Customer Service in an Upswing Housing Market: Getting Prepared!

By Jay Corey, MPA

Principal

Citygate Associates, LLC

Demand for housing throughout California is once again on the upswing. Inventories are down and buyers who have been sitting on the sidelines are now jumping back into the market. Experts agree, and buyers believe, that the California housing market has bottomed out. Interest rates are at historic lows and are expected to remain low for the next several years, according to Fed Chair Ben Bernanke.

The competition among home buyers in California has been intense: 9 out of 10 homes sold in San Francisco, Sacramento and cities in Southern California drew multiple bids during the month (of March). (CNN Money, April 5, 2013)

Metrostudy, a national housing data and consulting firm that maintains the most extensive primary database on residential construction in the US housing market, recently reported (May 8, 2013) that Northern California annual housing starts are up 82% from the first quarter of 2012, while closings are up 48%.

Steve Johnson, Regional Director of Metrostudy’s Southern California, Inland Empire and San Diego markets said, “Home builders are staffing up and searching the market for sites which they can rapidly bring to market for new subdivisions…”

Ask Your Staff if They’re Ready to Provide Quality Customer Service as Demand for Permits Increases

Community development, planning, and building departments in California have been decimated since the recession of 2008. At the recession’s lowest point, many senior highly-experienced staff members who could retire did so.

It just wasn’t pleasant or satisfying to stick around for the bloodletting as cities and counties suffered through layoffs. Moreover, many agencies offered attractive incentive programs to induce early retirements. As a result, many local government agencies are not in a good position to manage, much less  lead the way, as the housing and development markets begin to fire up. Those staff members that do remain are often less experienced, less confident, and less organized.

The World Has Changed Since September 2008

Think back five years. Google was still out to find its position in the marketplace; cell phones were being used but were not that “smart”; and Kodak was still in the film business. Only the very young were texting one another and PDFs were pretty much reserved for technology-savvy users. Social media? What was that? Facebook was still in a negative cash flow position in 2008 and half the world had never heard of it.

Improvements in technology allow the private sector to provide choices to the consumer that they didn’t have five years ago. Just click, and you’ve got it!

The private sector has figured out how to provide excellent customer service, day in and day out. When you call a customer service line nowadays you invariably hear, “How may I help you today?” or “I can help you with that.” When the transaction is completed, you’re asked, “Is there anything else we can do for you today?” and the call is ended by, “Thank you for calling us and thank you for using (fill in the blank).”

Local governments’ customer expectations with regard to how they are treated by staff have also changed—big time. These high customer expectations present a real challenge to both elected and appointed local government leaders. The public sector operates at a disadvantage: no competition and no profit incentives.

Take Advantage of the Generational Shift

New ways of doing business in the public sector have emerged and have led to a new set of “best practices” for customer service, community engagement, government transparency, and much, much more. The current generation of employees entering the public sector workforce approach problem solving and service delivery with an entirely new set of technology tools. Smart cities and counties are learning how to take advantage of these new resources.

Citygate’s Team Can Get You Ahead of the Curve on Quality Public Sector Customer Service

Citygate has a proven track record of helping cities and counties establish “best practice” development permit review systems. Applicants and stakeholders of all types and persuasions see the positive changes that result from our Action Plan recommendations.

Our team includes leading public sector authorities on the use of information technology, e-government and social media to make permitting processes and procedures more efficient and effective, to promote civic engagement, and to improve customer service. In fact, later this summer, our very own Citygate Press is publishing a book titled, Customer Service.Gov: Technology Tools and Customer Service Principles for Innovative and Entrepreneurial Government.

We have helped institute customer service and other efficiency and effectiveness improvements in dozens of cities and counties throughout California and the West.

If we can be of value to you, we would like to help. Please contact Jay Corey by phone at (510) 303-0327 or via email at jcorey@citygateassociates.com.

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We’ve Reinvigorated Strategic Planning! Using Values & Actionable Plans

William Sager, Senior Associate
“Our Strategic Planning Process Leader”

We know that predicting the future is at best difficult, particularly in today’s chaotic times.  Regardless of that reality, organizations still only have two choices: either plan for the future or do not plan.

Failure to plan is planning to fail. Strategic planning is one method by which an organization can plan to at least have some control over its destiny.  Strategic planning is not a panacea; nevertheless, strategic planning does provide organizations guidance and principles by which their futures can be structured.

 Avoid Paralysis by Analysis

Citygate believes, along with management authority Tom Peters, that strategic planning can easily lead to paralysis by analysis, or as Brian Quinn stated, “a good deal of corporate planning is like a ritual rain dance, it has no impact on the weather.”

The chief concern of all strategic planning critics is that opportunities and challenges will arise and the plan does not prepare the organization to take advantage of those opportunities or overcome the roadblocks when they occur. And in today’s chaotic world, they will occur.

