The City of Springfield

Presentation to Moody's Investors Service

May 20, 2010

City of Springfield• Domenic J. Sarno, Mayor• Lee C. Erdmann, Chief Administration and Finance Officer• John D. Judge, Chief Development Officer• Timothy J. Plante, Finance Director• LeeAnn Pasquini, Budget Director• Stephen Lonergan, Treasurer• Patrick Burns, Comptroller

First Southwest Company• Cynthia McNerney, Managing Director

The Springfield Team

• Mayor’s Strategic Priorities• Local Control - Financial Management• Springfield’s Success & Continued Priorities• FY10 Update• FY11 Recommendations• Economic Development

Agenda

1. Public Safety2. Education3. Job Creation4. Neighborhood Revitalization5. Financial Management

Mayor’s Strategic Priorities

• Successful recruitment of CAFO– 30 years of experience– Successes in another local City– 32 key goals and objectives identified– Need to address long term liabilities

Local Control - Accomplishments

Local Control - Accomplishments

2006 2007 2008 2009 2010 2010 Projected 2011 2012 2013 2014

Expenditures 436,928,949 495,296,122 505,731,534 494,085,999 528,657,502 521,260,686 533,905,178 584,430,214 600,230,073 616,570,551

Revenues 468,408,478 498,548,530 520,041,502 512,396,226 528,657,502 532,744,679 533,905,178 537,896,499 546,252,366 555,512,281

Surplus/(Gap) 31,479,529 3,252,408 14,309,968 18,310,227 0 11,483,993 0 (46,533,716 (53,977,707 (61,058,270

$0

$1

$2

$3

$4

$5

$6

$7Hu

ndre

ds o

f Mill

ions

Four Year Financial Plan* based on FY11 Finance Recommendations

• For context, the FY11 budget development process began with a projected gap of $45.5 million.

• To solve for this gap, ideas from the four year forecast have been included in the budget recommendations:– Maximizing offsets to grants– Developing a City-Wide Cost Allocation Plan– Reviewing all organization studies– Consolidating A&F functions of the School Department and City– Programmatic Cuts– Maximizing the use of MUNIS– Consolidating all solid waste activities into the Enterprise Fund– Hiring a Dispatch Director– Maximizing energy savings

• Additional recommendations will need to be considered over the coming years to solve for the projected gap.

Local Control - Accomplishments

• Smart Training– Conducted leadership training for executive and mid-level

management in the principles of human resource management, budgeting, communication and continuous improvement.

• LEAN Training & Continuous Improvement– Conducted 2 day training of all City senior management; conducted

1 Kaizen event and plans in the works for another; Steering Committee developed to keep the process locally driven.

• MUNIS Payroll– Implemented module to run all payroll through MUNIS to help

control FTEs and costs.– Position control within MUNIS has been an important tool to control

costs.

Local Control - Accomplishments

• A&F Department Restructuring– Created a stand alone payroll department; consolidated

HR and Labor Relations; Moved CitiStat under A&F

• Consolidation of City / School Business Functions– Single Finance Director overseeing both; reviewing

similar model for HR and IT

• Grants Management– Hired a dedicated grants manager and to date have

applied for $5 million in grants across City departments.

Local Control - Accomplishments

• Single Stream Recycling– Implemented SSR with new trucks and additional

purchase of blue bins anticipated in FY11.

• Capital Improvement Plan– Includes $374.2 million worth of projects and equipment

for various departments in the City of Springfield; FY11 Capital Budget strives to address the City’s largest capital needs which are facilities and vehicles for public safety and public works.

Local Control - Accomplishments

Local Control - Priorities• Budget balancing and continuing to build reserves

• Trust Fund repayment (dependent on Legislative proposal)

• Continue with City and School business functions consolidation

• Follow and update Financial Policies which are adopted as ordinances

• Continued improvement of the City’s bond rating

• Monthly financial and taxpayer reports

• Quarterly financial and performance reports starting in FY11

• Strategic planning and governing for results

• Maintain strong management structure in place for continued success

Management StructureCAFO

Labor Relations Capital Construction

Internal AuditCapital Planning MUNIS Division

CitiStat311

Productivity BankGrants Management

Financial Planning Centralized Dispatch

Training program

• Continued improvement to management of municipal operations– Streamlined management– Studied departments– Implemented improvements, hired managers, outsourced where appropriate– Trained staff– Developed and using data to manage operations

• Continued management of cost centers– Benefits: Projected health insurance savings of $70M - $96M (FY08 to FY12)– Wages: Wage growth within City’s ability to raise revenue; time and attendance system– Energy costs: ESCO; improved bidding and management– Debt Service

• Continued fiscal management– Implemented MUNIS. Established MUNIS Division to ensure system success– Developed Capital Improvement Plan– Energy Savings Contract (ESCO) project continues to yield over $1M in savings annually– Enacted Financial Policies as ordinances to strengthen financial control– Consistently managing departmental budgets and controlling expenditures– Comptroller granted formal sweep authority to prevent overspending– Improved budget development process to be more transparent, establish performance goals and improve communication– Created the Productivity Bank to encourage innovation, cost savings and accountability across the City– Implemented a new Grants Unit to coordinate grants management, ensure proper compliance and prevent turn backs– Continue to meet reporting requirement required by the State Department of Revenue and the Executive Office for Administration and

