bob goehrig
DESCRIPTION
TRANSCRIPT
1
Financing the Future
Long-Term Financial Planning for Local Government
Florida GFOA
2008
2
Agenda• Part I – Introduction to Financial
Planning
• Part II – Overview of Planning Process
3
Part I – Introduction
4
What is Long-Term Financial Planning?
• A combination of technical analysis and strategizing– Forecasting & strategy development
• A collaborative and visionary process– Elected officials, staff, & public
• An anchor of financial sustainability– Changing mindsets– Institutionalize long-term thinking
5
What is a Financial plan?• Essential characteristics
– What is the time horizon? – What funds are considered?– How often is a plan done?– What is in it?
6
Coral Springs’ Business Model
Strategic Plan
Business Plan
Budget
Output to Citizens
Data Analysis Citizen Input
7
Why Financial Planning?• Generally…
– Bring financial perspective to planning– Stimulate long-term & big-picture thinking– Raise specific issues– Create discipline– Communicate to citizens
8
The Case for Change in Coral Springs
• Approaching Build-Out
• Fiscal Impact Model – High density development
• Population Tipping Point – Small town management model not
appropriate for large urban city
9
Why Financial Planning Now?• Difficult housing market
• Health care and pension costs
• State-imposed constraints on local revenue
10
Challenges To Long-Term Planning
1. Taxation and Budget Reform Commission
• Considering revenue and spending caps
2. Legislature • Considering additional property tax relief
3. Legislature/Grass Roots Organizations • 1.35% Petition
11
Ad Valorem Tax RevenueImpact If 1.35% Petition Adopted
$35,411,380$33,221,630
$30,880,000
$22,165,702
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
FY 2007 FY 2008 FY 2009 FY 2010
12
So, Why Financial Planning?• Establish indicators for key conditions
• Build case for action
• Develop long-term strategies for financial health
• Prioritize services
• Build trust with citizens!
13
Trust
Citizens with a Great Deal or Fair Amount of Trust in Government
Federal State Local 2005 53% 67% 70% 1998 65% 80% 77%
14
Trust• Preliminary Findings of “Choice Works
Dialogues”
“We are prepared to pay more in taxes if that is necessary to realize the future we
want, but only if steps are taken to increase accountability and trust.”
15
Business Perception of Property Taxes
0
10
20
30
40
50
60
2004 2005 2006 2007 2008
Too high
High but quality ofservices is high
Taxes/service leveljust right
16
Trust Leads To Loyalty Recommend City to Friends, Family, Co-Workers
82
76
8890 89
65
70
75
80
85
90
95
2004 2005 2006 2007 2008
% V
ery
Lik
ely
17
Five Pillars of Planning• Long-Term Service Vision
• Financial Policies
• Technically Sound Analysis & Forecasting
• Collaborative & participative process
• Connection to other plans
18
Long-Term Service Vision• Define the future the community wants
– Great opportunity to engage elected officials and the public
– Makes planning more meaningful for participants
– Key for aligning finances with service levels
19
Coral Springs Long-Term Vision • 2004 Visioning Summit
– 100 participants dedicated an entire weekend
• Responsibility for making the vision a reality rests with the entire community, not just the City
• 2008 Visioning Summit Update– 60 participants spent one evening informing
others
20
Coral Springs Vision Consensus Areas
• Healthy, fit citizens • Walkable, bikeable • Safety and security • Aesthetically pleasing • A vibrant downtown • Family values and
spirituality • Educational excellence
• Appropriate housing for all
• Innovative approaches to preserve resources
• Involved citizens • Advanced technology • Open spaces• Recreational activities for
all • Innovative transportation
21
Financial Policies• Define standards for stewardship of
public’s tax dollars– Define financial future community wants– Forms basis for accountability and increasing
trust in government– Another crucial point of elected official
involvement
22
Getting Elected Officials On-Board
• Private sector support
• Focus on results & outcomes
• Don’t jump in the deep end – get results from a small project then build on that success
• Partnership between elected officials and professional staff
• Data trumps politics
23
Policy Vs. Operations
Strategic Plan
Business Plan
Budget
AdministrationOperation
Policy
24
Analysis and Forecasting• Sound analysis and forecasting provides:
– Credibility– Scenario analysis capabilities– Adaptability
25
Analysis & Forecasting Contribute to Planning Process
Begins with an Environmental Scan– Demographic data– Performance measurement track record – Resident and business surveys– Stakeholder input– Strengths-Weaknesses-Opportunities-Threats– Workforce analysis– Financial Trend Monitoring System
26
Collaborative & Participative Process
• Process must engage different groups to– Gain different vantage points– Increase plan quality– Build a wide basis of support for strategies
27
Police Teams: Pushing Results
• Key Objectives: Crime rate, Safety rating– Report Writing team reduced cycle time– “Choppers” team reduced cycle time– “Wolf Packs” reduced accidents at
intersections– Directed surveillance reduced
“smash and grabs” from cars– First offender programming
reduces recidivism
28
Connection to Other Plans
Strategic plan
Long-term financial plan
Budget Results evaluation
Capital Planning
29
Part I – Take-Aways• LTFP is a strategic and visionary process
• LTFP is part of a complete planning portfolio
• LTFP provides benefits across a spectrum of concerns
30
Part II – Overview of the Planning Process
31
Four Major Phases
Mobilization
Analysis
Decision
Execution
32
Mobilization Phase• Align Resources
– Identify participants– Design a process
• Preliminary Analysis– Initial SWOT analysis– Other analyses, like forecasts
33
Mobilization Phase• Service level preferences
– Strategic priorities and objectives
• Financial policies– Self-assess compliance with policies– Identify new policies
• Define purpose and scope– Consensus on problems planning is to solve– Limit scope of planning to those issues
34
Example of Policy Self-Assessment
Policy Statement Status Comment Utility Rates & Fees. The City will set fees and user charges for each utility fund at a level that fully supports the total direct and indirect cost of the activity. Indirect costs include the cost of annual depreciation and overhead charges.
