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STOCKTON RESEARCH PAPER & PRESENTATION;
“An Analysis of the City’s Budgeting Procedures”
By
SCSD Deputy Sheriff-Coroner
T. Luke Schwartz
Professor Nicholas Pinhey, Ph.D.
CSUS – Public Agency Budgeting (PADM 5200 – Stkn Cohort)
Mon., May 12th, 2014
May 12, 2014[
]
Situated in the heart of the Central Valley, Stockton represents one of the larger
municipalities south of the Sacramento State Capitol, and due east of the San Francisco Bay
Area. With a population of over 300,000 people, and an annual spending budget of over $524
million, Stockton has faced unique challenges over the years. Specifically, crime rates and
homicides have skyrocketed, and the city was recently compelled to file for Chapter 9
bankruptcy. Given the author was born and raised in Stockton, he has a particular vested interest
in the city’s success, as well as the plan its civic leaders have for eventually returning Stockton to
its heyday, when it was twice awarded “All-American” city status.
Throughout the course of this research paper and its subsequent presentation, an in-depth
analysis as to exactly how Stockton plans to turn the tide, and reverse its current faltering trends
will be discussed. The city’s budget documents, financial statements, mission statement, and all
of the accompanying financial reports, hold the key to the specific plan the council has adopted
in order to reverse its problematic course.
In accordance with the “Pendency Plan,” which essentially represents a modified budget
during the course of bankruptcy protection, the city is compelled to work closely with judges and
the federal bankruptcy courts in Sacramento in order to ensure its financial house of cards are
eventually restored, and are made solvent once again. Benefits of declaring Chapter 9 allowed
the city to suspend some of their outstanding debts, owed primarily to its Wall Street Creditors,
as well as to some of Stockton’s retirees whom were drawing handsome benefits as a member of
CalPERS (California Public Employees’ Retirement System). These newly obtained protections
from the city’s unfunded liabilities provided some additional breathing room to allow Stockton
Dep. T.L. Schwartz Page 2
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the opportunity to pay management costs, all of its litigation and negotiation fees, and eventually
begin to make some headway in the process of formulating creditor settlements.
One of the more contentious issues that arouse during the process of good-faith
negotiations between the City Manager’s Office and various bargaining agencies was the lifetime
medical benefit promised to retirees in the late 1990s and early 2000s. Clearly an unfunded
liability, this promise could simply not be delivered upon in the wake of the Great Recession,
and the situation was made worse by the housing crisis, which was felt particularly hard in the
California Central Valley. The promise to pay medical costs for a one-time employees’ lifetime
was a promise the city had to break in order to survive.
The decision to seek bankruptcy protection was one made after careful thought,
consideration, open debate and in-depth consultation with many experts and attorneys. The issue
was widely debated and publicized throughout the entire process. Stockton was on pace to be
one of the largest American cities to ever have to ever declare Chapter 9 bankruptcy. For
instance, while the city of Vallejo was once compelled to seek relief from its creditors and
outstanding debtors, the mere size differential between Vallejo and Stockton made these two
situations dissimilar from one another, as each city’s needs and fiscal circumstances were unlike
the other.
Through the course of interviewing various members of Stockton’s local city
government, which included Police Chief Eric Jones and Budgeting Officer Claire Tyson, a
picture began to emerge about how exactly Stockton manages its finances. It should be noted,
despite efforts on the part of the author, no response was ever received from Mayor Anthony
Silva or Program Manager II Edwin Gato.
Dep. T.L. Schwartz Page 3
May 12, 2014[
]
The process of preparing and approving the city’s annual budget includes three separate
“study sessions” that allow for in-depth budget discussions before final adoption. By fully
embracing the new economic climate, where staffing levels, service delivery expectations, and
all programs needed to be reduced in order to bring expenditures in line with diminishing
revenues, the city engaged its stakeholders and constituents through the process of a
comprehensive edification. The Internet and city webpage was one method, while the utilization
of an effective public relations and media campaign also proved to be beneficial. Local
newspapers, such as the Stockton Record, as well as local TV news stations 3, 10, 13 and 40, all
of which are out of Sacramento, began to spread the word as to just how broke the city had
become over the years.