Start Fresh

Citygate supports a fresh approach we call “values-based applied strategic planning.” Most textbook strategic planning starts out by assessing the organization’s mission, followed by focusing on the vision, and finally evaluating the organizational values. This follows the conventional organizational model of what, how, and why. Citygate uses an approach that breaks this paradigm. Our model works from why, how, and what.

Values and Culture Come First

We start planning by examining the values and culture of the organization and the community served. We do this because these are the intangibles that actually motivate an organization to act in a particular way. Ultimately, when unexpected opportunities or challenges arise, it will be the values and ongoing culture that drives the organization’s decision-making process and leads the organization forward.

Second…Vision of the Future

After the values are understood (the why), we then ask the planning team to envision the future of the organization. This vision of the future can be likened to a road map to an end state – how the organization will get there.

Third…Mission

After a vision of the future is developed (the how) then the planning team can either update or create a new mission statement (the what).

This is the necessary underlying structure for proceeding with planning. This process then leads to Environmental Monitoring where the planning team collects all the possible inputs about the various environments it operates within, both internal and external. This environmental monitoring is a constant throughout the planning process.

This is the “applied” part of strategic planning. Citygate’s plans result in objective, measurable and resourced “mini-plans” for each service line or program the organization offers. The entire mini-plan commitments and resource needs are then blended into an integrated, achievable time-over-distance plan that advances the prioritized actions.

While values-based strategic planning develops measurable results that enable the organization to fully deliver on its commitments, our planning also places emphasis on integrating into the plan the random noise, impressions, and performance audit findings that we as seasoned consultants are able to glean from analyzing the organization. Henry Mintzberg concludes in The Rise and Fall of Strategic Planning:

“While hard data may inform the intellect, it is largely soft data that generates wisdom.”

Citygate’s strategic planning approach goes further still; in addition to providing consultants with years of experience, we teach the process to the organization’s planning team so that when we leave, a group of planners has been developed who understand how to plan and can keep the plan alive and adjust it as circumstances require. The planning team becomes invested in the plan and more importantly, the organization’s future. They will act as guardians to ensure that the plan is lived.

With the ingredients of why, how, and what in this order, the organization’s strategic plan is on sound footing that can reliably guide its future. This strong foundation is an essential consideration that enables the organization to be flexible and ready to meet a highly volatile future in which unpredictable change is guaranteed. In a crisis, the organization does not need to reconsider its why, all that is needed is to adapt changes into the how or the what.

Citygate’s pledge to our strategic planning clients is:

• We care passionately about strategic planning, not only as a concept but as a means for organizations to guide their future;
• We are relentless in our focus on quality strategic plans;
• We develop plans that are practical and useful and leave behind in the organization a cadre of trained planners.

This Process Works!

We recently used our strategic planning model to assist the Los Angeles-Long Beach Fire Chiefs Regional Training Group with a very difficult strategic plan for 31 fire agencies, and as their project manager, Timothy Scranton, the Fire Chief in Beverly Hills, stated, “Citygate completed a near impossible task of creating a strategic plan for the entire region in less than two months – they are incredible and I am grateful!  I am a huge Citygate fan and share my experiences with everyone.” An example of this strategic plan can be found at:

www.citygateassociates.com/RTG.

If you would like to talk to us about creating a values-based strategic plan in your agency, please call William Sager at (916) 458-5100 ext. 302, or email him at:

bsager@citygateassociates.com.

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“My Elected Board wants it done now, but I don’t have the staff to do the work!”

September 2010

Are you cutting back on staff? 

Does your Elected Board still need and expect important key projects and programs to move forward?

Could you use some short-term help? 

Remember Lucy in the chocolate factory, struggling to wrap an overwhelming amount of chocolates on the conveyor belt, as the boss yells “Speed it up a little!”?  Ever feel like that?

Citygate Associates is available to serve city managers, county managers, and department heads by managing politically important projects and programs during these tough financial times.

We have highly experienced senior executives ready to step in immediately to produce and get results for you and your department heads in the following program areas:

• Law Enforcement
• Fire
• Finance
• Community Development
• Redevelopment
• Economic Development
• Planning
• Building
• Engineering
• Library
• Animal Control
• Public Works
• Information Technology
• Executive Search
• Human Resources

We can show up immediately to lend a hand.  All you have to do explain your need to us, point us in the right direction, give us the files, introduce us to the key contact persons…we’re on our way.  We get things done on time, on budget, and without disruption.

All our Citygate team members are comfortable in complex, nuanced, and challenging situations.  We would welcome the opportunity to represent YOU with loyalty and competency.

Citygate Associates, LLC is a management consulting firm providing services to local governments across the Western United States. Headquartered in Folsom, CA, Citygate’s clients benefit from our ability to provide effective and cost-efficient services through improved management approaches and systems, clarified focus, and upgraded skills.

                   Citygate Associates, LLC

                     Celebrating 20 Years!

                            Ph: (916) 458-5100

                    www.citygateassociates.com

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Cost benefit analysis: small cities disincorporate now!

