Financing the Future

1
Financing the Future

• Long-Term Financial Planning for Local Government
  

2
Agenda

• Part I Introduction to Financial Planning
• Part II Overview of Planning Process
• Part III Financial Planning in the Recovery
  Process

3
Part I Introduction
4
What is Long-Term Financial Planning?

• A combination of technical analysis and
  strategizing
• Forecasting strategy development
• A collaborative and visionary process
• Elected officials, staff, public
• An anchor of financial sustainability
• Changing mindsets
• Institutionalize long-term thinking

5
What is a Financial plan?

• Essential characteristics
• What is the time horizon?
• What funds are considered?
• How often is a plan done?
• What is in it?

6
Coral Springs Business Model
Data Analysis
Citizen Input
Strategic Plan
Business Plan
Budget
Output to Citizens
7
So, Why Financial Planning Now?

• Determine financial position condition
• Build case for action
• Develop mix of strategies for financial health
• Create financial resiliency
• Build trust with citizens!

8
What Financial Planning Has Done for Coral Springs

• Focus on key indicators of financial health
• Bond rating (AAA) save money
• FTMS and General fund balances
• Data-based, evidence-driven decisions
• Business survey reveals demand for planning help
• City provides planning assistance
• http//www.csbizassist.org/
• Results
• No layoffs, no service reductions
• Millage rate has remained low

9
Trust
10
Citizen Perception of Taxes
11
Highlights

• Similar percentages believe it is okay to
  collect the same amount of property taxes to
  preserve current levels of city services (44.3)
  as who agreed the City should reduce taxes with
  an associated reduction in City services
  (44.7).

12
Trust

• Preliminary Findings of Choice Works Dialogues
• 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.

13
Part I Take-Aways

• LTFP is a strategic and visionary process
• LTFP is part of a complete planning portfolio
• LTFP provides benefits across a spectrum of
  concerns

14
Part II Overview of the Planning Process
15
Four Major Phases
16
Mobilization Phase

• Align Resources
• Identify participants
• Design a process
• Preliminary Analysis
• Initial SWOT analysis
• Other analyses, like forecasts

17
Mobilization Phase

• Service level preferences
• Strategic priorities and objectives
• Financial policies
• Self-assess compliance with policies
• Identify new policies
• Define purpose and scope
• Consensus on problems planning is to solve
• Limit scope of planning to those issues

18
Example of Policy Self-Assessment
19
Align Resources With Strategy
Policy Deployment (Strategic Plan)
Feedback (Surveys, Town Meetings, Focus Groups,
and Citizen Committees)
Strategic Alignment (Business Plan)
Resource Allocation (Budget CIP)
Measurement (Quarterly Performance Reports and
State of the City)
20
Mobilization Phase Take-Aways

• Preparation is key to financial planning.
• A clear roadmap increases confidence in the
  planning process
• Financial policies are crucial
• Mobilization must identify service priorities
• There must be consensus on the purpose of planning

21
Analysis Phase

• Environmental Analysis
• Objective and subjective sources
• Build expertise for analysis strategizing
• Examine variety of factors, not just financial
• Revenue and Expenditure Forecasting
• 5 to 10 year forecasts are typical
• Hybrid techniques are the most common powerful
• Revenue modeling is a key practice

22
(No Transcript)
23
(No Transcript)
24
Crime Rate Comparisons
per 100,000
Fiscal Year
25
Drill Down
26
and Down
27
Analysis Phase

• Debt Analysis
• Analyze impact of current obligations
• Examine capacity for future indebtedness
• Financial Balance Analysis
• Consider all different types of imbalances
• Data visualization helps communicate imbalances

28
Fund Balance
29
Environmental Factors
30
Getting the Right Tax Rate/Service Level Mix
Updated
31
Debt Service Millage Rate is Unchanged Despite
Decline in Property Tax Base
13.5 million bond approved by voters
32
Analysis Phase Take-Aways

• Environmental analysis is the foundation of
  planning invest in it!
• Hybrid techniques are the most effective
• Debt analysis varies in importance with local
  circumstances
• Consider multiple types of imbalances
• Develop effective presentation techniques

33
Decision Phase

• Develop Financial Strategies
• Match strategy to size of imbalance
• Find the right mix of strategies
• Correct decision-making processes that led to
  imbalance
• Plan Conclusion and Transition to Action
• Design a clear culminating event
• A public meeting to approve the plan is common
• Gain formal commitment to financial strategies

