 8, 2015.

1. Implement Fundamental Projects

Recommendation 1.1 – Telephone Replacement

The City’s telephone system is over twenty-five years old, and manufacturer support is

ending. It is critical that this be replaced. Current telephony technology is scalable, multi-

modal and application-based.

Overview

With the help of a third-party independent telecommunications consulting firm, the City

has begun a project to replace the telephone system. The goal of the project is to

leverage new internet-based and mobile technologies to deliver a multi-modal system at

a low cost. Employees’ communication methods were analyzed to determine what is

needed from the system, from mobile devices to call center infrastructure.

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Schedule

• March 2014 – City Council approved a contract with a consulting firm to conduct

an analysis of the City’s communications needs, advise on current technologies

and industry trends, and assist in the development of a Request for Proposals

(RFP) for the telephone system replacement and network upgrade.

• January 2015 – City Council approved issuance of an RFP for a new telephone

system and network upgrade. The RFP was structured so that multiple vendors

could be awarded portions of the project; for example, one vendor may upgrade

the network while another implements the new telephone system.

• April 2015 – Panel review of responses to the RFP began.

• FY 2015-16 – Estimated City Council action to award contract and approve

financing plan.

• 2017 – 2018 – Estimated project completion.

Funding

The estimated cost of the telephone system replacement is approximately $16.1 million

(not including the cost to upgrade the network, which is shown in Recommendation 1.2).

The RFP included a request for financing options from each proposer. Additionally, the

Finance, Efficiency, Economy and Sustainability Subcommittee recommended City Council

approval to issue excise tax revenue bonds to fund the telephone replacement, and

associated network upgrade. The financing option(s) submitted by the successful vendor

will be analyzed in conjunction with the option to issue revenue bonds to determine the

most fiscally prudent funding plan to be recommended to the City Council.

Dependencies

The City’s data network is end-of-life and could not support current telephone

technologies. Therefore, the replacement of the telephone system is dependent on an

upgraded data network. The City’s current project budget and scope include both the

network upgrade and telephone system installation.

Risks

Because the current system will no longer be under support nor have available parts,

failure to replace the telephone system will eventually lead to the inability of the public to

communicate with City staff via telephone, and the inability of staff to communicate via

telephone for internal operations.

Recommendation 1.2 – Network Upgrade

A large percentage of the City’s data network is end-of-life. This is both a risk to the City,

and a serious limitation on future innovation. The data network is the backbone of the

City’s technology infrastructure, and an upgrade is necessary no matter what technology

delivery models the City chooses in the future.

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Overview

The City has begun a project to upgrade its data network in conjunction with the

telephone replacement project. The network in its current state could not support a new

telephone system. The data network is fundamental infrastructure that requires regular

maintenance and replacement. Funding constraints delayed continuous maintenance,

and have resulted in the need for an overhaul of a large percentage of the network.

Schedule

• March 2014 – City Council approved a contract with a consulting firm to conduct

an analysis of the City’s communications needs, advise on current technologies

and industry trends, and assist in the development of a RFP for the telephone

system replacement and network upgrade.

• January 2015 – City Council approved issuance of an RFP for a new telephone

system and network upgrade. The RFP was structured so that multiple vendors

could be awarded portions of the project; for example, one vendor may upgrade

the network while another implements the new telephone system.

• April 2015 – Panel review of responses to the RFP began.

• FY 2015-16 – Estimated City Council action to award contract and approve

financing plan.

• 2017 – 2018 – Estimated project completion.

Funding

The estimated cost of the network upgrade is approximately $16 million. The RFP

included a request for financing options from each proposer. Additionally, the Finance,

Efficiency, Economy and Sustainability Subcommittee recommended City Council

approval to issue excise tax revenue bonds to fund the telephone replacement, and

associated network upgrade. The financing option(s) submitted by the successful vendor

will be analyzed in conjunction with the option to issue revenue bonds to determine the

most fiscally prudent funding plan to be recommended to the City Council.

Dependencies

While many current and future business systems are dependent on the upgrade of the

City’s network, the network upgrade project is not dependent on other systems or

initiatives.

Risks

Because of the age of much of the current network’s components, failure of this project

will have significant detrimental effects on the City’s ability to operate and deliver

services. Mission-critical systems, such as the telephone system, financial accounting

application, Human Resource management application, and email connectivity, will fail.

While cloud solutions offer hosting for some applications, these cannot replace the City’s

basic network infrastructure.

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Recommendation 1.3 – Data Center Strategy

An organization’s data center is the brains of its technology operations. Maintaining

multiple data centers is costly in terms of equipment, space, energy, and staff resources. A

strategy of consolidation and an analysis of the potential for a hosted solution must be

developed to support the City’s future technology environment, and realize potential

savings.

Overview

The City is in the beginning phase of developing the strategy for data centers, and will

engage with a third-party consultant to evaluate the City’s needs and current industry

trends. In recent years the strategy has been to consolidate multiple City data centers in

order to realize efficiencies and scale appropriately for potential future rightsourcing. In

2011, the City began a virtualization and consolidation project to relocate departments’

make-shift data centers into the City’s downtown data center, and to the virtual server

environment in the leased space at the I/O data center. During this time, data centers

were consolidated for most departments, including Aviation, Water Services, Police, and

Public Works. The Task Force recommended that the city take the next step to develop a

strategy that evaluates all options for hosting and further virtual consolidation.

