Roadmap for Transformation and Consolidation of Government Services

1. Presented by: Christine Smith, Principal & Dave Varana, Manager IGFOA and WGFOA Joint ConferenceMay 13, 2010 Roadmap for Transformation and Consolidation of Government Services

2. Government Transformation: The Reality 88% of city finance officers believe their cities are less able to meet fiscal needs in 2009 than in previous years, and will be worse in 2010 and 2011

3. Government Transformation:The Case for Change Government Transformation: The Case for Change Population growth = increased demand for services Fewer people in the workforce, less able to afford services Declining economic conditions No respite from expenditure increases Health insurance Salary increases Pension expenditure growth Ongoing capital replacement Aging population Job growth occurring in low skill occupations “Brain drain” Aversion to tax increases Unfavorable Demographic Trends Local Government Budget Pressure Uncertainty over future federal and state aid Flat local aid payments from state • Lower income levels • Challenge to support property tax levels • Increased State funding of local services appear highly unlikely

4. Government Transformation:The Case for Change “ Tax burden, coupled with increasing demand for services, creates instability for local governments • Economic cycles create significant revenue flux for many Illinois governments which rely heavily on sales tax and other transactional services • Levy limits in Wisconsin create zero sum competition for new development and associated taxable property value The current approach to local government creates difficulty in addressing issues of a regional nature Incentives, tax burden, energy costs, and skilled workforce were the top responses by economic developers as ‘more important’ in Quarter 3. Source: New Economic Strategies, Economic Developers Index, December 2009 ”

5. Government Transformation:The Case for Change Race to the BottomThe Midwest’s economic competitiveness is declining due to: • Increasing tax burden • Misalignment between jurisdictions, service, and revenue sources • Difficulty in reaching agreement on regional priorities and investments Government Service Transformation Addresses Duplication Lack of Unified Vision Segregated Demographics

6. Government Transformation:The Case for Change Metropolitan regions are the key functional units in terms of economic activity • Recent research suggests that the old paradigm of the “national economy” resting on big cities and small towns, will be replaced by a global network of metropolitan regions that link human capital, innovation, infrastructure, and value-added economic activity. Source: Greater Ohio Policy Center

7. Government Transformation:The Case for Change • Ensuring the infrastructure is in place at the metropolitan level requires local government collaboration • Many types of service work better when delivered (and funded) on a regional basis • Particularly in Wisconsin – many silos • Illinois has comparatively more robust approach with greater number of regional authorities and service districts, but artificial firewalls remain

8. Government Transformation:The Case for Change Government can impact economic development/business growth by: • Eliminating fragmentation of service delivery which drives up cost • Positively impacting factors considered for business expansion for relocation • Creating regional incentives, efficiency, and cooperation • Streamlining economic development processes and approvals

9. Government Transformation:The Case for Change Consolidated or regional governmental models can have the following anticipated effects supporting economic development: Source: Government Consolidation and Economic Development Allegheny County and the City of Pittsburgh, 2008, Rand

10. Government Transformation:The Case for Change Site Selection factors to consider: • Existing and emerging technologies available • Operating costs (labor, power, and tax burden) • Business climate and regulatory levels • Site/building availability and quality • Ease of establishment/operation • Incentives • Tax burden is only one factor which governments can impact.

11. Government Transformation:The Case for Change Regional incentives, efficiencies, and collaboration • Metropolitan regions are the key functional units in the global economy and their ability to thrive is dependent upon their ability to collaborate • Efficiencies, realignments, and consolidations will free up scare resources to: • Meet more pressing priorities • Save taxpayers money • Better align government with the metropolitan scale which the modern economy operates • Current municipal focused revenue distribution models in many states create issues for collaboration and encouragement of regional economic development (i.e. WI – always compete for funds, IL – all suffer in poor economy and therefore compete at a higher level) “ Shared revenue’s absence of incentives for efficiency, cooperation, coordination, and performance metrics sends a message. Source: Sheehy Task Force on State and Local Government, 2003 ”

12. Government Transformation:The Case for Change • The need for streamlined and value-added reviews • Disagreement on economic strategy or key development priorities between different layers of government results in loss of development for the region. • Ineffective development policies or strategies can have significant impact on the tax base. • Delays in the development review process equal greater costs for businesses and can drive potential projects (and tax base) away.