Former City Manager, Bob Deis, took the brunt of the criticisms and community outrage
when pink slips needed to be distributed to its employees, and most salaries and benefits were
slashed. On a more personal and regrettable level, given that the author is a sworn deputy
sheriff-coroner in neighboring Stanislaus County, and once came close to going to work for the
city of Stockton as a police officer, the city’s law enforcement personnel took what amounted to
a nearly 20% overall reduction in pay during the height of the budgetary crisis. Other
departments were compelled to take hard looks at their budgets as well in order to alleviate the
revenue shortfalls.
The living document to the city’s finally adopted 2013-14 budget consists of over 400-
pages of total spreadsheets and text. Conveniently enough, it is broken into the following sub-
heading categories: Introduction, City-Wide Budget, Organization Chart, General Fund
Summary, Police, Fire, Public Works, Community Services, Community Development,
Dep. T.L. Schwartz Page 4
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]
Economic Development, Utilities, Admin and Support, Debt, Capital, Internal Service Funds,
and finally an Appendix and Glossary. With a city the size of Stockton, the budgeting office has
to rely upon the contributions of its many employees assigned to the various different
departments to determine the needs of each department. As such, each department head is
required to provide their own unique, detailed requests outlining their specific needs for the
upcoming fiscal cycle. The other members of the Executive Team, to include Laurie Montes of
the city manager’s office, Police Chief Jones, Fire Chief Piechura, Vanessa Burke of the finance
department, Gordon MacKay of public works, John Liebberke and Tom Krippaehne of the
auditor’s office, City Clerk Bonnie Paige, Teresia Haase of HR, Mel Lytle of municipal utilities,
and Steven Chase of community development are all expected to be well-versed in the financial
needs of their respective offices. By reporting back to the City Manager’s Office, as well as to
the individuals making up the budgeting office, the appropriate requests for funding can be made
well in advance.
According to city budgeting officer Claire Tyson, “The budget process at the City of
Stockton is extremely inclusive. Each department of the City is responsible for input and
recommendations of their budgets with development spanning over at least 6 months of
collaboration with the Budget Office. They work on salary projections, operational issues and
related budgets, fees that generate income for the City and provide services to the community,
and new projects that address City council strategic goals. In addition, several public sessions of
the City Council, commissions and committees enable those from the community to make
comments, suggestions and recommendations. All of these input elements are considered in the
Annual Budget that is approved by Council before July 1 each year.”
Dep. T.L. Schwartz Page 5
May 12, 2014[
]
Police Chief Eric Jones adds to the discussion: “Each Department is tasked with
developing their budget based on guidance provided by the Budget Office within the
Administrative Services Department. Departments with direct ties to the stakeholders or
constituencies are able to gather information to help them develop their budget request, however
there is not usually a formal process at this stage. Once the Department submits its budget
request, several levels of review are completed by Budget Office staff and City Manager's Office
staff. Ultimately, the City Manager has final say in what goes in to the Draft Annual Budget.
This document is made available to the public 45 days prior to the public hearing. The City
Council members typically hold Town Hall Meetings about a month before the budget public
hearing. The proposed budget is presented by Department Heads, City Manager, and the Council
member talks about their priorities and answers questions from constituents. The City Council
also holds ‘study sessions’ which are public meetings and allow for dialogue between Council,
City Manager and Department Heads. Members of the public are able to speak and raise
questions or concerns during these meetings. Finally, the City Council will hold a public hearing
to formally adopt the budget. The public has an opportunity to bring up any final comments or
concerns before the vote occurs.”