Schedule

A schedule will be developed to ensure a new strategy is in place before the expiration of

the current lease in August 2020 and required refresh of current data center equipment.

Funding

Initial analysis of the project will include preparing cost estimates. The project will be

presented to the Business Investment Board, the City’s internal body which reviews and

approves technology strategy and projects. (For more information on the Business

Investment Board, see Recommendation 4.1.)

Recommendation 1.4 – Enterprise Software

The City currently uses multiple versions of basic office productivity software, purchased

individually by departments. This creates inefficiencies between departments, and

outdated software negatively affects some departments’ interactions with the public and

private sector partners. Outdated software can also be a security risk to the City. The City

should leverage consolidated buying power to standardize on current office productivity

software for the enterprise.

Overview

In the Spring and Summer of 2015, the City deployed Office 365 as the new email and

office productivity solution. After extensive evaluation the City determined that a cloud

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solution would best serve the organization’s operational needs. An enterprise license was

negotiated with Microsoft to deliver email and the latest version of the Office suite,

including Word, Excel, PowerPoint and SharePoint. This solution consolidated the City’s

purchasing power and eliminated disparity in the versions of software in use by different

departments. This suite will also greatly improve internal communication and

collaboration capabilities, leading to greater operational efficiency.

While this project resolves the fundamental problems and risks related to aging software,

there remains room for further improvement by additional application consolidation or

rationalization. The City will continue to identify software in use in different departments

that could be consolidated into a shared solution.

Schedule

The deployment of the new email and upgraded office software was completed August

2015.

Funding

The budget for the project implementation was $3.4 million, with annual costs of

approximately $2.4 million.

Dependencies

The integrated nature of the Office 365 environment creates dependencies between

Microsoft applications, which require that new functionality and applications be enabled

for users. While this complicated the deployment, it will eventually result in employees’

having better tools to serve their customers.

Risks

The greatest risk to the success of Office 365 is employee acceptance and training. The

new suite challenged employees to change long-established routines and operations. This

risk was mitigated by the early deployment of online training videos and regular

communications.

2. Implement Projects with a High Return on Investment

While the bulk of the City’s technology resources and funding will be required to

maintain operations and implement fundamental projects, the City should also invest

in projects that have a high return on investment (ROI). This will keep the City moving

ahead with some innovative initiatives, and provide savings for future investment in

technology projects. Examples of projects with a high ROI include Business Intelligence

and eProcurement.

Recommendation 2.1 – Business Intelligence

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Overview

In February 2015, the City Council approved citywide expansion of Business Intelligence

(BI) or large data. Currently, the City uses hundreds of applications and devices that

collect and store data from departments. The expansion of the City’s large data

management technical infrastructure will allow the organization to analyze City data to

identify efficiencies and cost savings, and enable data-driven decision making.

Currently, the Public Works Department’s BI environment is used for the fleet

management program for the Solid Waste Division. The Department is able to

understand, in real time, the fleet and staffing needs for curbside trash and recycling

pickup.

Additionally, the Finance Department will use this technology for their Tax Simplification

initiative, a response to a State mandate regarding consolidating tax collection. Other

departments with immediate needs for the expanded environment include Water

Services, Aviation, Planning and Development, and Public Transit. The expanded BI

environment will also provide a platform for initiatives such as 311 and a more robust

Open Data program.

Schedule

• February 2015 - City Council approved expansion of large data management

• May 2015 - Infrastructure portion of the project completed

• June 2015 – Began project planning for on-boarding of individual departments’

solutions

Funding

The total cost for the BI expansion is $14.5 million over five years. Of the $14.5 million,

the Water Services Department allocated $5.1 million needed to support and maintain

the Customer Care and Billing system that processes the City’s utility bills. The City

leveraged this required investment to negotiate a citywide solution to be funded by those

departments with current plans to implement BI solutions.

Dependencies

Like any large infrastructure project, BI expansion is dependent on the successful upgrade

of the City’s network. Additionally, the expansion is an enterprise project, yet each

department’s implementation will be different in order to address their particular needs.

The data from these individual solutions will be shared in order to fully realize the

potential for BI. Therefore, the citywide deployment of BI is cumulative, dependent on

each department’s successful implementation of their solution.

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Risks

The greatest risk to BI expansion is resource constraints, including technical resources

with the required skills and departmental subject matter experts.

Recommendation 2.2 – eProcurement

Overview

In May 2013, the City Council approved a plan to implement improved procurement

functionality in the City’s financial management system, SAP. This initiative, called

eProcurement, leverages technology provide greater efficiency, better reporting, and

secure financial controls. The use of this system by other organizations has resulted in

savings from efficiencies, as well as lower costs from greater competition between

vendors.

Schedule

eProcurement began in the Fall of 2013 and went live in May 2015.

Funding

The eProcurement project was one component of the eProcurement, Transparency and

Budget Integration project authorized by City Council in May 2013. The total budgeted

amount is $9.4 million, of which about $5.6 million has been expended on the

implementation of eProcurement. The Transparency and Budget Integration project,

which will replace the City’s budget software application, began in July 2015.

Risks

The new eProcurement system completely changes the way in which the City procures

goods and services. It is an enormous change for employees. A risk to full realization of

efficiencies from the system is slow adoption by employees.

