Category Archives: budget

Set up a target, and I’ll hit it every time!

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Local government in Michigan has been operating under the shadow of the Economic Vitality and Incentive Program, or EVIP for the last two years.  The EVIP program has three basic components, transparency, cooperation & consolidation, and employee compensation.  The State of Michigan has set arbitrary requirements that if met, allow local government to get 2/3 of the revenue sharing money they had previously received without any strings. Why did this happen?  The state needs to create incentives for good government, because the locals clearly can’t achieve these objectives without help from above (please note sarcasm).

What has been accomplished through EVIP is nothing short of remarkable!  We have a program that has created new levels of bureaucracy at both the state and local level.  Added additional costs.  Stymied cooperative efforts.  Confused labor negotiations and contract administration.  Most importantly we have established a system that rather than spur innovation, encourages communities to manage to the prescribed targets.

Hitting a target is easy, it’s like checking a box…done.  But is that what we really want?  Take the second leg of EVIP.  It requires one additional  cooperative effort each year to receive funding.  Knowing that I need “ONE” every year, how many do you think I will implement on an annual basis?  When the state tells me to get funding I must publish certain information on my website, what gets published?  Its not what I think my community cares about, I “HIT” the target.  If I am negotiating labor agreements can I maximize my leverage when certain outcomes are predetermined, or do I ensure that I hit the target and receive our funding?

Clearly EVIP is needed. Without the new vision from the state as it relates to transparency, cooperation and managing benefits, local government could never have conceived of such innovations.  The hundreds of examples of cooperation and consolidation that already existed before EVIP should not be interpreted as working together or creating efficiency.   The countless ways that locals shared information previously doesn’t mean that we are being transparent.  And if we aren’t following a one size fits all approach to benefit design, then we must not be managing our benefits.

Fortunately, that has all been figured out for us.  We now have a target to hit, and we will it it every time.

 

How can this make sense?

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One good thing about working in local government is just when you think that you have seen it all…surprise!  The latest “you have to be kidding moment” comes courtesy of the federal government.  They are proposing to make municipal bonds taxable as one of the ways to plug the holes in their budget.  The same municipal bonds that help local government to build critical infrastructure.

What’s especially interesting about this idea is it doesn’t just mean that investors pay more in taxes.  It has the added effect of raising the cost of every local infrastructure project in the United States of America!  That’s the same US of A that has identified so many deficiencies in local infrastructure that most consider it to ba a crisis, is now considering a way to make projects less viable and more costly.  Municipal bonds are currently funding over $3.7 trillion worth of essential infrastructure across the country. Ninety (90) percent of this amount went to improve schools, hospitals, water and sewer facilities, public power utilities, roads and public transit.

I recognize that the federal government has budget issues that are almost beyond definition, but this “solution” takes money away from local projects and throws it into the federal abyss.  Every dollar the feds will take in taxes, is one less dollar we have to maintain our communities. Is this really a step forward?

Mark me down as a no.

Cooperation, Consolidation, Bigfoot, Roswell and other Famous Myths

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If I can figure out how to license the phrase cooperation and consolidation, I could retire tomorrow.  As I travel around the state and country working on local government issues, I find that it may be the most overused, and in my view, over heralded phrase in local government. My concern isn’t that I hear it so much, but rather that there is a belief that this will solve the ills created by of a decade of declining revenues and a couple generations worth of underfunded legacy costs.  I think we are more likely to see Sasquatch flying a space ship than we are to solve a broken financial model with consolidation.

Contrary to popular belief, local governments are for the most part well run and operate fairly lean.  Are their advantages to be gained by cooperating with your neighbors or consolidating services?  Probably.  Economies of scale generally will yield efficiencies that can lower the cost of service delivery, but to what end?  If our starting point is two communities that do not provide services to the level we all expect, isn’t it like combining two cars in need of repair and declaring victory because it drives?  Is this our vision for the future?

I don’t believe that the greatest challenge is being more efficient nor is the greatest benefit in combining departments or merging services.  The single biggest financial burden that our core communities are struggling with are legacy costs. Pending legislation in Michigan will help communities to draw a line in the sand and many already have, but they have no ability change the cost structure for those who have vested benefits or have left service.  More needs to be done.  In many established communities, the ratio of retirees to active employees is more than 2 to 1 with far more being spent on healthcare for retirees than is spent on active employees.  The hurdles both on both the human and political level to address this are substantial, but without real change it is not inconceivable that the only services a community might offer will be to hold elections, collect taxes, and pay and insure retirees.

It’s simply unsustainable.

 

Fish can’t climb trees!

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So if you’re like me, half your friends on Facebook post uplifting pics, sarcastic pics, stupid pics, people I would like to punch in the throat pics (okay I do like that one).  Most of the time I either ignore, chuckle, or shake my head as appropriate and move on to bigger and better things.  This one however resonated with me.

