Responding to Fiscal Challenges How to Deal with a Changing Economic Climate

1. Responding to Fiscal ChallengesHow to Deal with a Changing Economic Climate Jeff Tyne – Budget Director City of Peoria, Arizona

2. Today’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

3. Current Size 178 Square Miles Population Current 153,000 Projected Build Out 500,000 10-Year Capital Plan $1.1 Billion

4. Fiscal DistressHow 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?

5. Judging Your Financial ConditionOn Which Step is Your Community? Service Level Ability Long-Term Fiscal Position Upcoming Fiscal Position Cash Position

6. The Warning SignsHow 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

7. Financial BudgetProjected Inflows vs. Outflows $1,995,220 What do you do with the difference?

8. Financial BudgetProjected Inflows vs. Outflows ($3,442,795) ($2,414,751) ($1,969,805) ($1,726,160) $1,995,220

9. The Warning SignsHow 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

10. Financial Analysis & Reporting

11. The Warning SignsHow 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

12. How to Approach An 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

13. Potential Goals "Focus on Core Services" "Reward Good Practices" "Measure for Results" "Preserve Our Employees" "Be Outcome Oriented" "Let's Work Together"

14. An Organization in DistressWays to Approach the Problem • 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

15. Long-Lost InitiativesTime to Resurface? • Performance-Based Wage Structure • Outsourcing/Privatizing Services • Dealing with “Sacred Cows” • Performance Management

16. An Organization in DistressWays to Approach the Problem • 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 DEVELOP A COMMUNICATION PLAN

17. Council • Involve Early and Often • Manager Briefings • Organization • Standing Agenda Item • Engage Broad Range of Employees • Incentives • Citizens • Community Outreach • Special Committees • Use of Surveys • Unions • Standing Agenda Item • Promoting Collaboration • Media • Get out the Right Message DEVELOP A COMMUNICATION PLAN

18. Celebrate 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

19. 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

20. Solutions & AlternativesRevenue 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 Funds • Other Revenue Sources • Maintenance Improvement Districts • Utility Users Tax • Franchise Fee Levels

21. Solutions & AlternativesCost Containment Strategies Commonly Used Measures-Who are you hurting? • Across-the-Board Cuts • Cost Category Option • Negotiated Exemptions • Hiring Freezes-Be Thoughtful • Note Exemptions Before the Freeze • Employee Education/Wellness Programs

22. Solutions & AlternativesCost Containment Strategies Personnel-Related Ideas • 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

23. Solutions & AlternativesCost Containment Strategies Important Initiatives • Costing Out Services • Use of Performance Management • Job Sharing Opportunities • Job Shifting

24. Solutions & AlternativesCost Containment Strategies Future Liabilities • Operating Impacts of Capital Plan • Excise Tax Debt Service Payments

25. Solutions & AlternativesCost Containment Strategies Some Possible “Deep Pockets” • Closely Scrutinize Replacement Programs • Reevaluate Compliance “Mandates”

26. Solutions & AlternativesCost Containment Strategies Other Common Targets • 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

27. Solutions & AlternativesCost Containment Strategies Some Other Tips • Avoid “One-Time” Fixes to Handle Recurring Problems • Be careful – Travel & Training are Linked

28. Policy Decisions for Your Electeds • Recommended Cuts to High Priority Functions • Personnel Options • Outsourcing/Contracting • Managed Competition • Regionalization • Use of Auditing Function • Implementation of New Technology • Performance Management • Financial Principles • Economic/Financial Indicators

29. Restoring BalanceTips for Next Time • Routine Fiscal Assessment • Long-Term Financial Planning • Talk to your “Tax Generators” • Establish Fiscal Policies • Rainy Day Fund • One-Time Uses of Funding • Debt • Assess Balance to Land Use • Have an Inventory of Services Provided

30. Responding to Fiscal ChallengesHow to Deal with a Changing Economic Climate Jeff Tyne – Budget Director City of Peoria, Arizona