Southeast Michigan Council of Governments

1. Budget Best Practices Gain insight into effective techniques to develop and balance municipal budgets Webinar Presentation by: Dave Boerger & Ginger Juncker – SEMCOG Rob Maleszyk – City of Warren January 19, 2012 Southeast Michigan Council of Governments

2. Webinar Presenters Dave Boerger SEMCOG Team Virginia L (Ginger) Juncker SEMCOG Team Rob Maleszyk Controller, Warren

3. Agenda • Intro & Overview Dave Boerger, SEMCOG • Budget Best Practices Ginger Juncker, SEMCOG • Warren’s Budgetary Tools and Techniques Rob Maleszyk, Controller, Warren • Wrap-up and Q&A Dave Boerger

4. Webinar Logistics Audio will be provided via VOIP through the speakers on your computer For questions, type into the text box on the lower right hand side of your screen. Each will be answered at the end of the webinar For technical help, call Susan Stefanski at 313-961-4266 Copies of this presentation will be emailed after the webinar Use the embedded hyperlinks to access on-line information Please compete a webinar evaluation that will be emailed with the presentation The webinar will be archived on the SEMCOG website

5. Who Is SEMCOG? 159 Member Local Governments7 Counties = 50% of Michigan’s Population Assist local governments deal with issues Plan for common needs Recognize regional opportunities. Facilitate cooperation among local governments for mutual benefit. Advocate for changes in public policy

6. Programs and Services

7. SEMCOG Member Services • How to make your community run more efficiently? • Local government restructuring/budgeting assistance • Local government collaboration & shared services • How to make my community greener? • Storm water management • Low impact development • How to make my community more desirable? • Economic development • Combating foreclosures • Walkable/ bikeable/road safety audits • Traffic access management • How to become a better leader • SEMCOG Universities & outreach workshops • SEMCOG Delegate/Executive Committee member

8. Fiscal Distress Recovery

9. Linking Planning & Budgeting Source: GFOA

10. Budget Best Practices- Ginger Juncker • Engage & communicate openly with stakeholders • Consent on budget assumptions & targets, esp. revenues • Have a long range financial plan as a starting point • Variance against current budget & YTD actuals • Perform a comparable community gap analysis • Integrate performance goals & metrics • Link budget to Dashboard/Citizens Guide

11. Budget Best Practices (cont’d)- Ginger Juncker • Establish/include action plans to attain budget • Develop contingency plans & alternative scenarios • Implement stringent cost control measures • Regularly report results to budget • Recognize accomplishments/address issues • Involve stakeholders continuously

12. Stakeholder Engagement

13. Getting the Revenue Right Source: SEMCOG

14. Personal Property and State Tribunal Tax Risks • Impact on communities if Personal Property tax is eliminated: Allen Park -8.4% Brighton - 8.9% Ecorse – 45.8% Brownstown Twp. -7.4% Dexter - 14.6% Wayne - 20.2% Southfield- 14.0% Dearborn -15.2% Warren -15.3% • State Tax Tribunal Risk • 40,000 appeals are pending in Lansing, a 3-4 year backlog. • Oakland County has $3.9 billion of taxable value in dispute • $12 million has been set aside for anticipated tax refunds • 62% are being ruled in favor of the property owner

15. Personnel Costs Represent 70-85% of Municipal Budgets

16. Common Budget Technique

17. Budget Approaches • Variance-based • Multi-year • Outcome (or priority)-based • Zero-based • Performance (or target)-based

18. Variance Based Budgeting • Most common approach utilized by SE Michigan local governments • Resource allocation is dependent largely on prior year results and the relative influence of particular department heads, with little or no regard for other likely more important factors. • Budget figures are compared with actual results and a simple actual-budget variance comparison is calculated. Since the analysis is simple, this analysis lacks any sophistication in terms of adjusting similar budget items for forthcoming periods by increasing or decreasing the expenditure estimates. • Basically, variance results are generally used for revising monetary amounts for the next planning and budgeting cycle, and also for departmental performance tracking. http://www.gfoa.org/index.php?option=com_content&task=view&id=1279&Itemid=566#improve

19. Multi-Year Budgeting(Oakland County utilizes this approach) http://www.gfoa.org/index.php?option=com_content&task=view&id=1279&Itemid=566

20. Outcome (or Priority)- Based Budgeting(Grand Island, NE uses this approach) http://www.gfoa.org/index.php?option=com_content&task=view&id=516&Itemid=277

21. Zero Based Budgeting(Frederick, MD uses this approach) • When using zero-base budgeting (ZBB), a government builds a budget from the ground up, starting from zero. • ZBB has been around since the late 1970s, with renewed interest with current environment of fiscal constraint, • The “zero” in zero-base budgeting sends a powerful message that taxes and spending will be held in check. • More time consuming than other methodologies http://www.gfoa.org/index.php?option=com_content&task=view&id=1279&Itemid=566#ZBB

22. Performance (or Target)-Based Budgeting(Sterling Heights & Warren use this approach) • The practice of developing budgets based on the relationship between program funding levels and expected results from that program. • Based on the premise that presenting performance information alongside budget amounts will improve budget decision-making by focusing funding choices on program results. • The performance-based budgeting process is a tool that program administrators use to manage more cost-efficient and effective budgeting outlays. • This approach to budget analysis and utilization is many steps ahead of traditional methods. • Performance budgeting comprises three elements: • the result (final outcome) • the strategy (different ways to achieve the final outcome) • activity/outputs (what is actually done to achieve the final outcome • Performance Measurement and Performance Based Budgeting (PBB): This presentation provides the basic concepts of performance measurement, benchmarking, and performance/target-based budgeting.