13. Government Transition: The Reality of Common Myths

14. Government Transformation:Reality of Common Myths Myth #1More units of local government mean higher expenditures. RealityA variety of factors (i.e. fiscal capacity, service level preferences) impact per-capita cost levels

15. Government Transformation:Reality of Common Myths Relationship between number of local government units and expenditure per 1,000 population More expenditures, fewer units of governments More expenditures, more units of governments $8,000 Oregon Montana Minnesota $7,000 Illinois 2005-2006 Expenditures per 1,000 Population $6,000 0 1 3 4 5 Wisconsin Pennsylvania $5,000 New Hampshire Missouri Less expenditures, fewer units of governments Less expenditures, more units of governments Michigan Iowa $4,000 Number of Local Governments per 1,000 Population

16. Government Transformation:Reality of Common Myths Myth #2Consolidation of governments will create significant operational savings immediately. • RealitySavings are most frequently achieved through: • Avoided capital costs • Reduced annual rates of increase in expenditures

17. The Myths of Government Transformation Examples of cost savings LOGIS Member Avoided capital for ERP$600 thousand to more than $2 million Waukesha County Dispatch Lowered annual operating costs $2.7 million (ten municipalities) North Shore Fire Department Avoided capital$1.6 million

18. Government Transformation:Reality of Common Myths Myth #3All consolidations that truly make sense have already been accomplished. RealityOfficials responding to our survey in Fall 2009 reported that other services have real potential for consolidation in their community.

19. Which services have the most potential for consolidation?

20. Government Transition: Opportunities

21. Government Transformation:Opportunities Local Government & Business Community Local Government State & LocalGovernment Spread Costs Across More Taxpayers --------------------- Difficult, but feasible Increase Revenue via Economic Growth -------------------------- Economic growth requires value factors for businesses including impact on balance sheet and quality services Local Government Finance System Reform -------------------------- Reform of local government revenue system requires leadership at both State and Local levels Reduce Services --------------------- Wisconsin residents want government to play an active role in shaping a better community Raise Revenues --------------------- Tax increases are toxic

22. The Opportunities of Government Transformation Intergovernmental Cooperation Continuum LEVEL OF DIFFICULTY AND REQUIRED INVESTMENT Shared Programs or Equipment Shared Services thru Contract Joint Purchasing Shared Facilities Joint Departments Independent “Metro” Mutual Aid City/Town of Pewaukee Park & Recreation Department, Milton Joint fire Department, Everest Metro PD Village of Plover / City of Stevens Point Aerial Ladder Truck Purchase Multi-jurisdictional SWAT teams, Federal Byrne grant drug task forces Contracting for Road Maintenance services from the County HWY Department North Shore Fire Department, MMSD Fredonia Town/ Village Hall MABAS (Mutual Aid Box Alarm Systems Adapted from J. Ruggini, “Intergovernmental Service Sharing”, Government Finance Officers Association, 2007

23. Government Transformation:Opportunities • Collaborative Arrangement Benefits Enhanced Service Levels Especially if bringing two communities together Quality Workforce Proactively addresses fewer available and qualified workers Savings Usually on-going rather than one-time

24. The Success of Government Transformation It’s not the who, but the howthat matters Municipal services are viewed as having more potential for consolidated or shared services, depending on varying local requirements and responsibilities

25. Government Transformation:Opportunities • Suitability Factors Vary Across Services

26. Government Transformation:Opportunities • Factors Common to Every Successful Consolidation

27. Government Transition: Success Factors

28. Government Transformation:Success Factors • Improved Service Example • Everest Metro Police Department • In 1993, the Police Departments of the City of Schofield and the Village and Town of Weston merged to create the Everest Metro Police Department • Increased operational capabilities and breadth of services to the three municipalities • Resulted in new positions that wouldn’t have been financially possible for the individual communities without the consolidation 5 full-time officers have been added to the Department since the consolidation, including a detective unit, 2 school resource officers, and a community services officer.

29. Government Transformation:Success Factors • Clear Fiscal Benefit ExampleBrown-Outagamie-Winnebago (BOW) Solid Waste Partnership Agreement • Brown, Outagamie, and Winnebago County cooperate on Solid Waste Disposal, Recycling, and Hazardous Waste disposal and collection. • Previously, each County maintained their own collection system and landfill – Brown was nearing capacity and faced significant capital costs to open new site • BOW agreement delays opening new landfills until existing sites are at capacity $35 Million in estimated savings over 25 years for Brown, Outagamie, and Winnebago Counties through the BOW Solid Waste partnership.

