The City of Grand Rapids, like all cities in Minnesota, has been faced with unique challenges in the past few years. The commitment by the State to offer local government aid and the homestead credit as property tax relief mechanisms has been dramatically reduced. Because of this, by the end of 2009 the City of Grand Rapids had lost over $1,000,000 in annual revenues since 2008.
The City could have taken three distinct courses of action in dealing with the budget crisis we were faced with. We could have made marginal cuts to the budget that would have been more temporary in nature and had no real impact on our long term operating budgets (for example, deferring capital purchases and making marginal changes to employee salaries). Conversely, we could have simply increased taxes to replace the lost revenue from the State.
To the City Council it was clear that a longer term approach was necessary. Our focus needed to be significant, long-term expenditure reductions. By retooling our departments with new technology we were able to reduce our total workforce by more than 10%. The result was a reduction to the base budget by more than $1,100,000. Let me reiterate, we are spending $1,100,000 less per year than we would have been if we had not changed how we do things. This was made possible by the extraordinary effort of the City Council and the City employees.
We have sustained this lower operating budget for two years and our preliminary 2012 budget continues to maintain this lower base. The preliminary levy mandated to set in September is higher than last year. This is typically done on purpose to allow for some unforeseen emergency during our budget planning process, and the levy is then lowered prior to final approval in December. This year’s proposed increase to the debt levy goes toward the street projects currently under construction and for capital equipment purchases. These capital equipment purchases are part of an ongoing plan to upgrade the technology we use so we can keep ongoing costs lower. In essence we use short term capital funds to drive down long term expenses. We are working on finalizing the operating budgets with the goal of offsetting the increase in the debt levy with further decreases in the operating levy.
One of most impressive stories to come out of this situation is in Public Works. The Public Works Department spent nearly $300,000 less this year than it did four years ago. In those four years some of the largest areas of the former Grand Rapids Township were annexed into the city. In inflation adjusted dollars, the Public Works Department is spending the same amount as in 2001. In this ten-year period the population increased by 40% and the geographic area of the City has increased by nearly 100%. Public Works Director Jeff Davies and the staff in the Public Works Department have managed to provide service to over 3000 more people and over 40 more miles of streets with less money and fewer employees.
Another example of doing more with less comes from our police department. This department has left two patrol officer positions and one administrative position vacant and yet they continue to find ways to provide police coverage to a city that is now larger and has more people.
The fire department has made changes to allow for a reduction in administrative costs. Our three core services Police, Fire and Public Works account for about 80% of our operating budget and Police Chief Jim Denny; Fire Chief Steve Flaherty; and Public Works Director Jeff Davies understand the unique times we are in and have stepped up to find ways to significantly reduce costs without a noticeable reduction in service.
The City received notice from our health insurance carrier a few weeks ago that our premiums will go down by 2.8% in 2012. Prior to the implementation of the high deductible plan and the employee wellness program, we were experiencing average annual premium increases of 11%. Because these premium adjustments are based on utilization, we attribute a large part of this reduced cost to a wellness program that helps our employees get healthy and stay healthy.
Between 2002 and 2011 the tax rate for the city of Grand Rapids has decreased by 18.98%. It is the goal of this City Council to keep the tax rate on a downward trend and decrease it by at least another 10% in five years. However, the recent Minnesota State budget passed by the Legislature in special session removed $260,000,000 of property tax relief from the statewide system by changing the Homestead Credit to the Homestead Exclusion. The result for Grand Rapids will be a 4.7% tax rate on top of whatever tax rate the City sets.
We are working with our neighboring communities for opportunities to collaborate and lower our overhead costs. We will continue to work toward more collaboration with other government organizations like the Public Utilities to reduce duplication and cost. The City Council has directed me to find any and all ways to reduce duplication and increase efficiency in all City departments, agencies and affiliated operations. This means that there are no sacred cows. We are wiping the slate clean and rethinking how we deliver service to the citizens of Grand Rapids. These are unprecedented economic times which call for unprecedented innovation from your local government. That is exactly what we are doing.
Wednesday, September 28, 2011
Monday, March 14, 2011
On December 15th, 2010 the City Council met to develop a strategic plan for the next two years. From this meeting the council and staff developed six strategic initiatives that they would like to accomplish or have made significant progress toward by the end of 2012.
A general theme emerged from these initiatives that the City of Grand Rapids will emphasize “partnering to deliver services at less cost”. As we move forward over the next two years the City will leverage its limited time, attention and resources on these six priority areas:
1. Realize the efficiencies of a GRPUC/City collaboration
2. Improve efficiency and administration of recreation opportunities
3. Address Central School inefficiencies related to occupancy, rent, and marketing issues
4. Continue progress on becoming self-supportive without LGA funding
5. Develop and implement an efficiency study for Public works
6. Pursue needed Capital Improvements, particularly road work completion between Ridgewood and 14th Streets
Realize the efficiencies of a GRPUC/City collaboration
Improve efficiency and administration of recreation opportunities
The council has directed staff to begin meeting with our neighboring communities to begin work on forming a regional coalition for recreation programs. We began with a meeting with the Grand Rapids Park and Rec Board to explain what we are trying to do and to begin to get the buy in of our own Park and Rec Department. This collaboration is at the beginning of the process and we must first identify the opportunities that are available to us and how we can reduce cost and improve service delivery. We envision a seamless recreation program delivery throughout the region such that the end user of the service would not have to worry about which jurisdictional boundary they reside in. This would allow us to better coordinate the use of our facilities and possibly allow for specialization of recreation facilities, i.e. a set of ball diamonds that are specific to little league, or softball, etc. This sort of collaboration can be a model for further collaboration amongst our neighbors, be it in Public Works, GIS, or other services.