Finance

Springfield’s Success

FY10 UpdateFY10 anticipated surplus of $11.4 million based on:

• Spending Changes– Employee benefits– Delayed hiring and vacant positions– Mild winter– Continuous management

• Revenue Changes– License and permits collections– Tax liens

Spending 528,657,502 Revenue 528,657,502 Surplus / (Deficit) -

Spending 521,260,687 Revenue 532,744,679 Surplus / (Deficit) 11,483,992

March Projection

Original Budget Assumptions

FY11 Budget• Budget development began in January 2010 when

Department requests were due; 5-10% reductions from each department were requested.

• Mayor’s public hearings were conducted in March.• Drafts were shared with departments throughout the

process to ensure priorities were being properly met.• City Council is currently deliberating on the

recommendations.ACTUAL ADOPTED PROJECTED RECOMMENDED

FISCAL 2009 FISCAL 2010 FISCAL 2010 FISCAL YEAR 2011 $ VARIANCE TO % VARIANCE TOGENERAL FUND GENERAL FUND GENERAL FUND GENERAL FUND FY10 ADOPTED FY10 ADOPTED

TOTAL SPENDING 494,085,999 528,657,502 521,260,687 533,905,178 5,247,676 0.99%TOTAL REVENUE 512,396,226 528,657,502 532,744,679 533,905,178 5,247,676 0.99%SURPLUS (DEFICIT) 18,310,227 0 11,483,991 (0) (0)

FY11 Budget – Challenge & Drivers

Challenge:– Structural Deficit – Spending Growth – Minimal Revenue

-

10,000,000.0

20,000,000.0

30,000,000.0

40,000,000.0

50,000,000.0

60,000,000.0

1 2

FY11 Budget Gap

Gap = $45.5M

+37.9M

+10M+2.4M

Drivers:– School Department– Employee Benefits– Contractual Increases– Other Obligations (legal

and contractual)

FY11 Budget – Solutions

• To solve for the projected budget gap, many solutions were used to balance budget reductions, revenues and use of reserves:

Pension Funding 7,894,545 Debt Service 2,891,596 Health Insurance 3,788,109 Departmental Budget Reductions 5,412,163 FY10 Surplus 1,962,470 Net School Spending Change 6,001,550 Net Revenue Changes 5,115,000 Reserves 12,500,000 Total Solutions 45,565,433

Solutions

Group Insurance CommissionThe chart below demonstrates the savings in health insurance

based on the projected costs without GIC. The City continues to benefit from its use of the GIC for employee health insurance.

• The budget for the School department is $310.0 million in general fund dollars; an additional $5.1 million has been allocated from ARRA grant funds.

• This represents a 2% increase over FY10.

• During the budget process, the School department solved for a projected $16 million gap.

• The budget has been adopted by the School Committee and is currently before City Council.

FY11 – School Department Budget

FY11 Reserves – Stabilization FundFY 11 Projected Stabilization Reserves

Analysis of Reserves

Stabilization Fund Balance as of 4/30/10 25,005,399$

FY 2009 Free Cash Sources/UsesFY 2009 Certified Free Cash 22,319,922 Overlay Surplus 5,000,000 Special Revenue Fund Deficits (822,869) Prior Year Bills (310,919) Current Year Bills (1,062,733) Land Taking - Forest Park Middle School (2,000,000) Demolitions (1,000,000) Other Priorities (500,000) Subtotal 21,623,401

FY 2010 Free Cash Sources/UsesProjected General Fund Surplus 11,483,991 Projects funded with projected FY 10 Surplus (1,962,470) Subtotal 9,521,521

FY 2011 BudgetGeneral Fund Use of Reserves (12,500,000) Subtotal (12,500,000)

Projected Stabilization Fund Balance 7/1/10 43,650,321$

FY11 Reserves – All Sources

FY 11 Reserves All Sources

Springfield Reserves

Projected Stabilization Reserve 43,650,321$ Promise Fund - State Loan Repayment 43,000,000 Other Reserve FundsChapter 656 Reserve Fund 6,042,256 Self Insurance Reserve 564,143 ESCO Energy Services Stabilization 773,249 Total 94,029,969$

• The FY11 budget recommendation contemplates that 2% over the overall revenues come from reserves.

Improved Financial Management and Results

(50,000,000)

(40,000,000)

(30,000,000)

(20,000,000)

(10,000,000)

-

10,000,000

20,000,000

30,000,000

40,000,000

Certified Free Cash History

The chart below shows a history of Springfield’s Free Cash balances with recent positive balances deposited into Stabilization.

General Fund Balances

City of Springfield - General Fund Fund Balance Analysis

As of March 31, 2010

Fund Balance 82,150,889

Unreserved 41,712,840

Undesignated 38,867,229

• The General Fund balance is 15% of the total $533.9 million budget recommendation.