By Jay Corey, February 2010

Right. Not going to happen in my lifetime or yours. Having stipulated to the obvious, most professional municipal government officials would admit, albeit not in public, that many small cities would disappear if, like in the private sector, they were subject to mergers and acquisitions.

Why? Small cities, like many small companies, have a unit cost of production comparable to at least most mid-sized cities.

A Powerful Dilemma: Small Cities Are in a Squeeze

Private sector organizations come and go based on their ability to constantly “add value” for their customers. They change and adapt, or they’re gone. This highly successful process is commonly referred to as creative destruction, “[the] process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”[1]

This creative destruction process doesn’t take place among cities. There are no hungry competitive forces. Because of this reality, small cities get stuck in a dilemma. They get caught in the squeeze between two powerful forces:

Force One: The desire on the part of taxpayers to feel they have their own locally-controlled municipal government. They want it to be accessible, responsive, and an intimate part of the fabric of the community.

Force Two: The continual rise in the cost of goods and services and the complexity of providing services needed to meet community expectations. Small cities can’t achieve the cost benefits and level of personnel expertise that come with being at least a mid-sized organization. (Very large organizations often suffer from the opposite problem of not being nimble enough, so their unit cost of production in many areas may be high as well.) 

Consolidating Small City and District Services Can Work

In the mid-90s I was city manager in a small city in eastern Contra Costa County. It was the fastest growing city in the state according to the California Department of Finance during the entire time of my service. A well-established special district had historically been providing the city’s parks and recreation services for decades.

The district was proud of its well-earned affection from the community, but it was struggling to keep pace with the city’s rapid growth. Master planning for the district’s services and facilities had fallen way behind. The district’s finances could not keep up. They were in trouble.

The general manager and I began a dialogue, first at the peer-to-peer level and then at the technical level. In time, we brought in the city’s and district’s elected officials for policy leadership.

Then we brought in the staffs. The special district eventually consolidated its services with the city. The highly successful process was akin to childbirth: lots of communication, lots of hard work, and certainly some pain. But it was worth the effort.

The community to this day remains very proud of its parks and recreation program. It has grown and prospered, and is well ahead on the city’s facility and program demand curve.

Over a period of several years, through interagency joint ventures, we were able to leverage services and achieve multi-million dollar savings in other important program areas.

Opportunities for joint venturing between small cities and districts are numerable. The most fruitful area of opportunity for controlling costs and increasing efficiency and effectiveness is in the public safety arena: fire protection, emergency medical services, and police services. No surprise.

Other opportunities exist in business license administration, code enforcement, finance administration, human resources, purchasing, animal care and control, information technology, parks and recreation, fleet maintenance, facility maintenance, city engineering, and capital improvement administration.  

Lessons Learned: Getting Out of the Small City Dilemma

At Citygate Associates, LLC, we have worked effectively with many different agencies in implementing the steps necessary to successfully achieve getting out of the small city dilemma.

The graphic below provides a summary of what leads to successful joint ventures between small cities.

Budget Season Has Already Started: Act Now

Give Citygate a call today to discuss your needs. We have practical solutions borne from decades of successful management in complicated and challenging local government situations. We are experienced managers with a lot of time spent in the trenches through economic downturns.

Put us on your team for your most difficult project, including tough interagency opportunities like the examples described above. We can provide you with a written proposal almost immediately. The return on this one-time investment will provide structural cost savings and service enhancements to your city for years to come.

Often you can benefit from the experience of others. If you are wondering whether Citygate can help you in any of these areas, please call us.

If we can be of value to you, we would like to help. Please contact Jay Corey by phone at (510) 303-0327 or via email at jcorey@citygateassociates.com.

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[1]http://dictionary.reference.com/browse/creative+destruction

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Strategies for managing long-term retiree benefit costs

By Steven Harman, June 2009

Public agencies offering retiree health benefits are now required to tabulate and disclose the long-term costs of providing those benefits. Agencies are now coming to grips with the staggering long-term costs these benefit plans impose. To address these costs, many agencies have terminated the benefit and implemented defined contribution plans, while others have developed long-term financial strategies for meeting their obligations under GASB #45.

The good news is that strategies exist for agencies to reduce their long-term financial obligation while continuing to provide their retirees with this valuable benefit. Some of those strategies are discussed below.

Get to Know Your Actuary

GASB #45 requires a biannual actuarial valuation to determine the long-term financial obligations. It is essential to understand the key actuarial assumptions used in conducting the valuation and how making simple adjustments to your benefit may influence those assumptions.

Your actuary is an excellent source of critical information in helping you develop a comprehensive strategy to address costs. Talk with your actuary.

Promise to Pay

For some agencies, the amount of the agency’s premium payment toward the monthly premium for a retiree is tied to an external benchmark such as the “two-party” premium rate. When the amount of premium payment paid by the agency for the retiree is linked to a health insurance premium rate that increases annually, you can be assured that the long-term cost to provide the benefit will be huge.

