Advanced Tools for Finance Officers: Long Term Financial Planning Building the Case for LTFP in Your Government and Engagi...
Topics <ul><li>Why Financial Planning </li></ul><ul><li>Engaging Elected Officials </li></ul><ul><li>LTFP and the CEO/CAO ...
Why use Long-Term Financial Planning? <ul><li>Bring financial perspective to planning </li></ul><ul><li>Stimulate long-ter...
Case Study: Coral Springs, FL <ul><li>Approaching Build-Out  </li></ul><ul><li>Fiscal Impact Model  </li></ul><ul><ul><li>...
Impact of 1.35% Petition
Some Long-Term Strategies <ul><li>Economic development </li></ul><ul><li>Service delivery alternatives </li></ul><ul><li>N...
Citizens with a Great Deal or Fair Amount of Trust in Government Federal State Local 2005 53% 67% 70% 1998 65% 80% 77%
Choice Works Finding <ul><li>“We are prepared to pay more in taxes if that is necessary to realize the future we want, but...
Business Perception of Property Taxes
Trust Creates Loyalty Would you recommend the City to Friends and Family?
Engaging the Players <ul><li>Elected Officials </li></ul><ul><li>CEO / CAO </li></ul><ul><li>Employees </li></ul><ul><li>P...
Elected Officials <ul><li>THE key players. </li></ul><ul><li>Elected officials have the last word on the how much the orga...
Getting Buy-In <ul><li>Elected officials’ main contribution to financial planning is a long-term vision and a set of prior...
Planning Process
Making It Standard <ul><li>Financial planning should be central to how the government is governed and managed—not just a o...
Collaborative & Visionary Process
Keeping Track <ul><li>Elected officials must take leadership, maintain fiscal discipline, and stick to the strategies, des...
Dashboard
Financial Scorecard F F F F F F F F/C F W License & Permit Revenues F F F F F F F F F F Sales Tax Revenues F F F F F F F F...
Strategic Scorecard
Link to Budget <ul><li>The link between the financial plan and the budget is crucial. Elected official’s policies develope...
Stay Strategic <ul><li>Elected officials must be able to step back and adopt a strategic mindset. </li></ul><ul><ul><li>In...
CEO Buy-In <ul><li>Organizational management </li></ul><ul><li>Ensuring stability </li></ul><ul><li>Budgeting process </li...
Organizational Management <ul><li>More rigorous test for undertaking new programs and services. </li></ul><ul><li>Shared p...
Ensuring Stability
Budgeting Process <ul><li>Reduced conflict during budget process </li></ul><ul><li>Greater elected official confidence </l...
CFO Relationship <ul><li>CFO becomes a strategic partner </li></ul><ul><ul><li>Provide more strategic intervention </li></...
Employees <ul><li>Employees can get excited about LTFP as a career opportunity. </li></ul><ul><li>Employees can… </li></ul...
The Public <ul><li>Use the media </li></ul><ul><li>Surveys </li></ul><ul><ul><li>Citizen satisfaction, prioritization, or ...
Summary <ul><li>Financial Planning can be a tool for building trust with the public. </li></ul><ul><li>Elected officials c...
Coral Springs’ Value Rating <ul><li>Which statement best describes how you feel about the taxes you pay to the City of Cor...
Upcoming SlideShare
Loading in …5
×

Long-Term Financial Planning: Building The Case

1,726 views

Published on

March 22, 2010, GFOA Educational Conference in Reno, Nevada.

