Forecasting and analysis reveals problems, and then strategies are developed to address them Above all, the plan is strategic and visionary. It doesn’t just forecast the status quo into the future. It also involves others – particularly elected officials and other departments to develop consensus strategies and ensure a successful implementation. Tell CoMntclr story Develop big picture, long-term thinking among elected and appointed officials. Tell story of SV council.
A plan is between 5-10 years. Some plans included 20-year forecasts, but these are usually speculative in nature A plan could consider a range of funds but beginners tend to limit to fewer funds. However, the plan must include the funds that are relevant to the most pressing issues (e.g., if street repair is a big issue, then the street repair fund must be included) 3. A plan can be done annually or as-needed. Annually is ideal so that the plan can act as prelude to the budget process and contribute a long-term perspective to budget deliberations. As-needed plans may be driven by special issues like a large debt issuance or a financial crisis. A hybrid approach is also possible, where a plan is done annually but more sophisticated elements are only undertaken every few years. For example, Coral Springs does extensive community visioning and workshops only every few years. 4. A plan contains a scan of the environment, long-term forecasts, debt analysis, and financial strategies.
This shows integration between planning process in Coral Springs. The major points are: -Data analysis is a key part of the planning process because it leads to “data driven decision making” and away from intuitive or seat-of-the-pants, ad hoc decision making. For example, rather than basing decisions on which residents complained loudest at the last council meeting, decisions are made on community survey results. -Citizen input is key element of the plan. Citizen input is vital to maintaining financial support for City government. There will be more on this later in the show. -The City communicates back to citizens to let them know how the City is doing – it remains accountable to the community thereby building trust that citizen input matters and that resources are used wisely.
Define the problem and whether it is structural or cyclical Call stakeholders to action Important to balance short-term and long-term to get sustainability. This will become an ever more crucial discipline as governments face financial pressure – determining a few number of services to focus on, rather than providing all the same services at a now sub-standard level This is the most important reason – citizen trust is essential for counteracting forces like TABOR and TELs (reference back to Coral Springs, 1.35% petition)
Also brought in an economist to describe the economic situation to the council. Provides external credibility City offers classes and assistance on strategic and financial planning A long-term deliberate approach has allowed coral springs to maintain a stable, consistent set of public services.
These results are from the Gallup Poll. Shows trust declining over time. Perhaps, unsurprisingly, TELs and TABORs have taken off during this same period.
“Choice Works” is a series of focus groups held across the country, sponsored by Ford Foundation, Hewlett Foundation, and Kellogg Foundation The take-away here is that Leaders must understand and act on priorities for spending and service outcomes and that there must be transparency in financing and spending
Coral Springs starts to build trust with businesses by asking for their views on taxes and services. It is interesting that there is not a big preponderance of folks thinking taxes are too high even with media attention on the issue (e.g., 1.35% initiative)
This shows how building trust with citizens leads to loyalty to the community. Loyalty is important for citizens to: A) be open to funding government; and B) engaging in co-productino with government, thereby lowering the cost of providing government services.
This is just a summary preview slide. The next slides go over these concepts in detail.
This is crucial first step to rectifying the trust gap – define the future the community wants. Further, this is the favorite part of the process for elected officials because it is where they articulate what they want the community to be. An official or citizen doesn’t have to be a financial expert to participate – everyone can understand visioning. Reference back or tell Montclair story. The service vision helps officials start to tie services to finance and realize the trade-offs inherent in decision making. Data visualization can be hugely helpful here to provide an interactive means for seeing the impact of service decisions on finances. There usually is an excel demonstration as part of the show. Foreshadow excel demonstration. Mention CS vision summit – 100 participants representing a variety of groups
Policies help refine vision of the community, contributing to trust Policies help define standards of accountability by suggesting measures for a financial health scorecard – for example, what size of fund balance should we have and why? A policy checklist can also be developed as a means to verify compliance with policies. There is an example on the next slide. Elected official involvement is crucial for active support of policies. Developing checklists and scorecards will help them see how policies make a difference.