Benchmarking an agency’s contributions to a more stable external index will help reduce the long-term liability.

Benefit Plan

There are two main points to consider regarding your current benefit plan. The first point deals with the benefit plan design for both active and retired employees. Carefully review your plan’s experience data with your broker or consultant. Look to see how your employees and retirees are consuming health care. Some areas to look at include the number of doctor’s visits per year per covered employee, emergency room utilization, in-patient hospitalizations, prescription drug utilization, and outpatient procedures.

In particular, it is useful to correlate utilization data and trends in those areas to the required co-payment in place for those services. Lower co-payments tend to result in higher than expected plan utilization; slight adjustments in co-payments will result in a reduction of plan utilization by subscribers.

You need to be careful how this point is communicated to employees and retirees. You never want to tell employees and retirees not to seek medical care when necessary, but you want to ensure that they seek medical care when necessary.

Helping employees and retirees become better-educated consumers is essential for plan management.

The second point is the “implied subsidy” provision of GASB #45. When a group medical plan includes both active and retired employees in the same pool, everyone in the pool pays the same premium – even though active employees consume fewer benefits than retirees do. Those consuming fewer benefits are subsidizing the “real” premium cost for the higher consuming members. GASB #45 requires the actuarial study tabulate the value of the “implied subsidy.” One strategy to consider is separating active and retired employees into two pools (with the same or similar benefit levels) for premium purposes. This reduces the implied subsidy and lowers the long-term cost.

Pre-Funding the Long-Term Obligation

Nothing in GASB #45 requires an agency to pre-fund the long-term obligation. Nonetheless, there are several compelling reasons to pre-fund the cost of the benefit. First, negative consequences may accrue on an agency’s financial statement if benefits are not pre-funded. Using the “pay as you go” approach increases the long-term obligation and may adversely affect an agency’s debt rating.

Second, pre-funding using a 115 Trust allows the actuary to use a higher actuarial assumption regarding investment returns on funds placed in the Trust. Using a higher rate of return results in a reduction of long-term costs, but significantly increases the annual budget allocation for funding the retirement health benefit. A 115 Trust may not be appropriate for all agencies, as there are issues of trust governance and operation that must be considered.

Also, when using a 115 Trust, deciding on a funding policy to pay the Annual Required Contribution is important. GASB #45 does not require full funding of the ARC (many agencies do not have the resources to fully fund the ARC in the first few years of a 115 Trust), and agencies using this approach must develop a funding policy and disclose the policy as part of their compliance with GASB #45.

VEBA’s or Health Savings Accounts

Both Voluntary Employee Beneficiary Associations (VEBA) and Health Savings Accounts (HSA) provide an alternative approach to paying for retirement health benefits. Generally, agencies providing their employee with VEBAs or HSAs are not making a “promise to pay” for retiree health insurance and may not be subject to the provisions of GASB #45. In both VEBAs and HSAs, funds are deposited into interest-bearing employee accounts on a pre-tax basis and upon retirement, can be used to pay for a range of medical expenses, including premiums for health insurance.

VEBAs can be used by active employees as well. The risk associated with this approach is that the funds accumulated in the employee accounts are subject to market volatility and upon retirement may not be adequate to cover the cost of health insurance for the remainder of the retiree’s life.

Citygate’s next article on this topic will address managing pension cost issues.

Steven A. Harman is a Senior Associate with Citygate Associates. He provides consulting services on a wide range of human resource management challenges including GASB #45 compliance and strategies for reducing long-term costs. For more information, please contact Steve at (510) 599-5294 or at
sharman@citygateassociates.com.

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Protecting community development, engineering, planning, and building staff during tough times

 

By Jay Corey, January 2009

You’re the boss and for years you’ve had to struggle to keep up with the demands that growth has placed upon your organization:

• Complaints to your city council regarding poor customer service
• Getting transportation, sewer, water, parks, and facility infrastructure in place ahead of demand
• Keeping current with your General Plan and Zoning Regulations
• Getting your engineers and planners to cooperate effectively and efficiently.

Now the housing boom has come to a grinding halt. California is suffering from a serious economic downturn that could last several years. Nobody knows when the housing market will turn around and construction will begin again. California home sales have already plunged well below levels experienced during the 1990-91 recession. Now what?

Question No. 1: 

What can I do as a local government leader to provide stability for my community development, engineering, planning, and building staffs?

Question No. 2: 

What can I do to take advantage of these tough times by building a better organization that is highly productive as it waits for the next up turn in the economy?

I speak from experience when I say, “These times are full of opportunity.” When I served as Acting Finance Director and then as Interim City Manager, my city was experiencing serious financial troubles a few years ago — so serious that Standard & Poor’s and Moody suspended their credit ratings of our city. The financial troubles were so overwhelming that we had to lay off hundreds of our employees, including some sworn personnel. The city was a mess financially. Morale was non-existent. The city’s financial situation was so bad our mayor was interviewed on NBC’s Today Show.

