2nd Floor Staffing/Finance Workout Plan
Although this post is related to the Private Development Fund, known internally as Fund 862, its purpose is not to explain what happened to cause the balance to go negative. That subject requires its own post, which will be forthcoming in the following weeks. (For any of you who are fans of self-torture, I will go ahead and provide a link at the end of this post to my February 2013 Finance Committee report that does explain what happened, and you can read it at your leisure.)
Rather, this post explains the measures taken to correct the annual structural deficit; in short, it describes the plan we developed and implemented to stop the hemorrhaging. It was a good, solid plan, and it worked.
Now is probably a good time to point out that the $9m negative Fund balance always was, and still is, a General Fund obligation. Fund 862 is what is known as an Enterprise Fund — it provides services for a fee — and new fees are not permitted to pay for old debt. What that means is any annual shortfall in Fund 862 revenues should have been matched by a transfer from the General Fund.
Of course, therein lies the problem: General Fund dollars are premium, since they pay for Police and Fire. Fund 862 can legally carry a negative balance, so the General Fund transfer to cover operating shortfalls was pretty far down on the list of budget priorities. But enough of that for now; we need to get back to the purpose of this post, which is to explain how we arrested the annual operating losses.
While it may seem the two Fund 862 posts are being published in reverse order, this one is in direct response to the ongoing sarcastic commentary emanating from the Council dais, which I addressed from the podium at the December 17 meeting. I’ve just really had enough of the Council’s political grandstanding at the expense of staff who worked diligently (and successfully) to correct a decades-long error in funding development operations.
Here is the video clip of my 3-minute presentation and responses to questions posed by the Mayor:
And here is the chart I distributed to the Council during the meeting:
Note that the chart represents the annual structural deficit. To reiterate, nothing but General Fund dollars will ever correct the negative Fund balance.
And now, for your edification, here is the detailed version of the workout plan story:
In February of 2010, former Assistant City Manager John Rucker, whom l had never met, stopped by and asked me to walk across the street with him to get coffee. Although l was very nervous, l went along to see what he had on his mind.
He opened the dialogue by saying, “Mary, tell me about the Private Development Fund.”
And so, he and I talked at length, and I explained what I knew, although at that time I had never even seen the Fund-level accounting. I only knew what I could see from a Planning operations standpoint.
I cautioned him that the Council would never let him daylight what had gone wrong with the Fund, since it was a political bomb that would get everyone very messy when it went off. Nevertheless, he assured me that he had been directed to analyze the Fund and repair the structural (annual) deficit, and that the Council did in fact want an explanation of what had caused it.
I had been trying for some time to call attention to things that weren’t working right for Planning operations, although I had never been included in City Manager level budget meetings until the lead-up to fiscal year 2007-08, after Steve Peterson was hired as Planning Director and needed me there to explain his budget. Once I got into the meetings and was able to express my concerns, former Finance Director Jennifer Hennessy began making adjustments based on my working knowledge of Planning’s operations and funding. I suspect that either she or former City Manager Dave Burkland had pointed Mr. Rucker in my direction, since I had been a squeaky wheel for a few years.
But once Mr. Rucker put his shoulder behind the effort in 2010, and I was given full access to the City’s financial software and the ability to request custom reports to see all the moving parts, what a can of worms that Fund turned out to be! While the funding adjustments Ms. Hennessy had made were definitely steps in the right direction, they had really only scratched the surface of the operational issues that still needed to be addressed.
Former Building & Development Services Director Fritz McKinley led the 2nd floor team, collaborating with former Capital Projects Services Director Tom Varga to identify work efforts that had been pushed to the back burner after two rounds of early retirements had cost the 2nd floor 31% of its staff — that amounted to 22 bodies.
I have such a fond memory of watching the two of them using different colored markers to draw floor-wide organizational charts on sheets of butcher paper and brainstorming to identify opportunities to cross-train staff and build interdepartmental project teams. It was the beginning of an enormous undertaking, but they committed themselves to the plan and worked together even when things got very uncomfortable.
Meanwhile, I was working on developing the finance plan, coordinating with Ms. Hennessy and my current partner-in-crime, Alicia Meyer. We built an interdepartmental alliance, where in the past there had been distrust, and we developed a plan to properly finance 2nd floor operations. Ms. Hennessy made changes to the budget that allowed for greater transparency, so 2nd floor staff could clearly see what was impacting our funding.