No one individual can be expected to know the ins and outs of each and every municipal
office located within the city of Stockton. Operations of each specific department are wide-
ranging and diverse. The day-to-day functionality of the police department, for instance, is
completely different from the needs of the city library. It is incumbent upon department heads
such as Chief Jones to articulate to the city council, as well as to the decision makers in the city
manager’s office, the importance of ongoing “officer safety” in-service training for his
personnel, in addition to allocating moneys necessary to buy additional state of the art weaponry
Dep. T.L. Schwartz Page 6
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]
and ballistic protection to best prepare for a real-world, worst-case scenario or emergency, such
as an instance of mass civil unrest. Those considerations are far different from what would be
needed from, say, the Parks and Recreation department.
Aside from an easy-to-read online “pdf” document, public hearings and workshops are
also frequently held in order for the city council, city manager’s staff, and the mayor to bring the
community up to speed as to how the budgetary process works. Those workshops and hearings
include discussion focused on the proposed budget, the capital improvement plan running from
2013-2018, and the proposed fee schedule for various city services. Stockton understands their
two top priorities had to be to successfully exit its bankruptcy status, as well as bringing the
crime problem quickly under control. Through the establishment of Operation Peacekeeper and
Ceasefire, and more directly through the implementation of the city’s revised “Marshall Plan,”
Stockton is beginning to tackle the gang violence issues plaguing their streets. The local
newspaper, The Record, described those particular efforts as follows:
“…a method of targeting violent crime by focusing on the city’s most violent groups. It’s a double-pronged approach to combating violence. It starts with ‘call-ins,’ when gang members are brought together to meet with police and community leaders. They are offered help to find other options to committing crimes, but they are also told they could expect a concerted response from law enforcement if they don’t change their ways (Johnson, 2014).”
Stockton, like so many other northern Central Valley communities, typically relies upon a
limited number of news media outlets to disseminate its information to its populous. The
Record, which is the local Stockton newspaper, allocates a significant portion of its newspaper
coverage to the crime problems plaguing the city of Stockton. No issue, aside from perhaps
municipal bankruptcy (French), has created more of a stir, or initiated more of a debate and
discussion, than have violent murders and the ever-increasing crime statistics and figures.
Policies adopted by the city have been reflective of rapid turnover in not only the police
Dep. T.L. Schwartz Page 7
May 12, 2014[
]
department, where the war on crime is waged every single day, but the City Manager’s Office,
which has unfortunately been at the heart of the most recent political battles.
At first glance of the first page of Stockton’s “Administration and Support Bankruptcy
Fund & Proposed Budget with Revision,” the most critical rows and columns make reference to
revenues, expenditures, available balance dollars, transfers amongst funds, and all of their actual
and projected figures for the four fiscal years (2010-2014.) Additionally, Stockton’s governing
body has also utilized a Comprehensive Annual Financial Report in order to keep tabs on what is
coming in and what is going out. One of these previously authored reports demonstrates the city
once had to contend with nearly $444 million in total revenue, while expenditures totaled $485
million. As far assets were concerned, they reported over $1.903 billion in total assets and
nearly $680 million of total liabilities. Cash and total investments, which most certainly need to
be considered on the macro and micro scales, came in at over $203 million. The contrast of an
annual financial report to that of an apportioned city budget is an interesting one. The financial
report, which is normally compiled by the chief accountant, “…compares the appropriation of
each separate and distinct department, as amended, with the actual amount of expenditures
(Bland, 180).”
Claire Tyson further explains her city’s budgeting format by reporting the following:
“The Annual Budget Book begins with a staff report to City Council, a resolution to approve the
budget and a message from the City Manager which detail significant issues and circumstances
which impact the budget. Then a summarization of Citywide budget and organization chart is
presented, followed by a summary of the General Fund (core operations), and finally individual
departments and special funds. So the book begins with a narrative explanation, then high level
Dep. T.L. Schwartz Page 8
May 12, 2014[
]
summaries, then detailed operations. There are several communications to the public regarding
the budget, however most important is the Council Study Sessions (public information meeting)
that occur around the end of May or early June where each department head presents their
section of the budget and explains operations, goals and impacts to the budget. Finally, in late
June another public session with public hearing occurs where the final budget is considered,
discussed and approved.”