An annual review of the utility rates was completed.
Accounting. Maintain a liquidity ratio of at least 1:1
Reserves. The City will establish a Golf Course Improvement Reserve for costs associated with capital improvements budgeted in the Golf Course Fund. The reserve will be maintained at a level at least equal to the projected five-year costs.
--
Reserve = ($510,000) for FY 2005-06
35
Align Resources With Strategy
Resource Allocation(Budget & CIP)
Measurement(Quarterly Performance Reports
and State of the City)
Feedback(Surveys, Town
Meetings, Focus Groups, and Citizen Committees)
Strategic Alignment(Business Plan)
Policy Deployment(Strategic Plan)
36
Mobilization Phase Take-Aways• Preparation is key to financial planning.
• A clear “roadmap” increases confidence in the planning process
• Financial policies are crucial
• Mobilization must identify service priorities
• There must be consensus on the purpose of planning
37
Analysis Phase• Environmental Analysis
– Objective and subjective sources– Build expertise for analysis & strategizing– Examine variety of factors, not just financial
• Revenue and Expenditure Forecasting– 5 to 10 year forecasts are typical– Hybrid techniques are the most common &
powerful– Revenue modeling is a key practice
38
Goo
d
Crime Rate
5,093 5,1684,886
4,391
3,507 3,3903,001 3,194 3,085
2,7312,259
2,501
3,988
0
2,000
4,000
6,000
8,000
10,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Coral Springs Broward County State National
39
Drill Down…
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Murder Forcible Rape
Robbery Aggravated Assault
Burglaries Larceny
Motor Vehicle Theft
Goo
d
40
…and Down
41
Sales TaxRevenue
Amount of TouristConsumer Purchases
Proclivity forSpending
Job/IncomeGrowth
ConsumerConfidence
Number of PotentialConsumers
ConventionsAttendees
Strength ofTourist Season
SpendingAbility
Spending on Taxable Goodsand Services in Virginia Beach
Debt/Savings
Spending on Non-Taxable e-Commerce
National MacroeconomicCausal Factors
InflationInterestRates
FiscalPolicy
StockMarket
HousingValues
Shopping Trends& Preferences
LocalEconomic
Forces
HouseholdFormation
Local ShoppingEnvironment
MilitaryDeployments
Local ConsumerSpending
Amount of Area ResidentConsumer Purchases
Number ofTourists
Spending on Taxable Goods and Servicesin Neighboring Communities
Spending on Non-Taxable Goods &Services
Leakages
42
Quantitative• Demonstration of excel modeling
– Scenarios– Correlation analysis
43
Analysis Phase• Debt Analysis
– Analyze impact of current obligations– Examine capacity for future indebtedness
• Financial Balance Analysis– Consider all different types of imbalances
• Data visualization helps communicate imbalances
44
Fund Balance
1.34%
Unreserved Fund Balance as a % ofAnnual Operating Expenditures
Goal Range
CurrentYear 5 ofForecast
Goal: 12.5% - 17.5%
25%
20%
15%
10%
5%
0%
15.2% 11.0%
45
5 x 5 Table
This Year Next Year Year 3 Year 4 Year 5 Starting Balance $100 million $100 million ($1.1 billion) ($2.8 billion) ($6.4 billion) Revenues $18 billion $19.8 billion $21.8 billion $23.9 billion $26.2 billion Expenses $18 billion $21 billion $23.5 billion $27.5 billion $31 billion Surplus/(Deficit) $0 ($1.2 billion) ($1.7 billion) ($3.6 billion) ($4.8 billion) Ending Balance $100 million ($1.1 billion) ($2.8 billion) ($6.4 billion) ($11.2 billion)
Taken from The Price of Government by Osborne and Hutchinson
46
Environmental FactorsIndicator 2002 2003 2004 Progress
Tax Collection Rate NA 96.47% 96.82% Expenditures Per Capita NA $379.31 $379.21 Primary Tax Rate $1.18 $1.21 $1.21 Moody's Bond Rating Aa3 Aa3 NA Fitch Bond Rating AA AA+ NA % Increase in Operating Expenditures vs. Increase in Population and Inflation NA 3.1% 3.1% Mean Family Income $67,137 $67,624 NA Home Value to Income Ratio 2.23 2.32 NA