Credibility is key. A proven understanding of problems enables leadership to solutions. External experts can be used to vet forecasts and assumptions, thereby improving credibility. For example, a local university might have information on local economic conditions or assumptions could be compared to other cities who do forecasting. Scenario analysis is used to examine different futures and to expand thinking. Scenarios should be limited in number of focus on truly critical “unknowable” variables. Forecasts must be adaptable. Adjusting forecasts to account for new developments and decisions not only makes them more useful but emphasizes that forecasts are an evolving tool, not a crystal ball.
Different vantage points are needed to get the most accurate picture of the future that the community wants. Perform a stakeholder analysis to determine which groups to bring into the process. Other departments must also be engaged – for example, community development can help increase the quality of analysis by giving information on land-use trends, while the police department must be involved to develop operational solutions – for example, defining public safety service strategies or containing operational costs Getting a wide array of input puts in place community support for strategy implementation. For example, Coral Springs engages community groups to help implement the vision, including holding them to standards of accountability. This is crucial for holding down the price of government
LTFP has an important connection to other plans The strategic plan provides the long-term service vision, while the LTFP highlights financial balance. The LTFP highlights maintenance and operational costs of long-term assets, while the capital plan suggests future spending and debt burden The budget implements the LTFP
This is summary slide. Highlight any other key points.
This is a summary slide. Each phase will be covered in more detail in the following slides. Mobilization – Setting the stage for success Analysis – Information for decision support Decision – Informed Response Execution – Plan into action
A particularly important participant is the leader of the process. This is typically the CEO or the CFO. The leader must design the process and guide the participants though it, helping to interpret the environment and overcome problems along the way. A process map helps participants visualize the outcome and their role in planning An initial environmental scan is indispensable. Other analyses might include preliminary revenue/expenditure forecasts, etc.
Preferences come from a strategic plan. Policies set the standard against which long-term financial stewardship can be judged, e.g., fund balance levels, user fee cost recovery ratios, capital budgeting evaluation criteria. Scope establishes common understanding for purpose of plan. It is suggested by all of above. It is crucial to define expectations for the planning process up front so that participants won’t be dissapointed by the results.
This is from San Clemente. If the City is in compliance with a policy it gets a check. Areas where the City is not in compliances suggests issues that long-term planning can help fix.
The entire process creates a feedback loop so that Coral Springs is always able to make “course corrections” and react to changing conditions. The City also use what its learns from measurements and feedback to make process improvements aimed at increasing efficiency, customer satisfaction, and effectiveness.
Environmental analysis builds expertise for forecasting and strategizing. Environmental analysis also identifies special events (e.g., closing of a major local business, new major development, legislative change, etc.) Consulting a variety of sources results in better information and credibility. Factors should include demographics, land use, legislative, and public opinion issues. For example, what is the public’s opinion toward a voter approved tax? What new development is expected in the future? How will the population change? Hybrid forecasting is a mixture of quantitative and qualitative techniques The City of Palo Alto engaged an economist to compare the City’s hybrid of historical trending and expert judgments against more statistically rigorous techniques and the economist found that there was no appreciable gain in accuracy available. Revenue model on the next slide
This is a revenue model that shows what Virginia Beach, VA, considers when forecasting sales tax. The City doesn’t necessarily build mathematical relationships between these factors - rather, this is what they consider when making their final forecast, using both qualitative and quantitative techniques.
Example of analysis from Coral Springs – Shows how non-financial factors are examined and provides useful comparative data – trending and external benchmarks. Note that there was an increase in crime in the most recent year. What is a cost effective strategy for dealing with this? (see next slide) Figure Crime Rate Incidents per 100,000 (Composite Index Indicator and KIO) For Fiscal Year 2006, the City of Coral Springs’ crime rate is lowest in the State and the fourth lowest in the nation for cities with populations of 100,000-499,999.
Coral springs discovered that larceny is the cause. Now what can be done that doesn’t involve just increasing the number of officers?