Quietly below the radar screen, during these tough times, we were able to keep our community development, planning, engineering, and building programs intact. Not only did we retain our staff, we actually did some hiring! The organization remains fully intact today and, in fact, is successfully working its way through a multi-million dollar General Plan Update.

What did we learn from this tough-time experience? We developed valuable “Managed Decline Principles” to get through it all in a way that strengthened and improved the organization.

Here’s a partial list of the How To’s we developed:

• How to stop the bleeding now
• How to stabilize the organization
• How to develop visible Quick Fixes that boost confidence and morale
• How to involve customers in revenue enhancement decisions
• How to address sticky personnel issues with dignity and humanity
• How to conduct 360 degree transition planning
• How to attract, develop, and retain talent in tough times
• How to reevaluate customer service policies
• How to take a fresh look at technologies
• How to take a fresh look at short-term and long-term facility needs
• How to update regulatory codes and systems
• How to reposition through training
• How to develop efficiencies by eliminating organizational silos.

Develop a 3-Year Financial Plan With Investment Strategies that Motivate Employees

We found that involving staff at all levels in order to build a consensus-based 3-Year Financial Plan was an essential part of organizational survival and regeneration. We developed financial stress tests in an open and transparent environment so that everyone affected by the plan had a meaningful part in developing it, understanding it, and believing in it. We developed effective revenue strategies, overhead strategies, and reserve strategies that were understood by staff in a way that provided private-sector-like motivations and behavior. Along the way we made investments in technology and training.

Develop a 3-Year Action Plan that Gets Real Measurable Results

During tough times it is important that community development, planning, engineering, and building staff know where they are heading individually and as teams within the organization. A 3-Year Action Plan that is in sync with the previously mentioned financial plan is an essential ingredient to make sure there are measurable deliverables that will keep the organization on a highly productive track. The Plan should identify the recommended action(s) to be taken by the teams, its priority, the anticipated benefits, the lead person responsible for results, the support team members, the milestones, and the reporting-out mechanisms.

Getting Ready for the Economic Turn Around

A smart leader knows that there is no substitute for preparation. Yes, it is hard to imagine right now that the housing slow down will bottom out, but it will. And when it does, those agencies that have planned for the turn around will be in a good position to take advantage of growth and all the wealth accumulation opportunities it provides. As long as California offers sunshine and jobs, housing demand will continue. It is a question of when, not if.

Sometimes you can benefit from the experience of others. If you are wondering whether Citygate Associates can help you in any of these areas, please call us. If we can be of value to you, we would like to help.

Please contact Jay Corey by phone at (510) 303-0327 or via email at jcorey@citygateassociates.com.

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You’re running out of money and you’ve run out of ideas?

By Jay Corey, November 2008

You’re the City Manager and you know the City is in serious financial trouble. You know no one wants to cut services. You’ve done all the easy things like:

• Not filling existing vacancies
• Halting all non-emergency travel and conferences
• Eliminating training
• Delaying General Fund Capital Projects
• Finding more internal revenue
• Reviewing your fees
• Selling your services / consolidating with a neighbor
• Reviewing your insurance program
• Allocating your vehicle and heavy equipment costs
• Refinancing your debt.

But things just aren’t getting any better. Now what?

I spent some time with a city manager friend of mine who was in this situation. His city, which had a general fund operating budget of roughly $110 million, closed out the fiscal year with a $5.4 million deficit. His council adopted the budget in June with a known $6 million deficit built into it. His finance folks were showing a $12 million deficit for the next fiscal year! My friend told his city council that if nothing were done about the structural deficit the city would burn through all its reserves within 24 months. In municipal time, that’s RIGHT NOW!!

At Some Point a City CAN Run Out of Cash!!

I speak from experience. That’s exactly what happened in the City of Richmond a few years ago.  The City Manager asked me, as Deputy City Manager, to take on a temporary assignment as the Acting Finance Director. I’ll never forget my first day in charge of the department. I remember the eyes of the City’s revenue accountant when she told me someone on the Redevelopment Agency staff had just called to ask that a check be cut the next day for $6 million so that the Agency could close on a property it was obligated to purchase. I remember thinking to myself “so what?” Then she told me the City only had $19 million in LAIF, $5 million in a CD and $4,400 in a savings account!!

Then she told me the burn rate on payroll and payables was $15 million a month. It was July. The City had not qualified for a TRANS because its financial statements for the prior fiscal year had not been completed in time to make the deadline. The LAIF-RDA account was dry. All of the City’s funds were dry or nearly dry!! I remember the blank stare on the revenue accountant’s face when I asked for the 12-month cash flow projections. I was beginning to get the picture. Everybody got real busy.

Over a period of 15 months, in order to avoid bankruptcy, the City laid off or froze over 350 positions out of a workforce of 1100 employees. Many people lost their jobs, including 18 firefighters. Libraries and community centers were closed. Employee compensation was reduced by over 8 percent. Adding insult to injury, the voters got stuck with a new one-half cent sales tax increase even though services were being slashed. It was devastating to the organization and the community. A lot of people got hurt.