47
Revenue Trend Will SlowAssuming No Additional Property Tax Reform
$5.0
$15.0
$25.0
$35.0
$45.0
$55.0
$65.0
$75.0
$85.0
$95.0
$105.0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Property Tax Revenue Total Revenues
Projected
Millions
Recession
Tax Reform
48
$3
.36
51
$3
.87
15
$3
.87
15
$3
.87
15
$3
.87
15
$3
.87
15
$3
.87
15
$3
.87
15
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
$6.00
$6.50
$7.00
2001 2002 2003 2004 2005 2006 2007 2008
Coral Springs City 32 City 27
City 33 City 35 County Average
Goo
d
Operating Millage Rate
Getting the Right Tax Rate/Service Level Mix
49
5.9 5.8 5.9 5.9 5.8 5.7 5.8 5.7 5.9 6.0 5.8 5.9 6.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Coral Springs City 32 City 27 City 30 City 34
City 28 City 33 City 31 City 36 City 35
Goo
d
A Measure of Productivity Employees per 1,000 Residents
50
$593$636$662$703$661$780$0
$500$1,000$1,500$2,000$2,500$3,000$3,500$4,000
2001 2002 2003 2004 2005 2006
Coral Springs, FL City 25 City 26
City 21 City 22 City 1
City 24 City 9 City 5
Goo
d
The City’s Financial Policy is Focused Long-Term
Direct Net Long-Term Debt per Capita
51
General Fund Ad Valorem Tax Revenues
$28,000,000
$29,000,000
$30,000,000
$31,000,000
$32,000,000
$33,000,000
$34,000,000
$35,000,000
$36,000,000
FY 2007 FY 2008 FY 2009 FY 2010
Current $3.3651 Millage
Maximum Millage Rate with Simple Majority Vote
52
Analysis Phase Take-Aways• Environmental analysis is the foundation
of planning – invest in it!
• Hybrid techniques are the most effective
• Debt analysis varies in importance with local circumstances
• Consider multiple types of imbalances
• Develop effective presentation techniques
53
Decision Phase• Develop Financial Strategies
– Match strategy to size of imbalance– Find the right mix of strategies– Correct decision-making processes that led to
imbalance
• Plan Conclusion and Transition to Action– Design a clear culminating event– A public meeting to approve the plan is common– Gain formal commitment to financial strategies
54
Our Business Plan
• Translates the Strategic Plan into action
• Develop initiatives to support Strategic Priorities
• All resources are allocated within the Business Plan
• Financial strategy aligns short-term objectives with long-term financial health
• Performance monitored via review of KIOs and process-level performance measures
• Focuses budget decisions on strategic
priorities instead of line items
55
Decision Phase Take-Aways• The means by which strategies are
developed is as important as the strategies themselves
• Redressing a fiscal imbalance almost always requires a change to decision-making processes
• A culminating event is a mandatory part of the planning process
56
Execution Phase• Executing the Plan
– The budget is the most important execution tool– Other tools include performance measurement, action
plans, and participant commitment
• Monitoring– Updates– Scorecards
57
Sustainable Results
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1999 2000 2001 2002 2003 2004 2005 2006 2007
ResidentialBuild-Out
Property Tax
Reform
Economic Recession
September11th
HurricaneWilma
Cu
sto
mer
Sat
isfa
ctio
n
58
Financial Planning Delivers Results customer service satisfaction households94%
96%97%
AAAbond ratings from all three agencies
employee satisfaction
customer service satisfaction business
59
Execution Phase Take-Aways• The budget and LTFP must be linked
• Participant commitment is crucial for execution
• Develop on-going monitoring mechanisms to keep the plan at the forefront
60
The End• For more information …• Get on our mailing list (email [email protected])• E-mail us
– [email protected]– [email protected]
• Visit our websites– www.gfoa.org/ltfp– www.coralsprings.org/quality
• Read our book Financing the Future