Chief Jones adds to the dialogue: “The annual budget document is a lengthy pdf file
available through the City's website or by requesting a hard copy from the City Clerk. Within
this document are presentations of revenue, appropriations, city demographics, council goals and
a Budget Message from the City Manager. Each Department has a section within this document
that contains an organization chart, a mission statement, goals and objectives for the upcoming
year, and a presentation of expenditures by funding type. The Stockton Police Department does
not produce a separate budget document for the public.”
With regards to what she believes are problems with the “organizational performance
measures,” Tyson said, “Even though the City of Stockton has had many internal problems that
have been reflected in audit comments and findings along with other documented issues, the
Budget Office and process has remained clean of major problems. Having said that, there is
always room for improvements; we have lists and we attempt to address some each summer
when things slow down a bit. Organizationally throughout the City, departments are each
evaluating and addressing their operations. One of the main areas of measurement that is used
Citywide is the City Council Strategic Priorities (these are listed in the annual budget book
introduction section.) Council generally reviews these annually by evaluating accomplishments
Dep. T.L. Schwartz Page 9
May 12, 2014[
]
against the current strategic priorities and by considering revisions to the strategic priorities.
Council recently updated the strategic priorities and are expected to finalize them with the
upcoming budget to be released mid-May.”
Tyson further adds that the two most obvious means of procedural refinement and
improvement could come from the following: “1) a new computer financial system; our current
one is more than 20 years old and does not have current age efficiencies, and 2) updates to the
City Charter and other written guidelines that are more than a decade old. Both of these areas of
improvements are part of current strategic projects.”
Chief Jones’ opines on the same issue by saying, “The City uses Department-based
budgeting, which has challenges particularly when a program or service impacts more than one
Department or requires more than one Department's participation to accomplish. An example is
the Capital Improvement Program. This five-year plan is administered by the Public Works
Department, but includes projects for all City Departments. By allowing one Department to
administer, the needs of the other Departments aren't always conveyed properly due to a variety
of reasons such as lack of time, coordination, and knowledge of how the project fits in to the
overall operation of the affected Department.”
He goes on by adding that, “It is difficult to measure budgetary or organization
performance because each Department stands alone and is not comparable to its counterparts
other than ‘meets budget’ or ‘exceeds budget.’ How well a Department manages their budget is
not necessarily a reflection of how the Department or the City as a whole is meeting their stated
goals or other performance measures.”
Dep. T.L. Schwartz Page 10
May 12, 2014[
]
As far as the strengths of the budgeting process are concerned, Tyson believes what
works very well is that, “The City of Stockton holds the City Manager (CEO) accountable to the
annual budget with input from the Mayor, Council and the public (see Charter reference in
question 1 above). This is a good model as all City Departments report up to the City Manager
who is responsible for the overall operation of the City. From a business perspective, informed
data comes from functional experts (the departments), is reviewed and edited at an executive
reporting relationship level (City Manager) for overall relevance to the core purpose of the
organization, and is finally reviewed and approved at the ownership level (the citizen's who are
represented by the Mayor and City Council). I should share a disclaimer that although I have
worked in governments for more than 20 years, I only have a couple of years here at a City.
Another reason the City of Stockton budget process works well is that the Budget Department is
made up of the top analysts in the City who really know budgeting and are supported by the
administration. Budgeting is more complex that one might think, especially at a complex City
such as Stockton with complex issues such as bankruptcy.”
Chief Jones believes the strengths and areas for improvement are as follows: “The budget
process is streamlined in that each piece has a specific form to be completed, which allows for a
unifying document to be prepared. The flip side is, from a Department perspective, it is hard to
get a firm grasp of the overall proposal until many of the little pieces are already set. At that
point it can be difficult to change things that would make a difference during the year if fixed at
the onset.