3. Develop a Workforce Strategy

Attracting and retaining technology talent is a challenge throughout the technology

industry. As technologies change quickly, the pool of professionals with the right skills

lessens, and competition increases.

Recommendation 3.1 – In-house Talent

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Some technology services, such as security, should remain in-house. These service areas

should be identified, and strategies for hiring and maintaining qualified staff should be

developed.

Overview

In June 2014, the City began an Information Technology (IT) Shared Services initiative to

consolidate technology commodities, infrastructure, funding, and staffing. The goal of the

staffing portion of the initiative is to determine the current skill-sets of City technology

professionals, consolidate support models to reduce redundancies, and reallocate staff to

better utilize the talent that currently exists within the City.

The Information Technology Services Department developed an approach toward

assessing and analyzing each department’s current technology support needs and staffing

profile. The staffing analysis is part of a larger “deep dive” into each department’s

technology environment and the business needs it supports. The analysis is conducted in

coordination with each department’s management and technical staff. To date, analysis

has been completed in 13 departments, including the Phoenix Convention Center, Library,

and Neighborhood Services Departments. The analysis is currently underway for the

enterprise and public safety departments. At present, approximately 58 positions have

been designated for reallocation. Once transitioned, these positions will report to the

Information Technology Services Department.

Because the City has significant staff shortages in multiple areas, the initial reallocation of

staff has resulted in assignment to areas that match their current skills. However, as more

information about the City’s current technology staff is accumulated, a staffing strategy

will be developed to align staff to the overall technology strategic plan and to ensure in-

house staff are being used in keys areas, such as security and direct customer service.

Retraining staff as necessary will be addressed.

Additionally, the City is partnering with Arizona State University on an internship program

to help attract and recruit much-needed technical professionals.

Schedule

The first phase of the IT Shared Services initiative was completed in July 2015. The full

assessment will take an additional 18 months at a minimum.

Funding

Information Technology Services is utilizing current staff to perform the assessments and

analysis, and is leveraging its existing contract with Gartner, Inc. for IT research and

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analysis assistance, as necessary. Due to their complexity, large departments will hire

consultants to assist with their assessments. Savings are expected as staffing resources

are consolidated.

Dependencies

The assessment of citywide staff allocation is dependent on the continued success of the

IT Shared Services initiative.

Risks

The greatest risk to implementing a strategic staffing model is availability of staff

resources necessary to undertake the coordination and analysis. Executive management

has been supportive of this initiative, which has greatly reduced the risk normally

inherent in IT consolidation projects.

Recommendation 3.2 – Partnership with Private Sector

Some technology services should be a hybrid of in-house staff and private-sector contract

staff. This model can allow for consistency, while also addressing occasional increased

demand, specialized tasks, and unexpected staff turn-over.

Overview

The City currently relies on private-sector contract staff for staff augmentation and

specialized technical expertise for projects, including the use of third-party companies for

telephone, network, radio and microwave support. Continued and expanded use of

private sector contract staff is expected as part of the IT Shared Services initiative

referenced in Recommendation 3.1.

Schedule


assessment will take an additional 18 months at a minimum.

Recommendation 3.3 – Rightsourcing

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Rightsourcing services and utilizing hosted solutions will be an appropriate solution for

some technologies. This strategy can help the City focus on innovation rather than simply

supporting operations, and can allow the organization to remain agile as new

technologies are developed.

Overview

The City is currently utilizing a number of hosted and/or cloud solutions: much of the

City’s server environment is housed in a private data center; the IT service management

system is a cloud solution; and, the new email system and office productivity suite are

cloud solutions.

One of the primary goals of the IT Shared Services initiative, outlined in Recommendation

3.1, is to consolidate technology resources so that commodity-based and standard

technology services can be right-sourced. Begun in June 2014, this initiative includes the

consolidation and realignment of staff in order to assign them to those functions that

most require in-house staff, such as security, direct resident service, and support of

specialized departmental applications. When this consolidation is complete, standard,

commercially-available services will be contracted with private-sector firms.

Schedule


assessment will take an additional 18 months at a minimum. Once complete, the

procurement of appropriate IT services will be conducted in accordance with City

procurement requirements.

4. Mature Technology Governance Practices

Recommendation 4.1 – Develop an Investment Plan for 3-year

Goals

The City must develop an investment plan for the fundamental projects outlined in

recommendation 1. Opportunities for savings from consolidation of systems and

maintenance should be considered.

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Overview

In early 2015, the City established the Business Investment Framework, a governance

program for technology investments. The goal of the program is to provide oversight of

technology spending, and ensure that procurement is based on business needs. The

decision-making body of the Framework is the Business Investment Board, including City

executives, department heads, and members of the public, and chaired by the City

Manager. The initial work of this body has been to assess current and proposed

technology projects to determine which should be continued, such as the network

upgrade, and which require further justification. The recommendations of the Task Force

on Technology Advancement, resulting from the Technology Summit, have been

incorporated into the decision-making criteria of the Framework.

The Framework includes a process by which new technology projects are requested and

assessed by the Board. Departments will utilize this new process for the first time in the

2015-16 Fiscal Year.

Schedule

The Information Technology Services and the Budget and Research Departments

developed a Technology Investment Plan to align with the City’s established budget

process. Staff expects an initial Investment Plan will be developed for the 2016-17 fiscal

year budget.