“Everybody is a genius, but if you judge a fish by its ability to climb a tree it will live its whole life believing that it is stupid”  This made me wonder to myself, how many tree climbing fish do I know?  Or more importantly, how many fish am I trying to get to climb a tree?

How much energy might we be wasting trying to get conformity, or trying to get people to do something they are not wired to do?  The answer to that question might be scary.  Are the right people not on the bus, or are we putting them in the wrong seats?  As leaders we need to leverage our resources to maximize our output.  That is not going to be achieved with an extensive tree climbing training program for our fish, and I certainly don’t want to be judged by my ability to teach fish to climb.

Now if there isn’t a roll for fish in our organization, that is a different problem.  But we need to let the monkeys climb and let the fish swim. In other words, let people do what they do best. Leverage their skill sets to your mutual advantage. I regularly see marketing people struggle to produce a spreadsheet, and it falls short of the mark anyway.  If they had asked anyone in the finance department it would have been done in minutes, and done better.  Conversely, I can try and make an accountant artistic, or maybe I could let them do accounting.   Different skill sets, different roles perhaps?

Justin Verlander isn’t judged by his ability to play shortstop or hit a ball.  Barry Sanders wasn’t kept out of the hall of fame because he never kicked a field goal.  Are we judging our fish on their tree climbing?  I think that Big Al might be on to something.

 

Get by with a little help from your friends

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I applaud the City of Detroit and the State of Michigan for making everyone a winner with the Belle Isle lease agreement.  The deal for the state to lease Belle Isle relieves the city of the substantial cost of maintaining the park, and opens the door for significant improvements to this tarnished gem making it an even greater asset to the city.  Residents and visitors to Detroit alike should be thrilled with this announcement as everyone stands to benefit.  So what lessons can we all take a way from this historic agreement?

Lesson one:  Put your good sense ahead of your pride.  It sounds easy, but that can be tough to do and takes a fair amount of courage.  This decision was not a slam dunk.  Not because it didn’t make sense, but because many felt that if the city doesn’t directly manage the park, then it must be a loss for the city. It wouldn’t have been a loss of money, improvements or access, those all improve.  None of that made the decision any less difficult.  Fortunately all involved had the vision to see that allowing the state to be a partner with the city improves Belle Isle for everyone.

Lesson two: Do what you do best.  Belle Isle is a major park that requires a huge continuing investment. Even though it is utilized by many folks outside the city, Detroit bore the full financial burden. In short Detroit was not set up to succeed on this one. The State has more resources, manages large parks, and is actually pretty good at it. The city is far better served by focusing their energy and financial wherewithal on other areas of the city’s operation. They can now put added emphasis on neighborhood parks, public safety or other key areas.

Lesson three:  The Stockdale paradox – Confront the brutal truth of the situation, yet at the same time never give up hope.  Like so many municipalities in Michigan, the City of Detroit is faced with some very difficult financial circumstances.  It serves no one’s purposes, especially your residents, to ignore the reality that we all face.  Confront it and utilize all the resources at your disposal to craft a plan that keeps your community moving forward.

My father always told me, “don’t cut off your nose to spite your face”, and it seems appropriate in this circumstance.  To have let this opportunity pass would have served no one.  We should all learn from the leadership shown here to be open to new ideas, even if that idea stings a little at first.  Maybe that idea is in the form of a partnership, or even a hand off.  If in the end our residents are better served, then we have done our job. Kudos all around!

A little shameless self promotion…

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As readers of this Blog know, I put food on the table working for the Michigan Municipal League, and am very proud to be a part of the League team. As we always are this time of year, we are gearing up for our Annual Convention  on Mackinac Island this year. The theme of this years event is the Tools of Placemaking, and while place will be a big part of the convention, so too will be the nuts and bolts of running a city.

We will once again be conducting our Community Excellence Awards. This is a fantastic opportunity to hear first hand what is working from your peers around Michigan as they present their best ideas to try and garner your support. While a lot of fun, this is always a great way to hear from some true innovators in local government.

We will also be hosting a number of breakout sessions targeting a number of topics.  Some of them include: Your Infrastructure, Your Buildings — For Today and Tomorrow;
Living with Health Care Reform and a Look into the Future of Health Care Plans; and
Office 365 and the Power of the Microsoft Cloud. We have added sessions about new state and federal cell tower laws, on local operation challenges and strategies ( I hear the speaker is really, really good and writes a blog on these types of issues), there will be a session on financial reporting for local governments that targets what elected and appointed officials need to know, paperless government, and a session featuring practical tips to to manage the rising cost of benefits.

We will also be hosting an informational session about our new Natural Gas Purchasing Program which I have the pleasure of moderating.  This session will be very informative and help those who are unclear about how third party providers work or that are on the fence about joining our program.