Published in: Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,726
On SlideShare
0
From Embeds
0
Number of Embeds
11
Actions
Shares
0
Downloads
16
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • This quote from the City Manager of Gresham, Oregon, says it: “Clarity of resources makes the city better able to craft and clarify the choices and challenges faced by the organization over the long term and injects reality into decisions” Reference back to SV story – elected officials (and appointed) can really get behind long-term planning when they see how it supports their objectives: gain public approbation for running government “like a business”; demonstrate good financial stewardship, and help them address longer term and complex community issues. Sustainability issues may be a particularly useful connection. For example, Mayor RT Rybak in Minneapolis is an ardent advocate of LTFP not least because it helps the City achieve his water quality goals. Planning highlights issues of major concern to the community: road conditions in San Clemente meant that creating, funding, and maintaining a regular road repair schedule was a crucial objective of their initial plan. In Coral Springs, a community survey showed that schools were of prime importance to citizens, so the City’s plan investigates how the City can support schools, including funding a police presence in the school and help the school acquire land for facilities. Appreciation of longer term benefits makes it easier to appreciate the value of today’s hard decisions. For example, in order to rectify problems created by pension liabilities and internal service fund deficits, Minneapolis’s plan called for an 8% increase in property taxes each year for five years – the council members disciplined and determined support was instrumental for this to succeed. Planning can help make believers out of skeptics. In fact, San Clemente has seen individual elected to council as skeptics become believers after going through the planning process. Build a financial health “scorecard” that provides “at-a-glance” information on big picture financial condition. This helps officials better appreciate the big picture than if they only have access to detailed line items. Build a case, like Coral Springs – focus on local impacts deriving from mega-trends described earlier or based on more unique situations Long-term strategies will often cross over into “non-financial” areas like land use, economic development, or environmental 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)
  • Build out means that the City could no longer depend on new-growth revenue to support services High-density development required a new approach to service provision (and hence finances) Rapid growth meant that a “small town” management philosophy was overtaxed by “big city” issues. The City was criticized for typical bureaucratic behaviors both at commission meetings and in the press.
  • This shows how Coral Springs illustrated the impact of a statewide voter initiative to cap all property taxes at 1.35% of taxable value while preserving existing property tax exemptions. This plan cuts property taxes by $8 billion and reduces property tax collections by 26% statewide. This helps make the case that long-term planning is needed.
  • 1. Developing new bases, diversifying the base: auto sales tax example. 2. Shared services, Xboundary collaboration, outsourcing, privatization 3. Citizens may be more comfortable with taxes/fees that are put towards a specific purpose that they want: Example: bond issue for new police facility, Boulder’s carbon tax, San Clemente’s storm water fee
  • These results are from the Gallup Poll. Shows trust declining over time. Perhaps, unsurprisingly, TELs and TABORs have taken off during this same period. TABOR is a state tax and expenditure limit that includes the following elements: it is a constitutional amendment; it restricts revenue or expenditure growth to the sum of inflation plus population change; and it requires voter approval to override the revenue or spending limits. In Colorado, where the so-called “Taxpayer Bill of Rights” or TABOR was adopted in 1992, public services have deteriorated significantly.
  • “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 what coral springs examines
  • -The long-term financial plan should provide an opportunity for elected officials to describe what the community aspires to be and the service levels that will be provided. -Strategic planning -Links financial plan to service priorities -Identifies important issues facing the community -Provides insight on long-term resource requirements
  • -Impacts forecasts -Implementation and monitoring provides feedback for subsequent year’s planning session
  • Financial planning should take place each year as a prelude to the budgeting process. Elected officials should be involved in deciding what issues the plan will tackle and the strategies it will employ to achieve and maintain financial balance. -Financial plan provides overarching guidance to the budget -Consider one-on-one meetings or other low-pressure forums.
  • Orange are good points of potential council interaction. This is from the City of San Clemente. -Confirmation of issues makes sure plan is headed the right direction from the start -A joint financial strategy workshop will result in a set of strategies for the LTFP that everyone understands and supports from the beginning -the strategies are implemented through the budget