Recommendation 4.2 – Institute Refresh Budget

Like any core infrastructure, technology must be refreshed regularly to remain functional

and, importantly, secure. The cost of any technical innovation becomes prohibitive when

the underlying infrastructure must be overhauled to support it. This leads to stagnation

and, ultimately, proves very expensive as resources are used to support antiquated

technology rather than to innovate.

Overview

One of the goals of the new Business Investment Framework, outlined in

Recommendation 4.1, is to determine a budget process for technology that includes

planning for refreshing technology. The Board has acknowledged the detrimental

compounding effect of neglecting technology infrastructure and the high capital costs it

requires to remediate.

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As stated in Recommendation 4.1, the Information Technology Services and the Budget

and Research Departments developed a Technology Investment Plan to align with the

City’s established budget process. In the past, annual requests for operational funds to

support technology were developed by individual departments for review with the

Budget and Research Department during the annual budget process. Currently, the

Business Investment Board is reviewing a proposed technology budgeting plan that would

allow for centralized review of budget requests to maintain and support current

technologies. This process will allow for budgets to reasonably refresh technology

without being dependent on individual departments’ discretion to cut such expenditures

when budget reductions are necessary. While such reductions may be necessary, they

would be part of a larger review prioritizing based on citywide needs.

Schedule

A central review of budgets for refreshing technology will be aligned with the annual

budgetary process beginning in Fiscal Year 2015-16.

Recommendation 4.3 – Utilize Appropriate Project Management

Building on the groundwork laid by the fundamental projects, and projects with high ROI,

requires that these projects be successful and on schedule. Project Management is

necessary for these, and future projects, to control project costs, determine the City’s risk

tolerance, measure projects’ success, and measure project impact on decision-making.

Overview

The Program Management Office in the Information Technology Services Department

provides in-house and contracted project managers, architects, and business analysts for

City technology projects. These professionals follow nationally-recognized professional

project management standards. As outlined in Recommendation 4.1, the City has

instituted a Business Investment Framework, led by the Business Investment Board. All

new technology projects will be reviewed through the new Framework process. All

projects resulting from this process will include professional project management. Project

management costs will be included in project cost projections, whether provided by in-

house project managers or consultants.

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Schedule

This requirement will take effect immediately for new projects.

Conclusion

City Council members’ request for a Technology Summit provided an opportunity to assess the

City’s current technology environment and practices. The Task Force on Technology

Advancement planned a successful event that led to actionable recommendations to further

the City’s technology environment and practices. The recommendations of the Task Force are

practical and will help create the foundation necessary for the City to be truly innovative and

visionary. The Information Technology Services Department is grateful for the opportunity to

implement the recommendations of the Task Force in collaboration with other City

departments. As outlined in this report, much work has been accomplished in the months

following the Task Force’s report. The recommendations from the Task Force are also being

incorporated into the City’s decision-making framework for technology to help ensure

continued success in using technology to efficiently support City operations and improve the

lives of Phoenix residents.

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CITY COUNCIL REPORT

TO: Paul Blue

Deputy City Manager

FROM: Christine Mackay

Community & Economic Development Director

SUBJECT: AUTHORIZATION TO ENTER INTO DEVELOPMENT AGREEMENTS BETWEEN CITY OF PHOENIX AND W.L. GORE & ASSOCIATES, INC. AND CANYON CROSSROADS, LLC

This report requests that the Finance, Efficiency, Economy and Sustainability (FEES) Subcommittee recommend City Council authorization for the Community & Economic

Development Department to negotiate terms and enter into separate development agreements with W.L. Gore & Associates, Inc. (Gore) and Canyon Crossroads, LLC (Canyon Crossroads) for development of Gore’s future campus at Canyon Crossroads

(see Attachment A – Map).

THE ISSUE Gore is a significant employer in the City with approximately 750 employees on their

existing campus in North Phoenix. Although the company has room for several additional buildings on their existing site, their future needs dictate the acquisition of

additional property. To prepare for that growth, Gore plans to acquire approximately 47 acres at Canyon Crossroads, which is located at the northwest corner of Dove Valley Parkway and future 31st Avenue, to construct approximately 682,000 square feet of

office, research and manufacturing space at the site. Gore anticipates creating 1,200 jobs at the campus at build-out, and in a phased manner.

As part of the master development of the entire property owned by Canyon Crossroads, three development parcels will be created. The parcel for the Gore

development, an additional parcel that will include a grocery-anchored retail center that will be located at the northeast corner of Dove Valley Parkway and future 31st Avenue, and will be the initial development, as well as a multi-family parcel for future

development. The development of these combined parcels have closely related development issues and numerous combined infrastructure requirements, providing for

the need of a mutually agreed upon direction for development. The City recognizes the resulting significant economic impacts to the City and region

from Gore’s expansion efforts. Additionally, the City understands Gore’s need to have the City’s cooperation to facilitate development of the Gore Site, and necessary

improvements to public infrastructure in the area surrounding the Canyon Crossroads property and Gore site.

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OTHER INFORMATION

In order to facilitate the development of the Gore and Canyon Crossroads sites, including the significant additional employment-generating uses on the campus to

further advance Phoenix’s economic growth, staff recommends that the City enter into separate agreements with Gore and Canyon Crossroads. Specific terms of the proposed agreements are listed in Attachment B – Obligations; and Attachment C – a

Zoning Verification Letter from the Planning & Development Department.

Execution of these development agreements will be subject to Gore’s acquisition of Parcel 1A-1 as described in Attachment A.