Along the way, I learned a few “Must Do’s” that could be of benefit to anyone who is concerned about bankruptcy and municipal oblivion:

• You must tell the city council and the community the brutal truth about the city’s financial condition.
• You must not let anyone waste time establishing blame.
• You must paint a picture for the city council so that they understand what “bouncing checks on your watch” really means.
• You must reach out to the community and get them involved in the problem solving process.
• You must work closely with the labor groups and get them involved in the problem solving process.
• You must be prepared to lay off sworn public safety personnel, whether you like it or not.
• You must treat all your employees, safety and non-safety, in a consistent manner.

In the early stages of our recovery effort in Richmond the City Council, to their credit, unanimously embraced the simple Principles of Municipal Wealth Accumulation. I got out a drum and repeated the principles publicly everywhere over and over again:

Principle No. 1:  Manage your labor costs. Continually invest in and protect your human assets.

Principle No. 2:  Create an operating surplus every year in your General Fund, even if the surplus is a small one, and match one-time revenues with one-time expenses.

Principle No. 3:  Fill your General Fund Reserves off the top, before you spend money on salaries and other operating costs.

Principle No. 4:  Invest heavily in your public infrastructure, particularly job creating infrastructure, using off the top dollars from your General Fund. Continually invest in and protect your fixed assets.

Principle No. 5:  Make economic development your top program priority.

While these principles may seem obvious to a city management professional, they are not necessarily obvious to elected officials, city employees or community stakeholders.

As was well publicized, things improved in Richmond and bankruptcy was avoided thanks to the hard work of some very dedicated individuals including elected officials, appointed officials, union leaders, employees and consultants. Eventually, as reported in The Bond Buyer: “Moody’s Investors Service restored Richmond, California’s issuer credit rating to investment grade…citing a financial turnaround for the San Francisco Bay Area city a year after it discovered a $35 million budget deficit.”

Do you have concerns about your organization’s financial health?  Are other major organizational issues consuming all your time?  Citygate can help you. We can make a practical, results oriented financial assessment and Action Plan to help you put these tools and principles in place so there are no unmanageable surprises. Please contact Jay Corey by phone at (510) 303-0327 or via email at jcorey@citygateassociates.com. If this service is of value to you, we would like to help.

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Got financial crisis?

By Dwane Milnes, May 2008

What do you do when you think your agency is broke, or at the very least, the cliff is near and the rocks below are sharp?

What do you do when you’re the local government manager and you think you can’t balance the budget without cutting services; and no one wants to cut services?  Furthermore, the State is cutting local government revenue.

Some of us went through local government fiscal turmoil in the early ‘70s, the early ‘80s, and again in the recession of the ‘90s.

I honestly can’t remember managing a city that had plenty of money. We were usually on the brink of raising taxes, cutting police or closing swimming pools. Somehow, we never went over the cliff.

After several fiscal alarms, my own “bag of strategies” to hold off making the ugly choices became familiar to me: open the drawer and pull out the list.

Over 25 years ago, David Koester, former City Manager of Santa Cruz, California, gave me a list of things to remember as a City Manager. And so I thought I would pass on my own list of things to do when facing a fiscal crisis. I hope this is as useful to you as it has been to me.

1. Don’t Fill Existing Personnel Vacancies

This is only a temporary strategy that allows you to assess whether reorganizing will save money. It has the “human” benefit of providing vacancies into which you can transfer people if reorganization or service reductions eliminate positions. As a short-term strategy, freezing vacancies often reduces services in the area where the vacancy occurs; and this may not be your best “long-term” choice. Finally, freezing vacancies agency-wide only results in some of the savings accruing to the General Fund; but an agency-wide freeze can give a sense of shared pain and more positions into which you can transfer employees from areas where services are cut or reorganization occurs.

2. Delay General Fund Capital Projects

You probably didn’t budget the capital project unless you badly needed it. Most General Fund projects seem to be for facility repair/replacement or a community-serving facility. Again, this is a short-term strategy that preserves cash while you develop a long-term solution. Postponing repair and replacement too long is often “penny wise and pound foolish.”

3. Find More Internal Revenue

Many public agencies think they already charge an appropriate amount to enterprise funds, special revenue accounts, and the Redevelopment Agency to recover the cost of General Fund services to these activities. But every time I encounter a fiscal crisis, I discover that: 1) the indirect overhead charge has not been updated recently; 2) the direct charges are either the same percentage, or worse yet, the same dollar amount the agency had been charging for several years, which no longer reflects the services to “other funds;” and/or 3) the agency has not been charging General Fund service costs to all possible places, such as capital projects, assessment districts, or AB1600 fee accounts. It’s always interesting to see how much General Fund subsidy has crept into “other funds” because we were too busy to review and update. Best of all, this is usually recurring revenue.

