Get documents about "The Springfield Turnaround June 8, 2004
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- posted:
- 1/24/2009
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- 28
Document Sample
The Springfield
Turnaround
June 8, 2004
Eric Kriss
Executive Office for
Administration and Finance
Agenda
• Background on Springfield’s situation
– 10-year prospective
2
Union negotiations dominate city management
Total Annual Municipal Costs - FY2003
100%
Other
80 Fixed costs
60
Wages Collective
40
& benefits bargaining
under 150E
20
0
Expenditures
3
Background on Chapter 150E
• All state and local governments exempt from
federal labor laws
• Chapter 150E passed in 1973
– Exclusive representation (employees must pay
union dues)
– Establishes evergreen umbrella apart from
specific contract provisions upon expiration
– Prohibits unilateral government action
• Spells out complex negotiating rules
4
Chapter 150E negotiation rules
Start
Reasonable period
Return to of negotiation
Negotiation
Petition board
for determination
Fact findings of impasse
made public
No unilateral Board findings
Fact changes
findings during this process
Board appoints
mediator
Petition for
fact-finding
Reasonable period
Mediation of mediation
findings
5
City resources mirror state economic fortunes
Springfield Resources
State aid and local taxes FY 93-04
($ in millions)
$400 11-year sustainable growth rate = 5.1%
$350
$111 $116
$126
$300 $107
$103
$99 Local Revenues
$250
$96
State Aid
$95
$94
$200
$93
$90 $266 $264
$88 $235 $244 $247
$214
$150 $193
$162 $174
$134 $146
$128
$100
FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004
Springfield data from the Division of Local Services 6
Repeated violations of sustainable growth
30% Springfield
25% annual cost
20% increases
15% 5%
sustainable
10% growth
5%
0%
-5% 93 94 95 96 97 98 99 0 1 2 3
-10%
-15%
layoffs
7
Springfield peer group
• Brockton • Lawrence
• Chicopee • Lowell
• Fall River • New Bedford
• Haverhill • Revere
• Holyoke • Worcester
8
Springfield more volatile than its peers
30%
25%
20%
15% Average sustainable
10% growth
5%
0%
-5% 93 94 95 96 97 98 99 0 1 2 3
-10%
-15%
Springfield Peer Group
9
No surprise … more volatility in FY05
FY 04-05P Total Expenditures
$450 $437.3 MM
$430
$410 $403.8 MM 8.4%
$390
($ in millions)
$370
$350
$330
$310
$290
$270
$250
FY 2004 FY 2005P
General Government Public Safety Health and Welfare Public Works
Education Culture and Recreation Pension Group Insurance
Debt Service Miscellaneous
10
… creating a $20m budget gap
Projected FY 2005 Budget Expenditures
$500
$450 $437.3 MM
$417.2 MM
gap
$400 Group Insurance
$350 Local Tax Levy
Pension/Debt Service
($ in millions)
$300
Local Receipts
$250
$200 Education
$150
$100 Net State Aid
$50
General Government
$0
Revenues Expenditures
11
Agenda
• Background on Springfield’s situation
• Is this a revenue problem?
12
Springfield’s RE tax inflow matched peers …
City of Springfield Tax Levy
Tax Levy FY 93-04 CAGRs
FY 93-04
$150.00 3.70%
3.60%
3.50%
3.30%
$125.00 3.3% CAGR
$100.00
($ in millions)
$75.00
$50.00
$25.00
$0.00
FY 9 3
FY 9 4
FY 9 5
FY 9 6
FY 9 7
FY 9 8
FY 9 9
FY 0 0
FY 0 1
FY 0 2
FY 0 3
04
FY 93-04 FY 96-04
19
19
19
19
19
19
19
20
20
20
20
20
FY
Springfield Peer Group
13
… and city’s local aid also kept pace
Net State Aid Net State Aid
Fiscal 93-04 Fiscal 93-04 CAGR
($ in millions)
$280 6.8%
$266 $264
$260 6.2%
$244 $247
$240 $235
$220 $214
$200 6.2% CAGR $193
$180 $174
$162
$160
$146
$140 $134
$128
$120
$100
FY FY FY FY FY FY FY FY FY FY FY FY
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Springfield Peers
14
… while non-Chapter 70 aid beat inflation
Net State Aid increase since FY93
$45 3.24% CAGR
$40 $38.6
$35
$30 $27.2
$ in millions
$25
$20
$15
$10
$5
$0
Springfield
Since July 1993, the state and local government inflation rate is 2.63% and
the consumer price index inflation rate for the Boston area is 2.98% 15
Overall, Springfield revenue exceeds peers
FY04 Total Revenue Per Capita
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
Springfield Peer Group
Tax levy State Aid & Other Receipts
16
Springfield has the highest overall tax rate
Blended Tax Rate FY 04 Blended Tax Rates
FY 93-04
Springfield Brockton Chicopee
Fall River Haverhill Holyoke
Springfield Peers Lawrence Lowell New Bedford
Revere Worcester
$27.50
$25.00
(Tax Rate/$1,000 Valuation)
$25.00 $23.07
$22.50
$20.00
$20.00
$15.00
$17.50
weighted $10.00
$15.00
average
$5.00
$12.50
$0.00
$10.00
93 94 95 96 97 98 99 0 1 2 3 4 Blended Tax Rate
All data from the Division of Local Services. Peer Group includes Brockton, Chicopee, Fall River, Haverhill, Holyoke,
Lawrence, Lowell, New Bedford, Revere and Worcester. 17
Agenda
• Background on Springfield’s situation
• Is this a revenue problem? NO
• Is this a cost problem?