30. Government Transformation:Success Factors • Trust ExampleRock County and City of Beloit Health Department Merger • Major consolidation obstacle was convincing residents of Beloit that they would receive the same level of service in the same service areas • City and County hired an independent outside consultant to assess the fiscal and service impacts of the merger • City of Beloit and Rock County officially began operating as one public health department on January 1, 2007 “ Once citizens could see that their services would not decrease, they were much more supportive. Source: Case Study Interviewee ”

31. Government Transformation:Success Factors • Leadership ExampleWaukesha County Dispatch Consolidation • Consolidation of Lakes Area Communications, the Waukesha County Sheriff, and six other agencies • Later, City of Brookfield and Village of Butler joined as well • Initially, the County planned to build a new dispatch center and charge municipalities to join the consolidation effort, but there was no interest with this structure • County Executive decided to fund with county tax levy to spread the operating costs – the County paid for half of the capital cost and assumed the financial risk “ It takes political will and leadership among elected officials. Source: Case Study Interviewee ”

32. Government Transformation:Success Factors • Community Support ExampleDeForest and Windsor Now (DaWN) • Intended to promote cooperative planning between the Village of DeForest and the Town of Windsor • Citizens realized that without new business investments, the tax base of the municipalities and the DeForest School District would stagnate • Led by a prominent local business leader, a nine person group was created with the goal of promoting joint progress between the two municipalities “ By having residents of both DeForest and Windsor in DAWN, we’ve had a real buy-in by the community. Source: Case Study Interviewee ”

33. Government Transformation:Success Factors • Shared Perception of Need ExampleCity of Onalaska Public Works • Municipalities in La Crosse County have been cooperating on providing public works to citizens since 2004 • The City of Onalaska has an agreement to share equipment with the Town of Holmen and has snow plowing arrangements with the Town of Onalaska • The City also contracts with La Crosse County for mowing services and rents equipment to fill cracked pavement “ We use [their] bucket truck and [they] use our skid loader. Now we both don’t have to buy our own. Source: Case Study Interviewee ”

34. Government Transition: Success Stories

35. Government Transformation:Success Factors • Regional ApproachCase Study: Outagamie County Planning and Economic Development • Planning and Economic Development between Brown, Calumet, Outagamie, and Winnebago Counties. “ If we only have a specific amount of dollars, let’s make the most of it. Source: Case Study Interviewee ” Success Factors Significant avoided costs Benefits Avoided duplication of service

36. Government Transformation:Success Factors • Cross Geographic BoundariesCase Study: Village of Worth and North Palos Fire District Consolidation • Fire protection cooperation between Village of Worth and North Palos Fire District. “ The deal was projected to save Worth $388,000 in the first year alone. Importantly, North Palos did not annex Worth, nor does it have any taxation rights in the Village. Source: Case Study Interviewee Success Factors Potential for service improvements, significant avoided costs, and support of community and staff. Benefits Better service, access to better equipment, and lower costs. ”

37. Government Transformation:Success Factors • Address a CrisisCase Study: City of Champaign and Champaign County • Animal control cooperation between City of Champaign and Champaign County. “ Our interest is in seeing the work in the animal control department can be done. Source: Case Study Interviewee ” Success Factors Significant avoided costs Benefits Better Service

38. Summary Population growth = increased demand for services Fewer people in the workforce, less able to afford services Declining economic conditions No respite from expenditure increases Health insurance Salary increases Pension expenditure growth Ongoing capital replacement Aging population Job growth occurring in low skill occupations “Brain drain” Aversion to tax increases Unfavorable Demographic Trends Local Government Budget Pressure Uncertainty over future federal and state aid Flat local aid payments from state Local Government & Business Community Local Government State & LocalGovernment Spread Costs Across More Taxpayers --------------------- Difficult, but feasible Increase Revenue via Economic Growth -------------------------- Economic growth requires value factors for businesses including impact on balance sheet and quality services Local Government Finance System Reform -------------------------- Reform of local government revenue system requires leadership at both State and Local levels Reduce Services --------------------- Wisconsin residents want government to play an active role in shaping a better community Raise Revenues --------------------- Tax increases are toxic

39. Closing Thank you. To download all case studies and more in-depth discussions of the case for change and critical success factors of government transformation and consolidation, connect with us at: http://www.bakertilly.com/SL_GovServices Report Title: “A Roadmap for Government Transformation”