RECOMMENDATION Staff requests the FEES Subcommittee recommend City Council authorization for the

Community & Economic Development Department to negotiate terms and enter into separate development agreements with W.L. Gore & Associates, Inc. and Canyon

Crossroads, LLC for development of Gore’s future campus at Canyon Crossroads (see Attachment A).

Attachments: Attachment A – MAP; Attachment B – Obligations; and Attachment C – a Zoning Verification Letter from the Planning & Development Department

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ATTACHMENT A

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ATTACHMENT B

Obligations and Acknowledgements

Gore and Canyon Crossroads, LLC Obligations: • Gore agrees to create a corporate campus at the northwest corner of Dove Valley Parkway and 31st Avenue alignment, and contemplates the creation of a 682,000- square-foot office, research and manufacturing space at the Gore Site. Gore

anticipates creating 1,200 jobs at the campus at build-out. The City acknowledges the Gore Site is appropriately zoned for the contemplated use.

• City agrees that it will accept dedication, at no cost to the City, of 31st Avenue on the Canyon Crossroads Property and the Gore Site as a public road, once the road

is constructed by others to City Street Standards and in accordance with the Canyon Crossroads Master Street Plan (which shows a street width of 44’ and a ROW of 60’), and the road has been inspected and accepted by the City of

Phoenix. Further, the roadway should function properly, including truck traffic and the 44’ roadway should match the truck turning templates used by Gore’s and

Canyon Crossroads’ consultant. City agrees that the building setback distance from the ROW on 31st Avenue shall be 15’.

• Based on estimated domestic water and fire demands, the City has adequate water and sewer capacity to meet the requirements of the Gore Preliminary Site

Plan and the Canyon Crossroad General Development Plan (dated May 6, 2015). Canyon Crossroads and Gore will be required to meet City Code 37-33 related to frontage or water main looping as required to meet the development demands.

Standard water and sewer connection fees will apply to this development. • Concurrent with the Gore acquisition, City agrees to accept, at no cost to the City, a donation of approximately 20.96 acres on the Site that encompasses Skunk Creek. Further, City will agree to grant an easement to Gore through the Skunk

Creek Area for the purpose of Gore maintaining their property, including retaining walls. City will not accept maintenance of any retaining wall or property adjacent to the Skunk Creek Area.

• Canyon Crossroads and Gore agree to maintain, to a minimum standard set by the City, all landscaping shown on the Canyon Crossroads Master Landscape Plan in the public right-of-way adjacent to the Canyon Crossroads Property and the Gore Site.

City Obligations: • Should a traffic impact analysis, approved by the City, indicate a need for a traffic signal at 31st Avenue and Dove Valley Parkway, City will install the signal at its expense if the need for the traffic signal is caused by Gore’s development of the Site.

• When and if the City selects to install a traffic signal at the intersection of 27th Drive and North Valley Parkway, at its expense, the City will execute a reimbursement agreement that will require payment to the City for 25% of the total cost of the

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traffic signal upon permit issuance for the portion of the Canyon Crossroads property located at the northwest corner of 27th Drive and North Valley Parkway.

• City will provide a 10-year easement to Macerich Companies, W.L. Gore and Canyon Crossroads over the Skunk Creek Area for the purpose of maintaining cattle grazing.

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ATTACHMENT C

Zoning Verification Letter

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55


CITY COUNCIL REPORT

TO: Ed Zuercher

City Manager

THRU: Cindy Bezaury

Acting Human Resources Director

FROM: Mary Kyle

Assistant Human Resources Director

SUBJECT: COBRA AND FLEXIBLE SPENDING ACCOUNT ADMINISTRATION SERVICES CONTRACT

This report requests the Finance, Efficiency, Economy and Sustainability (FEES) Subcommittee recommend City Council approval for the Human Resources

Department to enter into a contract with ASIFlex to provide Consolidated Omnibus Budget Reconciliation Act (COBRA) and Flexible Spending Account (FSA) administration services. Information on the City’s Flexible Spending Account program

was provided to the FEES Subcommittee on February 18, 2015.

THE ISSUE The City issued a Request for Proposals (RFP) on June 16, 2015, with a deadline of July 2,

2015 for COBRA and FSA administration services. Six vendors submitted proposals which were reviewed by a four-member selection committee consisting of Finance and

Human Resources staff and a representative from the Administrative, Supervisory, Professional and Technical Employees Association (ASPTEA). Proposals were scored based on qualifications and experience, method of approach, and pricing. Interviews

were conducted with two of the six firms. The selection committee recommended ASIFlex, which is the current FSA administration services provider, as the provider for both COBRA and FSA administration services for the following reasons: a highly

qualified team; extensive experience with public sector clients; strong customer service; a five-year rate guarantee; competitive pricing; and specific experience with the City’s

benefits program. Below are the scores (out of 1,000 pts) for the two proposers invited to interview:

Proposal Score

ASIFlex 986

WageWorks 909

If approved, the contract term will be for an initial three years, beginning January 1, 2016, with two optional one-year extensions. The combined annual cost for these

services is $117,000 ($45,000 for COBRA services and $72,000 for FSA services), based on current and projected enrollment, for a total amount not to exceed $585,000 over the

five-year life of the contract. Funding is available in the Health Care Benefits Trust Fund.