  • The buck stops with elected officials. They are responsible for the City’s stewardship over the public resources. Staff can help by making the most meaningful financial data and analysis available on a timely basis. Regular updates show the impact of current decisions on future financial position Financial scorecards provide-at-a-glance information on key items and are a recurring theme in this presentation. Following are a couple of examples
  • scorecard device used by the City of Washington, D.C., for available budget for personnel services (PS) costs and non-personnel services (NPS) costs. The City&apos;s system divides remaining available budget authority (calculated subtracting total annual expenditures, total obligations, and total interagency advances from the total annual budget) by total annual budget to arrive at the results showed by the gauges This is a good example because the eye is drawn towards the red and yellow areas. This example is good because the dashboard tracks fundamental issues. Idea is that focus on routine issues only occur if there is a problem – otherwise, council can focus on more strategic concerns.
  • San Clemente. Favorable, caution, warning, or unfavorable.
  • The budget ultimately creates or destroys financial balance. Therefore, the financial plan must be tightly linked to the budget process so that financial strategies come to fruition. -Critical assumptions are those assumptions that were made in the financial plan for the City to achieve long-term sustainability. Those same assumptions hold throughout the budget process. An example is assumed increases in employee headcount. -The business plan will describes multi-year service goals and assumed resource requirements (Environmental scan)
  • Successful financial planning demands a whole-of-government outlook. The planning process should provide opportunities to consider the strategic aspects of financial management. -Financial policies define stewardship standards, like levels of fund balance to be maintained, tax rates, and more. -Alert system can be used to highlight underperformance of routine issues, like Addison or provide summarized information on strategic issues. We will see an example from Coral Springs, FL later. -Either approach to scorecards helps focus on strategy.
  • . For instance, the cost of operating and maintaining an asset after it is built is given greater weight in capital planning and the ability of the city’s revenues to keep up with rapidly escalating employee benefit costs is given careful thought when considering expansion of the city workforce to provide a new service. This means that the city manager must more carefully plan how to meet the city’s service level objectives because initiatives that may have passed muster in the absence of a long-range perspective may not when the sustainability of those initiatives is considered over the longer term Financial policies, service level preferences and policies AND financial strategies and monitoring mechanisms.
  • the city manager spends more time thinking strategically about financial issues and more time interacting with finance staff as the information they produce becomes more relevant to strategic considerations and long-term financial stability is elevated to an organization-wide priority. Shared decision-making and concerted action is required for the city to make best use of available resources.
  • Budget formulation is often characterized by fierce competition over limited resources. While a financial plan cannot eliminate all such tension, it can help mitigate it. The emphasis placed on long-term thinking and the shared understanding of community priorities provides an overarching context for the budget process. This gives departments a greater appreciation of how the full range of municipal services fits into the City’s overall financial and service strategy, making them more understanding of resource allocation decisions, even when those decisions are not in favor of their particular programs. The context provided by financial planning also gives elected officials greater confidence that the budget reflects the community’s service priorities while also maintaining long-term financial balance. A number of communities interviewed report that, thanks to upfront financial planning, their final public budget hearings now are concluded in a matter of minutes whereas before they may have taken hours or even days. Departments also know that long-term sustainability of programs is a central consideration, so address this issue in their budget requests.
  • Move beyond “control” orientation to financial leadership. The Strategist role influences the organization’s overall direction by providing financial leadership for government initiatives. It does so by providing relevant, accurate, and timely financial information to decision makers The Catalyst instills a financial mindset across government by partnering with government program executives and leaders from IT, HR, and other functions to drive organizational behavior and focus on efficient execution. Examples: Economic development review, capital projects, performance measurement
  • Use press releases, meeting with the media to describe the plan an citizens’ role Coral springs value rating, Long Beach experience, and Montclair Long Beach Edmonton example with budget assumptions
  • Long-Term Financial Planning: Building The Case