Use GIS technology to find that larceny crimes are taking place at soccer games in the public parks. Hence, the City directed existing resources to focus on these areas during high-risk periods and also implemented appropriate tactical solutions like bike police in the park during games and leaving notes in unsecured vehicles that tells the owner that “If I were a thief, you would have been robbed.” This is an example of data driven decision making and working with police to come up with solutions other than undirected staffing increases.
Debt can have important ramifications for future financial position as a long-term obligation. A long-term plan can serve different purposes with respect to debt. Perhaps it focuses on affordability of current debt levels and how a sustainable level of debt can be maintained. Or perhaps it focuses on making elected officials and the public more comfortable with the use of debt fund critical infrastructure needs. In this case the plan might concentrate on development of debt policies. Examples of imbalances Underfunded liabilities: pensions, asset maintenance, capital needs Policies that need revision: user fees Unfavorable trend: Gresham education levels Many examples of data visualization on following slides
Integrates financial policies into decision-making Focuses on fund balance, which is a bottom-line indicator of financial position.
Good example of how tables can be used. This table places the focus clearly on ending balance. Simplicity and readability are key.
Shows how environmental indicators can be communicated. Note the self-explanatory progress indicator on the right.
This is an example from Coral Springs that takes into account things like recession and tax reform.
The price a government is a key concern for citizens, so Coral Springs compares their property tax rate with other cities. Note that Coral Springs has the lowest millage rate in the county, which shows that you can get great results without great revenues.
Similar idea to last slide, different perspective
Less debt per capita equals more flexibility, however, too little debt could also mean underinvestment in infrastructure.
Different mechanisms: council-staff workshops, committees, community surveys Mix of strategies: short and long-term. Short-term strategies can be used to buy time, but know what you are buying time for Correcting decision-making processes: Financial policies that decision-makers support and a budget process that focuses on meeting citizen priorities, addresses financial constraints, and aligns budget with strategies. Culminating event: Celebrate success, transition to action Commitment: Meaningful participation throughout the process is essential to commitment. Commitment should really be in place before the meetings
Business plan is translates strategy into action -Money is allocated -Results to be achieved are identified -Accountabilities created – held accountable for results, not for spending a budget
Uses of budget Implement specific recommendations – for example, if user fee cost recovery ratios are to be increased, then the budget should provide the allocation for necessary studies and then show projections for increases in revenue. Develop budget within given parameters – identify critical assumptions like debt affordable and headcount levels. Update the plan regularly to make it a living document. Use a financial scorecard to focus attention the big issues.
Customer satisfaction is a key strategic measure for Coral Springs. It also shows customer service can be maintained despite trials and tribulations
Some of Coral Springs notable planning results
Financing the Future Long-Term Financial Planning for Local Government
Agenda <ul><li>Part I – Introduction to Financial Planning </li></ul><ul><li>Part II – Overview of Planning Process </li></ul>
What is Long-Term Financial Planning? <ul><li>A combination of technical analysis and strategizing </li></ul><ul><ul><li>Forecasting & strategy development </li></ul></ul><ul><li>A collaborative and visionary process </li></ul><ul><ul><li>Elected officials, staff, & public </li></ul></ul><ul><li>An anchor of financial sustainability </li></ul><ul><ul><li>Changing mindsets </li></ul></ul><ul><ul><li>Institutionalize long-term thinking </li></ul></ul>