34
Coral Springs Business Plan

• Translates the Strategic Plan into action
• Develop initiatives to support Strategic
  Priorities
• All resources are allocated within the Business
  Plan
• Financial strategy aligns short-term objectives
  with long-term financial health
• Performance monitored via review of KIOs and
  process-level performance measures
• Focuses budget decisions on strategic
• priorities instead of line items

35
Decision Phase Take-Aways

• The means by which strategies are developed is as
  important as the strategies themselves
• Redressing a fiscal imbalance almost always
  requires a change to decision-making processes
• A culminating event is a mandatory part of the
  planning process

36
Execution Phase

• Executing the Plan
• The budget is the most important execution tool
• Other tools include performance measurement,
  action plans, and participant commitment
• Monitoring
• Updates
• Scorecards

37
Coral Springs Key Intended OutcomesFinancial
Health Economic Development Goals
38
Execution Phase Take-Aways

• The budget and LTFP must be linked
• Participant commitment is crucial for execution
• Develop on-going monitoring mechanisms to keep
  the plan at the forefront

39
Part III Financial Planning and Recovery from
Financial Distress
40
(No Transcript)
41
LTFPs Role in Recovery

• Recognize financial condition
• Identify implement long-term strategies
• Institutionalize good long-term financial
  practices
• Sustainability versus Resiliency
• A sustainable system is potentially brittle
• A resilient system is regenerative and adaptable
• Go beyond sustainability to resiliency

42
Surviving and Thriving

• Recently, LTFP leaders have
• Reached or maintained AAA bond ratings
• Made believers out of skeptics
• Prepared for the future
• Investing in infrastructure
• Implementing labor saving technologies
• Improved collaboration

43
Features of a Resilient System

• Diversity
• Redundancy
• Decentralization
• Collaboration
• Fail gracefully
• Flexibility
• Foresight

44
Diversity

• Avoiding a single point of failure
• Multi-faceted perspective on financial health
• Diversity of land-use
• Enlarge base of supporters

45
Redundancy

• Avoid having one path of escape or rescue
• Reserves
• A policy to prevent use for recurring expenses
• Create reserves for specific purposes
• Governance
• Policies
• Citizen engagement
• Multiple Financial Strategies

46
Decentralization

• Centralized systems look strong, but when they
  fail, the failure is catastrophic
• Engage depts in financial management
• Make managers manage budgets
• Actively engage depts in financial strategy
• Joint approach to forecasting
• Promotes accuracy and understanding
• Long-Term Planning Framework

47
Collaboration

• Working together to become stronger
• Elected officials
• Engage by building in their priorities
• Orient new council members
• Create peer pressure for new council members
• Use key indicators to get officials on board

48
Fail Gracefully

• Failure happens. Make sure a failure state wont
  make things worse
• Recognize changing conditions to make a soft
  landing
• Promote credibility and open dialogue

49
Tax reform plus an economic downturn eroding
revenue
Phase I of Tax Relief
Double Homestead Exemption
Economic Recession
Economic Recession
-1.67chg
-2.35chg
Millions
-4.26chg
-2.23chg
Projected
Projected
Actual
Actual
Budget
Preliminary Estimate as of June 1
50
Flexibility

• Be ready to change when plans aren't working
• Constant environmental scanning
• Know when flexibility will be called for
• Financial Modeling
• Evolve the planning process

51
Foresight

• Think and prepare
• Forecasting
• Identify the parameters within which to develop
  and execute strategies
• Environmental scanning
• Complement financial planning with other
  long-term plans

52
General Fund 5-Year Forecast
This chart is for planning purposes and
illustrates the potential shortfalls the General
Fund could face if no positive action is taken.
By Florida law, the proposed budget will be
balanced. Financial Strategies will be formulated
to address future year shortfalls and will be
included in the Fiscal Year 2010 Business Plan.
53
Take-Aways

• Dont be satisfied with sustainability
• Go for resiliency!
• If you arent doing long-term financial planning,
  get started even now
• If you are, assess your process against the
  resiliency characteristics

54
The End

• For more information
• Get on our mailing list (email ltfp_at_gfoa.org)
• E-mail us
• skavanagh_at_gfoa.org
• Visit our websites
• www.gfoa.org/ltfp
• www.coralsprings.org/quality
• Read our book Financing the Future