Zombie TIF and Other Notes from Last Night

DeKalb’s city council met again with DeKalb’s financial consultants, EPI/Crowe, to consider the latter’s latest report and recommendations.

The most important information to pass on to you is that the consultants told the council, at least twice AND in so many words, that the city will enter another financial crisis within five years if it doesn’t drastically change its operating model.

Yes, this concern has been a recurring topic at City Barbs since at least the time of the analysis of the Reduction in Force of 2010. Maybe they’ll listen now that they’ve paid someone to tell them these things. We’ll see.

Key to change, said the consultants, is strategy. Laying off people when you get into financial trouble is not strategic, it’s tactical. Strategic means planning for fulfilling needs 3-5 years out. Tactical is doing whatever it takes to get through the next year. One way is sustainable, the other a grubby little bandage giving temporary relief.

Bottom line, in my words alone: Getting rid of 30-plus employees is a desperate act borne of failure to recognize changing realities, and those responsible should not be allowed to pretend they are financial geniuses. Continue reading Zombie TIF and Other Notes from Last Night

Procurement

In its May 2009 report, Executive Partners, Inc. (EPI) recommended the City of DeKalb centralize its purchasing.

DeKalb never followed through. Now that the consultants have returned (as EPI/Crowe) they must repeat themselves.

Once again I offer a transcription, taken from the April 13 workshop between EPI/Crowe and City of DeKalb officials. And once again the speaker is my new BFF, Larry Kujovich of EPI/Crowe.

Here’s the setup. One of the council members is grumbling that the estimated yearly savings was determined by a benchmark instead of an actual invoice analysis.

I couldn’t consolidate by vendor what you spend, or by commodity. I was incapable of doing that because the system doesn’t allow me to do that right now. So for me to say, “Hey, if I go from Vendor A to Vendor B I’m gonna save “X” percent of this,” I couldn’t do that.

DeKalb’s expenditures are $12 million a year paid out to some 250 vendors and the benchmark for savings is 10%. Yet even though we could conceivably have saved something in the neighborhood of a million a year since the recommendation was first made, we couldn’t be bothered to set up the system for a proper analysis to find out. Continue reading Procurement

DeKalb’s Business Friendliness

I am rapidly developing a crush on Larry Kujovich, a member of the group of financial consultants hired by the City of DeKalb.

Still working on taking in the whole of the April 13 workshop video, I swooned this time during a discussion of image-building as part of economic development strategy.

Use terms like “image building” and “branding” and I reflexively roll my eyes because such exercises are futile when the desired image and reality reside in different zip codes. But I quickly regained focus when Mr. Kujovich said this:

[I]f you survey potential businesses, would they consider DeKalb business friendly? I don’t know the answer to that question. We have heard anecdotal evidence; some say that DeKalb is one of the most business-unfriendly cities they’ve ever encountered. Well, if that’s the case, economic development will be a challenge. So, it’s something that perhaps could be addressed.

Continue reading DeKalb’s Business Friendliness

EPI and City of DeKalb Operations

Here’s a transcript of a bit of commentary by Larry Kujovich from the dynamic duo Executive Partners and Crowe Horwath, the consultants who met with City of DeKalb officials April 13 to talk strategic financial planning.

You’ve gotta look into the future. . .Does your 5-year plan list what you need, or what is available in terms of resources. And at the end of the day, it doesn’t say what you need. If you’ve got to fund all your capital requirements, all your replacement funds, AND fully fund your pension plans, you’ve got a hole that is HUGE. You need to know what that hole is, even if you can’t solve it right now. Because you’re making short-term decisions, and maybe — we talked earlier about the half-million savings, or the million dollars, how can we use it? — you may need that to do just what you’re doing today, three years from now. And if you don’t have that visibility, you’re gonna get yourself in a box where you spend it now and you don’t have it in three years. Now again, this is my private sector experience; if we didn’t do this THERE, we’d be bankrupt.

Mr. Kujovich also recommended a culture change, in which the focus shifts from the requirements of the organization to an outcomes-based model that asks how best to deliver what the citizenry needs. In other words, he’s asking the bureaucracy to act like less of a bureaucracy.

Watch the full video here. The operations portion begins roughly an hour in, following the discussion of revenue opportunities.

Correction: Pilots, PILOTs & Water

In a recent post about the latest Executive Partners, Inc. (EPI) involvement with the City of DeKalb as its financial consultant, I expressed anxiety about a proposal to privatize the city’s water.

Turns out, that’s not the EPI proposal for the Water Division, and I’m sorry to have led you astray.

It’s a PILOT (not pilot) program. PILOT stands for “payment in lieu of taxes,” and is sometimes spelled PILT as well.

Among EPI’s tasks this round is identification of potential new revenue sources. One of its suggestions is to add up the assets of the Water Division, calculate what Water would be paying in taxes if it were a private company, and then charge us the amount of the calculation.

A preliminary assessment shows net assets and potential annual in-lieu tax payments to be $26 million and $186,000, respectively.

Again, sorry for the error.

EPI is Back

*Post corrected May 21*

Executive Partners, Inc. (EPI) was hired four years ago to help put the City of DeKalb on a more sustainable path financially.

The fix didn’t take, so they’re back. EPI met with city officials at an April 13 special meeting.

Mr. Nuehring stated he will discuss opportunities for revenues. He noted that there are approximately 375 fines and fees and enforcement can be a challenge. He added that a full review of all may be necessary. The question was asked of staff yesterday, he said, if fines and fees are viewed as revenue or used for public safety and compliance. Staff stated they are meant for public safety and compliance. Mayor Povlsen agreed.

DeKalb’s personnel expenses are going up $1 million in FY2014, but most of its core revenues are slipping. Property taxes are still flat, city sales tax has been reduced more than $100,000 in the past year and the utility tax revenue estimate for FY2013 is $320,000 less than the year before. Are we really supposed to believe the timings of the new rental housing registration program, towing/impounding regulations and steep increases in fines are coincidental and not responses to continuing revenue shrinkage? Continue reading EPI is Back