What is a Financial plan? <ul><li>Essential characteristics </li></ul><ul><ul><li>What is the time horizon? </li></ul></ul><ul><ul><li>What funds are considered? </li></ul></ul><ul><ul><li>How often is a plan done? </li></ul></ul><ul><ul><li>What is in it? </li></ul></ul>
Coral Springs’ Business Model Strategic Plan Business Plan Budget Output to Citizens Data Analysis Citizen Input
So, Why Financial Planning Now? <ul><li>Determine financial position & condition </li></ul><ul><li>Build case for action </li></ul><ul><li>Develop mix of strategies for financial health </li></ul><ul><li>Prioritize goals and services </li></ul><ul><li>Build trust with citizens! </li></ul>
What Financial Planning Has Done for Coral Springs <ul><li>Focus on key indicators of financial health </li></ul><ul><ul><li>Bond rating (AAA) – save money </li></ul></ul><ul><ul><li>General fund balances </li></ul></ul><ul><li>Data-based, evidence-driven decisions </li></ul><ul><ul><li>Business survey reveals demand for planning help </li></ul></ul><ul><ul><li>City provides planning assistance </li></ul></ul><ul><ul><ul><li>http:// www.csbizassist.org / </li></ul></ul></ul><ul><li>Results </li></ul><ul><ul><li>No layoffs, no service reductions </li></ul></ul><ul><ul><li>Millage rate has remained low </li></ul></ul>
Trust <ul><li>Preliminary Findings of “Choice Works Dialogues” </li></ul><ul><li>“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.” </li></ul>
Trust Leads To Loyalty Recommend City to Friends, Family, Co-Workers
Five Pillars of Planning <ul><li>Long-Term Service Vision </li></ul><ul><li>Financial Policies </li></ul><ul><li>Technically Sound Analysis & Forecasting </li></ul><ul><li>Collaborative & participative process </li></ul><ul><li>Connection to other plans </li></ul>
Long-Term Service Vision <ul><li>Define the future the community wants </li></ul><ul><ul><li>Great opportunity to engage elected officials and the public </li></ul></ul><ul><ul><li>Makes planning more meaningful for participants </li></ul></ul><ul><ul><li>Key for aligning finances with service levels </li></ul></ul>
Financial Policies <ul><li>Define standards for stewardship of public’s tax dollars </li></ul><ul><ul><li>Define financial future community wants </li></ul></ul><ul><ul><li>Forms basis for accountability and increasing trust in government </li></ul></ul><ul><ul><li>Another crucial point of elected official involvement </li></ul></ul>
Analysis and Forecasting <ul><li>Sound analysis and forecasting provides: </li></ul><ul><ul><li>Credibility </li></ul></ul><ul><ul><li>Scenario analysis capabilities </li></ul></ul><ul><ul><li>Adaptability </li></ul></ul>
Collaborative & Participative Process <ul><li>Process must engage different groups to </li></ul><ul><ul><li>Gain different vantage points </li></ul></ul><ul><ul><li>Increase plan quality </li></ul></ul><ul><ul><li>Build a wide basis of support for strategies </li></ul></ul>
Part I – Take-Aways <ul><li>LTFP is a strategic and visionary process </li></ul><ul><li>LTFP is part of a complete planning portfolio </li></ul><ul><li>LTFP provides benefits across a spectrum of concerns </li></ul>
Mobilization Phase <ul><li>Align Resources </li></ul><ul><ul><li>Identify participants </li></ul></ul><ul><ul><li>Design a process </li></ul></ul><ul><li>Preliminary Analysis </li></ul><ul><ul><li>Initial SWOT analysis </li></ul></ul><ul><ul><li>Other analyses, like forecasts </li></ul></ul>
Mobilization Phase <ul><li>Service level preferences </li></ul><ul><ul><li>Strategic priorities and objectives </li></ul></ul><ul><li>Financial policies </li></ul><ul><ul><li>Self-assess compliance with policies </li></ul></ul><ul><ul><li>Identify new policies </li></ul></ul><ul><li>Define purpose and scope </li></ul><ul><ul><li>Consensus on problems planning is to solve </li></ul></ul><ul><ul><li>Limit scope of planning to those issues </li></ul></ul>
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)
Mobilization Phase Take-Aways <ul><li>Preparation is key to financial planning. </li></ul><ul><li>A clear “roadmap” increases confidence in the planning process </li></ul><ul><li>Financial policies are crucial </li></ul><ul><li>Mobilization must identify service priorities </li></ul><ul><li>There must be consensus on the purpose of planning </li></ul>