4. Review Your Fees

Every time I started a new job as City Manager, and now in most of the agencies where I have assisted as a consultant these past six years, the fee schedule seems not to have been updated recently.

Tying building fees to the Building Code, indexing fees to inflation, identifying services that are unique to individuals, such as fire permits and inspection services, can bring in added revenue. A few dollars soon add up.

5. Have You Had an Energy Audit Lately?

This source of savings is off the radar screen for most agencies. The light fixtures have been changed, variable speed pumps installed and timers activated. But in my last few years as a City Manager, my Assistant City Manager badgered me into another energy audit. This one focused on whether our utility was charging us on the proper schedule for each use. They weren’t. There is also new technology coming out in a steady stream that provides more energy savings.

6. Sell Your Services / Consolidate With a Neighbor

In public agencies, as in stocks and real estate, timing seems to be everything. Last year your neighbors did not want to talk about a shared animal control operation, contracting to buy fire services, or consolidating dispatch. Today they may be interested. Fiscal crises often present the timing that makes cooperation possible for savings that is like new revenue.

7. Review Your Insurance

Insurance rates go up and down like a yo-yo. Whenever they go up sharply, we often get aggressive in seeking new sources and reviewing our self-insured retention levels. When the rates are stable we frequently ignore insurance as a potential source of savings. When was the last time you reviewed your retention levels and the adequacy of your insurance reserves? Can these be adjusted to save money? Are you absorbing most of the cost of insurance in the General Fund, or are you spreading the cost to the other funds, reflecting the risk they should absorb?

8. Where Are Vehicle and Heavy Equipment Costs Being Charged?

I remember the concept of the equipment replacement fund from the ‘60s. It was one of my first jobs as an analyst to calculate the amount each department should be charged for use of city vehicles. The City was in financial trouble and wanted to make sure that the utilities were paying their share of maintenance and replacement costs. Rate calculations are not an exciting job and so it does not get done very often. The rates then drift and the General Fund ends up subsidizing the “other funds.” I have used a fiscal crisis as an opportunity to update the rates. It has helped pull the General Fund back from the edge of the fiscal cliff.

Sometimes you are up to your neck in alligators and don’t have time to drain the swamp to find the savings and revenue. Sometimes you don’t have enough staff. If you are wondering whether Citygate can help you in any of these areas, please call us. If we can be of value to you, we would like to help.

Dwane Milnes may be contacted at (559) 786-8587.

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Citygate opens pacific northwest office

Citygate Associates, LLC is pleased to announce the appointment of Rich Carson as both a Senior Associate and the General Manager of Citygate’s new Pacific Northwest office based in the Portland-Vancouver metropolitan area. Joining Rich is new Senior Associate Geoff Davey.

Over the 18 years of Citygate’s existence, the firm has worked with local and state government agencies nationwide, while headquartered in Folsom (Sacramento), California. With Rich’s and Geoff’s expertise and assistance, the company will provide a higher level of service and understanding of local regulations from a Pacific Northwest perspective and will better serve the city, county and state agencies who aspire to improvement-driven government.

Citygate Associates’ mission is to provide professional consultant services to improve government agency efficiency and effectiveness. Citygate provides services in the areas of general management, strategic planning, organizational development, as well as specific assistance in community development, animal control, fire protection and emergency medical services, and leadership development training for public officials.

Rich Carson

Rich Carson recently retired from public service after 30 years of working in city, county, regional and state government in Oregon and Washington. For nine years he was the Director of Clark County’s Community Development Department and managed 160 staff, a $15 million annual budget and was responsible for reviewing $600 million in new construction. Rich oversaw current and long-range planning, engineering, building inspection, code enforcement, animal control and the fire marshal’s office.

Rich was also Community Development Director for the city of Oregon City and before that was the Director of Planning and Development for METRO in Portland, Oregon. In that job he was responsible for regional planning for an area that included three (3) counties, 24 cities and 1.5 million people. This included land use planning, as well as planning for open space, solid waste management and emergency preparedness for the region.

Prior to that, Rich was the Planning Manager for the Oregon Economic Development Department and worked for two Governors. While there, he worked to change state and local regulatory requirements.

Rich was also the Planning Manager for one of the top three architectural/engineering firms (Daniel, Mann, Johnson & Mendenhall) in Portland, Oregon. In this job he managed projects in Oregon, Washington, Alaska, and California. Rich holds a Bachelor of Science in Geography from Portland State University and a Master of Public Administration from Lewis and Clark College.

Geoff Davey

Geoff recently retired after serving 33 years in county government. Most recently, he was the CFO/COO of the County of Sacramento, where he oversaw development of an annual budget exceeding $3 billion, and county operations carried out by over 12,000 employees.

Sacramento County has historically had the majority of the population in the county live in the “unincorporated areas” of the County rather than in the cities within the County. Since 1997, three new cities have been formed in the County. Geoff negotiated the “revenue neutrality” agreements with each of those new cities. The County still has the largest population and law enforcement and public works departments of any municipality within the County.