23. GFOA Budget Survey ((Performance or

24. Recommended Approach Hybrid Solution: • Multi-year • Performance-based • Use variances from current year actuals and projected financial data for next year

25. Budget Best Practice Resources • Government Finance Officers Association: www.gfoa.org This organization represents many of the Finance Directors and other finance professionals in the public sector. It as additional links to reference materials, training, and other good to know information. • Government Accounting Standards Board: www.gasb.org The mission of the Governmental Accounting Standards Board is to establish and improve standards of state and local governmental accounting and financial reporting that will result in useful information for users of financial reports and guide and educate the public, including issuers, auditors, and users of those financial reports. • International City/County Mangers Association: www.icma.org ICMA's mission is to create excellence in local governance by developing and fostering professional local government management worldwide.

26. Warren Budgetary Tools & Techniques- Rob Maleszyk

27. Warren’s Budget History & Forecast

28. Integrated Performance Objectives & Indicators

29. CitiStat/Qalert Performance Measurement

30. Citizen Budgetary Input

31. Citizen Budgetary Input (cont’d)

32. Comparable Benchmarks

33. Warren Budget Process • December: The preparation of the budget begins with the distribution of budget instructions • January & February: the Mayor and Controller’s Office hold meetings with all departments, divisions, and commissions to review proposed spending and activities. • January & February: concurrently, alternative approaches are sought to provide better services and reduce costs. • March: Departmental requests are addressed by the Mayor within overall City needs and available resources. • Early April: the Mayor submits to the Council a recommended budget for the next fiscal year that is within the tax limit and other revenue sources of the City. • Mid-April & Mid-May: Council reviews the Mayor’s recommended budget, together with supporting schedules, information and messages. • Early May: a public hearing on the budget is held not less than one week before its final adoption. • Mid May: Council, by resolution, adopts a budget for the next fiscal year in accordance with the Michigan Uniform Accounting and Budgetary Act.

34. Budgetary Standards • Uniform Budget Act • The City is legally subject to the budgetary control requirements of State of Michigan P.A. 621 of 1978 (the Uniform Budgeting Act). Major provisions include: • • Budgets must be adopted for the General Fund, Special Revenue Funds, and Debt Service Funds. • • The budgets must be balanced. • • The budgets must be amended when necessary. • • Debt cannot be entered into unless permitted by law. • • Expenditures cannot exceed budget appropriations. • • Expenditures cannot be made unless authorized in the budget. • • A public hearing must be held before budget adoptions. • Budgetary Basis of Accounting • Budgets for the General, Special Revenue, Debt Service and Capital Project Funds are prepared and adopted on the modified accrual basis of accounting consistent with Generally Accepted Accounting Principles (GAAP). • Government Financial Officers Association (GFOA) • Local government unit must publish a budget document that meets the program criteria as a policy document, as an operations guide, as a financial plan, and as a communication device.

35. Personnel Reductions

36. Warren Consolidation Cost Savings Examples

37. Warren Efficiency Cost Savings Examples

38. Warren Benefit Cost Savings

39. Wrap-up & Final Thoughts- Dave Boerger • Budgets are critical for success • Supplemented by efficiency, productivity improvement, collaboration & performance measurement processes • Restructuring may be necessary to balance budgets by consolidating, privatizing and/or selectively reducing services • Regularly engage all stakeholders • Steadfast leadership • Request SEMCOG consulting team assistance at no cost

40. Sampling of LGEC Projects • Shared service assistance • Privatization help • Court consolidation • Employee benefits analysis • Munetrix fiscal information • AgileGov searchable database • Millage vote readiness assessment • Dispatch collaboration • Benefit cost savings • Citizen Guide/Dashboard development • Citizen surveys w/ Cobalt • Comparable benchmark analysis • Budget assistance • Performance measurement • Fiscal assessment process • Energy efficiencies • Presentation to elected officials/staff • Taxable value forecasts • Financial plan development • Department consolidation

41. Q&AWebinar Evaluation • Type your questions into the text box on the right hand side of your screen • Complete and return a webinar evaluation that will be emailed along with this presentation shortly after the webinar • Also included will be information from Cobalt on the employee survey and how to apply • The webinar will be archived on the SEMCOG website within the week

42. For additional information or assistance, contact: Dave Boerger, SEMCOG 248-875-7120 boerger@semcog.org www.semcog.org Southeast Michigan Council of Governments 535 Griswold St., Suite 300 Detroit, MI 48226