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OTHER INFORMATION

COBRA requires employers with group health plans to provide temporary continuation

of group health coverage, when such coverage would otherwise be lost, to covered employees and their dependents. The City typically has 350-400 COBRA enrollments at any time and Human Resources staff currently administer COBRA benefits. A FSA is a

tax-favored program offered by employers which allows their employees to pay for eligible out-of-pocket health care and dependent care expenses with pre-tax dollars.

The City’s program is known as “Flexrap” and administration of Flexrap has been outsourced since January 1, 2015. For the 2015 calendar year, 1,900 employees are enrolled in the healthcare FSA enrollments and 300 are enrolled in the dependent care

FSA. RECOMMENDATION

Staff requests the FEES Subcommittee recommend approval to the City Council to enter

into a contract with ASIFlex to provide both COBRA and FSA administration services.

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CITY COUNCIL REPORT

TO: Ed Zuercher

City Manager

FROM: Toni Maccarone

Special Assistant To The City Manager

SUBJECT: STRATEGIC GOAL SETTING CONSULTANT CONTRACT

This report requests the Finance, Efficiency, Economy and Sustainability (FEES) Subcommittee recommend City Council approval to enter into a contract with The Mejorando Group to

provide strategic planning goal setting services to the City. At the September 9 Formal City Council meeting, the City Council voted unanimously to refer this item to FEES Subcommittee

for further discussion. THE ISSUE

RFP 15-183 was conducted in accordance with Administrative Regulations 3.10. There were

four offers received by the Finance Department, Procurement Division on July 10, 2015. The proposals were scored by a five-member evaluation committee based on the following criteria: Knowledge/Expertise/Qualifications of Firm/Personnel (300 points), Method of

Approach (250 points), Fees and Expenses (200 points), Proposal Response (150 points) and References (100 points). The top three proposers and their scores are as follows:

Company Name Overall Rating Annual Expenditures

The Mejorando Group 795 points $58,250.00

Management Partners 643 points $134,500.00

Carla Carter and Associates, Inc. 630 points $45,380.00

Staff recommends that the offer from The Mejorando Group be accepted as the highest scored, responsive and responsible offer that was advantageous to the City. Although, Carla Carter and Associates, Inc. offered the lowest overall cost, the evaluation committee

concluded their proposal did not score high enough in other key criteria to be considered.

OTHER INFORMATION The consulting services provided by The Mejorando Group will be conducted in two phases.

The first phase will include working with the Mayor and City Council to develop organizational priorities and strategic goal setting. The second phase will entail working with executive

leadership to facilitate priority implementation planning. Benchmarks and milestones will also be included to measure the City’s progress over the course of the next five years.

The Mejorando Group has facilitated strategic plans for large municipal governments including the City of San Antonio, Texas and the City of Chandler, Arizona in addition to experience

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providing change and organizational effectiveness services for the City of Austin, Texas and San Jose, California.

RECOMMENDATION

Staff requests that the FEES Subcommittee recommend City Council approval to enter into a contract with The Mejorando Group to provide strategic goal setting services to the City.

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CITY COUNCIL REPORT

TO: Ed Zuercher

City Manager

FROM: Toni Maccarone

Special Assistant To The City Manager

SUBJECT: CITYWIDE OFFICE SPACE STUDY RESULTS AND RECOMMENDATIONS

This report provides information about a Citywide office space study, gives an update and recommendations regarding the Human Resources (HR) building, and requests

that the Finance, Efficiency, Economy and Sustainability Subcommittee recommend staff develop a Request For Proposal (RFP) to market and sell the HR building. Staff will

return to the Subcommittee in October for specific discussions about the draft RFP. THE ISSUE

Over the past five years, the City has implemented many efficiencies, reduced

unneeded vacancies, and streamlined other programs and services. As a result of these efforts, there are approximately 3,000 fewer City positions.

Because of the fewer number of City positions, staff conducted a Citywide office space study to understand what opportunities might be available to use space to its greatest potential. The space evaluation resulted in a finding that employees from the HR

building, located at the southwest corner of Second Avenue and Monroe Street, could be relocated to available space in the Calvin C. Goode Building in order to use space

to its fullest capacity. OTHER INFORMATION

After conducting a thorough, floor-by-floor analysis of the HR, Calvin C. Goode and City

Hall buildings, staff is recommending that the approximately 100 HR employees be relocated to the Calvin C. Goode Building. Because of existing available space at the Calvin C. Goode Building, only approximately 50 Equal Opportunity Department and

Information Technology Services Department employees will need to be relocated to other areas of Calvin C. Goode and City Hall. In total, approximately 170 employees

will be relocated. According to the Finance Department, approximately $2.2 million in outstanding debt

remains on the HR building. Staff anticipates the moves to cost approximately $1.2 million, which will be paid for with the proceeds from the sale of the HR building. Once

the building is sold, staff also expects an annual savings of approximately $400,000 from utilities, ongoing maintenance and landscaping costs that will no longer be necessary, and a one-time savings of approximately $220,000 because the HR building will not

need to be rewired for the Citywide telephony project.

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Another area that is being researched as part of the office space study is analyzing any space that departments currently are leasing and determining if there are any

opportunities for savings. One follow-up area is the Police Department Professional Standards Bureau, which currently is paying approximately $300,000 a year to lease

space downtown. Staff has been working with the Police Department and believes that Professional Standards Bureau employees can be relocated to existing City office space, creating a savings of approximately $300,000 per year. This project is ongoing,

and the current lease expires in September 2016. Over the next several months, staff will research options and return with a full report and recommendation.