    1. 1. Advanced Tools for Finance Officers: Long Term Financial Planning Building the Case for LTFP in Your Government and Engaging the Players
    2. 2. Topics <ul><li>Why Financial Planning </li></ul><ul><li>Engaging Elected Officials </li></ul><ul><li>LTFP and the CEO/CAO </li></ul><ul><li>Employees </li></ul><ul><li>The Public </li></ul>
    3. 3. Why use Long-Term Financial Planning? <ul><li>Bring financial perspective to planning </li></ul><ul><li>Stimulate long-term and big-picture thinking </li></ul><ul><li>Anticipate issues </li></ul><ul><li>Create discipline </li></ul><ul><li>Establish early warning indicators </li></ul><ul><li>Take into account local conditions </li></ul><ul><li>Develop long-term strategies for financial health </li></ul><ul><li>Prioritize services </li></ul><ul><li>Build trust with citizens </li></ul>
    4. 4. Case Study: Coral Springs, FL <ul><li>Approaching Build-Out </li></ul><ul><li>Fiscal Impact Model </li></ul><ul><ul><li>High density development </li></ul></ul><ul><li>Population Tipping Point </li></ul><ul><ul><li>Small town management model not appropriate for large urban city </li></ul></ul>
    5. 5. Impact of 1.35% Petition
    6. 6. Some Long-Term Strategies <ul><li>Economic development </li></ul><ul><li>Service delivery alternatives </li></ul><ul><li>New revenue sources </li></ul>
    7. 7. Citizens with a Great Deal or Fair Amount of Trust in Government Federal State Local 2005 53% 67% 70% 1998 65% 80% 77%
    8. 8. Choice Works Finding <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>
    9. 9. Business Perception of Property Taxes
    10. 10. Trust Creates Loyalty Would you recommend the City to Friends and Family?
    11. 11. Engaging the Players <ul><li>Elected Officials </li></ul><ul><li>CEO / CAO </li></ul><ul><li>Employees </li></ul><ul><li>Public </li></ul>
    12. 12. Elected Officials <ul><li>THE key players. </li></ul><ul><li>Elected officials have the last word on the how much the organizations taxes and spends and what it spends on. </li></ul><ul><li>You need their buy-in to effectively use long-term financial planning. </li></ul>
    13. 13. Getting Buy-In <ul><li>Elected officials’ main contribution to financial planning is a long-term vision and a set of priorities. </li></ul><ul><ul><li>Have a strategic planning process that elected officials participate in. </li></ul></ul><ul><ul><li>The strategic plan should be a precursor to the planning process. </li></ul></ul><ul><ul><li>The financial plan should account for the costs of the strategic plan. </li></ul></ul>
    14. 14. Planning Process
    15. 15. Making It Standard <ul><li>Financial planning should be central to how the government is governed and managed—not just a one-time event or a staff tool . </li></ul><ul><ul><li>Link financial planning to budgeting – make the plan real. </li></ul></ul><ul><ul><li>Give elected officials the chance to provide input on important financial issues. </li></ul></ul>
    16. 16. Collaborative & Visionary Process
    17. 17. Keeping Track <ul><li>Elected officials must take leadership, maintain fiscal discipline, and stick to the strategies, despite pressure to expand programs, reduce taxes, etc. </li></ul><ul><ul><li>Update financial forecasts regularly </li></ul></ul><ul><ul><li>Develop a “dashboard” or “scorecard” of key financial indicators </li></ul></ul>
    18. 18. Dashboard
    19. 19. Financial Scorecard F F F F F F F F/C F W License & Permit Revenues F F F F F F F F F F Sales Tax Revenues F F F F F F F F F/C W Elastic Revenues F F F F F F F F F F Property Values F F F F F F F F F F Property Tax Revenues F F F F F W W F/C F/C F Revenues Per Capita 99 00 01 02 03 04 05 06 07 08 Indicator
    20. 20. Strategic Scorecard
    21. 21. Link to Budget <ul><li>The link between the financial plan and the budget is crucial. Elected official’s policies developed through planning should be reflected in the budget. </li></ul><ul><ul><li>Engage elected officials on understanding and approving critical forecast assumptions. </li></ul></ul><ul><ul><li>Make the transfer of these assumptions to the budget transparent. </li></ul></ul>
    22. 22. Stay Strategic <ul><li>Elected officials must be able to step back and adopt a strategic mindset. </li></ul><ul><ul><li>Involve elected officials in approving financial policies. </li></ul></ul><ul><ul><li>Keep them apprised of compliance with the financial policies. </li></ul></ul><ul><ul><li>Address truly “strategic” issues in the plan as well as hot-button operational issues . </li></ul></ul>
    23. 23. CEO Buy-In <ul><li>Organizational management </li></ul><ul><li>Ensuring stability </li></ul><ul><li>Budgeting process </li></ul><ul><li>CFO relationship </li></ul>
    24. 24. Organizational Management <ul><li>More rigorous test for undertaking new programs and services. </li></ul><ul><li>Shared priorities. </li></ul><ul><li>Focus on forward-looking indicators. </li></ul>
    25. 25. Ensuring Stability
    26. 26. Budgeting Process <ul><li>Reduced conflict during budget process </li></ul><ul><li>Greater elected official confidence </li></ul><ul><li>Greater alignment between submissions and funding realities </li></ul>
    27. 27. CFO Relationship <ul><li>CFO becomes a strategic partner </li></ul><ul><ul><li>Provide more strategic intervention </li></ul></ul><ul><ul><li>CFO becomes more involved in helping departments create value </li></ul></ul><ul><li>Result of Global Study </li></ul><ul><ul><li>80% see improved decision-making as highest priority for improving financial operations </li></ul></ul><ul><ul><li>Improving transparency & integration of financial information was second </li></ul></ul>
    28. 28. Employees <ul><li>Employees can get excited about LTFP as a career opportunity. </li></ul><ul><li>Employees can… </li></ul><ul><ul><li>Analyze financial position. </li></ul></ul><ul><ul><li>Analyze and strategize on critical issues. </li></ul></ul><ul><ul><li>Help develop financial strategies. </li></ul></ul>
    29. 29. The Public <ul><li>Use the media </li></ul><ul><li>Surveys </li></ul><ul><ul><li>Citizen satisfaction, prioritization, or specific issue. </li></ul></ul><ul><li>Community Meetings </li></ul><ul><li>Committees </li></ul><ul><ul><li>“Blue ribbon” </li></ul></ul><ul><ul><li>Standing </li></ul></ul><ul><li>Reports </li></ul>
    30. 30. Summary <ul><li>Financial Planning can be a tool for building trust with the public. </li></ul><ul><li>Elected officials can best be engaged by integrating financial planning with service delivery policy. </li></ul><ul><li>Financial planning can help transform the finance officer into a strategic partner. </li></ul><ul><li>Consider a “value rating” or other global indicator of citizen satisfaction. </li></ul>
    31. 31. Coral Springs’ Value Rating <ul><li>Which statement best describes how you feel about the taxes you pay to the City of Coral Springs? </li></ul><ul><ul><li>Taxes are high, but the City is providing more services at a higher quality than I expect. </li></ul></ul><ul><ul><li>Taxes are just right for the amount and quality of city services that I am receiving. </li></ul></ul><ul><ul><li>Taxes are too low for the amount and quality of city services that I am receiving. </li></ul></ul><ul><ul><li>Taxes are too high for the quality of services that I am receiving. </li></ul></ul>

    ×