Previously, Geoff served as Sacramento County’s Principal Administrative Analyst for Law and Justice, and the Director of the Office of Revenue Reimbursements, the County’s internal collection agency for court-ordered fines, restitution and criminal justice-related fees. He has served on numerous legislative and other statewide task forces for the California State Association of Counties. He led the issuance of over $6 billion in municipal bonds, notably the first Tobacco Litigation Securitization securities in California, three Pension Obligation Bond issues, and numerous Tax Revenue Anticipation Notes (TRANs) and Certificates of Participation (COPs). Geoff holds a bachelor’s degree in Economics from the California State University Sacramento. Geoff retired and moved to the Pacific Northwest last fall.

President’s Message

In announcing the appointments, David DeRoos, Citygate’s President, said: “Rich Carson’s department in Clark County, Washington, was a client of ours in the year 2000. Rich was so impressed with our services and our mission that he actually wrote several articles about it. So it was not surprising that over the years he and I kept talking about how we could work together someday. We had a similar experience with Geoff Davey. He was our client when he worked for Sacramento County. So I am very pleased that Rich and Geoff retired from the public sector and have joined us.”

If you would like to discuss the idea of reinventing or creating an improvement-driven local or state government agency, please contact Rich Carson by phone at (360) 635-8161 or via email at rcarson@citygateassociates.com or contact Geoff Davey at (916) 830-0722 or via email at gbdavey@citygateassociates.com.

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The rollout stage of the performance audit report: principles and steps

By Jay Corey, March 2007

You are the leader. You came up with the idea to hire an independent, third party auditor to examine the department of…fill-in-the-blank. The audit is in its draft form and is nearing completion.

You are thinking, “Now what? How do we handle going public with it?”

Citygate Associates, LLC has assisted hundreds of clients through the performance audit process. Sometimes the audit findings are uncomfortable to hear, much less present publicly. For the benefit of our clients, we’ve developed Rollout Stage principles that serve as a guide as we work with our clients through this sensitive phase of the review. It is at the rollout stage that the rubber begins to meet the road!

Principle #1: Do Unto Others As You Would Have Others Do Unto You

If performance auditors were examining your department or work program, you would first and foremost want an opportunity to be heard in a meaningful way. You would want to be treated with respect throughout the process. At Citygate Associates, when writing a report we often ask ourselves if this phrasing would pass the “breakfast with your spouse” test. In other words, are the difficult points in the report presented in a way that the employee could show them to their partner or spouse without being dehumanized? It’s advisable to apply this same test to the staff report and press releases that accompany the performance audit report.

It is wise to depersonalize the report by referring only to programs, processes and systems that need attention, not individuals.

Principle #2: Forewarned Is Forearmed

Make them angry as early as possible. This sounds counter-intuitive, but it is not. It is best to deliver the negative findings to key personnel early in the performance review process. That gives leadership staff the time needed to react to it, think about it and accept it…before you go public. This approach increases the odds for a successful outcome.

It is always best to give an alert or “heads up” to the elected officials before they get the report. Seasoned leaders do this automatically, but it is worth repeating.

Principle #3: Accentuate The Positive

Performance audits can be difficult even for the most confident administrator. It is wise to lead with those findings that denote accomplishments and things that are being done in accord with best practices. Context is important.

ROLL-OUT STEPS…

Step #1

The client receives the Draft Report and reads it for tone, incorrect facts and glaring implementation problems. In most cases, there is little in the way of major changes to the Draft Report because the client and Citygate Associates are on the same page coming out of our confidential meeting to discuss Preliminary Findings.

Step #2

After discussing the Draft Report with the client, Citygate Associates works out any needed changes for the Final Report and gets it back to the client.

Step #3

The client then schedules the Final Report to be presented before the Board or City Council in a public meeting, and we deliver copies to the client.

Step #4

The client should meet with staff the day the report becomes a public document. We suggest that the client meet one-on-one with the managers and then hold an all-hands meeting (or two) for the employees. They need to hear it from their leaders, not read about it in the papers or hear it from someone else.

Step #5

Citygate Associates strongly suggests that key personnel review the press release in advance. It is important that everyone stay on message throughout the rollout. The press release becomes the guide. Citygate Associates is always available to talk to the press, if need be. We know how to be truthful, positive and constructive in our remarks.

Step #6

Citygate Associates attends the City Council or Board meeting, makes a PowerPoint presentation and answers questions.

Step #7

Citygate Associates provides follow-up services and support, as needed.

Jay Corey is a Principal with Citygate Associates and has served as a top-level executive in California cities for 29 years. Mr. Corey specializes in strategic local government finance, community development in rapid-growth and complex environments, and related performance audits. He began his association with Citygate in 1999, taking leave in 2002 to be of service to the City of Richmond as Assistant City Manager, Acting Finance Director and Interim City Manager.

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