18
10% lower living costs, but 20% higher wages
1.5
Wages COLA
1.3 1.21 1.20 Cost of
living
1.1
1.00 1.00 1.00
Springfield
0.90
0.9
Peer
0.7
0.5
Source: Municipal Yardstick by Municipal LLC FY04 Peer Group includes Attleboro, Boston, Brockton, Chelsea,
Chicopee, Fall River, Fitchburg, Haverhill, Holyoke, Lawrence, Leominster, Lowell, New Bedford, Pittsfield, Revere,
Southbridge, Taunton, Westfield and Worcester.
19
… and cost premium is a long-term trend
Fiscal 93-03 General Fund Per Capita General Fund
Expenditures Per Capita
$3,000
$3,000 2,616
$2,500 2,266
$2,500
$2,000
15%
$ in millions
$2,000
$1,500
$1,500 higher
$1,000 $1,000
$500 $500
$0
$0
93
94
95
96
97
98
99
00
01
02
03
FY03
19
19
19
19
19
19
19
20
20
20
20
Springfield Peer Group Springfield Peers
20
Unions contracts are frequently back-loaded …
July 2000 Collective Bargaining Agreements
Wages only
5.2% 5.2%
4.6% 4.7%
3.6% 3.7%
1.6% 1.7%
FY 2001 FY 2002 FY 2003 FY 2004
Police Firefighters
Data from July 2000 Collective Bargaining Agreements with the International Association of
Firefighters and the International Brotherhood of Police Officers 21
… creating a permanent differential …
Firefighters - Base Pay - FY03 Police Officers - Base Pay - FY03
$50,000 $50,000
$40,000 $40,000
$30,000 $30,000
$20,000 $20,000
$10,000 $10,000
$0 $0
minimum maximum minimum maximum
Springfield peer median Springfield peer median
Source: Municipal Yardstick by Municipal LLC FY04 Peer Group includes Attleboro, Boston,
Brockton, Chelsea, Chicopee, Fall River, Fitchburg, Haverhill, Holyoke, Lawrence, Leominster,
Lowell, New Bedford, Pittsfield, Revere, Southbridge, Taunton, Westfield and Worcester.
22
… at all levels, including management (in thousands)
Premium vs.
peer group
Economic development 56%
Health inspector 59%
Library director 43%
MIS director 31%
Personnel director 35%
Planning director 28%
Purchasing agent 63%
Source: Municipal Yardstick by Municipal LLC FY04 Peer Group includes Attleboro, Boston, Brockton, Chelsea, Chicopee, Fall
River, Fitchburg, Haverhill, Holyoke, Lawrence, Leominster, Lowell, New Bedford, Pittsfield, Revere, Southbridge, Taunton,
Westfield and Worcester.
23
Agenda
• Background on Springfield’s situation
• Is this a revenue problem? NO
• Is this a cost problem? YES
• Why is this happening?
24
Pattern of poor management practices
• Failure to effectively negotiate under 150E
• Lack of basic management controls
– Inadequate IT systems
– Lagging collection of taxes
• Under-funded liabilities
– Deferred maintenance
– Lack of reserves (eg. no self-insurance trust)
• Excessive use of debt
– Like deficit financing (eg. bond premium use)
25
Agenda
• Background on Springfield’s situation
• Is this a revenue problem? NO
• Is this a cost problem? YES
• Why is this happening? 150E + poor mgmt
• What was learned in Chelsea?
26
Agenda
• Background on Springfield’s situation
• Is this a revenue problem? NO
• Is this a cost problem? YES
• Why is this happening? 150E + poor mgmt
• What was learned in Chelsea? Jim Carlin
• The solution
27
The Springfield Turnaround
• 5-member Control Board, 3-year term, with sweeping powers
• State financial assistance
– $20 million grant
– $30 million credit line backed by property tax receivables
– Revenue anticipation notes qualified under Chapter 44A
• Financial “self-help”
– Expedited property foreclosure to accelerate tax collection
– Tax amnesty program to accelerate tax collection
• Management rights
– Temporary suspension of 150E and civil service to enable restructuring
and “re-set” collective bargaining agreements without evergreen
– If necessary, move to receivership and Ch 9 bankruptcy
28
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