Analysis Phase <ul><li>Environmental Analysis </li></ul><ul><ul><li>Objective and subjective sources </li></ul></ul><ul><ul><li>Build expertise for analysis & strategizing </li></ul></ul><ul><ul><li>Examine variety of factors, not just financial </li></ul></ul><ul><li>Revenue and Expenditure Forecasting </li></ul><ul><ul><li>5 to 10 year forecasts are typical </li></ul></ul><ul><ul><li>Hybrid techniques are the most common & powerful </li></ul></ul><ul><ul><li>Revenue modeling is a key practice </li></ul></ul>
Analysis Phase <ul><li>Debt Analysis </li></ul><ul><ul><li>Analyze impact of current obligations </li></ul></ul><ul><ul><li>Examine capacity for future indebtedness </li></ul></ul><ul><li>Financial Balance Analysis </li></ul><ul><ul><li>Consider all different types of imbalances </li></ul></ul><ul><li>Data visualization helps communicate imbalances </li></ul>
Revenue Trend Will Slow Assuming No Additional Property Tax Reform Projected Millions Recession Tax Reform
Getting the Right Tax Rate/Service Level Mix Operating Millage Rate Good
A Measure of Productivity Employees per 1,000 Residents Good
The City’s Financial Policy is Focused Long-Term Direct Net Long-Term Debt per Capita Good
Analysis Phase Take-Aways <ul><li>Environmental analysis is the foundation of planning – invest in it! </li></ul><ul><li>Hybrid techniques are the most effective </li></ul><ul><li>Debt analysis varies in importance with local circumstances </li></ul><ul><li>Consider multiple types of imbalances </li></ul><ul><li>Develop effective presentation techniques </li></ul>
Decision Phase <ul><li>Develop Financial Strategies </li></ul><ul><ul><li>Match strategy to size of imbalance </li></ul></ul><ul><ul><li>Find the right mix of strategies </li></ul></ul><ul><ul><li>Correct decision-making processes that led to imbalance </li></ul></ul><ul><li>Plan Conclusion and Transition to Action </li></ul><ul><ul><li>Design a clear culminating event </li></ul></ul><ul><ul><li>A public meeting to approve the plan is common </li></ul></ul><ul><ul><li>Gain formal commitment to financial strategies </li></ul></ul>
Coral Springs Business Plan <ul><li>Translates the Strategic Plan into action </li></ul><ul><li>Develop initiatives to support Strategic Priorities </li></ul><ul><li>All resources are allocated within the Business Plan </li></ul><ul><li>Financial strategy aligns short-term objectives with long-term financial health </li></ul><ul><li>Performance monitored via review of KIOs and process-level performance measures </li></ul><ul><li>Focuses budget decisions on strategic </li></ul><ul><li>priorities instead of line items </li></ul>
Decision Phase Take-Aways <ul><li>The means by which strategies are developed is as important as the strategies themselves </li></ul><ul><li>Redressing a fiscal imbalance almost always requires a change to decision-making processes </li></ul><ul><li>A culminating event is a mandatory part of the planning process </li></ul>
Execution Phase <ul><li>Executing the Plan </li></ul><ul><ul><li>The budget is the most important execution tool </li></ul></ul><ul><ul><li>Other tools include performance measurement, action plans, and participant commitment </li></ul></ul><ul><li>Monitoring </li></ul><ul><ul><li>Updates </li></ul></ul><ul><ul><li>Scorecards </li></ul></ul>
Financial Planning Delivers Results customer service satisfaction households 94% 96% 97% AAA bond ratings from all three agencies employee satisfaction customer service satisfaction business
Execution Phase Take-Aways <ul><li>The budget and LTFP must be linked </li></ul><ul><li>Participant commitment is crucial for execution </li></ul><ul><li>Develop on-going monitoring mechanisms to keep the plan at the forefront </li></ul>
The End <ul><li>For more information … </li></ul><ul><li>Get on our mailing list (email [email_address] ) </li></ul><ul><li>E-mail us </li></ul><ul><ul><li>[email_address] </li></ul></ul><ul><li>Visit our websites </li></ul><ul><ul><li>www.gfoa.org/ltfp </li></ul></ul><ul><ul><li>www.coralsprings.org /quality </li></ul></ul><ul><li>Read our book Financing the Future </li></ul>