RECOMMENDATION

Staff requests that the Finance, Efficiency, Economy and Sustainability Subcommittee approve the recommendations from the Citywide office space study and recommend staff develop an RFP to market and sell the HR building. Staff will return to the

Subcommittee in October for specific discussions about the draft RFP.

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CITY COUNCIL REPORT

TO: Ed Zuercher

City Manager

THRU: Milton Dohoney, Jr.

Assistant City Manager

FROM: Mario Paniagua

Deputy City Manager

SUBJECT: CITY MANAGER’S LEAN TEAM

This report provides information to the Finance, Efficiency, Economy and Sustainability

(FEES) Subcommittee on the creation of the City Manager’s Lean Team and requests Subcommittee recommend City Council approval to issue a Request for Proposals (RFP)

for a training consultant. THE ISSUE

In spring 2015, the City Manager began internal discussions on the potential creation of

a Phoenix “Lean Team” that would improve processes and service based on the combined methodologies of two internationally-utilized business process enhancement strategies: Lean and Six Sigma.

The goal with the Lean Team is to develop a well-trained employee team certified in Lean/Six Sigma, from varying levels citywide, to collaborate with departments to review

business processes and recommend improvements to productivity and customer service. Processes would be chosen based upon the difficulties they create for residents

and/or city staff conducting business or delivering service. This could mean that the process identified is overly complex, burdensome, takes too much time, unnecessarily duplicates efforts, or is unreliable or inconsistent in its outcome.

OTHER INFORMATION

Originally utilized in the 1970’s by Toyota, “Lean Thinking” is aimed at eliminating waste, creating an environment of continuous process improvement, and aligning customer

satisfaction with employee satisfaction.

“Six Sigma Thinking”, founded by a group of Motorola engineers in the 1980’s and most notably implemented by Jack Welch at General Electric in the 1990’s, is a methodology often used in the manufacturing industry to reduce or eliminate variability and increase

business process reliability.

Next Steps The City Manager’s Office will coordinate with department heads to determine the

diverse, critical thinking group of individual staff members who will become members of

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the City Manager’s Lean Team. In addition, a procurement process is necessary to partner with an educational institution or private firm, whichever is determined to

provide the winning proposal, to conduct the required staff training. The City Manager’s Office and Lean Team will identify and prioritize processes for review that

provide substantial improvement opportunities. The City Manager’s Office will return to the FEES Subcommittee to provide updates on

the work of the Lean Team at milestones and as progress is achieved.

RECOMMENDATION This report provides information to the FEES Subcommittee on creation of the City

Manager’s Lean Team and requests Subcommittee recommend City Council approval to issue a RFP for a training consultant.

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CITY COUNCIL REPORT

TO: Ed Zuercher

City Manager

FROM: Denise Olson


SUBJECT: REVIEW COLLECTION AGENCY AND LIEN COST RECOVERY INFORMATION

This report provides additional information to the Finance, Efficiency, Economy and Sustainability (FEES) Subcommittee relating to cost recovery of collection activities. Staff requests Subcommittee affirm its earlier recommendation for City Council

approval to decrease the costs of the collection of delinquent City accounts receivable balances by allowing the recovery of collections as well as the lien

documentation and processing costs from the debtor. THE ISSUE

At the Formal meeting on July 1, 2015, City Council requested additional information on

the specific types of debt involved as well as the citizen population that will be impacted by this cost recovery proposal.

The City has systematic delinquency processes in place which include multiple attempts to contact customers, sending customer letters and developing individualized payment plans to assist in the collection of debt. If the collection efforts are not

successful after 90 days, the account is typically liened and/or referred to a collection agency. Special attention is paid to customers with high balances as well as customers

with active accounts in City systems. Accounts identified as belonging to deceased or bankrupt customers are isolated along with aged uncollectible accounts and accounts with minimal balances which are not economically feasible to pursue.

The recovery of collection agency and lien documentation and processing costs relate

specifically to Municipal Services Bills, Transaction Privilege Tax (TPT), Fire Emergency Transportation Services (ETS) and other miscellaneous City debt including General Accounts Receivable. These changes do not include, affect or change Municipal

Courts or judicial system fees. The requested code updates mirror the current Municipal Courts City code that has been in effect since the mid 1990’s.

Cost recovery of collections fees is not unusual among the largest 20 cities in the United States. 15 of the 19 largest cities, including New York, Los Angeles and Houston, use

outside collections agencies and recover these costs from the debtors. Most of the larger cities utilizing outside collection agencies charge debtors 30% of their original

debt. Phoenix’s proposed recovery percentage of 13% to 20% will vary based on the collection agency assigned and the age of the debt.

The cost recovery methods above could produce significant annual savings to the City.

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In fiscal year (FY) 14/15; 1,143 liens were processed worth $5.7 million. These included liens on sewer, TPT, ETS and other city debt. Over 1,300 liens were released during the

same fiscal year worth $1.5 million. The City could have saved an additional $62,000 with lien cost recovery in place.

Over 30,000 accounts worth $14 million were placed with collection agencies/legal firms in FY14/15. The agencies returned almost $1 million in past due receipts to the City

coffers in FY14/15 alone and the City paid $304,000 for these services. The City could have saved this amount with collection agency cost recovery in place.