Address Central School inefficiencies related to occupancy, rent, and marketing issues.
The city council has formed a task force to study the issues at Central School and devise a strategy to attract new tenants to the building. The task force is examining every possibility for the future of the building. The “All Options on the Table” approach has allowed us to wipe the slate clean and begin to reimaging the operation of Central School. One thing that the task force has heard is that this sort of process could lead to the demolition of the building. The task force has agreed that this option is not viable, because of the negative impact on the downtown area and character of the City and because of the cost of taking such action. The fact that the building is on the National Registry of Historic Places creates certain obstacles to demolition that are difficult to overcome. More than likely, for the city to get permission to take such an action the building would have to sustain damage that would make it structurally unsound. Additionally, the demolition of a building of this size and age is quite expensive. Mitigation of hazardous materials like lead paint and asbestos will have costs running into the hundreds of thousands of dollars.
Continue progress on becoming self-supportive without LGA funding
The over-arching theme of the strategic plan for the next two years is to make strategic expenditure reductions so we can move Local Government Aid out of our operating revenue. Once this is done, the LGA we do receive will be used to offset capital costs by buying down debt, creating sinking funds to make bond payments thus decreasing the tax levy, or by using the cash we receive to pay for projects. The fact of the matter is that there is a high probability that we may have our LGA taken away completely. This city council has directed me to develop a response to such a scenario that does not include property tax increases. In fact they would prefer that we find expenditure reductions to match the LGA loss and allow for decreases in the tax levy. This is no easy task. We began work on this over two years ago and have been able to make permanent reductions to our operating expenditures to match $1,100,000 reduction in revenue due to the decrease in LGA that has already occurred, the increase in our fiscal disparities contribution, and the loss of commercial/industrial tax base.
To move us further toward this goal we have begun working toward more collaboration and to continue to find ways to reduce our costs. We need to identify approximately $950,000 in expenditure reductions to completely eliminate our reliance on LGA. Once this process is complete we will have reduced operating expenditures by over 25% as compared to three years ago. We are also pursuing the local option sales tax authority that would allow us to place a referendum on the ballot asking for a local sales tax of up to 1%. If successful we would be able to lower our property tax levy and replace LGA. This would mean that residential property tax payers would save approximately $100 to $200 for every $100,000 of Estimated Market Value on their property tax bill.
Develop and implement an efficiency study for Public works
A Public Works Best Practices Review Task Force has been formed to examine the operations of the Public Works department. The mission of this task force is to examine the operations of the Public Works Department to determine if any improvements can be made to the efficiency and effectiveness of service delivery. This group will send a report to the city council by July 25th, 2011 with its findings in regards to the following questions:
1) Are we doing anything that could be done more cost effectively from an outside agency?
2) Are there opportunities to share services/equipment with outside groups government/private agencies?
3) Are we utilizing our staff as well as possible?
4) Do we have an effective/comprehensive facility plan in place?
5) Is our procurement procedure as good as can be, are we using the most effective/lowest cost equipment and materials for all application, what methods do we use to determine?
6) Is our management structure as efficient as possible, within the entire city operation - are there tasks and departments that should be under the PW umbrella that should be or shouldn't be there?
7) Are the financial controls used the best available?
8) Are there other groups/tasks that we can incorporate to increase revenues?
9) Can we design benchmarks to determine our effectiveness?
The task force will present its report to the City Council at the July 25th, Council Work Session
Pursue needed Capital Improvements, particularly road work completion between Ridgewood and 14th Streets
There has been considerable debate and energetic discussion about a possible road realignment from Ridgewood Road around the Fairgrounds to 14th Street. Two serious issues are at the center of this debate. One is the environmental degradation of Crystal Lake due to storm water run off from the fairgrounds. This run off is having a visible impact on the lake and needs to be addressed. The road project would do just that. With the completion of the road there will be stromwater runoff mitigation put in place, such as rain gardens and the like, to keep the stromwater from running untreated into the lake. The second issue is the safety of pedestrians and motorists in the area around the fairgrounds. The current road alignment is not safe and needs to be realigned to accommodate the increase in traffic due to the Middle School. The Middle School now houses the fifth grade and District 318 has constructed a bus garage in the same area which will mean an increase in bus traffic in the area. The fairgrounds itself can be improved as part of this project and the road can be closed during events such as the County Fair, the Car Show, and Blues Fest.
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