I guess what I am saying is, don’t let the title fool you.  While placemaking may be the show pony of our convention, there is a ton of great stuff here for the operations folks too.

You really don’t want to miss this!

The Big Disconnect

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Once upon a time in a land far, far, away….Oh wait wrong fairly tale.  What am I talking about? The fact that not too long ago the provision ofr services in Michigan used to be a shared responsibility between state government and local government.  But, over the past decade or more what we have seen is a devolving of those responsibilities to primarily locals as the state has used nearly $5 billion meant for locals to fill its own budget hole.  As a result we’ve seen locals layoff police and fire personnel, close parks and libraries, and put off much need upgrades to important infrastructure such as local streets and sewers. At the same time, getting state government (governors and legislators) to come together on the need for additional revenues has been virtually impossible.  Take additional revenues to help fix our roads and bridges and support transit alternatives.  Even with federal dollars at stake, the legislature can’t seem to find a way to agree to something…anything that would bring such areas into the 21st century.

And yet, at the local level, residents are passing millage after millage to support any number of services.  As a matter of fact at the August election, 90% of all local millages were approved.  This included 100% of all public transit millage requests!   The story has been the same the past couple of years. In the August 2010 election, 86% of all millages were approved and in May of 2011 more than 80% were adopted.

So what’s the deal in the halls of Lansing or Washington?   Clearly, local voters are more than willing to support additional revenues for items when the case is made for specific services that add to our quality of life.  Lets just be sure that the next time we hear a state legislator say the public is against raising taxes to remind them of the reality.

Can you afford to cut training from your budget?

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An all too frequent casualty of tightening budgets are the dollars spent on training.  It seems painless.  There is no immediate manifestation of a service cut, or elimination of a position so it on a relative basis it seems like a good cut to make.  But what is the cost of what you don’t know?  What is the impact of not being aware of innovations that would provide more efficient operations and lessen the budget constraints?  I would suggest that these costs far outweigh the cost of the training.

We are all being asked to do more with less, or as I have heard some folks express recently, to do something with nothing.  How does anyone expect to succeed in this environment without providing themselves the opportunity to train and network with their peers? Elected and appointed officials are tasked with running very complex, multifaceted corporations.  In the case of  elected officials, most begin office with a love for their community but little to no training or experience about the role they are accepting.  That is not a formula for efficiency and innovation, it’s a formula for disaster.

Every successful business understands the fundamental need to train their employees,   but we somehow diminish that same value when it comes to our local operations.  Training and networking are not perks , they are a necessary part of any successful business.  Don’t short change your community by taking a short term solution to a long term problem.  You have a duty to take the necessary steps to be certain you are in a position to succeed. A big part of that is sowing the seeds of innovation and efficiency with appropriate educational and networking opportunities.

Imagine if your community never learned about computers, the internet, or email.  Think about the cost it would take to deliver services without the benefit of these innovations.  Are you up to speed on grants? Economic development laws and practices?  Service delivery models?  Laws pertaining to setting rates and charges?

What’s the future cost of what you don’t know about today?  It might shock you!

Municipal Budgets and Placemaking: Peanut Butter and Jelly, or Oil and Water?

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As a member of the League’s staff with expertise in municipal finance, I find myself in the rather unique position of speaking to large groups of people about both the importance of place, as well as municipal finance and budgeting. Obviously these two topics have nothing in common, or do they? While it seems to some that these are divergent topics, I would suggest that they should be uncompromisingly intertwined.  Preparing a budget without the proper vision is like making a sandwich without bread.  It will meet the basic requirement, but it isn’t very appealing.

We all know too well that we have been dealing with some of the most challenging financial circumstances in memory.  Too often the budget process becomes an agonizing contest with the singular focus of balancing revenues and expenditures without remaining grounded to a fundamental placemaking strategy.  Some of the first targets of the local budget process can frequently be community assets that help define our community. Somehow these facilities and programs lose out to other more “critical” operations.  We must remember however, that a community’s unique sense of place is its greatest asset. Therefore it must be the foundation of any budget, and the balancing decisions should reflect that fact.  To put it another way, why do people choose to live in your community?  Why did you choose to live there?  If the budgets you adopt don’t reflect the answer to that question, then aren’t you destroying the “sense of place” that brought you and other residents to your community? Isn’t this further diminishing your community’s value?

Clearly you all have difficult decisions to make, but in doing so you should resist the temptation to uncouple place from budget.  To do so is not in your community’s best interests, and that strategy will actually work to exacerbate an already challenging situation. Place isn’t just a buzz word that we talk about to make ourselves feel better; it is at the core of who we are and why we exist.  Money spent supporting our own unique places are dollars well spent.

Budget accordingly.