OTHER INFORMATION

This item was previously approved by FEES on April 15, 2015 and presented to City Council on July 1, 2015. This item will be presented to full Council again on September 30, 2015.

RECOMMENDATION

Staff requests Subcommittee affirm its earlier recommendation for City Council approval to decrease the costs of the collection of delinquent City accounts

receivable balances by allowing the recovery of collections as well as the lien documentation and processing costs from the debtor.

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CITY COUNCIL REPORT

TO: Ed Zuercher

City Manager

FROM: Denise Olson


SUBJECT: PAYMENT STRATEGY

This report provides information to the Finance, Efficiency, Economy and Sustainability (FEES) Subcommittee relating to a payment strategy the Finance Department plans to implement over the next year to allow the City to make electronic payments. THE ISSUE

With the passing of Proposition 102 allowing the City to make electronic payments, a comprehensive payment strategy can now be implemented citywide. Over the last

several years, City staff with direction from the Subcommittee has identified ways to maximize innovations and efficiencies of accounts payables through the use of the

banking contract. A comprehensive payment strategy could be inclusive of:

• A Single Use Agreement (SUA) program recommended by FEES and

approved by City Council in 2013. The SUA program utilizes a unique 16-digit virtual account number for each payment (no physical card).

• Purchasing Card (P-Card): A pilot program was recommended by FEES

and approved by City Council in 2015. P-Cards will be distributed to specific departments for use and evaluation of controls and processes.

• Ghost Account: A Ghost Account may be used in place of a P-Card program. Ghost accounts are when an account number is given to the vendor to charge with transactions. There is only one account number

per vendor. • Automated Clearing House Payments: City could make payments

through the use of Automated Clearing House option (ACH payments). ACH payments are an electronic transfer of funds, through a batching process sent electronically. Costs savings are realized in that the banks

receive their ACH transactions at once and process them as a single transaction, in a batch.

• Wire Transfers: One of the fastest ways to send money is via wire transfer. A wire transfer is a bank-to-bank transaction that would allow the City to move money from its account directly into the vendor account. This is

especially beneficial in large monetary transactions. • Prepaid Cards: Cards are distributed to payee and money is transferred

to the card account as necessary for city payments. • Emerging Technologies: The Finance Department is committed to

continuously evaluating and researching banking industry trends and best

practices to ensure the City is performing accounts payable functions

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efficiently while maintaining outstanding customer service and internal controls.

In order to develop a comprehensive payment strategy, staff will evaluate all of the

City’s transactions. The second step is to match payment transactions with a payment method that maximizes either rebates to the city or discounts from the vendor or both. Lastly, an analysis will be completed comparing a rebate program with the City’s ability

to maximize interest on cash accounts. Below further describes the various payment methods and when they should be applied:

• P-Cards/Ghost Account – High volume, low dollar purchases, 1.5% rebate • SUA – Repetitive high dollar payments, vendors with contracts, 1.5%

rebate • ACH/Wire Transfers – Utilities, Intergovernmental and critical large dollar

payments

• Paper Checks or Prepaid Cards – Settlements, small vendors.

The Finance Department is responsible for all payables for the city of which there are about 150,000 to 180,000 checks issued worth over $2.3 billion each year. Since July 2015, Finance has processed 30,190 invoices averaging 750 invoices processed per

day. At least 90% of the invoices currently are being paid with paper checks. The below table indicates preliminary goals that could result from an analysis that would

maximize rebates and vendor discounts through implementation of a payment strategy.

Table 1 – Preliminary Goals

Method Current Future Impact to Vendors

P-Cards/

Ghost Account

HR recruiters

Fire Emergencies IT Domain Names

Replace Petty Cash

Funds, frequent purchases under $5,000, office supplies, home

improvements, small equipment

Reduces steps in

process, is paid immediately, incurs bank

transaction fees

SUA program

300 Vendor Agreements

$30 million in annual spend $450,000 in rebates

Increase spend by 25% Paid within 30 days, Payment terms in

Contract, Incurs bank transaction fees

ACH/Wire Transfers

Various vendors paid through ACH and wire

transfers for large critical transactions

Apply to 100 government entities and 20 utilities

Efficient process, no fees

Paper Checks or prepaid cards

Settlements, small vendors

Paper checks not exceed 30% of Payments

No Impact

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The following are steps over the next year that the Finance Department will take to implement a payment strategy:

1) Expand the use of the SUA program by modifying procurements and

payment terms in contracts. 2) Evaluate and implement controls for the P-Card pilot program by February

2016.

3) Select a vendor and implement a Ghost Account payment method by July 2016.

4) Identify all payments associated with Governments and Utilities and implement ACH payments by February 2016.

5) Complete a payment strategy analysis and implement a comprehensive plan by January 2017.

OTHER INFORMATION

Overall a payment strategy will result in less administrative burden to administer, less risk

of loss of cash, faster payments to vendors, and maximize efficiencies in purchasing activities for employees. Best practices in the payment industry include a strategic use of all payment methods described above. The SUA program revenues are projected to be

$450,000 for fiscal year ending 2016. Further, with the voter-approved charter change, the City anticipates saving $250,000 by reducing the number of printed checks once a

program is fully implemented. There is also potential for additional revenue from rebates as the P-Card program and SUA program are maximized.

RECOMMENDATION

This report is for information only.

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