The Capital Improvement Program and the Fee Schedule are separate documents and
preparation of their content is handled concurrently, but separately from the rest of the process.
This creates a disconnect between fee generation and operating costs for some of the
Dep. T.L. Schwartz Page 11
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]
Departments and Divisions because each one is looked at on its own. The Community is able to
listen to a presentation and comment on the budget document, but is often uneducated in how
government budgets work, which sets up an unrealistic expectation from the community on what
should be included and why certain things are funded and others not. Also, based on when and
where meetings are scheduled, there are numerous citizens who are excluded from the process.
The City could do a better job reaching out to its constituents and gauging their support for
certain initiatives, programs and/or services. The City did a good job of this when we were going
through Fiscal Emergency, but once we entered Bankruptcy and everything was confidential, we
were unable to continue to reach out and educate the public. It would be a good thing if the City
was once again able to resume its outreach and education once Stockton exits Bankruptcy.”
In final review and summary, it became evident during the course of researching the city
of Stockton’s adopted 2013-2014 annual budget that their final document was comprehensive,
detailed and thorough in every sense of the word. What this author found the most
commendable about Stockton’s budgeting document was just how open and honest it was with
its citizens. Under the Chapter 9 bankruptcy declaration, the city agreed to work collaboratively
with the federal judge, on a frequent and regular basis, in order to provide status updates by
delivering the latest information as to exactly how they intend to make themselves solvent once
again, and furthermore successfully restructuring their outstanding debts in an organized and
systematic way. The “Pendency Plan” is kept right where it needs to be: front and center, and
clearly categorized as the number one priority.
If there are any recommendations that could be made by this particular author, in terms of
how the organization could improve its budgeting process and documentation, it would be to
Dep. T.L. Schwartz Page 12
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]
condense, consolidate and simplify the whole process. The fundamental idea or goal behind
engaging stakeholders and constituents is to inform, educate and illicit their honest feedback and
constructive criticisms. Even as a graduate level public agency budgeting student, who through
the course of a semester’s worth of instruction and added familiarity with commonly used
budgeting terms, the author of this paper still found the over 400-pages of text to be a bit
daunting and overwhelming to digest. While budgets need to be thorough, and certainly need to
cover all of the various departments of a city, especially in one as large and diverse as Stockton,
it needs to be equally as user-friendly for a lay person to easily interpret the dense budgetary
language.
Perhaps the city can consider in following years the creation of a more abridged version
in order for people to come away with a stronger understanding of their hometown’s annual
budget. Realistically speaking, a lay person’s interest most likely cannot be held throughout the
entire reading of over 400-pages of what could be construed as “dry” text. By hitting upon the
important highlights, emphasizing the bottom line, and deferring to only the most critical
revenues and expenditure categories, the budgeting office might find it easier to have an
educated, two-way dialogue with residents about the future of their city. The city undoubtedly
has to be detailed and complete with its financial openness, especially since it is making every
reasonable effort to escape the unsavory position of a bankrupt municipality. This is precisely
why thought should be given to the creation of two separate documents, one of which could be
utilized for official city, state and federal purposes, while the other could be referenced by
citizens hoping to easily access and understand information that would otherwise be overly
confusing and daunting to tackle.
Dep. T.L. Schwartz Page 13
May 12, 2014[
]
REFERENCES & BIBLIOGRAPHY
Bland, Robert L. (2013). A Budgeting Guide for Local Government; 3rd Ed. ICMA Press.
French, Ron. Sense of surrender permeates bankrupt Stockton, California; is that what’s in store for Detroit? Bridge Magazine. (2013, July 19). http://mlive.com/news
Johnson, Zachary K. 12 arrested in Gang Sweep. The Record. (2014, April 10). http://www.recordnet.com
Special thanks to Claire Tyson and Eric Jones of the city of Stockton for their contributions. Facts & figures obtained from actual budget document & Wikipedia.
Dep. T.L. Schwartz Page 14