Collection of Back TaxesThe chart below shows Springfield’s aggressive collection of taxes

that continues to be a priority of the City.

• Strong economic base with hospitals, colleges and finance and insurance, and precision manufacturing

• Low rental and home owner vacancy rates

• Economic Center of the entire region

• Although unemployment is high we have passed the peak and expect to see declines

• Taxable value will decline in FY11, but some property types show signs of stabilizing

Local Economy

Metro Area Residential Vacancy RatesLowest Rental Vacancy Rates City % 1. Springfield 3 2. Bakersfield 3.3 3. Boston 3.7 4. Albany 4.1 5. Columbus 4.7 6. Honolulu 5.2 7. Portland (OR) 5.3 8. Albuquerque 6.1 9. New York 6.210. Buffalo 6.4

Lowest Homeowner Vacancy Rates City % 1. Worcester .4 2. Rochester .5 3. Springfield .6 4. Richmond .7 5. Albuquerque .7 6. Birmingham 1.0 7. Jacksonville 1.2 8. Los Angeles 1.2 9. Hartford 1.310. San Antonio 1.3

Springfield is the Economic Center of the Region

Springfield is the Economic Center of the Region

% of Pioneer Valley Employment

Agawam4% Chicopee

7%

E. Longmeadow3%

Holyoke8%

Northampton6%

W. Springfield6%

Westfield6%

Springfield27%

Other33%

Springfield Employment by Industry

Other Sectors 47,773 - 63% Finance & Industry

6,429 - 8%

Manufacturing 4,455 - 6%

Colleges & Universities 2,266 - 3%

Ambulatory Health Services 6,634 - 9%

Hospitals 8,339 - 11%

• Demolition and environmental remediation of Chapman Valve/Crane site for industrial redevelopment

• Produced a monthly e-newsletter • Created a Strategic Marketing Committee & Soft Launched Campaign• Hosted a Developers Conference – 240 attendees• Broke ground on Homeless Resource Center• Expended $16.8M to advance State Street Corridor• Received $3.5M in Neighborhood Stabilization Funds• Established a new nonprofit development partner: DevelopSpringfield• Partnered with area colleges on several grant opportunities• Expended $5.5M to advance South End Revitalization Project• Administered more than $4M in Community Development Block Grant

Program, to 40 local projects and organizations• Opened the 100,000 sq. ft medical/life sciences building on Wason Avenue.

This new building had a building permit of $13 million. In addition, a second much smaller building has been built on that site.

Economic Development –Recent Highlights

Economic Development – Current Projects

• Established MOU with UMass to create an Urban Design Center• Won ULI Technical Assistance Project on Riverfront revitalization• Moved to redevelop: Union Station; Court Square; former Asylum

building; 1550 Main; Mason Square; former Zanetti School; Waterfront Club; Eastern Gateway and other key infrastructure projects

• Created Special Tax Assessment to keep Titeflex in the city and saved 103 jobs. Titeflex will invest another $3 M to modernize their 58 year-old facility

• Won Green Communities Award and working with PVPC on greening city services

• Established a Small Business Forum series in Neighborhoods• Secured F.W. Webb to purchase land and construct a new 70,000 sq ft

building at Smith & Wesson Memorial Industrial Park.

Economic Development – 2010-2011 Strategic Objectives

1. Reshape our Economy

2. Restore balance in our housing stock

3. Build the Springfield Brand

4. Green and beautify neighborhoods

5. Foster Collaboration

6. Build Capacity

Economic Development – 2010 Strategic Actions

• Establish Springfield as leader in the Green Economy• Implement Global Partners/Socios Globales• With Regional Employment Board and other groups, create GED

career-based educational alternatives• Expand GreenSeal - Springfield’s conservation & energy efficiency

award program• Break ground on new data center at former Tech High• Demolish and redevelop former Asylum building• Market former York Street Jail, Court Square, 1550 & 1592 Main Street

sites for redevelopment• Develop/refine City’s Marketing Campaign• Cultivate UMass presence downtown• Procure Owners Project Manager, Design & Legal for Union Station

Regional Intermodal• Implement new Acela Inspectional services software system

• Municipalities with General Fund Budgets Exceeding $70 million• Springfield Total Reserves does not Include Promise Program

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

ATTL

EBO

RO

CHEL

SEA

FALL

RIV

ER

FITC

HBUR

G

HAVE

RHILL

HOLY

OKE

LOW

ELL

LYNN

MAL

DEN

MED

FORD

MET

HUEN

NEW

BED

FORD

PITT

SFIE

LD

RAND

OLP

H

REVE

RE

SAUG

US

STO

UGHT

ON

TAUN

TON

WES

TFIE

LD

WO

RCES

TER

SPRI

NGFI

ELD

Total Reserves as a % of Total BudgetA1

• Municipalities with General Fund Budgets Exceeding $70 million• Springfield Total Reserves does not Include Promise Program

Questions & Discussion