Alicia taught me to run complex financial reports, and together we unwound decades of less-than-transparent time card coding. Direct charges to other Funds ceased, in favor of a multi-Fund allocation tied to Fund 862 salaries. Cost centers were assigned to specific staff activities to provide solid data for the User Fee Study projections. These changes enabled us to identify the true cost of processing development applications.
Revenues and expenses were monitored on a bi-weekly basis in an effort to stay ahead of any negative trends. Historically, 2nd floor Departments simply monitored their Operating Budgets, without regard for whether or not revenue projections were being met. That obviously didn’t work out very well.
Citywide Indirect Cost Allocation Plan (CAP) bases were analyzed to determine which allocations should be redirected to operating budgets in Funds other than Private Development. The allocation to Fund 862 was reduced to reflect what was being used in the most recent User Fee Study.
Development projects subject to time and materials billing (rather than flat fees) were moved into the Subdivision Fund. This enabled us to more accurately identify true City costs, without having to sort them from charges that would be passed through to project applicants.
A General Fund operating budget was established for Planning, to account for unrecoverable operating costs related to non-fee activities (e.g., Tree Ordinance, Historic Preservation Ordinance, Economic Development Committee).
Floor-wide operations were thoroughly analyzed to maximize service levels while living within constricted means. Staff were cross-trained across department lines to ensure they were working where there were both need and funding. There was no “created” work. As I mentioned earlier, the 2nd floor had lost 22 bodies, all of whom left work behind that needed to be redistributed. In addition, the Federal ARRA (Obama’s shovel-ready) grant projects had come in, which required extensive staff work and reporting. There was plenty of work, and we built a team to get it done.
Specifically, we consolidated the remaining six administrative staff into a floor-wide team to absorb the duties of seven who had opted for retirement; we transferred one Building Inspector to Construction Inspection to absorb the duties of two retired Inspectors; we assigned double duty to the Senior Development Engineer, who absorbed the work of the retired Senior Civil Engineer in Construction Inspection; we transferred a Senior Planner and an Associate Planner to Capital Projects Services to work on environmental review, the ARRA projects, the update to the Bike Master Plan, and the “ultimate annexation” that was to incorporate the entire Chapman-Mulberry area; we moved an Assistant Planner to Sewer/Storm Drain Engineering to work on the Nitrate Action Plan projects and provide backup support for the public counter. In short, everyone was working on whatever needed to be done.
Here is an email from Mr. Rucker reinforcing the cross-department assignments during the workout plan. This was serious business, not some ploy to avoid making tough decisions.
What the 2nd floor staff accomplished — working at that level of efficiency to give the taxpayers the maximum bang for their buck — should serve as a model for all City departments. Yet the Council continues to say staff did nothing.
Now, as promised, here is the report I wrote for presentation at the February 26, 2013 Finance Committee meeting. This is the last iteration before Nakamura directed me to strike all references to Council actions. He told Mr. McKinley, in my presence, that the Council actually did not want to know what had happened. (Odd, isn’t it, that the Council has subsequently spent so much of their grandstanding efforts accusing staff of withholding information?)
As it turned out, Mr. McKinley “mysteriously resigned” the night before the meeting, so the report did not get presented. As I mentioned earlier, lots of important folks would have had messy stuff blown all over their pretty faces if that bomb had been detonated. And we can’t have that…
Next up will be the Private Development Fund, I guess. If you read that memo, you’ll likely want it to be translated from bureaucrat-speak to English, so I will oblige. I’m really sorry this stuff is so complicated, but if it were simple, the government would have to find some other way to do it, right?
Thank you for your continued readership. As always, your comments and questions are welcome. Please continue to share with your family, friends, and neighbors. An informed citizenry can create an accountable government.
And finally, a very special Merry Christmas to all City staff, former and present, who made the 2nd floor staffing and finance plan work. You did an excellent job.
Remember: Truth Matters, Chico!
Posted on December 24, 2013, in Budget, Private Development Fund and tagged 2nd Floor Workout Plan, Chico Budget, Chico City Council, Fritz McKinley, Fund 862, John Rucker, Private Development Fund, Tom Varga. Bookmark the permalink. 4 Comments.