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